Delaware | 1-13429 | 94-3196943 | ||
(State or other jurisdiction of incorporation) | (Commission file number) | (I.R.S. Employer Identification No.) | ||
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-2) | |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240. 13e-4(c)) | |
(d) | Exhibits |
Exhibit No. | Description | |
99.1 | Press Release dated April 27, 2017 | |
Simpson Manufacturing Co., Inc. | ||||
(Registrant) | ||||
DATE: | April 27, 2017 | By | /s/ Brian J. Magstadt | |
Brian J. Magstadt | ||||
Chief Financial Officer | ||||
l Net sales of $219.9 million increased 10% quarter-over-quarter |
l Diluted net income per common share was $0.48 |
l Recorded Bargain Purchase Gain of $8.4 million or $0.18 per diluted common share |
l Declared quarterly cash dividend of $0.21 per share |
• | Net sales increased 10% to $219.9 million from $199.5 million. Recent acquisitions accounted for $12.6 million of the increase in net sales. |
◦ | Net sales to lumber dealers, dealer distributors and home centers increased, primarily due to increased home construction activity, while net sales to contractor distributors decreased. |
◦ | Wood construction product net sales, including sales of connectors, truss plates, fastening systems, fasteners and shearwalls, represented 87% and 86% of the Company's total net sales in the first quarters of 2017 and 2016, respectively. |
◦ | Concrete construction product net sales, including sales of adhesives, chemicals, mechanical anchors, powder actuated tools and reinforcing fiber materials, represented 13% and 14% of the Company's total net sales in the first quarters of 2017 and 2016, respectively. |
• | Gross profit increased to $100.2 million from $92.5 million. Gross profit margin was 46% in both quarters. |
◦ | Recent acquisitions had an average gross profit margin of 30%. |
◦ | Product group – The gross profit margins, including some inter-segment expenses, which were eliminated in consolidation, and excluding other expenses that are allocated according to product group, decreased to 47% from 48% for wood construction products and was 32% for both quarters for concrete construction products. |
• | Research and development and engineering expense increased 15% to $13.1 million from $11.4 million, primarily due to an increase of $1.3 million in personnel costs, primarily related to the recent North America acquisition as well as the addition of staff and pay rate increases instituted on January 1, 2017, and a $0.4 million increase in stock-based compensation (see "Stock-based compensation" below), most of which occurred in North America. Recent acquisitions increased research and development and engineering expense by $1.1 million. |
• | Selling expense increased 17% to $29.5 million from $25.2 million, primarily due to increases of $2.6 million in personnel costs, $1.1 million in advertising costs and $0.9 million in stock-based compensation, partly offset by decreases of $0.5 million in professional fees and $0.3 million in cash profit sharing and sales commissions expenses. Recent acquisitions increased selling expense by $1.8 million. |
• | General and administrative expense increased 19% to $35.0 million from $29.3 million, primarily due to increases of $3.0 million in stock-based compensation, $3.0 million in legal and professional fees, mostly related to strategic initiatives such as software and systems integration and compensation and governance changes, $1.0 million in personnel costs, mostly related to the addition of staff and pay rate increases instituted on January 1, 2017, $0.6 million in software licensing and maintenance fees, $0.3 million in bad debt expense, and $0.2 million in intangible amortization expense related to recent acquisitions. That was partly offset by decreases of $1.4 million in cash profit sharing expense on lower operating income and reduced payouts under our executive officer cash profit sharing plan, $0.4 million in depreciation expense, and a $1.0 million decrease in net foreign currency losses. Recent acquisitions increased general and administrative expenses by $1.0 million. |
• | The Company's effective income tax rate decreased to 25% from 38%. The decreases were primarily due to a non-recurring gain on a bargain purchase related to the Gbo Fastening Systems acquisitions (see "Gain on bargain purchase" below), which was not taxable, and the adoption of Financial Accounting Standards Board Update No. 2016-09 (“ASU 2016-09”) in 2017, which recognizes the excess tax benefits of stock-based awards as a reduction to income tax expense instead of the previous methodology which recorded the benefit on the balance sheet as a component of stockholders' equity. |
• | Stock-based compensation – Stock-based compensation expense increased $5.1 million, primarily due to a $3.7 million increase from an updated retirement eligibility requirement for stock-based awards that were granted in February 2017, as well as a $1.6 million increase in expense related to 2017 awards, whose vesting is subject to achieving future performance goals. The updated retirement eligibility requirement increased the number of employees that were eligible for retirement and accelerated recognition of the expense related to those awards in the first quarter of 2017. For the 2017 awards, an expense was first recorded in the first quarter of 2017, whereas the expense related to similar awards in 2016 was first recorded in the second quarter of 2016. The acceleration of the recognition of the stock-based compensation expense in the first quarter of 2017 is expected to reduce the stock-based compensation expense related to the same awards in future periods through early fiscal 2021. |
• | Gain on bargain purchase – On January 3, 2017, the Company acquired Gbo Fastening Systems, a Sweden limited company, for approximately $10.2 million. Gbo Fastening Systems manufactures and sells a complete line of CE-marked structural fasteners and unique fastener dimensioning software for wood construction applications currently sold mostly in northern and eastern Europe, which is expected to complement the Company's line of wood construction products in Europe. This transaction was recorded as a business combination in accordance with the business acquisition method. The Company recorded a preliminary bargain purchase gain of $8.4 million, which represents an estimate of the excess fair value of the net assets acquired and liabilities assumed over the consideration exchanged as of the acquisition date. The Company assessed the preliminary recognition and measurement of the assets acquired and liabilities assumed based on historical and pro forma data for future periods and concluded that its valuation procedures and resulting measures were reasonably appropriate. This non-recurring, non-operating income gain is included in the line item “Gain on bargain purchase of a business” in the results of operations below for the three months ended March 31, 2017. |
• | Net income was $23.1 million compared to $16.3 million. Diluted net income per common share was $0.48 compared to $0.34. The increase in net income was primarily due to the non-recurring $8.4 million gain on a bargain purchase (see "Gain on bargain purchase" above), which increased diluted net income $0.18 per common share. |
• | Net sales increased 5%, mostly due to increased average net sales unit prices in the United States as well as an increase in sales volumes. Canada's net sales increased, primarily due to increased sales volumes on flat average net sales unit prices. Canada's net sales were not significantly affected by foreign currency translation. The recent North America acquisition increased net sales by $1.5 million. |
• | Gross profit margin was 48% in both quarters, primarily due to a decrease in material costs, offset by increases in factory overhead, partly due to increases of $0.9 million in stock-based compensation (see "Stock-based compensation" above), labor, shipping and warehousing. |
• | Research and development and engineering expense increased 15% to $11.8 million from $10.3 million, primarily due to an increase of $1.2 million in personnel costs, primarily related to the recent North America acquisition as well as the addition of staff and pay rate increases instituted on January 1, 2017, and a $0.3 million increase in stock-based compensation |
• | Selling expense increased $2.8 million, primarily due to increases of $1.1 million in personnel costs, mostly related to the addition of staff and pay rate increases instituted on January 1, 2017, $1.1 million in advertising costs, and $0.9 million in stock-based compensation, partly offset by decreases of $0.3 million in cash profit sharing and sales commissions expenses and $0.3 million in professional fees. |
• | General and administrative expense increased $4.7 million, primarily due to increases of $2.8 million in legal and professional fees, $2.2 million in stock-based compensation, $0.8 million in personnel costs, mostly related to the addition of staff and pay rate increases instituted on January 1, 2017, $0.5 million in software licensing and maintenance fees, $0.2 million in intangible amortization expense, and $0.2 million in bad debt expense, partly offset by decreases of $0.9 million in cash profit sharing expense and $0.3 million in depreciation expense, as well as a $0.9 million decrease in net foreign currency losses. The recent North America acquisition increased general and administrative expense by $0.4 million. |
• | Net sales increased 45%, mostly due to recent Europe acquisitions. Recent Europe acquisitions had the effect of increasing net sales by $11.1 million, which was offset by the negative effects of approximately $1.3 million in foreign currency translations, primarily related to the weakening of the British pound against the United States dollar in the latter half of 2016. |
• | Gross profit margin decreased to 32% from 36%, primarily due to recent Europe acquisitions. Recent Europe acquisitions had an average gross profit margin of 21%. |
• | Selling expense increased $1.4 million, primarily due to an increase of $1.3 million in personnel costs, mostly related to the addition of staff, partly offset by a decrease of $0.3 million in professional fees. Recent Europe acquisitions increased selling expense by $1.7 million. |
• | General and administrative expense increased $1.1 million, primarily due to increases of $0.3 million in personnel costs, mostly related to the addition of staff and pay rate increases instituted on January 1, 2017, $0.2 million in stock-based compensation, and $0.2 million in in software licensing and maintenance fees. Recent Europe acquisitions increased general and administrative expense by $0.6 million. |
• | For information about the Company's Asia/Pacific segment, which it believes is not significant to overall performance, please refer to the additional financial data of the Company for the three months ended March 31, 2017 and 2016, below. |
• | General and administrative expenses decreased, primarily due to a decrease of $0.7 million in cash profit sharing expense, partly offset by an increase of $0.6 million in stock-based compensation. |
• | Market prices for steel to remain relatively stable during the second quarter of 2017. |
• | Gross profit margin for the full-year of 2017 to be approximately 45% to 46%. |
• | The effective tax rate for the full-year of 2017 to be between 34% and 36%, which includes the non-recurring gain on a bargain purchase and the adoption of ASU 2016-09. |
Three Months Ended March 31, | |||||||
(Amounts in thousands, except per share data) | 2017 | 2016 | |||||
Net sales | $ | 219,867 | $ | 199,523 | |||
Cost of sales | 119,711 | 107,000 | |||||
Gross profit | 100,156 | 92,523 | |||||
Research and development and engineering expense | 13,108 | 11,423 | |||||
Selling expense | 29,483 | 25,187 | |||||
General and administrative expense | 34,986 | 29,298 | |||||
Gain on disposal of assets | (51 | ) | (26 | ) | |||
Income from operations | 22,630 | 26,641 | |||||
Income in equity method investment, before tax | (28 | ) | — | ||||
Interest expense, net | (189 | ) | (235 | ) | |||
Gain on bargain purchase of a business | 8,388 | — | |||||
Income before taxes | 30,801 | 26,406 | |||||
Provision for income taxes | 7,680 | 10,063 | |||||
Net income | $ | 23,121 | $ | 16,343 | |||
Earnings per common share: | |||||||
Basic | $ | 0.49 | $ | 0.34 | |||
Diluted | $ | 0.48 | $ | 0.34 | |||
Weighted average shares outstanding: | |||||||
Basic | 47,616 | 48,297 | |||||
Diluted | 47,906 | 48,450 | |||||
Cash dividend declared per common share | 0.18 | 0.16 | |||||
Other data: | |||||||
Depreciation and amortization | $ | 8,363 | $ | 7,437 | |||
Pre-tax equity-based compensation expense | $ | 7,976 | $ | 2,750 | |||
March 31, | December 31, | |||||||||||
(Amounts in thousands) | 2017 | 2016 | 2016 | |||||||||
Cash and cash equivalents | $ | 167,059 | $ | 232,028 | $ | 226,537 | ||||||
Trade accounts receivable, net | 148,506 | 135,123 | 112,423 | |||||||||
Inventories | 256,271 | 210,787 | 232,274 | |||||||||
Other current assets | 13,744 | 13,284 | 14,013 | |||||||||
Total current assets | 585,580 | 591,222 | 585,247 | |||||||||
Property, plant and equipment, net | 250,465 | 216,660 | 232,810 | |||||||||
Goodwill | 135,113 | 125,614 | 124,479 | |||||||||
Other noncurrent assets | 47,042 | 35,465 | 37,438 | |||||||||
Total assets | $ | 1,018,200 | $ | 968,961 | $ | 979,974 | ||||||
Trade accounts payable | $ | 38,219 | $ | 29,023 | $ | 27,674 | ||||||
Capital lease obligation - current portion | 521 | — | — | |||||||||
Other current liabilities | 84,821 | 70,523 | 81,122 | |||||||||
Total current liabilities | 123,561 | 99,546 | 108,796 | |||||||||
Other long-term liabilities - net of current portion | 7,686 | 5,159 | 5,336 | |||||||||
Stockholders' equity | 886,953 | 864,256 | 865,842 | |||||||||
Total liabilities and stockholders' equity | $ | 1,018,200 | $ | 968,961 | $ | 979,974 | ||||||
Three Months Ended | |||||||||||
March 31, | % | ||||||||||
(Amounts in thousands) | 2017 | 2016 | change* | ||||||||
Net Sales by Reporting Segment | |||||||||||
North America | $ | 183,772 | $ | 174,454 | 5% | ||||||
Europe | 34,381 | 23,698 | 45% | ||||||||
Asia/Pacific | 1,714 | 1,371 | 25% | ||||||||
Total | $ | 219,867 | $ | 199,523 | 10% | ||||||
Net Sales by Product Group** | |||||||||||
Wood Construction | $ | 190,877 | $ | 171,777 | 10% | ||||||
Concrete Construction | 28,817 | 27,745 | 4% | ||||||||
Other | 173 | 1 | N/M | ||||||||
Total | $ | 219,867 | $ | 199,523 | 10% | ||||||
Gross Profit (Loss) by Reporting Segment | |||||||||||
North America | $ | 88,990 | $ | 83,713 | 6% | ||||||
Europe | 11,056 | 8,562 | 29% | ||||||||
Asia/Pacific | 129 | 306 | (58)% | ||||||||
Administrative and all other | (19 | ) | (58 | ) | 67% | ||||||
Total | $ | 100,156 | $ | 92,523 | 8% | ||||||
Income (Loss) from Operations | |||||||||||
North America | $ | 26,767 | $ | 30,452 | (12)% | ||||||
Europe | (1,835 | ) | (1,618 | ) | (13)% | ||||||
Asia/Pacific | (195 | ) | 155 | (226)% | |||||||
Administrative and all other | (2,107 | ) | (2,348 | ) | 10% | ||||||
Total | $ | 22,630 | $ | 26,641 | (15)% | ||||||
* | Unfavorable percentage changes are presented in parentheses. | |
** | The Company manages its business by geographic segment but is presenting sales by product group as additional information. | |
N/M | Statistic is not material or not meaningful. | |