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. 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, 2018
or
2017
. 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.
Cash Equivalents
Cash and cash equivalents include cash on hand, cash in banks and cash equivalents, which are 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 evaluates 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.
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.
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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Raw materials and purchased finished goods for resale — principally valued at cost determined on a weighted average basis; and
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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 and has consistently applied this methodology. 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
Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or a liability. Assets and liabilities recorded at fair value are measured and classified under a three-tier fair valuation hierarchy based on the observability of the inputs available in the market: 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; and Level 3 inputs are unobservable inputs based on the Company’s assumptions used to measure assets and liabilities at fair value. The fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
As of
December 31, 2018
and
2017
, the Company’s investments included in cash equivalents consisted of only money market funds, which are the Company’s primary financial instruments and carried at cost, approximating fair value, based on Level 1 inputs. The balance of the Company’s primary financial instruments as of
December 31, 2018
and
2017
was
$0.2 million
and
$5.3 million
, respectively. 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.
Property, Plant and Equipment
Property, plant and equipment are carried at cost. Major renewals and betterments are capitalized. Maintenance and repairs are expensed as incurred. 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
Software, including amounts capitalized for internally developed software is amortized on a straight-line basis over an estimated useful life of three to five years. Machinery and equipment is depreciated using accelerated methods over an estimated useful life of three to ten years. 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. Purchased intangible assets with finite useful lives are amortized using the straight-line method over the estimated useful lives of the assets.
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.
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.
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.
Foreign Currency Translation
The local currency is the functional currency of most of the Company’s operations in Europe, Canada, Asia, Australia and New Zealand. 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.
Revenue Recognition
Generally, the Company's revenue contract with a customer exists when the goods are shipped, and services are rendered; and its related invoice is generated. The duration of the contract does not extend beyond the promised goods or services already transferred. The transaction price of each distinct promised product or service specified in the invoice is based on its relative stated standalone selling price. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product to a customer at a point in time. The Company’s shipping terms provide the primary indicator of the transfer of control. The Company's general shipping terms are F.O.B. shipping point, where title and risk and rewards of ownership transfer at the point when the products leave the Company's warehouse. The Company recognizes revenue based on the consideration specified in the invoice with a customer, excluding any sales incentives, discounts, and amounts collected on behalf of third parties (i.e., governmental tax authorities). Based on historical experience with the customer, the customer's purchasing pattern and its significant experience selling products, the Company concluded that a significant reversal in the cumulative amount of revenue recognized will not occur when the uncertainty (if any) is resolved (that is, when the total amount of purchases is known). Refer to Note 2 for additional information.
Sales Taxes
The Company presents taxes collected and remitted to governmental authorities on a net basis in the accompanying Consolidated Statements of Operations.
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
$10.8 million
,
$10.6 million
and
$10.8 million
in
2018
,
2017
and
2016
, 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
2018
,
2017
and
2016
, 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 8 — 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
$7.6 million
,
$9.6 million
and
$7.1 million
in
2018
,
2017
, and
2016
, 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.
Accounting for Stock-Based Compensation
The Company recognizes stock-based expense 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 expense related to performance share grants are measured based on grant date fair value and expensed on a graded basis over the service period of the awards, which is generally a performance period 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.
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.
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.
Recently Adopted Accounting Standards
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 adopted the new revenue standard on January 1, 2018 using the modified retrospective approach. Refer to Note 2 for additional information.
In October 2016, the FASB issued Accounting Standards Update ("ASU") 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. On January 1, 2018, the Company adopted ASU 2016-16 using a modified retrospective approach. Adoption of ASU 2016-16 had no material effect on the Company's consolidated financial statements and footnote disclosures.
In January 2017, the FASB issued ASU 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. On January 1, 2018, the Company prospectively adopted ASU 2017-04. In 2018, the Company applied ASU 2017-04 to the Company's measurement of impairment for its Denmark reporting unit. Refer to Note 9 for additional information.
In February 2018, the FASB issued ASU 2018-02,
Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income
("ASU 2018-02")
.
ASU 2018-02 allows but not require 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. During the fourth quarter of 2018, the Company early adopted the new accounting guidance and elected to reclass the stranded tax effects under ASU 2018-02. The election resulted in a reclass of
$0.4 million
to retained earnings.
All other issued and effective accounting standards during
2018
were determined to be not relevant or material to the Company.
Recently Issued Accounting Standards Not Yet Adopted
In February 2016, the FASB issued ASU No. 2016-02, (Topic 842),
Leases
(“ASU 2016-02”).
ASU 2016-02 core requirement is to recognize the assets and liabilities that arise from leases including those leases classified as operating leases. The amendments require a lessee to recognize a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term in the statement of financial position. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset to not recognize lease assets and lease liabilities. If a lessee makes this election, it should recognize lease expense for such leases generally on a straight-line basis over the lease term. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted.
Optional transition method -
ASC 2018-11, Topic 842,
Targeted Improvements
(issued in July 2018) provide entities with an additional (and optional) transition method to adopt the new lease standard. This additional transition method allows a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption without adjusting the comparative periods presented. On January 1, 2019, the Company will adopt the new lease standard using the optional transition method.
During the fourth quarter of 2018, in preparation for the adoption of the new lease accounting standard, the Company has implemented internal controls and a new lease accounting information system to enable the preparation of financial information. The Company will elect and apply practical transition expedients of not reassessing whether any expired or existing contracts are or contain leases; not reassessing the lease classification for any expired or existing leases and not reassessing initial direct costs for any existing leases. The adoption of Topic 842 will result in recognition of right-of-use ("ROU") assets and lease liabilities of approximately
$36.0 million
to
$37.0 million
and approximately
$35.0 million
to
$36.0 million
, respectively on January 1, 2019, on the Company’s balance sheets. The most significant impact from recognition of ROU assets and lease liabilities is related primarily to facilities and auto operating leases.
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2.
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Revenue from Contracts with Customers
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On January 1, 2018, the Company adopted the New Revenue Standard ("Topic 606") using the modified retrospective method and recorded an
$0.8 million
, net of tax, increase to opening retained earnings on January 1, 2018 as the cumulative effect of adopting Topic 606 for estimated rights of return assets on product sales.
Disaggregated revenue
Under Topic 606, the Company disaggregates net sales consistent with the distribution of the Company's net sales by the following product groups as noted in Note 18 segment information of these financial statements.
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Wood Construction Products Revenue
. Wood construction products represented almost
85%
of total net sales in the year ended
December 31, 2018
.
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Concrete Construction Products Revenue.
Concrete construction products represented
15%
of total net sales in the year ended
December 31, 2018
.
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Customer acceptance criteria.
Generally, there are no customer acceptance criteria included in the Company's standard sales agreement with customers. When an arrangement with the customer does not meet the criteria to be accounted for as a revenue contract under the standard, the Company recognizes revenue in the amount of nonrefundable consideration received when the Company has transferred control of the goods or services and has stopped transferring (and has no obligation to transfer) additional goods or services. The Company offers certain customers discounts for paying invoices ahead of the due date, which are generally 30 to 60 days.
Other revenue
. Service sales, representing after-market repair and maintenance, engineering activities and software license sales and services are less than
1.0%
of net sales and recognized as the services are completed or the software products and services are delivered. Services may be sold separately or in bundled packages. The typical contract length for service is generally less than one year. For bundled packages, the Company accounts for individual services separately if they are distinct. A distinct service is separately identifiable from other items in the bundled package if a customer can benefit from it on its own or with other resources that are readily available to the customer. The consideration (including any discounts) is allocated between separate services in a bundle based on their stand-alone selling prices. The stand-alone selling prices are determined based on the prices at which the Company separately sells the services.
Reconciliation of contract balances
Contract assets are the rights to consideration in exchange for goods or services that the Company has transferred to a customer when that right is conditional on something other than the passage of time. Contract liabilities are recorded for any services billed to customers and not yet recognizable if the contract period has commenced or for the amount collected from customers in advance of the contract period commencing. As of
December 31, 2018
, the Company had no contract assets or contract liabilities from contracts with customers
.
Other accounting issues
Volume discounts.
Volume discounts are accounted for as variable consideration because the transaction price is uncertain until the customer completes or fails to purchase the specified volume of purchases (consideration is contingent on a future outcome - occurrence or nonoccurrence). In addition, the Company applies the volume rebate or discount retrospectively, because the final price of each products or services sold depends on the customer's total purchases subject to the rebate program. The estimated rebates are deducted from the transaction price revenues based on the historical experience with the customer.
Rights of return and other allowances.
Rights of return creates variability in the transaction price. The Company accounts for returned product during the return period as a refund to customer and not a performance obligation. The estimated allowance for returns is based on historical percentage of returns and allowance from prior periods and the customer's historical purchasing pattern. This estimate is deducted from revenues based on the gross transaction price.
Principal versus Agent.
The Company considered the principal versus agent guidance of the new revenue recognition standard and concluded that the Company is the principal in a third-party transaction. The Company manufactures its products and has control over transfer of its products to Dealer Distributors, Contract Distributors, and end customers.
Costs to obtain or fulfill a contract.
Costs incurred to obtain a contract are immaterial. Commission cost is not an incremental cost directly related to obtaining a contract.
Shipping costs.
The Company recognizes shipping and handling activities that occur after the customer has obtained control of goods as a fulfillment cost rather than as an additional promised service. Therefore, the Company recognizes revenue and accrues shipping and handling costs when the control of goods transfers to the customer upon shipment.
Advertising costs.
Cooperative advertising and partnership discounts are consideration payable to a customer and not a payment in exchange for a distinct product or service at fair value. Estimated cooperative advertising and partnership discounts are reductions to the transaction price.
Practical Expedients.
The Company did not use either the practical expedient for the existence of a significant financing component or, the practical expedient for expensing certain costs of obtaining a contract.
The following shows a reconciliation of basic earnings per share (“EPS”) to diluted EPS:
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For the Year Ended December 31,
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(in thousands, except per-share amounts)
|
2018
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|
2017
|
|
2016
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Net income available to common stockholders
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$
|
126,633
|
|
|
$
|
92,617
|
|
|
$
|
89,734
|
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Basic weighted average shares outstanding
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46,213
|
|
|
47,486
|
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|
48,084
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Dilutive effect of potential common stock equivalents
|
327
|
|
|
288
|
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|
211
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Diluted weighted average shares outstanding
|
46,540
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47,774
|
|
|
48,295
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Net earnings per share:
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Basic
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$
|
2.74
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|
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$
|
1.95
|
|
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$
|
1.87
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Diluted
|
$
|
2.72
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|
|
$
|
1.94
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|
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$
|
1.86
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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. At its meeting in August 2017, the Board authorized the Company to repurchase up to
$275.0 million
of its common stock. This authorization increased and extended the
$125.0 million
repurchase authorization from August 2016 and remained 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").
In February 2018, the Company received
182,171
shares of its common stock as the final delivery for the 2017 December ASR Program. For the year ended December 31, 2018, the Company repurchased
1,772,658
shares of the Company's common stock on the open market at an average price of
$62.69
per share. As of December 31, 2018, the Company repurchased approximately
$234.6 million
of the Company's previously announced
$275.0 million
share repurchase authorization (which expired at the end of 2018).
At the Company's meeting in December 2018, the Board authorized the Company to repurchase up to
$100.0 million
of its common stock which will remain in effect through the end of 2019.
See the "Consolidated Statements of Stockholders’ Equity for the years ended
December 31, 2018
,
2017
and
2016
."
Comprehensive Income or Loss
The following shows the components of accumulated other comprehensive income or loss as of
December 31, 2018
and
2017
, respectively:
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Foreign Currency Translation
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Pension Benefit
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Total
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(in thousands)
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Balance at January 1, 2016
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$
|
(27,552
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)
|
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$
|
(1,024
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)
|
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$
|
(28,576
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)
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Other comprehensive income before reclassification net of tax benefit (expense) of ($222) and $87, respectively
|
(3,920
|
)
|
|
(474
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)
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(4,394
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)
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Balance at December 31, 2016
|
(31,472
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)
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(1,498
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)
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(32,970
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)
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Other comprehensive loss net of tax benefit (expense) of ($0) and $37, respectively
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21,273
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(944
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)
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20,329
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Amounts reclassified from accumulative other comprehensive income, net of $0 tax
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145
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—
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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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|
(12,496
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)
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Other comprehensive loss net of tax benefit (expense) of $0 and $59, respectively
|
(12,911
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)
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757
|
|
|
(12,154
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)
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Balance at December 31, 2018
|
$
|
(22,965
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)
|
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$
|
(1,685
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)
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$
|
(24,650
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)
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5.
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Stock-Based Compensation
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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 does not currently intend to award incentive stock options or restricted stock units under the 1994 Plan or the 1995 Plan.
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. Shares of common stock underlying awards to be issued pursuant to the 2011 Plan are registered under the Securities Act. Under the 2011 Plan, the Company may grant restricted stock and restricted stock units, although the Company currently intends to award primarily performance-based and/or time-based restricted stock units ("RSUs").
The following table shows the Company’s stock-based compensation activity:
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Fiscal Years Ended December 31,
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(in thousands)
|
2018
|
|
2017
|
|
2016
|
Stock-based compensation expense recognized in operating expenses
|
$
|
10,356
|
|
|
$
|
12,744
|
|
|
$
|
13,113
|
|
Tax benefit of stock-based compensation expense in provision for income taxes
|
2,476
|
|
|
4,575
|
|
|
4,757
|
|
Stock-based compensation expense, net of tax
|
$
|
7,880
|
|
|
$
|
8,169
|
|
|
$
|
8,356
|
|
Fair value of shares vested
|
$
|
15,372
|
|
|
$
|
11,043
|
|
|
$
|
13,186
|
|
Proceeds to the Company from the exercise of stock-based compensation
|
$
|
695
|
|
|
$
|
6,610
|
|
|
$
|
7,976
|
|
Tax benefit from exercise of stock-based compensation, including shortfall tax benefits
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(251
|
)
|
The Company allocates stock-based compensation expense among cost of sales, research and development and other engineering expense, selling expense, or general and administrative expense based on the job functions performed by the employees to whom the stock-based compensation is awarded. Stock-based compensation cost capitalized in inventory was immaterial for all periods presented.
The following table summarizes the Company’s unvested restricted stock unit activity for the year ended
December 31, 2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
(in thousands)
|
|
Weighted-
Average
Price
|
|
Aggregate
Intrinsic
Value *
(in thousands)
|
Unvested Restricted Stock Units (RSUs)
|
|
|
Outstanding at January 1, 2018
|
696
|
|
|
$
|
35.34
|
|
|
$
|
39,609
|
|
Awarded
|
189
|
|
|
54.99
|
|
|
|
|
Vested
|
(263
|
)
|
|
35.23
|
|
|
|
|
Forfeited
|
(18
|
)
|
|
39.23
|
|
|
|
|
Outstanding at December 31, 2018
|
604
|
|
|
$
|
41.37
|
|
|
$
|
32,669
|
|
Outstanding and expected to vest at December 31, 2018
|
598
|
|
|
$
|
41.32
|
|
|
$
|
32,388
|
|
* The intrinsic value for outstanding and expected to vest is calculated using the closing price per share of
$54.13
, as reported by the New York Stock Exchange on
December 31, 2018
.
During the year ended
December 31, 2018
, the Company granted
189,167
RSUs to the Company's employees, including officers, and
eight
non-employee directors at an estimated weighted average fair value of
$54.99
per share, based on the closing price (adjusted for certain market factors, and to a lesser extent, the present value of dividends) of the Company's common stock on the grant grants. The RSUs granted to the Company's employees may be time-based, performance-based or time- and performance-based. Certain of the performance-based RSUs are granted to officers and key employees, where the number of performance-based awards to be issued is based on the achievement of certain Company performance criteria established in the RSU agreement over a cumulative three year period. These awards cliff vest after three years. In addition, these same officers and key employees also receive time-based RSUs, which vest pursuant to a three-year graded vesting schedule. Time- and performance based RSUs are granted to the Company's employees excluding officers and certain key employees, vest ratably over the four year life of the award, and require the underlying shares of the Company's common stock to be subject to a performance-based adjustment during the first year.
The total intrinsic value of RSUs vested during the years ended
December 31, 2018
,
2017
and
2016
was
$9.8 million
,
$10.8 million
and
$10.3 million
, respectively, based on the market value on the vest date.
The following table summarizes the Company’s stock option activity for the year ended December 31, 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, 2018
|
28
|
|
|
$
|
29.66
|
|
|
0.1
|
|
|
$
|
780
|
|
Exercised
|
(23
|
)
|
|
$
|
29.66
|
|
|
|
|
|
|
|
Forfeited
|
(5
|
)
|
|
$
|
29.66
|
|
|
|
|
|
Outstanding and exercisable at December 31, 2018
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
—
|
|
The total intrinsic value of stock options exercised during each of the three years ended December 31, 2018, 2017 and 2016, was
$0.7 million
,
$4.6 million
and $
3.1 million
, respectively. Currently, the Company is not awarding stock options under its 2011 Plan.
As of
December 31, 2018
, the Company's aggregate unamortized stock compensation expense was approximately
$10.3
million, which is entirely attributable to unvested RSUs and is expected to be recognized in expense over a weighted-average period of approximately
2.1
years.
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 awarded 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 awarded
9,000
shares for service through 2018, (
5,500
shares to be issued and
3,500
shares of which are expected to be settled in cash for the Company's foreign employees). In
2017
and
2016
, the Company awarded
12,000
and
10,000
shares, respectively. As a result, we recorded pre-tax compensation charges of
$0.8 million
,
$1.2 million
and
$0.8 million
for each of the years ended
December 31, 2018
,
2017
and
2016
, respectively. The charges also include cash bonuses to compensate employees for income taxes payable as a result of the stock bonuses.
6. Trade Accounts Receivable, net
Trade accounts receivable consisted of the following:
|
|
|
|
|
|
|
|
|
|
December 31,
|
(in thousands)
|
2018
|
|
2017
|
Trade accounts receivable
|
$
|
149,886
|
|
|
$
|
139,910
|
|
Allowance for doubtful accounts
|
(1,364
|
)
|
|
(996
|
)
|
Allowance for sales discounts
|
(2,470
|
)
|
|
(2,956
|
)
|
|
$
|
146,052
|
|
|
$
|
135,958
|
|
The Company adopted ASC 606 effective January 1, 2018, resulting in the reclassification of an estimated refund liability of $
0.8 million
from allowance for sales discounts and returns to other current liabilities as of
December 31, 2018
.
The components of inventories consisted of the following:
|
|
|
|
|
|
|
|
|
|
December 31,
|
(in thousands)
|
2018
|
|
2017
|
Raw materials
|
$
|
98,058
|
|
|
$
|
91,022
|
|
In-process products
|
24,645
|
|
|
26,849
|
|
Finished products
|
153,385
|
|
|
135,125
|
|
|
$
|
276,088
|
|
|
$
|
252,996
|
|
|
|
8.
|
Property, Plant and Equipment, net
|
Property, plant and equipment consisted of the following:
|
|
|
|
|
|
|
|
|
|
December 31,
|
(in thousands)
|
2018
|
|
2017
|
Land
|
$
|
30,034
|
|
|
$
|
33,087
|
|
Buildings and site improvements
|
198,809
|
|
|
212,817
|
|
Leasehold improvements
|
4,826
|
|
|
4,684
|
|
Machinery and equipment
|
330,076
|
|
|
300,334
|
|
|
563,745
|
|
|
550,922
|
|
Less accumulated depreciation and amortization
|
(318,388
|
)
|
|
(299,907
|
)
|
|
245,357
|
|
|
251,015
|
|
Capital projects in progress
|
9,240
|
|
|
22,005
|
|
|
$
|
254,597
|
|
|
$
|
273,020
|
|
Included in property, plant and equipment at
December 31, 2018
and
2017
, are fully depreciated assets with an original cost of
$196.8 million
and
$189.9 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 the direct costs of services provided by third-party consultants and payroll for internal employees, both of which are performing development and implementation activities on a software project. As of
December 31, 2018
and
2017
, the Company had capitalized software development costs subject to amortization of
$39.1 million
and
$20.5 million
, respectively, and as of December 31, 2018 and 2017,
$3.6 million
and
$12.2 million
, respectively, included in capital projects in progress.
In November 2018, the Company sold a facility that was not occupied by the Company and was leased to a third party. The Company received net proceeds of
$17.5 million
, after closing costs and sales price adjustments
Depreciation expense, including depreciation of equipment, internally developed software and software acquired through capital lease arrangements, was
$33.3 million
,
$27.3 million
and
$21.6 million
for the years ended December 31,
2018
,
2017
and
2016
, respectively.
|
|
9.
|
Goodwill and Intangible Assets
|
Goodwill
The annual changes in the carrying amount of goodwill, by segment, as of
December 31, 2017
and
2018
, were as follows, respectively:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
North
America
|
|
Europe
|
|
Asia
Pacific
|
|
Total
|
Balance as of January 1, 2017
|
|
|
|
|
|
|
|
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
(1)
|
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
|
|
Goodwill acquired
|
913
|
|
|
—
|
|
|
—
|
|
|
913
|
|
Foreign exchange
|
(233
|
)
|
|
(738
|
)
|
|
(145
|
)
|
|
(1,116
|
)
|
Balance as of December 31, 2018
|
|
|
|
|
|
|
0
|
|
Goodwill
|
107,101
|
|
|
52,573
|
|
|
1,344
|
|
|
161,018
|
|
Accumulated impairment losses
|
(10,666
|
)
|
|
(20,102
|
)
|
|
—
|
|
|
(30,768
|
)
|
|
$
|
96,435
|
|
|
$
|
32,471
|
|
|
$
|
1,344
|
|
|
$
|
130,250
|
|
(1)
During 2017,
$3 thousand
and
$192 thousand
was reclassified to other assets, with a corresponding
$189 thousand
decrease in goodwill related to the CG
Visions and MS Decoupe acquisitions.
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, which is at the country level, except for the United States, Australia and S&P Clever reporting units.
The Company 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 three components: Australia, New Zealand, 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, 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 determined that the S&P Clever reporting unit includes ten components: S&P Switzerland, S&P Poland, S&P Austria, S&P The Netherlands, S&P Portugal, S&P Germany, S&P France, Socom, 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.
The Company may first assess qualitative factors related to the goodwill of the reporting unit to determine whether it is necessary to perform an 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. This assessment method was not utilized in our 2018 annual goodwill impairment test.
For all reporting units, the Company compares the fair value of the reporting unit to its carrying value. The fair value calculation uses both 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, the Company would record an impairment charge equal to the difference between the implied fair value of the goodwill and the carrying value, not to exceed the goodwill asset's carrying amount.
Determining the fair value of a reporting unit, or an indefinite-lived purchased intangible asset, requires 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 calculations.
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
2018
annual testing of goodwill for impairment resulted in an impairment charge. The carrying value of the Denmark reporting unit exceeded its fair value in an amount that approximated the carrying value of its goodwill, primarily due to the reporting unit not meeting management's pre-tax operating profit objectives. As a result, the Company impaired all of the Denmark reporting unit’s goodwill, which was
$6.7 million
at
December 31, 2018
.
The
2017
and
2016
annual testing of goodwill for impairment did not result in impairment charges.
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 definite-lived intangible assets at
December 31, 2018
were
$53.2 million
and
$28.8 million
, respectively. The aggregate amount of amortization expense of intangible assets for the years ended
December 31, 2018
,
2017
and
2016
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 for the years ended December 31, 2018 and 2017 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
Carrying
Amount
|
Patents
|
|
|
Balance at January 1, 2017
|
$
|
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
|
|
Amortization
|
—
|
|
|
(107
|
)
|
|
(107
|
)
|
Removal of fully amortized assets
|
(241
|
)
|
|
241
|
|
|
—
|
|
Balance at December 31, 2018
|
$
|
2,109
|
|
|
$
|
(411
|
)
|
|
$
|
1,698
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
Carrying
Amount
|
Unpatented Technology
|
|
|
Balance at January 1, 2017
|
$
|
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
|
|
Amortization
|
—
|
|
|
(2,557
|
)
|
|
(2,557
|
)
|
Reclassifications
(1)
|
277
|
|
|
—
|
|
|
277
|
|
Foreign exchange
|
(90
|
)
|
|
$
|
—
|
|
|
(90
|
)
|
Removal of fully amortized assets
|
(1,192
|
)
|
|
1,192
|
|
|
—
|
|
Balance at December 31, 2018
|
$
|
20,662
|
|
|
$
|
(12,344
|
)
|
|
$
|
8,318
|
|
(1)
Reclassifications in 2018 of
$0.3 million
in unpatented technology, with a corresponding reduction in other assets related to Technogrout asset acquisition.
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
Carrying
Amount
|
Non-Compete Agreements,
Trademarks and Other
|
|
|
|
|
Balance at January 1, 2017
|
$
|
6,727
|
|
|
(4,100
|
)
|
|
2,627
|
|
Acquisition
|
9,260
|
|
|
—
|
|
|
9,260
|
|
Amortization
|
—
|
|
|
(2,495
|
)
|
|
(2,495
|
)
|
Foreign exchange
|
16
|
|
|
—
|
|
|
16
|
|
Removal of fully amortized assets
|
(3,778
|
)
|
|
3,778
|
|
|
—
|
|
Balance at December 31, 2017
|
12,225
|
|
|
(2,817
|
)
|
|
9,408
|
|
Acquisition
|
879
|
|
|
—
|
|
|
879
|
|
Amortization
|
—
|
|
|
(1,757
|
)
|
|
(1,757
|
)
|
Reclassifications
|
(24
|
)
|
|
—
|
|
|
(24
|
)
|
Removal of fully amortized asset
|
(855
|
)
|
|
855
|
|
|
—
|
|
Balance at December 31, 2018
|
$
|
12,225
|
|
|
$
|
(3,719
|
)
|
|
$
|
8,506
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
Carrying
Amount
|
Customer Relationships
|
|
|
Balance at January 1, 2017
|
$
|
21,217
|
|
|
(14,945
|
)
|
|
6,272
|
|
Acquisition
|
1,091
|
|
|
—
|
|
|
1,091
|
|
Amortization
|
—
|
|
|
(1,574
|
)
|
|
(1,574
|
)
|
Reclassifications
(1)
|
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
|
|
Amortization
|
—
|
|
|
(1,430
|
)
|
|
(1,430
|
)
|
Foreign exchange
|
(115
|
)
|
|
—
|
|
|
(115
|
)
|
Balance at December 31, 2018
|
$
|
17,563
|
|
|
$
|
(12,299
|
)
|
|
$
|
5,264
|
|
(1)
During 2017,
$0.6 million
was reclassified to customer relationships with a corresponding
$0.6 million
decrease in other assets related to the MS Decoupe
acquisition.
At
December 31, 2018
, estimated future amortization of intangible assets was as follows:
(in thousands)
|
|
|
|
|
2019
|
$
|
5,319
|
|
2020
|
5,287
|
|
2021
|
4,807
|
|
2022
|
2,928
|
|
2023
|
2,124
|
|
Thereafter
|
3,321
|
|
|
$
|
23,786
|
|
Indefinite-Lived Intangible Assets
As of
December 31, 2018
, the only indefinite-lived intangible asset, consisting of a trade name, totaled
$0.6 million
.
Definite-lived and indefinite-lived assets, net, by segment as of
December 31, 2018
and
2017
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2018
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
Carrying
Amount
|
(in thousands)
|
|
|
Total Intangible Assets
|
|
|
North America
|
$
|
30,825
|
|
|
$
|
(16,002
|
)
|
|
$
|
14,823
|
|
Europe
|
22,353
|
|
|
(12,774
|
)
|
|
9,579
|
|
Total
|
$
|
53,178
|
|
|
$
|
(28,776
|
)
|
|
$
|
24,402
|
|
|
|
10.
|
Acquisitions and Dispositions
|
Under the business combinations topic of the FASB ASC 805, the Company accounts for acquisitions where the acquiree meets the definition of an acquired business 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, to support our strategic initiative to sell engineered products solutions, 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 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.
The results of operations of the businesses acquired in
2016
through
2018
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 statements of operations.
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 method of accounting and recognized Ruby Sketch investment 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.
Accrued liabilities consisted of the following:
|
|
|
|
|
|
|
|
|
|
December 31,
|
(in thousands)
|
2018
|
|
2017
|
Sales incentive and advertising accruals
|
$
|
36,312
|
|
|
$
|
31,143
|
|
Vacation liability
|
2,901
|
|
|
8,993
|
|
Dividend payable
|
10,024
|
|
|
9,954
|
|
Labor related liabilities
|
22,365
|
|
|
20,196
|
|
Sales taxes payable and other
|
26,970
|
|
|
18,199
|
|
|
$
|
98,572
|
|
|
$
|
88,485
|
|
The Company has revolving lines of credit with various banks in the United States and Europe. Total available credit at
December 31, 2018
was
$304.0 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
$300.0 million
revolving line of 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, 2018
, the LIBOR Rate was
2.46%
, 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. There was no amount outstanding under this revolving line of credit as of December 31, 2018 and 2017, respectively.
In addition to the
$300.0 million
credit facility, the Company’s borrowing capacity under other revolving credit lines totaled
$3.4 million
at
December 31, 2018
. The other revolving credit lines charge interest ranging from
0.49%
to
9.50%
and have maturity
dates of December 2019. The Company had
$0.8 million
outstanding under these other revolving lines of credit as of
December 31, 2018
, and had
no
outstanding balance as of December 31, 2017.
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, 2018
.
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, 2018
,
2017
and
2016
, consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
2018
|
|
2017
|
|
2016
|
Interest costs incurred
|
$
|
1,224
|
|
|
$
|
1,249
|
|
|
$
|
1,167
|
|
Less: Interest capitalized
|
(160
|
)
|
|
(72
|
)
|
|
(20
|
)
|
Interest expense
|
$
|
1,064
|
|
|
$
|
1,177
|
|
|
$
|
1,147
|
|
Capital Lease Obligations
During 2017, 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 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, 2018
, the current portion of the outstanding liability for the leased equipment was approximately
$1.1 million
and the long-term portion was approximately
$1.6 million
.
|
|
14.
|
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
2018
,
2017
and
2016
with respect to all leased property was approximately
$6.9 million
,
$6.4 million
and
$5.9 million
, respectively.
At
December 31, 2018
, minimum rental commitments under all non-cancelable leases were as follows:
(in thousands)
|
|
|
|
|
2019
|
$
|
6,962
|
|
2020
|
5,830
|
|
2021
|
4,481
|
|
2022
|
3,457
|
|
2023
|
2,399
|
|
Thereafter
|
8,563
|
|
Total
|
$
|
31,692
|
|
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 the 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, 2018
, other contractual obligations were as follows:
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2018
|
Debt and Interest Obligations
|
|
Capital Lease Obligations
|
Purchase Obligations
|
|
Total
|
2019
|
$
|
1,234
|
|
|
$
|
1,160
|
|
$
|
28,438
|
|
|
$
|
30,832
|
|
2020
|
450
|
|
|
1,160
|
|
2,367
|
|
|
3,977
|
|
2021
|
250
|
|
|
484
|
|
1,507
|
|
|
2,241
|
|
2022
|
—
|
|
|
—
|
|
583
|
|
|
583
|
|
2023
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
Thereafter
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
Total
|
$
|
1,934
|
|
|
$
|
2,804
|
|
$
|
32,895
|
|
|
$
|
37,633
|
|
Employee Relations
As of December 31, 2018, in the U.S. approximately
14%
of our employees are represented by labor unions and are covered by collective bargaining agreements. The Company has two-facility locations with collective bargaining agreements covering tool and die craftsmen, maintenance workers, and sheet-metal workers. In Stockton, California, two union contracts will expire in September 2019 and June 2023, respectively. Also, the Company has two contracts in San Bernardino County, California that will expire in June 2022 and February 2021, respectively. The Company expects to agree on the extension with the existing labor union contract that will expire in September 2019, while parties are negotiating a new agreement. Based on current information and subject to future events and circumstances, the Company believes 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. Although the plaintiffs’ original complaint did not specifically reference the Company’s products, their subsequent amended complaints make such reference. The amended complaints also allege that sill plates made by a third party are prematurely corroding. 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 and mudsill anchors. 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.
Ronald Yee, et al. v. D.R. Horton, Inc. and D.R. Horton-Schuler Homes
, LLC, Civil No. 18-1-1748-10, a putative class action lawsuit, was filed in the Hawaii First Circuit on October 30, 2018 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 and mudsill anchors made by the Company that are suffering premature corrosion. The case is related to the
Vitale
matter discussed above. The complaint also alleges that sill plates made by a third party are prematurely corroding. The plaintiff homeowners have not sued the Company, and the Company is not currently a party to the
Yee
lawsuit. The lawsuit in the future could potentially involve the Company. If claims are asserted against the Company in the
Yee
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
Yee
case may be covered by its insurance policies
Given the nature and the complexities involved in the
Gentry
,
Vitale
and
Yee
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 has elected to treat any GILTI inclusions as a period cost.
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 is not 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, 2018.
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. During the year ended December 31, 2017, the Company 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. As of December 31, 2018, we have completed our accounting for the tax effects of the Tax Reform Act. Subsequent adjustments to these amounts resulted in additional tax benefits recorded during 2018 of approximately
$0.7 million
and
$0.6 million
, respectively. Management will continue to monitor any changes in tax law.
The provision for income taxes from operations consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
(in thousands)
|
2018
|
|
2017
|
|
2016
|
Current
|
|
|
|
|
|
|
|
|
Federal
|
$
|
27,410
|
|
|
$
|
36,077
|
|
|
$
|
39,649
|
|
State
|
9,515
|
|
|
6,357
|
|
|
7,053
|
|
Foreign
|
4,605
|
|
|
3,068
|
|
|
3,333
|
|
Deferred
|
|
|
|
|
|
|
|
|
Federal
|
3,179
|
|
|
6,093
|
|
|
260
|
|
State
|
263
|
|
|
544
|
|
|
13
|
|
Foreign
|
523
|
|
|
(338
|
)
|
|
(1,142
|
)
|
|
$
|
45,495
|
|
|
$
|
51,801
|
|
|
$
|
49,166
|
|
Income and loss from operations before income taxes for the years ended
December 31, 2018
,
2017
, and
2016
, respectively, consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
(in thousands)
|
2018
|
|
2017
|
|
2016
|
Domestic
|
$
|
169,109
|
|
|
$
|
132,105
|
|
|
$
|
131,827
|
|
Foreign
|
3,019
|
|
|
12,313
|
|
|
7,073
|
|
|
$
|
172,128
|
|
|
$
|
144,418
|
|
|
$
|
138,900
|
|
At
December 31, 2018
, the Company had
$37.0 million
of pre-tax loss carryforwards in various foreign taxing jurisdictions, of which
$0.9 million
will begin to expire between 2019 and 2025. The remaining tax losses can be carried forward indefinitely.
At
December 31, 2018
, and
2017
, the Company had deferred tax valuation allowances of
$13.3 million
and
$11.1 million
, respectively. The valuation allowance increased
$2.1 million
and
$4.2 million
for the years ended
December 31, 2018
and
2017
, respectively. The increase in 2018 valuation allowances was primarily a result of increases in foreign losses in jurisdictions where the Company has recorded a full valuation allowance. The increase in 2017 valuation allowances was primarily due to the Company's remaining foreign tax credits carryforward in the U.S. As of December 31, 2018, the Company believes 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, and as a result, the Company recorded a net
$3.2 million
tax liability based on undistributed foreign earnings of approximately
$23.9 million
. As a result of the implications of the 2017 Tax Reform Act and in satisfying Management’s 2020 Plan, the Company announced one-time distributions from select foreign jurisdictions to the U.S. during 2018. The Company repatriated approximately
$63.0 million
between the third and fourth quarter and recorded taxes of approximately
$1.0 million
which is primarily comprised of withholding taxes and state income taxes. 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)
|
2018
|
|
2017
|
|
2016
|
Federal tax rate
|
21.0
|
%
|
|
35.0
|
%
|
|
35.0
|
%
|
State taxes, net of federal benefit
|
4.5
|
%
|
|
3.2
|
%
|
|
3.4
|
%
|
Tax benefit of domestic manufacturing deduction
|
—
|
%
|
|
(2.0
|
)%
|
|
(2.5
|
)%
|
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
|
%
|
|
1.3
|
%
|
|
(0.1
|
)%
|
True-up of prior year tax returns to tax provision
|
(1.2
|
)%
|
|
(0.5
|
)%
|
|
(0.2
|
)%
|
Difference between United States statutory and foreign local tax rates
|
0.5
|
%
|
|
(0.8
|
)%
|
|
(0.3
|
)%
|
Change in uncertain tax position
|
(0.1
|
)%
|
|
—
|
%
|
|
(0.2
|
)%
|
Other
|
0.4
|
%
|
|
(1.1
|
)%
|
|
0.3
|
%
|
Effective income tax rate
|
26.4
|
%
|
|
35.9
|
%
|
|
35.4
|
%
|
The decrease in the Company’s effective tax rate is primarily driven by the reduced U.S. federal income tax rate in 2018.
The tax effects of the significant temporary differences that constitute the deferred tax assets and liabilities at
December 31, 2018
and
2017
, respectively, were as follows:
|
|
|
|
|
|
|
|
|
|
December 31,
|
(in thousands)
|
2018
|
|
2017
|
Deferred asset taxes
|
|
|
|
|
|
State tax
|
$
|
919
|
|
|
$
|
1,390
|
|
Workers’ compensation
|
785
|
|
|
822
|
|
Health claims
|
445
|
|
|
487
|
|
Vacation liability
|
370
|
|
|
1,008
|
|
Allowance for doubtful accounts
|
171
|
|
|
104
|
|
Inventories
|
5,659
|
|
|
5,385
|
|
Sales incentive and advertising allowances
|
799
|
|
|
709
|
|
Stock-based compensation
|
3,074
|
|
|
2,967
|
|
Unrealized foreign exchange gain or loss
|
440
|
|
|
291
|
|
Foreign tax credit carryforwards
|
5,043
|
|
|
4,453
|
|
Uncertain tax positions’ unrecognized tax benefits
|
39
|
|
|
31
|
|
Foreign tax loss carry forward
|
8,091
|
|
|
6,892
|
|
Other
|
1,813
|
|
|
1,291
|
|
|
$
|
27,648
|
|
|
$
|
25,830
|
|
Less valuation allowances
|
(13,254
|
)
|
|
(11,114
|
)
|
Total deferred asset taxes
|
$
|
14,394
|
|
|
$
|
14,716
|
|
|
|
|
|
Deferred tax liabilities
|
|
|
|
|
|
Depreciation
|
$
|
(9,189
|
)
|
|
$
|
(7,050
|
)
|
Goodwill and other intangibles amortization
|
(13,027
|
)
|
|
(11,331
|
)
|
Tax effect on cumulative translation adjustment
|
(497
|
)
|
|
(487
|
)
|
Total deferred tax liabilities
|
(22,713
|
)
|
|
(18,868
|
)
|
|
|
|
|
Total Deferred tax asset/(liability)
|
$
|
(8,319
|
)
|
|
$
|
(4,152
|
)
|
A reconciliation of the beginning and ending amounts of unrecognized tax benefits in
2018
,
2017
and
2016
, respectively, was as follows, including foreign translation amounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Unrecognized Tax Benefits
|
2018
|
|
2017
|
|
2016
|
Balance at January 1
|
$
|
1,895
|
|
|
$
|
1,119
|
|
|
$
|
1,107
|
|
Additions based on tax positions related to prior years
|
—
|
|
|
660
|
|
|
204
|
|
Reductions based on tax positions related to prior years
|
(171
|
)
|
|
(1
|
)
|
|
—
|
|
Additions for tax positions of the current year
|
100
|
|
|
319
|
|
|
155
|
|
Lapse of statute of limitations
|
(67
|
)
|
|
(202
|
)
|
|
(347
|
)
|
Balance at December 31
|
$
|
1,757
|
|
|
$
|
1,895
|
|
|
$
|
1,119
|
|
Tax positions of
$0.1
,
$0.0
, and
$0.0
million are included in the balance of unrecognized tax benefits at
December 31, 2018
,
2017
, and
2016
, 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, 2018
and
2017
, accrued interest increased by
$5 thousand
and
$0.2 million
, respectively, and during the years ended
2016
, accrued interest decreased by
$61 thousand
. The Company had accrued
$0.4 million
for each of the fiscal years ended
2018
and
2017
and
$0.2 million
for the year ended
2016
, for the potential payment of interest, before income tax benefits.
At
December 31, 2018
, the Company remained subject to United States federal income tax examinations for the tax years 2015 through
2018
. In addition, the Company remained subject to state, local and foreign income tax examinations primarily for the tax years 2013 through
2018
.
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, 2017 and 2018 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, 2018
,
2017
and
2016
, was
$15.8 million
,
$14.2 million
and
$10.1 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, 2018
, 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
$4.5 million
,
$4.0 million
and
$3.1 million
for the years ended
December 31, 2018
,
2017
and
2016
, respectively.
17. Related Party Transactions
During
2018
, the Company identified certain purchases of goods and services from companies where the Chief Executive Officer of the Company serves as a director on the respective company providing the goods or services. 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, 2018
.
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 (comprised primarily of the Company's operations in the United States and Canada), the Europe segment and the Asia/Pacific segment (comprised of the Company’s operations in Asia, the South Pacific, 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 gain on sale of property, rental income and depreciation expense on the Company’s property in Vacaville, California. In November 2018, the Vacaville property was sold for
$17.5 million
, net of closing costs and sales price adjustments and resulted in a pre-tax gain of
$8.8 million
.
The following table shows certain measurements used by management to assess the performance of the segments described above as of
December 31, 2018
,
2017
and
2016
, respectively:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
North
America
|
|
Europe
|
|
Asia/
Pacific
|
|
Administrative
& All Other
|
|
Total
|
2018
|
|
|
|
|
Net sales
|
$
|
910,587
|
|
|
$
|
159,027
|
|
|
$
|
9,195
|
|
|
$
|
—
|
|
|
$
|
1,078,809
|
|
Sales to other segments *
|
2,279
|
|
|
1,773
|
|
|
28,292
|
|
|
—
|
|
|
32,344
|
|
Income from operations
|
164,453
|
|
|
(3,026
|
)
|
|
2,040
|
|
|
8,865
|
|
|
172,332
|
|
Depreciation and amortization
|
30,505
|
|
|
6,297
|
|
|
1,794
|
|
|
797
|
|
|
39,393
|
|
Impairment of goodwill
|
—
|
|
|
6,686
|
|
|
—
|
|
|
—
|
|
|
6,686
|
|
Significant non-cash charges
|
6,340
|
|
|
1,169
|
|
|
48
|
|
|
3,619
|
|
|
11,176
|
|
Provision for income taxes
|
39,638
|
|
|
2,947
|
|
|
113
|
|
|
2,797
|
|
|
45,495
|
|
Capital expenditures and business acquisitions, net of
cash acquired
|
27,059
|
|
|
2,556
|
|
|
1,702
|
|
|
—
|
|
|
31,317
|
|
Total assets
|
1,119,012
|
|
|
157,437
|
|
|
25,644
|
|
|
(280,430
|
)
|
|
1,021,663
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 (loss) from operations
|
132,995
|
|
|
2,723
|
|
|
1,296
|
|
|
901
|
|
|
137,915
|
|
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
|
137,466
|
|
|
2,115
|
|
|
1,807
|
|
|
(178
|
)
|
|
141,210
|
|
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 (benefit from) 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
|
|
* 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
$113.6 million
,
$80.2 million
and
$137.4 million
as of
December 31, 2018
,
2017
and
2016
, respectively. As of
December 31, 2018
, the Company had
$45.5 million
, or
28.4%
, 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 repatriated to the United States.
The significant non-cash charges comprise compensation related to equity 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, 2018
,
2017
and
2016
, respectively:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
|
2016
|
(in thousands)
|
Net
Sales
|
|
Long-Lived
Assets
|
|
Net
Sales
|
|
Long-Lived
Assets
|
|
Net
Sales
|
|
Long-Lived
Assets
|
United States
|
$
|
860,482
|
|
|
$
|
210,063
|
|
|
$
|
758,181
|
|
|
$
|
223,184
|
|
|
$
|
702,071
|
|
|
$
|
192,787
|
|
Canada
|
46,874
|
|
|
4,257
|
|
|
43,176
|
|
|
4,650
|
|
|
38,269
|
|
|
4,473
|
|
United Kingdom
|
27,194
|
|
|
1,417
|
|
|
23,157
|
|
|
1,459
|
|
|
20,751
|
|
|
1,183
|
|
Germany
|
22,950
|
|
|
13,221
|
|
|
21,821
|
|
|
14,153
|
|
|
33,062
|
|
|
12,582
|
|
France
|
40,182
|
|
|
7,891
|
|
|
36,677
|
|
|
9,152
|
|
|
20,905
|
|
|
8,349
|
|
Poland
|
10,200
|
|
|
2,794
|
|
|
20,409
|
|
|
2,471
|
|
|
6,633
|
|
|
1,830
|
|
Sweden
|
15,461
|
|
|
1,154
|
|
|
16,421
|
|
|
1,068
|
|
|
—
|
|
|
—
|
|
Denmark
|
11,682
|
|
|
1,454
|
|
|
14,723
|
|
|
1,601
|
|
|
15,728
|
|
|
1,249
|
|
Norway
|
12,324
|
|
|
—
|
|
|
12,902
|
|
|
229
|
|
|
—
|
|
|
—
|
|
Switzerland
|
6,939
|
|
|
8,067
|
|
|
5,593
|
|
|
8,748
|
|
|
6,549
|
|
|
8,469
|
|
Australia
|
6,119
|
|
|
199
|
|
|
5,501
|
|
|
268
|
|
|
4,741
|
|
|
239
|
|
Belgium
|
5,547
|
|
|
1,961
|
|
|
5,050
|
|
|
2,065
|
|
|
1,286
|
|
|
1,798
|
|
The Netherlands
|
5,068
|
|
|
81
|
|
|
4,834
|
|
|
110
|
|
|
4,909
|
|
|
21
|
|
New Zealand
|
3,061
|
|
|
111
|
|
|
2,604
|
|
|
130
|
|
|
2,474
|
|
|
163
|
|
Chile
|
3,233
|
|
|
41
|
|
|
2,314
|
|
|
61
|
|
|
1,572
|
|
|
56
|
|
Other countries
|
1,493
|
|
|
11,635
|
|
|
3,662
|
|
|
12,710
|
|
|
1,711
|
|
|
7,471
|
|
|
$
|
1,078,809
|
|
|
$
|
264,346
|
|
|
$
|
977,025
|
|
|
$
|
282,059
|
|
|
$
|
860,661
|
|
|
$
|
240,670
|
|
Net sales and long-lived assets, excluding 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, 2018
,
2017
and
2016
, respectively:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
2018
|
|
2017
|
|
2016
|
Wood Construction
|
$
|
913,202
|
|
|
$
|
833,200
|
|
|
$
|
732,414
|
|
Concrete Construction
|
165,317
|
|
|
143,102
|
|
|
128,247
|
|
Other
|
290
|
|
|
723
|
|
|
—
|
|
Total
|
$
|
1,078,809
|
|
|
$
|
977,025
|
|
|
$
|
860,661
|
|
No customer accounted for as much as
10%
of net sales for the years ended
December 31, 2018
,
2017
and
2016
.
On
January 28, 2019
, the Board declared a cash dividend of
$0.22
per share of our common stock, estimated to be
$9.8 million
in total. The record date for the dividend will be
April 4, 2019
, and will be paid on
April 25, 2019
. At the same meeting, the Board authorized the Company to repurchase up to
$100.0 million
of the Company's common stock. The authorization is in effect from January 1, 2019 through December 31, 2019.
During February 2019, a tentative settlement in principle was reached to resolve a certain pending legal proceeding outstanding as of the year end. As a result, the Company recorded a charge to Administrative expense, which decreased net income by approximately
$2.9 million
after taxes from the amount previously disclosed in the Company’s earnings release dated February 4, 2019. Diluted earnings per share decreased from
$2.78
reported previously to
$2.72
per diluted share. The adjustment had no material impact to the Company’s consolidated balance sheet or cash flows for the period.
|
|
20.
|
Selected Quarterly Financial Data (Unaudited)
|
In 2018, the Company recorded out-of-period adjustments, which increased cost of sales and decreased general and administrative expenses in equal amounts. Such adjustment only applied to the North America segment, which resulted from recording certain depreciation expense on company-owned real estate as general and administrative expense rather than cost of goods sold. Income from operations and net income for each of the quarters as presented below were not affected by the adjustment. In 2018, the Company changed its presentation of its consolidated statement of operations to display foreign exchange gain (loss), net, as a separate item below income from operations. Foreign exchange gain (loss), net, was previously included in general and administrative expenses and in income from operations. Income before tax and net income for each of the quarters as presented below were not affected by the change in presentation.
The following table sets forth selected quarterly financial data for each of the quarters in
2018
and
2017
, respectively:
(in thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
|
Fourth
Quarter
|
|
Third
Quarter
|
|
Second
Quarter
|
|
First
Quarter
|
|
Fourth
Quarter
|
|
Third
Quarter
|
|
Second
Quarter
|
|
First
Quarter
|
|
|
|
|
|
|
|
|
Net sales
|
$
|
241,845
|
|
|
$
|
284,178
|
|
|
$
|
308,007
|
|
|
$
|
244,779
|
|
|
$
|
231,681
|
|
|
$
|
262,476
|
|
|
$
|
263,002
|
|
|
$
|
219,867
|
|
Cost of sales
|
143,409
|
|
|
150,282
|
|
|
167,442
|
|
|
137,157
|
|
|
129,777
|
|
|
143,338
|
|
|
140,139
|
|
|
120,390
|
|
Gross profit
|
98,436
|
|
|
133,896
|
|
|
140,565
|
|
|
107,622
|
|
|
101,904
|
|
|
119,138
|
|
|
122,863
|
|
|
99,477
|
|
Research and development and other engineering
|
10,216
|
|
|
10,441
|
|
|
11,249
|
|
|
11,150
|
|
|
12,565
|
|
|
11,265
|
|
|
11,967
|
|
|
11,819
|
|
Selling
|
26,278
|
|
|
26,879
|
|
|
29,201
|
|
|
27,573
|
|
|
28,753
|
|
|
27,867
|
|
|
28,646
|
|
|
29,637
|
|
General and administrative
|
45,195
|
|
|
37,356
|
|
|
39,354
|
|
|
37,188
|
|
|
36,236
|
|
|
33,441
|
|
|
37,586
|
|
|
35,845
|
|
Total operating expenses
|
81,689
|
|
|
74,676
|
|
|
79,804
|
|
|
75,911
|
|
|
77,554
|
|
|
72,573
|
|
|
78,199
|
|
|
77,301
|
|
Net gain on disposal of assets
|
(8,810
|
)
|
|
(460
|
)
|
|
(125
|
)
|
|
(1,184
|
)
|
|
(13
|
)
|
|
(147
|
)
|
|
50
|
|
|
(50
|
)
|
Impairment of goodwill
|
6,686
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Income from operations
|
18,871
|
|
|
59,680
|
|
|
60,886
|
|
|
32,895
|
|
|
24,363
|
|
|
46,712
|
|
|
44,614
|
|
|
22,226
|
|
Loss in equity investment, before tax
|
(11
|
)
|
|
(30
|
)
|
|
2
|
|
|
(24
|
)
|
|
(33
|
)
|
|
(13
|
)
|
|
(12
|
)
|
|
(28
|
)
|
Foreign exchange gain (loss)
|
(571
|
)
|
|
1,242
|
|
|
(142
|
)
|
|
(99
|
)
|
|
342
|
|
|
(16
|
)
|
|
523
|
|
|
403
|
|
Interest (expense) income, net
|
(239
|
)
|
|
(58
|
)
|
|
(184
|
)
|
|
(90
|
)
|
|
(104
|
)
|
|
(296
|
)
|
|
(199
|
)
|
|
(189
|
)
|
Gain (adjustment) on bargain purchase of a business
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,052
|
)
|
|
—
|
|
|
8,388
|
|
Gain (loss) on disposal of a business
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(654
|
)
|
|
443
|
|
|
—
|
|
|
—
|
|
Income before income taxes
|
18,050
|
|
|
60,834
|
|
|
60,562
|
|
|
32,682
|
|
|
23,914
|
|
|
44,778
|
|
|
44,926
|
|
|
30,800
|
|
Provision for
income taxes
|
5,293
|
|
|
16,473
|
|
|
16,476
|
|
|
7,253
|
|
|
10,829
|
|
|
16,581
|
|
|
16,712
|
|
|
7,679
|
|
Net income
|
$
|
12,757
|
|
|
$
|
44,361
|
|
|
$
|
44,086
|
|
|
$
|
25,429
|
|
|
$
|
13,085
|
|
|
$
|
28,197
|
|
|
$
|
28,214
|
|
|
$
|
23,121
|
|
Earnings per share of common stock:
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
0.28
|
|
|
$
|
0.96
|
|
|
$
|
0.95
|
|
|
$
|
0.55
|
|
|
$
|
0.28
|
|
|
$
|
0.60
|
|
|
$
|
0.59
|
|
|
$
|
0.49
|
|
Diluted
|
0.28
|
|
|
0.95
|
|
|
0.94
|
|
|
0.54
|
|
|
0.27
|
|
|
0.59
|
|
|
0.59
|
|
|
0.48
|
|
Cash dividends declared per
share of common stock
|
$
|
0.22
|
|
|
$
|
0.22
|
|
|
$
|
0.22
|
|
|
$
|
0.21
|
|
|
$
|
—
|
|
|
$
|
0.42
|
|
|
$
|
0.21
|
|
|
$
|
0.18
|
|
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.