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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 
FORM 10-K 
(Mark One) 
     Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 
For the fiscal year ended December 31, 2023 
OR 
         Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
for the transition period from                      to                 . 
Commission file number:  1-13429 
Simpson Manufacturing Co., Inc.
(Exact name of registrant as specified in its charter) 
Delaware 94-3196943
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
 
    5956 W. Las Positas Blvd., Pleasanton, CA                             94588
    (Address of principal executive offices)                              (Zip Code)
Registrant’s telephone number, including area code:  (925) 560-9000 
Securities registered pursuant to Section 12(b) of the Act: 
Title of Each ClassTrading SymbolName of Each Exchange on Which Registered
Common Stock, par value $0.01SSDNew York Stock Exchange
 
Securities registered pursuant to Section 12(g) of the Act: 
None
(Title of class) 
        Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  ý  No  o 
    Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.
Yes  o  No  ý
    Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  ý  No  o 
    Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  ý  No  o 
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of
the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.
7262(b)) by the registered public accounting firm that prepared or issued its audit report.
    Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filerxAccelerated filer  
Non-accelerated filer    Smaller reporting company  
Emerging growth company 
 
    If an emerging growth company, indicate by check mark if the registrant has elected has elected not to use the extended transition period for complying with the new or revised financial accounting standards provided pursuant to Section 13 (a) of the Exchange Act o

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. o

1



Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).
    
    Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes    No  ý 

    The aggregate market value of the shares of common stock, par value $0.01 per share, which is the only outstanding class of voting and non-voting equity, held by non-affiliates of the registrant (based on the closing price for the common stock on the New York Stock Exchange on June 30, 2023) was approximately $5,910,175,321.
    As of February 22, 2024, 42,467,634 shares of the registrant’s common stock were outstanding. 

Documents Incorporated by Reference 
Portions of the registrant's definitive Proxy Statement for its 2024 annual meeting of stockholders (the "2024 Annual Meeting") are incorporated herein by reference in Part III of this Annual Report on Form 10-K to the extent stated herein. Such Proxy Statement will be filed with the Securities and Exchange Commission (the "SEC") within 120 days of the registrant's fiscal year ended December 31, 2023.
2



SIMPSON MANUFACTURING CO., INC.

TABLE OF CONTENTS
 
Page
PART I
Item 1.
Item 1A.
Item 1B.
Item 1C.
Item 2.
Item 3.
Item 4.
PART II
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 9C.
PART III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
PART 1V
Item 15.
Item 16.

3



NOTE ABOUT FORWARD-LOOKING STATEMENTS

In this filing we make statements concerning our expectations, beliefs, plans, objectives, goals, strategies, and future events or performance. Such statements are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended "the "Exchange Act"). Forward-looking statements generally can be identified by words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “target,” “continue,” “predict,” “project,” “change,” “result,” “future,” “will,” “could,” “can,” “may,” “likely,” “potentially,” or similar expressions. Forward-looking statements are all statements other than those of historical fact and include, but are not limited to, statements about future financial and operating results, our plans, objectives, business outlook, priorities, expectations and intentions, expectations for sales and market growth, comparable sales, earnings and performance, stockholder value, capital expenditures, cash flows, the housing market, the home improvement industry, demand for services, share repurchases, our ongoing integration of FIXCO Invest S.A.S ("ETANCO"), our strategic initiatives, including the impact of these initiatives, on our strategic and operational plans and financial results, and any statement of an assumption underlying any of the foregoing.

Forward-looking statements are subject to inherent uncertainties, risks and other factors that are difficult to predict and could cause our actual results to vary in material respects from what we have expressed or implied by these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those expressed in or implied by our forward-looking statements include, the effects of inflation and labor and supply shortages on our operations, the operations of our customers, suppliers and business partners, and our ongoing integration of ETANCO and those discussed under Item 1A. Risk Factors and Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023. Additional risks include: the cyclicality and impact of general economic conditions; changing conditions in global markets including the impact of sanctions and tariffs, quotas and other trade actions and import restrictions; the impact of pandemics, epidemics or other public health emergencies; volatile supply and demand conditions affecting prices and volumes in the markets for both our products and raw materials we purchase; the impact of foreign currency fluctuations; potential limitations on our ability to access capital resources and borrowings under our existing credit agreement; restrictions on our business and financial covenants under our credit agreement; reliance on employees subject to collective bargaining agreements; and or ability to repurchase shares of our common stock and the amounts and timing of repurchases, if any.

We caution that you should not place undue reliance on these forward-looking statements, which speak only as of the date of this report. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law. Readers are urged to carefully review and consider the various disclosures made by us in this report and in our other reports filed with the Securities and Exchange Commission (the "SEC") that advise of the risks and factors that may affect our business.

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PART I
 
Item 1. Business.

Company Background

Simpson Manufacturing Co., Inc. ("Simpson," the "Company," "we," "us," or "our,") through its subsidiaries, including, Simpson Strong-Tie Company Inc. ("SST"), designs, engineers and is a leading manufacturer of structural solutions for wood, concrete, and steel connections. These solutions help customers design and build safer and stronger structures. The Company is relentlessly focused on providing customers the best in-class field support, technical expertise, digital tools, and training. Our research, rigorous testing, and focus on innovation enable us to design cost-effective, high-performing, and easy-to-install solutions for a multitude of applications in wood, steel, and concrete structures. Our products for wood construction are used in light-frame building applications and include connectors, truss plates, screw fastening systems, fasteners and pre-fabricated lateral-force resisting systems. Our products for concrete construction products are used in concrete, masonry and steel building applications and include adhesives, chemicals, mechanical anchors, carbide drill bits, powder actuated tools, fiber reinforced materials, and other repair products used for protecting and strengthening structures. We market our products to the residential construction, commercial construction, original equipment manufacturer ("OEM"), component manufacturers and national retail markets domestically in North America, primarily in the United States, and internationally, primarily in Europe. We also provide engineering services to support and enhance products and specifications of products while growing our offering of digital tools and design, planning and estimating software to facilitate the specification, selection and use of our products. The Company has continuously manufactured structural connectors since 1956 and believes that the Simpson Strong-Tie® brand benefits from strong brand name recognition in residential, light industrial and commercial applications.

Acquisition of ETANCO

As previously disclosed, on April 1, 2022, the Company successfully completed the acquisition of 100% of the outstanding equity interest of FIXCO Invest S.A.S. (together with its subsidiaries, "ETANCO"). ETANCO is a leading designer, manufacturer and distributor of fixing and fastening solutions for the European building and construction market. ETANCO's primary product applications directly align with the addressable markets in which the Company operates, expands our portfolio of solutions, including mechanical anchors, fasteners and commercial building envelope solutions, and significantly increase our market presence across Europe. We continue to believe that the acquisition of ETANCO will support continued growth in our European business, including expansion into new geographies, sales channels and commercial building offerings. For more information, see “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Sales

The Company attracts and retains customers by designing, manufacturing and selling high quality, high-performing products that are cost-effective and easy for our customers to install. The Company manufactures and warehouses its products in geographic proximity to its markets to help ensure availability and facilitate timely delivery to customers, which enables us to promptly respond to customer requests for specially designed products and services. The Company maintains levels of inventory intended to operate with minimum backlog and fill most customer orders within 24-48 hours. High levels of manufacturing automation and flexibility allow the Company to maintain its high-quality standards while continuing to provide prompt delivery to meet our customers' needs.

The Company intends to continue efforts to increase market share in its geographic markets of North America, Europe, and Asia/Pacific as well as across its broad product range through:

An increasingly diverse portfolio of products and software, and a commitment to developing complete solutions for the markets we serve;
Our long-standing reputation, relationships and engagement with engineers, building officials, and contractors to design safer, stronger structures and improve construction standards and practices;
A dedication to innovation and extensive product engineering along with rigorous research and testing in our nine state-of-the-art labs;
Striving for best-in-class field support, technical expertise, digital tools, and training to make it easy to select, specify, install and purchase our products;
Industry-leading product availability and delivery standards on our vast product offering across multiple distribution channels, with typical delivery within 24-48 hours and high fill rates;
A deep commitment to trades education and partnering with organizations that provide training and career opportunities to attract more people to the construction industry and alleviate labor shortages; and
Building out or introducing additional solutions and offerings to our end-market customers in the residential, OEM, commercial, national retail, and component manufacturer areas.
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Products and Services

Historically, the Company’s product lines have encompassed connectors, anchors, fasteners, lateral-force resisting systems, and truss plates, as well as repair and strengthening product lines for the industrial and transportation markets. See “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Note 19 — Segment Information” to the Company’s consolidated financial statements for financial information regarding revenues by product category. The Company has established a presence in Europe through acquisition of companies with existing customer bases, such as the acquisition of ETANCO, and through servicing U.S.-based customers operating in Europe. The Company also distributes connector, anchor, and epoxy products in Canada, Mexico, Chile, Australia, and New Zealand. Additionally, with the acquisition of ETANCO, the Company expanded its product portfolio to include commercial building envelope solutions and significantly increased its market presence across Europe.

Many of the Company’s products are code-listed and approved by building code evaluation agencies. To achieve these approvals, the Company conducts extensive product testing, which is witnessed and certified by independent testing laboratories. These tests also provide the basis of load ratings for the Company’s structural products. This test and load information is used by architects, engineers, contractors, building officials, and homeowners in selecting our products and comparing them to those of competitors, and is useful across all applications of the Company’s products, ranging from the deck constructed by a homeowner to a multi-story structure designed by an architect or engineer.

Structural Products for Wood Construction. The Company produces and markets over 15,000 standard and custom products for wood construction applications. These products are used primarily to strengthen, support and connect wood applications in residential and commercial construction and do-it-yourself (“DIY”) projects. The Company’s wood construction products contribute to structural integrity and resistance to seismic, wind and gravitational forces. As described below, the Company’s wood construction products include:

Connectors - Connectors are prefabricated metal products that attach wood, concrete, masonry or steel together and are essential for tying wood construction elements together and create safer and stronger buildings. Included in this category are connectors, holddowns, and truss connector plates.
Fasteners - The fastening line includes various nails, screws and staples, which are complemented by the Company's multiple screw fastening systems, which are used in numerous applications such as building envelope applications, decking, subfloors, drywall and roofing; and
Lateral-Force Resisting Systems - Lateral-force resisting systems are assemblies used to resist earthquake or wind forces and include pre-fabricated steel and wood shearwalls, Anchor Tiedown Systems (ATS), and yield-link connections for steel moment and braced frames.

Structural Products for Concrete Construction. The Company produces and markets over 3,000 standard and custom products for concrete construction applications. These products are composed of various materials including steel, chemicals and carbon fiber. They are used primarily to anchor, protect and strengthen concrete, brick and masonry applications in industrial, infrastructure, residential, commercial and DIY projects. The Company’s product solutions for concrete construction applications contribute to structural integrity and resistance to seismic, wind and gravitational forces. These products are sold in all segments of the Company. As described below, the Company’s concrete construction products include:

Anchor Products - Anchor products include adhesives, mechanical anchors, carbide drill bits and powder-actuated pins and tools used for numerous applications of anchoring or attaching elements onto concrete, brick, masonry and steel; and
Repair, Protection and Strengthening Products - Concrete construction repair, protection and strengthening products include grouts, coatings, sealers, mortars, fiberglass and fiber-reinforced polymer systems and asphalt products.

Engineering and Design Services. The Company’s engineers not only design and test products, but also provide engineering support for customers in connection with a number of products that the Company manufactures and sells. This support might range from the discussion of a load value in a catalog to testing the suitability of an existing product in a unique application. For the truss product line, the Company’s engineers review the output of the Company’s software to assist customers in ensuring that trusses are properly designed and specified, and in some instances seal design diagrams. Generally, in connection with any engineering services the Company provides, the Company’s engineers serve as a point of reference and support for the customer’s engineers and other service professionals, who ultimately determine and are responsible for the engineering approach and design loads for any project.

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The growth of the Company’s business, as well as many of its current growth initiatives, have been and are currently facilitated by its current technology and software solutions, as well as its ongoing software development initiatives. The Company has an ever-growing suite of advanced technology tools, including software, to improve operational efficiencies in the building industry. The Company’s early software solutions started by supporting engineers and designers with product selection and specification applications as well as estimating solutions for builders and retailers. The Company strategically expanded its software offerings to enhance collaboration with building industry partners in an effort to streamline workflows, reduce labor time and costs, improve accuracy, support scalability, and increase its profitability. The Company has grown its software solutions to support the growth of many customer groups, such as component manufacturers, builders and lumber yards. The Company has also introduced software applications for the DIY and repair and remodel markets. Whether focusing on residential, commercial, or outdoor structures, the Company’s technology solutions are designed to solve challenges, simplify tasks and provide cost-effective product and design recommendations that ultimately enhance customer efficiency and business success. The Company’s customer-facing software and other technology solutions are anticipated to expand over time to address the growing needs of its end-markets to become a larger portion of the Company’s overall value-added offerings.

Distribution Channels and Markets

The Company seeks to expand existing and identify new distributions channels in the markets it serves and expand into new markets. Presently, the Company primarily serves in three geographic markets, which are also its operating segments, consisting of the North America, Europe and Asia/Pacific segments. The North America segment includes operations primarily in the U.S. and Canada. The Europe segment includes operations primarily in France, the United Kingdom, Germany, Denmark, Switzerland, Portugal, Poland, The Netherlands, Belgium, Spain, Sweden, Norway, Italy and Romania. The Asia/Pacific segment includes operations primarily in Australia, New Zealand, China, Taiwan, and Vietnam. These segments are similar in several ways, including similarities in the products manufactured and distributed, the types of materials used, the production processes, the distribution channels and the product applications.

The Company sells its products through multiple channels, including the following:

Dealers. The Company intends to increase penetration of the residential market by expanding its markets in which it sells products directly to lumber dealers and cooperatives. The Company's sales force maintains ongoing contact with these customers and supports the inventory levels, resets, and displays.
Home Centers. The Company intends to increase penetration of the DIY and contractor customer markets by continuing to expand its product offerings through home centers. The Company’s sales force maintains ongoing contact with home centers to work with them in a broad range of areas, including inventory levels, retail display maintenance and product knowledge training. The Company’s strategy is to ensure that the home center retail stores are fully stocked with adequate supplies of the Company’s products carried by those stores. The Company has further developed extensive bar coding and merchandising aids and has devoted a portion of its research and development efforts to DIY products. The Company’s sales to home centers increased year-over-year in 2023, 2022 and 2021.
Wood Component Manufacturers. The company works directly with wood component manufacturer customers. We continue to develop our software solutions, equipment offerings, and provide better technology solutions increasing our truss connector plate sales as well as other Simpson Strong-Tie core products sales within the component industry.
OEM Relationships. The Company works closely with manufacturers of engineered wood, composite laminated timber and original equipment manufacturers ("OEMs") for off-site construction to develop and expand the application and sales of its engineered wood connector, fastener, anchor, and truss products. The Company has relationships with many of the leaders in these industries. The Company also intends to expand opportunities with the other OEMs where its products complement their offerings.
Distributors. The Company regularly evaluates its distribution coverage and the service level provided by its distributors, and from time to time implement changes. The Company evaluates distributor product mix and conducts promotion to encourage distributors to add the Company's products that complement the mix of their product offerings in their markets.
Contractors. In some markets, the Company sells to a wide range of end customers mainly through direct sales.

New Products

In order to innovate, advance and diversify our product offerings, the Company commits substantial resources to new product development. The majority of SST’s products have been developed through its internal research and development program. The Company believes it is the only U.S. manufacturer with the capability to internally test multi-story wall systems, thus enabling full scale testing rather than analysis alone to prove system performance. The Company’s engineering, sales, product management, and marketing teams work together with architects, engineers, building inspectors, code officials, builders and customers in the new product development process.
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The Company’s product research and development is based largely on products or solutions that are identified within the Company, feedback or requests from customers for new or specialty products and in connection with the Company’s strategic initiatives to expand into new markets and/or develop new product lines. The Company’s strategy is to develop new products on a proprietary basis, to seek patents when appropriate and to rely on trade secret protection for others or depending on availability and circumstances, the Company will acquire products or solutions meeting our strategic initiatives.

Since at least 2006, the Company generally develops 15 to 35 new products each year. In 2023, through our research and development efforts, the Company developed over 50 new products expanding its product offerings by adding:

new connectors and lateral products for wood framing applications;
new connectors and fasteners for mass timber and offsite constructions;
connections for structural steel construction;
new connectors for cold formed steel applications;
new fastener products and tools for wood construction;
new mechanical and adhesive anchors for concrete and masonry construction; and
new repair and strengthening systems for concrete and masonry applications.

By executing on its research and development strategy, the Company intends to continue to expand its product offerings.

The Company provides expertise and resources to offer software solutions and services to builders and lumber building material dealers, and supports efforts to further develop integrated software component solutions for the building industry. The Company also has ongoing development of truss software for the design, modeling and truss plate selection for its integrated component manufacturing customers.

Competition

Simpson is a category creator in the building products space. Our mission is to provide solutions that help people design and build safer, stronger structures. Our products improve the performance and integrity of the structures they are installed in, helping to make those structures more sustainable, and often helping to save lives in times of natural disasters and catastrophe.

Currently, 26 of the top 30 U.S. builders (based on number of housing starts per year) are engaged in our builder program.

We encounter a variety of competitors that vary by product line, end market and geographic area. The Company's competitors include many regional or specialized companies, as well as large U.S. and non-U.S. companies or divisions of large companies. While we do not believe that any single company competes with us across all of our product lines and distribution channels, certain companies compete in one or more product categories and/or distribution channels.

For over 67 years, through Simpson Strong-Tie® brand, we have led the industry in the wood connectors products space and a growing presence in both the concrete and fastener markets in the U.S. and Europe. We’ve successfully increased our market share over the years through:
designing and marketing end-to-end construction product systems;
product availability with delivery in typically 24 hours to 48 hours;
strong customer support and education for engineers, builders, contractors and building officials;
extensive product testing capabilities at our state-of-the-art test lab;
strong relationships with engineers that get our products specified on the blueprint and pulled through to the job site; and
active involvement with code officials to improve building codes and construction practices.

We believe these value-added services are competitive differentiators for us and provide us with a competitive advantage, helping us to achieve industry-leading margins, strong brand recognition and a trusted reputation. We also provide engineering services in support of some of our products and increasingly offer design and other software that facilitates the specification, selection and use of our products. We are also investing in software technology, such as 3D visualization software tools, truss design and specification software and BIM software, in order to drive increased specification and use of our building material products with homeowners, truss component manufacturers, builders and distributors as well as to support our customers with additional solutions and services.

In an effort to help mitigate our exposure to the cyclicality of the U.S. housing market, as well as to respond to the needs of our customers, we’ve made investments over the years in adjacent products such as anchors, fasteners and software solutions and
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expanded operations into Europe through acquisitions. As a result, the Company is less dependent on U.S. housing starts, though they are still a leading indicator for a portion of our business.

Resources

Raw Materials

The principal raw material used by the Company is steel, including stainless steel. The Company also uses materials such as carbon fiber, fiberglass, mortars, grouts, epoxies and acrylics in the manufacture of its chemical anchoring and reinforcing products. The Company purchases raw materials from a variety of commercial sources. The Company’s practice is to seek cost savings and enhanced quality by developing business relationships with and purchasing from a limited number of suppliers.

We purchase steel at market prices, which fluctuate as a result of supply and demand driven by prevailing economic conditions in the marketplace. The steel industry is highly cyclical and prices for the Company’s raw materials are influenced by numerous factors beyond the Company’s control including geopolitical and macroeconomic factors, supply constraints and supply chain disruptions, foreign currency fluctuations, import tariffs and duties, and unsettled international trade disputes. The steel market continues to be dynamic, with a high degree of uncertainty about future pricing trends. Numerous factors may cause steel prices to increase in the future. In addition to increases in steel prices, steel mills may add surcharges for zinc, energy and freight in response to increases in their costs. See “Item 1A — Risk Factors” and “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The Company historically has not attempted to hedge against changes in prices of steel or other raw materials. However, the Company may purchase and carry more steel or other raw materials in inventory to meet projected sales demand in a tight raw materials market.

Patents, Trademarks and Intellectual Property

Generally, the Company seeks statutory protection for strategic or financially important intellectual property developed in connection with its business. Certain intellectual property, where appropriate, is protected by contracts, licenses, confidentiality or other agreements. From time to time, the Company takes action to protect its businesses by asserting its intellectual property rights against third-party infringers.

The Company’s trademarks are registered or otherwise legally protected in the U.S. and many non-U.S. countries where products and services of the Company are sold. The Company may, from time to time, become involved in trademark licensing transactions. Most works of authorship produced for the Company, such as computer programs, catalogs and sales literature, carry appropriate notices indicating the Company's claim to copyright protection under U.S. law and appropriate international treaties.

The Company has U.S. and foreign patents, the majority of which cover products that the Company currently manufactures and markets. These patents, and applications for new and continuation patents, cover various design aspects of the Company’s products, as well as processes used in their manufacture. The Company continues to develop new potentially patentable products, product enhancements and product designs as well as acquire patented product. The Company also seeks continuation patents for all pending patents and it is dedicated to securing patents for any new developments. Although the Company does not have plans to apply for additional foreign patents covering existing products, the Company is committed to pursuing intellectual property protection for patentable enhancements as appropriate. The Company has developed an international patent program to protect any innovative new products that it may develop, ensuring its competitive advantage is safeguarded. In addition to seeking patent protection, the Company relies on unpatented proprietary technology to maintain its competitive position. See “Item 1A — Risk Factors.”

While the Company believes its intellectual property portfolio is important to its business operations and in the aggregate constitutes a valuable asset, no single patent, trademark, license or other intellectual property, or group of such intellectual property, is critical to the success of the business or any segment.

Seasonality and Cyclicality

Although the Company’s sales have been seasonal and cyclical, with operating results varying from quarter to quarter, as a result of the acquisition of ETANCO overall sales are becoming less seasonal. Our sales and income have historically been lower in the first and fourth quarters than in the second and third quarters of a fiscal year, as the Company's customers tend to purchase construction materials in the late spring and summer months for the construction season. Additionally, weather conditions, such as extended cold or wet weather, which affected and sometimes delayed installation of some of our products, would negatively affect our results of operations. Operating results vary from quarter to quarter and with economic cycles.
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Although the Company’s sales are also dependent, to a degree, on the North American residential home construction industry, our North America Segment accounted for approximately 78% of our net sales for the fiscal year ended December 31, 2023. As noted above, the same efforts to mitigate the Company's reliance on housing starts have also softened the effects of seasons and adverse weather on the Company's quarterly results. See “Item 1A — Risk Factors” and “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Human Capital Resources

Successful execution of our strategy is largely dependent on attracting, developing and retaining key employees and leaders. The skills, experience, industry knowledge, and contributions of our employees significantly benefit our operations and performance. We continuously evaluate, modify, and enhance our internal programs, processes and technologies to increase employee engagement, productivity, and efficiency and provide the opportunities, skills, and resources they need to be successful.

As of December 31, 2023, our employees, including those employed by consolidated subsidiaries, by region were approximately:

Asia Pacific
668 
Europe
1,555 
North America
3,274 
5,497 




Inclusion and Diversity

Our commitment to diversity and inclusion starts at the top with a highly skilled and diverse board. We strive to have a diverse culture of employees representing different genders, ages, ethnicities and abilities by implementing thoughtful, customized solutions and programs.

As of December 31, 2023, we had the following global gender demographics:

Women
Men
Not Disclosed
All employees
22%69%9%
Individual Contributors
22%68%10%
Middle Management
19%74%7%
Senior Leadership
19%81%—%

As of December 31, 2023, our U.S. employees had the following race and ethnicity demographics:

All U.S. Employees
Individual Contributors
Middle Management
Senior Leadership
American Indian or Alaska Native
1%1%—%—%
Asian
11%11%8%14%
Black or African American
9%11%3%3%
Hispanic or Latino
19%20%9%—%
Native Hawaiian or Other Pacific Islander
1%1%—%—%
Two or More Races
2%2%2%—%
White
52%49%75%83%
Not disclosed5%6%3%—%

Talent Development

Our focus on talent development is fundamental to executing our strategy and advancing the development, manufacture, and marketing of innovative products and services. The opportunity to grow and develop skills and abilities, regardless of job role, division, or geographical location is critical to the success of the Company as a global organization. We continually invest in
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our employees’ career growth and provide employees access to a wide variety of learning and development resources, including a suite of online courses for developing both soft and technical skills. Our extraordinary leadership development programs provide employees with training, tools and experiences that are targeted to develop their full leadership potential.

Pay Equity

The Company’s compensation philosophy is to attract, retain, motivate, and differentiate employees through its rewards programs. We believe people should be paid for what they do and how they do it, regardless of their gender, race, or other personal characteristics, and we are committed to internal pay equity. Our Board of Directors, through its Compensation and Leadership Development Committee, monitors the relationship between the pay received by our executive officers, and Human Resources monitors the relationship of pay received by all other employees. We believe our compensation philosophy and strategy are strongly aligned with our corporate strategic priorities and our vision for stockholder value creation.

In addition to financial compensation, we offer a health and wellness package to our employees which is designed to provide a range of options that can be personalized to suit their individual and/or family needs. As part of our ongoing commitment to attract, retain, and inspire our workforce in the United States, we provide remote and flexible work options for positions that support remote work. We regularly engage our partners and benefits consultants to ensure our health and wellness package evolves to meet the needs of our diverse workforce both now and in the future.

Workplace Safety and Health

A vital part of our business is providing our workforce with a safe, healthy and sustainable working environment. Our Environmental, Health and Safety program focuses on implementing change through employee observation feedback channels to recognize risk and continuously improve our processes, as well as conducting regular risk reviews and self-audits at our manufacturing facilities around the world to explore new opportunities to reduce potential employee exposure to occupational injuries. Our continuous focus on workplace safety has enabled us to preserve business continuity without sacrificing our commitment to keeping our colleagues and workplace visitors safe.

Labor Relations

As of December 31, 2023, approximately 9% of the Company’s employees are represented by labor unions and are covered by collective bargaining agreements. We have 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 June 2027 and September 2028, respectively. Also, we have two union contracts in San Bernardino County, California that will expire in February 2025 and in June 2026. Based on current information and subject to future events and circumstances, we believe that, even if new agreements are not reached before the existing labor union contracts expire, it is not expected to have a material adverse effect on the Company’s ability to provide products to customers or on the Company’s profitability. See “Item 1A — Risk Factors.”

Available Information

The Company's website address is www.simpsonmfg.com. We file or furnish annual, quarterly and current reports, proxy statements and other information with the SEC. You may obtain a copy of any of these reports, free of charge, on the "Financials - SEC Filling" page of our website, as soon as reasonably practicable after we file such material with, or furnish it to the SEC. Printed copies of any of these materials will also be provided free of charge on request.

Through the "Governance" page of our website, it is also possible to access copies of the charters for our Audit and Finance Committee, Compensation and Leadership Development Committee, Corporate Strategy and Acquisitions Committee and Nominating and ESG Committee, Sustainability Reports, as well as our Corporate Governance Guidelines and Code of Business Conduct and Ethics. Each of these documents is made available free of charge. We intend to disclose on our website any amendment to, or waiver of, any provisions of our Code of Business Conduct and Ethics that apply to any of our directors, executive officers or senior financial officers that would otherwise be required to be disclosed under the rules of the SEC or the New York Stock Exchange (the "NYSE"). The foregoing information regarding our website and its content is for your convenience only. The information contained in or connected to our website is not deemed to be incorporated by reference in this Annual Report or filed with the SEC.

In addition, the SEC maintains a website that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, where you may obtain a copy of all information we file publicly with the SEC. The SEC website address is www.sec.gov.

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Item 1A. Risk Factors.

Investing in our common stock involves a high degree of risk. You should carefully review the following discussion of the risks that may affect our business, results of operations and financial condition, as well as our consolidated financial statements and notes thereto and the other information appearing in this report, for important information regarding risks that affect us. Current global economic events and conditions may amplify many of these risks. These risks are not the only risks that may affect us. Additional risks that we are not aware of or do not believe are material at the time of this filing, may also become important factors that adversely affect our business.

Global and Economic Risks

Global economic conditions, including inflation and supply chain disruptions, could continue to adversely affect our operations.

General global economic downturns and macroeconomic trends, including heightened inflation, capital market volatility, interest rate and currency rate fluctuations, and economic slowdown or recession, may result in unfavorable conditions that could negatively affect demand for our products due to customers decreasing their inventories in the near-term or long-term, reduction in sales due to raw material shortages, reduction in research and development efforts, our inability to sufficiently hedge our currency and raw material costs, insolvency of suppliers and customers and exacerbate some of the other risks that affect our business, financial condition and results of operations. Both domestic and international markets experienced significant inflationary pressures in fiscal year 2023 and inflation rates in the U.S., as well as in other countries in which we operate, are currently expected to continue at elevated levels for the near-term. We may be adversely affected during periods of high inflation, mainly from raw material and labor costs. Inflation could increase our cost of financing, raw materials and labor and could cause our financial results and profitability to decline. In addition, the Federal Reserve in the U.S. and other central banks in various countries have raised, and may again raise, interest rates in response to concerns about inflation, which, coupled with reduced government spending and volatility in financial markets, may have the effect of further increasing economic uncertainty and heightening these risks. Interest rate increases or other government actions taken to reduce inflation could also result in recessionary pressures in many parts of the world.

The impact of public health crises, could have a significant effect on supply and/or demand for our products and services and have a negative impact on our business, financial condition and results of operations.

Global pandemics, such as COVID-19, or other public health crises may adversely affect, among other things, our supply chain and associated costs; demand for our products and services; our operations and sales, marketing and distribution efforts; our research and development capabilities; our engineering, design, and manufacturing processes; and other important business activities. These events could result in significant losses, adversely affect our competitive position, increase our costs, require substantial expenditures and recovery time, make it difficult or impossible to provide services or deliver products to our customers or to receive components from our suppliers, create delays and inefficiencies in our supply chain and result in the need to impose employee travel restrictions. Our operations and those of our suppliers and distributors could be adversely affected if manufacturing, logistics, or other operations in key locations, are disrupted for any reason, such as those described above or other economic, business, labor, environmental, public health, regulatory or political reasons. In addition, even if our operations are unaffected or recover quickly, if our customers cannot timely resume their own operations, they may reduce or cancel their orders, or these events could otherwise result in a decrease in demand for our products.

Changes in government and industry regulatory standards pertaining to health and safety could have a material adverse effect on our business, financial condition or results of operations.

Public health crises, such as the COVID-19 pandemic, and the measures taken in response to such events have in the past negatively impacted, and may again in the future negatively impact, our operations and workforce, as well as those of our partners, customers and suppliers. Additionally, concerns over the economic impact of such events have, from time to time, caused increased volatility in financial and other capital markets. The negative impacts of any such events on business operations and demand for our offerings will depend on future developments and actions taken in response to such events, which may be outside our control, highly uncertain, and cannot be predicted at this time.

Risks Related to Our Business and Our Industry

Business cycles and uncertainty regarding the housing market, economic conditions, political climate and other factors beyond our control could adversely affect demand for our products and services, and our costs of doing business, any of which may harm our business, financial condition and results of operations.

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The primary drivers of our North America segment are residential remodeling, replacement activities and housing starts. Accordingly, our business, financial condition and results of operations depend significantly on the stability of the housing and residential construction and home improvement markets, which are affected by conditions and other factors that are beyond our control. These conditions include, but are not limited to:

uncertainty about the housing and residential construction and home improvement markets;
consumer confidence and spending;
unemployment levels;
foreclosure rates;
interest rates;
raw material, logistics and energy costs;
labor and healthcare costs;
capital availability, or lack thereof, to builders, developers and consumers;
unfavorable weather conditions and natural disasters; and
political or social instability, such as war, or acts of terrorism or other international incidents.

These factors could adversely affect demand for our products and services, and our costs of doing business, and our business, financial condition and results of operations may be harmed. Further, many of our customers in the construction industry are small and medium-sized businesses that are more likely to be adversely affected by economic downturns than larger, more established businesses. Uncertainty about current global economic conditions may cause these consumers to postpone or refrain from spending or may cause them to switch to lower-cost alternative products, which could reduce demand for our products and materially and adversely affect our financial condition and results of operations.

We have a few large customers, the loss of any one of which could negatively affect our sales and profits.

Our largest customers accounted for a significant portion of net sales for the years ended December 31, 2023, 2022, and 2021. A reduction in, or elimination of, our sales to any of these customers would at least temporarily, and possibly on a longer term basis, cause a material reduction in our net sales, income from operations and net income. Such a reduction in or elimination of our sales to any of our largest customers would also increase our relative dependence on our remaining large customers.

In addition, our distributor customers and builders have increasingly consolidated over time, which has increased the material adverse effect risk of losing any one of them and may increase their bargaining power in negotiations with us. These trends could negatively affect our sales and profitability.

Our growth may depend on our ability to develop new products and services and penetrate new markets, which could reduce our profitability.

Our continued growth depends upon our ability to develop additional products, services and technologies that meet our customers’ expectations of our brand and quality and that allow us to enter into new markets. Expansion into new markets and the development of new products and services may involve considerable costs and may not generate sufficient revenue to be profitable or cover the costs of development. We might not be able to penetrate these product markets and any market penetration that occurs might not be timely or profitable. We may be unable to recoup part or all of the investments we make in attempting to develop new products and technologies and penetrate new markets. Any of these events could reduce our profitability.

We face significant competition in the markets we serve and we may not be able to compete successfully.

In order to compete effectively we must continue to develop enhancements to our existing products, new products and services on a timely basis that meet changing consumer preferences and successfully develop, manufacture and market these new products, product enhancements and services. There can be no assurance that we will be successful in developing and marketing new products, product enhancements, additional technologies and services. Many of our competitors are dedicating increasing resources to competing with us, especially as our products and services become more affected by technological advances and software innovations. Our inability to effectively compete could reduce the sales of our products and services, which could have a material adverse impact on our business, financial condition and results of operations.

Additionally, our ability to compete effectively in North America depends, to a significant extent, on the specification or approval of our products by architects, engineers, building inspectors, building code officials and customers and their acceptance of our premium brand. If a significant portion of those communities were to decide that the design, materials,
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manufacturing, testing or quality control of our products is inferior to that of any of our competitors or the cost differences between our products and any competitors are not justifiable, our sales and profits could be materially reduced.

Increases in prices of raw materials and energy could negatively affect our sales and profits.

Steel is the principal raw material used in the manufacture of many of our products. The price of steel has historically fluctuated on a cyclical basis and has often depended on a variety of factors over which we have no control including geopolitical and macroeconomic conditions and currency exchange rates. Import tariffs and/or other mandates also could significantly increase the prices on raw materials that are critical to our business, such as steel. The cost of producing our products is also sensitive to the price of energy.

The selling prices of our products have not always increased in response to raw material, energy or other cost increases, and we are unable to determine to what extent, if any, we will be able to pass future cost increases through to our customers. Increases in prices of raw materials and energy, our inability or unwillingness to pass increased costs through to our customers could materially and adversely affect our financial condition or results of operations.

We depend on third parties for transportation services and the lack of availability of transportation and/or increases in cost could materially and adversely affect our business and operations.

Our business depends on the transportation of both our products to our customers and distributors and the transportation of raw materials to us. We rely on third parties for transportation services of these items, which services are occasionally in high demand (especially at the end of calendar quarters) and/or subject to price fluctuations. Damage or disruption to our supply chain, including transportation and distribution capabilities, could impair our ability to manufacture or sell our products. Failure to take adequate steps to mitigate the likelihood or potential impact of disruptions, or to effectively manage such events if they occur could adversely affect our business or financial results.

If the required supply of transportation services is unavailable when needed, our manufacturing processes may be interrupted if we are not able to receive raw materials or we may be unable to sell our products at full value, or at all. This could harm our reputation, negatively impact our customer relationships and have a material adverse effect on our financial condition and results of operations. In addition, a material increase in transportation rates or fuel surcharges could have a material adverse effect on our profitability.

Expectations relating to environmental, social and governance considerations expose the Company to potential liabilities, increased costs, reputational harm and other adverse effects on the Company’s business.

Many governments, regulators, investors, employees, customers and other stakeholders are increasingly focused on environmental, social and governance considerations relating to businesses, including climate change and greenhouse gas emissions, human capital and diversity, equity and inclusion. We make statements about our environmental, social and governance goals and initiatives through information provided on our website, press statements and other communications, including through our Environmental, Social and Governance Report. Responding to these environmental, social and governance considerations and implementation of these goals and initiatives involves risks and uncertainties, including those described under “Forward-Looking Statements,” requires investments and are impacted by factors that may be outside our control. In addition, some stakeholders may disagree with our goals and initiatives and the focus of stakeholders may change and evolve over time. Stakeholders also may have very different views on where environmental, social and governance focus should be placed, including differing views of regulators in various jurisdictions in which we operate. Any failure, or perceived failure, by us to achieve our goals, further our initiatives, adhere to our public statements, comply with federal, state or international environmental, social and governance laws and regulations, or meet evolving and varied stakeholder expectations and standards could result in legal and regulatory proceedings against us and materially adversely affect our business, reputation, results of operations, financial condition and stock price.

Risks Related to Our Intellectual Property and Information Technology

We have experienced and may in the future experience delays, outages, cyber-based attacks or security breaches in relation to our information systems and computer networks, which have disrupted and may in the future disrupt our operations and may result in data corruption. As a result, our profitability, financial condition and reputation could be negatively affected. In addition, data privacy statements and laws could subject us to liability.

We depend on information technology networks and systems, including the Internet, to process, transmit and store electronic information. We depend on our information technology infrastructure for electronic communications among our locations
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around the world and between our personnel and our subsidiaries, customers and suppliers. We collect and retain large volumes of internal and customer, vendor and supplier data, including some personally identifiable information, for business purposes. We also maintain personally identifiable information about our employees. The integrity and protection of our customer, vendor, supplier, employee and other Company data is critical to our business. The regulatory environment governing information, security and privacy laws is increasingly demanding and continues to evolve. Maintaining compliance with applicable security and privacy regulations may increase our operating costs or adversely affect our business operations.

Despite the security and maintenance measures we have in place, our facilities and systems, and those of the retailers, dealers, licensees and other third-parties with which we do business, we remain vulnerable to security breaches, cyber-attacks, acts of vandalism, computer viruses, malware, data corruption, delays, disruptions, programming and/or human errors or other similar events, such as those accomplished through fraud, trickery or other forms of deceiving our employees, contractors or other agents or representatives and those due to system updates, natural disasters, malicious attacks, accidents, power disruptions, telecommunications failures, acts of terrorism or war, computer viruses, physical or electronic break-ins or similar events. Such incidents have occurred, continue to occur, and may occur in the future.

Security breaches of our infrastructure could create system disruptions, shutdowns or unauthorized disclosures of confidential information. Despite the security measures we have in place, our facilities and systems, and those of the retailers, dealers, licensees and other third parties with which we do business, we may be vulnerable to security breaches, cyber-attacks, acts of vandalism, computer viruses, misplaced or lost data, programming and/or human errors or other similar events. Such incidents may involve misappropriation, loss or other unauthorized disclosure of confidential data, materials or information, including those concerning our customers, employees or suppliers, whether by us or by the retailers, dealers, licensees and other third-party distributors with which we do business, disrupt our operations, result in losses, damage our reputation, and expose us to the risks of litigation and liability (including regulatory liability); and may have a material adverse effect on our business, results of operations and financial condition.

Our recent efforts to increase our technology offerings and integrate new software and application offerings may prove unsuccessful and may affect our future prospects.

In North America the residential construction industry has experienced increased complexity in some home design and builders are more aggressively trying to reduce their costs. One of our responses has been to develop and market sophisticated software and applications to facilitate the specification, selection and use of our product systems. We have continued to commit substantial resources to our software development endeavors in recent years and expect that trend to continue.

We may not be able to create and further develop commercially successful software and applications. Even if we are able to create and develop initially successful ideas, the technology industry is subject to rapid changes. We may not be able to adapt quickly enough to keep up with changing demands, and our software may become obsolete.

While we see having a software interface with the construction industry as a potential growth area, we also face competition from other companies that are focused solely or primarily on the development of software and applications. These companies may have significantly greater expertise and resources to devote to software development, and we may be unable to compete with them in that space.

If we cannot protect our intellectual property, we will not be able to compete effectively.

We monitor and protect against activities that might infringe, dilute, or otherwise harm our patents, trademarks and other intellectual property and rely on the patent, trademark and other laws of the U.S. and other countries. However, we may be unable to prevent third parties from using our intellectual property without our authorization. To the extent we cannot protect our intellectual property, unauthorized use and misuse of our intellectual property could harm our competitive position and have a material adverse impact on our business, financial condition and results of operations. In addition, the laws of some non-U.S. jurisdictions provide less protection for our proprietary rights than the laws of the U.S. and we therefore may not be able to effectively enforce our intellectual property rights in these jurisdictions. If we are unable to maintain certain exclusive licenses, our brand recognition and sales could be adversely impacted. Current employees, contractors and suppliers have, and former employees, contractors and suppliers may have, access to trade secrets and confidential information regarding our operations which could be disclosed improperly and in breach of contract to our competitors or otherwise used to harm us.

Third parties may also claim that we are infringing upon their intellectual property rights. If we are unable to successfully defend or license such alleged infringing intellectual property or if we are required to substitute similar technology from another source, our operations could be adversely affected. Even if we believe that such intellectual property claims are without merit, defending such claims can be costly, time consuming and require significant resources. Claims of intellectual property
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infringement also might require us to redesign affected products, pay costly damage awards, or face injunctions prohibiting us from manufacturing, importing, marketing or selling certain of our products. Even if we have agreements to indemnify us, indemnifying parties may be unable or unwilling to do so.

We are subject to cyber security risks and may incur increasing costs in efforts to minimize those risks and to comply with regulatory standards.

We employ information technology systems and operate websites which allow for the secure storage and transmission of proprietary or confidential information regarding our customers, employees and others. We make significant efforts to secure our computer network to mitigate the risk of possible cyber-attacks, including, but not limited to, data breaches, and are continuously working to upgrade our existing information technology systems to ensure that we are protected, to the greatest extent possible, against cyber risks and security breaches. Despite these efforts security of our computer networks could be compromised which could impact operations and confidential information could be misappropriated, which could lead to negative publicity, loss of sales and profits or cause us to incur significant costs to reimburse third- parties for damages, which could adversely impact profits.

We strive to comply with all applicable laws, policies, legal obligations and industry codes of conduct relating to privacy and data protection, to the extent possible. However, we continue to see increasingly complex, rigorous and more stringent state and national regulatory standards enacted to protect businesses and personal data, including the General Data Protection Regulation (“GDPR”) and the California Consumer Privacy Act of 2018 ("CCPA"). GDPR is a comprehensive European Union privacy and data protection reform, effective in 2018, which applies to companies that are organized in the European Union or otherwise provide services to consumers who reside in the European Union, and imposes strict standards regarding the sharing, storage, use, disclosure and protection of end user data and significant penalties (monetary and otherwise) for non-compliance. The CCPA, which became effective in 2023 established a new privacy framework for covered businesses by, among other things, creating an expanded definition of personal information, establishing new data privacy rights for consumers in the State of California and creating a new and potentially severe statutory damages framework for violations of the CCPA and for businesses that fail to implement reasonable security procedures and practices to prevent data breaches. More recently, on November 3, 2020, California enacted the California Privacy Rights Act (the “CPRA”). The CPRA, which went into effect on January 1, 2023, expands upon the protections provided by the CCPA, including new limitations on the sale or sharing of consumers' personal information, and the creation of a new state agency to enforce the CPRA’s protections. Any failure to comply with GDPR, the CCPA, the CPRA, or other state or regulatory standards, could subject the Company to legal and reputational risks. Misuse of or failure to secure personal information could also result in violation of data privacy laws and regulations, proceedings against us by governmental entities or others, damage to our reputation and credibility, and could have a material adverse effect on our business and results of operations.

We publicly post our privacy policies and practices concerning our processing, use, and disclosure of personally identifiable information on our websites. If we fail to adhere to our privacy policy and other published statements or applicable laws concerning our processing, use, transmission and disclosure of protected information, or if our statements or practices are found to be deceptive or misrepresentative, we could face regulatory actions, fines and other liability.


We rely on complex software systems and hosted applications to operate our business, and our business may be disrupted if we are unable to successfully and efficiently update these systems or convert to new systems.

We are increasingly dependent on technology systems to operate our business, reduce costs, and enhance customer service. These systems include complex software systems and hosted applications that are provided by third parties such as financial management and human capital management platforms from SAP America, Inc. and Workday, Inc. Software systems need to be updated on a regular basis with patches, bug fixes and other modifications. Hosted applications are subject to service availability and reliability of hosting environments. We also migrate from legacy systems to new systems from time to time. Maintaining existing software systems, implementing upgrades and converting to new systems are costly and require a significant allocation of personnel and other resources. The implementation of these systems upgrades and conversions is a complex and time-consuming project involving substantial expenditures for implementation activities, consultants, system hardware and software, often requires transforming our current business and financial processes to conform to new systems, and therefore, may take longer, be more disruptive, and cost more than forecast and may not be successful. If the implementation is delayed or otherwise is not successful, it may hinder our business operations and negatively affect our financial condition and results of operations. There are many factors that may materially and adversely affect the schedule, cost, and execution of the implementation process, including, without limitation, problems during the design and testing phases of new systems; system delays and malfunctions; the deviation by suppliers and contractors from the required performance under their contracts with us; the diversion of management attention from our daily operations to the implementation project; reworks
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due to unanticipated changes in business processes; difficulty in training employees in the operation of new systems and maintaining internal control while converting from legacy systems to new systems; and integration with our existing systems. Some of such factors may not be reasonably anticipated or may be beyond our control.

Some of our agreements for software and software-as-services products have limited terms, and we may be unable to renew such agreements and may lose access to such products.

We have various agreements with a number of third parties that provide software and software-as-a-service products to us. These agreements often require reoccurring payments for online access to the products and have limited terms. In the future, we will be required to renegotiate the terms of these agreements, and may be unable to renew such agreements on favorable terms. If any such agreement cannot be renewed or can only be renewed on terms that are materially worse for us, we may be unable to access the applicable software, and our business and operating results may be adversely affected.

Risks Related to Our International Operations

International operations and our financial results in those markets may be affected by legal, regulatory, political, currency exchange and other economic risks.

During 2023, revenue from sales outside of the U.S. was $583.4 million, representing approximately 26.4% of consolidated sales. In addition, a significant amount of our manufacturing and production operations are located outside the U.S. As a result, our business is subject to risks and uncertainties associated with international operations, including:

difficulties and costs associated with complying with a wide variety of complex and changing laws, including securities laws, tax laws, employment and pension-related laws, competition laws, U.S. and foreign export and trading laws, and laws governing improper business practices, treaties and regulations;
limitations on our ability to enforce legal rights and remedies;
adverse domestic or international economic and political conditions, business interruption, war and civil disturbance;
changes to tax, currency, or other laws or policies that may adversely impact our ability to repatriate cash from non-U.S. subsidiaries, make cross-border investments, or engage in other intercompany transactions;
future regulatory guidance and interpretations of the tax legislation commonly known as the U.S. Tax Cuts and Jobs Act of 2017 (the "Tax Act"), as well as assumptions that the Company makes related to the Tax Act;
changes to tariffs or other import or export restrictions, penalties or sanctions, including modification or elimination of international agreements covering trade or investment;
costs and availability of shipping and transportation;
nationalization or forced relocation of properties by foreign governments;
currency exchange rate fluctuations between the U.S. dollar and foreign currencies; and
uncertainty with respect to any potential changes to laws, regulations and policies that could exacerbate the risks described above.

All of these factors could result in increased costs or decreased revenues and could materially and adversely affect our sales, financial condition and results of operations. Additionally, international construction standards, techniques and methods differ from those in the U.S. and as a result, we may need to redesign our products, or design new products, to compete effectively and profitably in international markets.

In addition, we operate in many parts of the world that have experienced governmental corruption and we could be adversely affected by violations of the Foreign Corrupt Practices Act ("FCPA") and similar worldwide anti-corruption laws. The FCPA and similar anti-corruption laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments to officials for the purpose of obtaining or retaining business. Although we mandate compliance with these anti-corruption laws, we cannot provide assurance that these measures will necessarily prevent violations of these laws by our employees or agents. If we were found to be liable for violations of anti-corruption laws, we could be liable for criminal or civil penalties or other sanctions, which could have a material adverse impact on our business, financial condition and results of operations.

Failure to comply with export, import, and sanctions laws and regulations could materially and adversely affect us.

We are subject to a number of export, import and economic sanction regulations, including the International Traffic in Arms Regulations (“ITAR”), the Export Administration Regulations (“EAR”) and U.S. sanction regulations administered by the U.S. Department of Treasury, Office of Foreign Assets (“OFAC”). Foreign governments where we have operations also implement
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export, import and sanction laws and regulations, some of which may be inconsistent or conflict with ITAR and EAR. Where we face such inconsistencies, it may be impossible for us to comply with all applicable regulations.

If we do not obtain all necessary import and export licenses required by applicable export and import regulations, including ITAR and EAR, or do business with sanctioned countries or individuals, we may be subject to fines, penalties and other regulatory action by governmental authorities, including, among other things, having our export or import privileges suspended. Even if our policies and procedures for exports, imports and sanction regulations comply, but our employees fail or neglect to follow them in all respects, we might incur similar liability.

Any changes in applicable export, import or sanction laws or regulations or any legal or regulatory violations could materially and adversely affect our business and financial condition.

Our manufacturing facilities in China complicate our supply and inventory management.

We maintain manufacturing capability in various parts of the world, including Jiangsu, China, in part to allow us to serve our customers with prompt delivery of needed products. In recent years, we have significantly expanded our manufacturing capabilities in China. Substantially all of our manufacturing output in China was and is currently intended for export to other parts of the world. Any halting or disruption to our operations at or near our Jiangsu, China manufacturing facility could substantially interfere with our general commercial activity related to our supply chain and customer base, which could have a material adverse effect on our financial condition, results of operations, business or prospects. In such event, we may need to seek alternative sources of supply for products for our customers, which may increase the costs to manufacture and deliver our products.

If significant tariffs or other restrictions are placed on our imports or any related counter-measures are taken by other countries, our costs of doing business, revenue and results of operations may be negatively impacted.

If significant tariffs or other restrictions are placed on Chinese or other imports or any related countermeasures are taken by China or other countries, our costs of doing business, revenue and results of operations may be materially harmed. If duties are imposed on our imports, we may be required to raise our prices, which may result in the loss of customers and harm our operating performance. Alternatively, we may seek to shift production outside of China, resulting in diversion of management's attention, significant costs and disruption to our operations as we would need to pursue the time-consuming processes of establishing a new supply chain, identifying substitute components and establishing new manufacturing locations.

We are subject to U.S. and international tax laws that could affect our financial results.

We generally conduct international operations through our wholly-owned subsidiaries. Our income tax liabilities in the different countries where we operate depend in part on internal settlement prices and administrative charges among us and our subsidiaries. These arrangements require us to make judgments with which tax authorities may disagree. Tax authorities may impose additional tariffs, duties, taxes, penalties and interest on us. Transactions that we have arranged in light of current tax rules could have material and adverse consequences if tax rules change, and changes in tax rules or imposition of any new or increased tariffs, duties and taxes could materially and adversely affect our sales, profits and financial condition.

Tax laws are dynamic and subject to change as new laws are passed and new interpretations are issued or applied. If the U.S. or other foreign tax authorities change applicable tax laws, our overall taxes could increase, and our business, financial condition or results of operations may be adversely impacted.

Significant judgment and certain estimates are required in determining our worldwide provision for income taxes. Future tax law changes may materially increase the Company’s prospective income tax expense.

We are subject to income taxation in the U.S. as well as numerous foreign jurisdictions. Significant judgment is required in determining our worldwide income tax provision and, there are many transactions and calculations where the ultimate tax determination is uncertain. Although we believe our estimates are reasonable, the ultimate tax outcome may differ from the amounts recorded in our financial statements and may materially affect our financial results in the period or periods for which such determination is made.

Increases in income tax rates, changes in income tax laws or disagreements with tax authorities could adversely affect our financial performance.

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Increases in income tax rates or other changes in tax laws, including changes in how existing tax laws are interpreted or enforced, could adversely affect our financial performance. For example, economic and political conditions in countries where we are subject to taxes, including the United States, have in the past and could continue to result in significant changes in tax legislation or regulation. For example, numerous countries have agreed to a statement in support of the Organization for Economic Co-operation and Development model (OECD) rules that propose a partial global profit reallocation and a global minimum tax rate of 15%. Certain countries, including European Union member states, have enacted or are expected to enact legislation incorporating the global minimum tax with effect as early as 2024 and widespread implementation of a global minimum tax is expected by 2025. As the legislation becomes effective in countries in which we do business, our taxes could increase and negatively impact our provision for income taxes. This increasingly complex global tax environment could increase tax uncertainty, which could in turn result in higher compliance costs and adverse effects on our financial performance. We are also subject to regular reviews, examinations and audits by numerous taxing authorities with respect to income and non-income based taxes. Economic and political pressures to increase tax revenues in jurisdictions in which we operate, or the adoption of new or reformed tax legislation or regulation, also could make resolving any tax disputes more difficult and the final resolution of any tax audits could have an adverse effect on our financial performance.

We are a global company with significant revenues and earnings generated internationally, which exposes us to the impact of foreign currency fluctuations, as well as political and economic risks.

A significant portion of our net sales and earnings are generated internationally. Sales outside of the U.S. accounted for 26.4% of our consolidated net sales in 2023 and we anticipate that sales from international operations will continue to represent a significant portion of our net sales in the future. In addition, many of our manufacturing facilities and suppliers are located outside of the U.S. Our foreign operations subject us to certain commercial, political and financial risks. Our business in these foreign markets is subject to general political conditions, including any political instability (such as those resulting from war, terrorism and insurrections) and general economic conditions in these markets, such as inflation, deflation, interest rate volatility and credit availability. Additionally, a number of factors, including U.S. relations with the governments of the foreign countries in which we operate, changes to international trade agreements and treaties, increases in trade protectionism, or the weakening or loss of certain intellectual property protection rights in some countries, may affect our business, financial condition and results of operations. Foreign regulatory requirements, including those related to the testing, authorization, and labeling of products and import or export licensing requirements, could affect the availability of our products in these markets.

In addition to risks associated with general political conditions, our international operations are subject to fluctuations in foreign currency exchange rates The functional currency for most of our foreign operations is the applicable local currency. As a result, fluctuations in foreign currency exchange rates affect the results of our operations and the value of our foreign assets and liabilities, which in turn may adversely affect results of operations and cash flows and the comparability of period-to-period results of operations. Foreign governmental policies and actions regarding currency valuation could result in actions by the United States and other countries to offset the effects of such fluctuations. Given the unpredictability and volatility of foreign currency exchange rates, ongoing or unusual volatility may adversely impact our business and financial conditions.

Risks Related to Product, Services and Sales Risks

Product liability claims and litigation could affect our business, reputation, financial condition, results of operations and cash flows.

In the ordinary course of business, the products that we design and/or manufacture, and/or the services we provide, have led to product liability claims or other legal claims being filed against us. To the extent that plaintiffs are successful in showing that a defect in a product’s design, manufacture or warnings led to personal injury or property damage, or that our provision of services resulted in similar injury or damage, we may be subject to claims for damages. Although we are insured for damages above a certain amount, we bear the costs and expenses associated with defending claims, including frivolous lawsuits, and are responsible for damages up to the insurance retention amount. The insurance that we carry is limited in the amount of coverage and may not be adequate to cover all of our resulting costs, business interruption and lost profits if we are subject to product liability claims. We might also face increases in premiums and reductions in the availability of insurance covering product liability, which could have a significant impact on our business. In addition to claims concerning individual products, as a manufacturer, we can be subject to costs, potential negative publicity and lawsuits related to product recalls, which could adversely impact our results of operations and damage our reputation.

Design defects, labeling defects, product formula defects, inaccurate chemical mixes, product recalls and/or product liability claims could harm our business, reputation, financial condition and results of operations.

Many of our products are integral to the structural soundness or safety of the structures in which they are used and we have on occasion found flaws and deficiencies in the design, manufacturing, assembling, labeling, product formulations, chemical mixes
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or testing of our products. We also have on occasion found flaws and deficiencies in raw materials and finished goods produced by others and used with or incorporated into our products. Some flaws and deficiencies have not been apparent until after the products were installed or used by customers.

If any flaws or deficiencies exist in our products and if such flaws or deficiencies are not discovered and corrected before our products are incorporated into structures, the structures could be unsafe or could suffer severe damage, such as collapse or fire, and personal injury or death could result. To the extent that such damage or injury is not covered by our product liability insurance and we are held to be liable, we could be required to correct such damage and to compensate persons who might have suffered injury or death, and our business, reputation, financial condition, results of operations and cash flows could be materially and adversely affected.

As a result of the nature of many of our products and their use in construction projects, claims (including product warranty claims and claims resulting from a natural disaster) may be made against us with regard to damage or destruction of structures incorporating our products whether or not our products failed. Any such claims, if asserted, could require us to expend material time and efforts defending the claim and may materially and adversely affect our business, reputation, financial condition and results of operations. Costs associated with resolving such claims (such as repair or replacement of the affected parts) could be material and may exceed any amounts reserved in our consolidated financial statements.

While we generally attempt to limit our contractual liability and our exposure to price or expense increases, we may have uncapped liabilities or significant exposure under some contracts, and could suffer material losses under such contracts.

We enter into many types of contracts with our customers, suppliers and other third parties, including in connection with our expansion into new markets and new product lines. Under some of these contracts, our overall liability may not be limited to a specified maximum amount or we may have significant potential exposure to price or expense increases. If we receive claims under these contracts or experience significant price increases or comparable expense increases, we may incur liabilities significantly in excess of the revenues associated with such contracts, which could have a material adverse effect on our results of operations.

Some of our technology offerings provide planning and design functions to customers, and we are involved both in product sales and engineering services. Any software errors or deficiencies or failures in our engineering services could have material adverse effects on our business, reputation, financial condition, results of operations and cash flows.
Our planning/design software applications facilitate the creation by customers of complex construction and building designs and is extremely complex. If our software applications contain defects or errors, our engineers prepare, approve or seal drawings that contain defects or we are otherwise involved in any design or construction that contains flaws, regardless of whether we caused such flaws, we may be required to correct deficiencies and may become involved in litigation. Further, if any damage or injury is not covered by our insurance and we are held to be liable, we could be required to correct such damage and to compensate persons who might have suffered injury, and our business, reputation, financial condition, results of operations and cash flows could be materially and adversely affected.

Risks Related to Human Capital

We depend on executives and other key employees, the loss of whom could harm our business.

We depend, in part, on the efforts and skills of our executives and other key employees, including members of our sales force. Our executives and key employees are experienced and highly qualified. The loss of any of our executive officers or other key employees could harm the business and the Company’s ability to timely achieve its strategic initiatives. Our success also depends on our ability to identify, attract, hire and retain our key personnel. We face strong competition for such personnel and may not be able to attract or retain such personnel. In addition, when we experience periods with little or no profits, a decrease in compensation based on our profits may make it difficult to attract and retain highly qualified personnel. We may not be able to attract and retain key personnel or may incur significant costs to do so.

Our work force could become increasingly unionized in the future and our unionized or union-free work force could strike, which could adversely affect the stability of our production and reduce our profitability.

A significant number of our employees are represented by labor unions and covered by collective bargaining agreements that will expire between 2025 and 2028. Generally, collective bargaining agreements that expire may be terminated after notice by the union. After termination, the union may authorize a strike similar to the strike which was initiated at our Stockton facility in the third quarter of 2019. Although we believe that our relations with our employees are generally good, no assurance can be
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given that we will be able to successfully extend or renegotiate our collective bargaining agreements as they expire. If we fail to extend or renegotiate our collective bargaining agreements, if disputes with our unions arise, or if the workers covered by one or more of the collective bargaining agreements engage in a strike, lockout, or other work stoppage, we could have a material adverse effect on production at one or more of our facilities, incur higher labor costs, and, depending upon the length of such dispute or work stoppage, on our business, results of operations, financial position and liquidity.

Risks Related to Seasonality and Weather Conditions

Seasonality and weather-related conditions may have a significant impact on our financial condition from period to period.

The demand for our products and services is heavily correlated to both seasonal changes, with operating results varying from quarter to quarter, and unpredictable weather patterns. Our sales and income have historically been lower in the first and fourth quarters than in the second and third quarters, as customers tend to purchase construction materials in the late spring and summer months for the construction season. In addition, weather conditions, such as unseasonably warm, cold or wet weather, which affect, and sometimes delay or accelerate installation of some of our products, may significantly affect our results of operations. Sales that we anticipate in one quarter may occur in another quarter, affecting both quarters’ results and potentially our stock price.

In addition, we typically ship orders as we receive them and maintain inventory levels to allow us to operate with minimum backlog. The efficiency of our inventory system, and our ability to avoid backlogs and potential loss of customers, is closely tied to our ability to accurately predict seasonal and quarterly variances. Further, our planned expenditures are also based primarily on sales forecasts. When sales do not meet our expectations, our operating results will be reduced for the relevant quarters, as we will have already incurred expenses based on those expectations. This could result in a material decline in our stock price.

Climate change, drought, weather conditions and storm activity could have a material adverse impact on our results of operations.

In North America, weather conditions and the level of severe storms can have a significant impact on the markets for residential construction and home improvement. As a result, climate change that results in altered weather conditions or storm activity could have a significant impact on our business by:

depressing or reversing economic development;
reducing the demand for construction;
increasing the cost and reducing the availability of wood products used in construction;
increasing the cost and reducing the availability of raw materials and energy;
increasing the cost and reducing the availability of insurance covering damage from natural disasters; and
lead to new laws and regulations that increase our expenses and reduce our sales.

Generally, any weather conditions that slow or limit residential or construction activity can adversely impact demand for our products and services.

Lower demand for our products or services as a result of this scenario could adversely impact our business, financial condition and results of operations. Additionally, severely low temperatures may lead to significant and immediate spikes in costs of natural gas, electricity and other commodities that could negatively affect our results of operation.

Natural disasters or other catastrophes could decrease our manufacturing capacity or harm our business and financial condition.

Some of our manufacturing facilities are located in geographic regions that have experienced, or may experience in the future, major natural disasters and other catastrophes, such as fires, earthquakes, floods and hurricanes. Our disaster recovery plan may not be adequate or effective to respond in such events. Further, although we maintain various form and levels of insurance to protect us against potential loss exposures, the scope of our available insurance coverage may not be adequate to protect us against all potential risks. For example, we do not carry earthquake insurance and other insurance that we carry is limited in the risks covered and the amount of coverage. Our insurance may not be adequate to cover all of our resulting costs, business interruption and lost profits when a major natural disaster or catastrophe occurs. A natural disaster rendering one or more of our manufacturing facilities totally or partially inoperable, whether or not covered by insurance, would materially and adversely affect our business and financial condition.

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Capital Expenditures, Expansions, Acquisitions and Divestitures Risks

Acquisitions, divestitures, and other strategic transactions could fail to achieve financial or strategic objectives, disrupt our ongoing business, and adversely impact our results of operations.

In furtherance of our business strategy, we routinely evaluate opportunities and may enter into agreements for possible acquisitions, divestitures, or other strategic transactions. A significant portion of our growth has been generated by acquisitions, such as the acquisition of ETANCO and we may continue to acquire businesses in the future as part of our growth strategy. Furthermore, there is no assurance that any such transaction will result in synergistic benefits. A potential acquisition, divestiture, or other strategic transaction may involve a number of risks including, but not limited to:

the transaction may not effectively advance our business strategy, and its anticipated benefits may never materialize;
integration of an acquired business' accounting, information technology, human resources, and other administrative systems may fail to permit effective management and expense reduction;
diversion of management’s attention from business operations to integration matters;
departure of key personnel from the acquired business;
effectively managing entrepreneurial spirit and decision-making;
unanticipated costs and exposure to unforeseen liabilities; and
impairment of assets.

As a result, if we fail to evaluate and execute these transactions properly, we might not achieve the anticipated benefits of such transactions and we may incur costs in excess of what we anticipate. These risks would likely be greater in the case of larger transactions.

In addition, future acquisitions may involve issuance of additional equity securities that dilute the value of our existing equity securities, increase our debt, cause impairment related to goodwill and cause impairment of, and amortization expenses related to, other intangible assets, which could materially and adversely affect our profitability.

Our capital expenditures may not be adequate to maintain our competitive position and may not be implemented in a timely or cost-effective manner.

Our capital expenditures are limited by our liquidity and capital resources and the amount we have available for capital spending is limited by the need to pay our other expenses and to maintain adequate cash reserves and borrowing capacity to meet unexpected demands that may arise. Productivity improvements through process re-engineering, design efficiency and manufacturing cost improvements may be required to offset potential increases in labor and raw material costs and competitive price pressures. If we are unable to make sufficient capital expenditures, or to maximize the efficiency of the capital expenditures we do make, our competitive position may be harmed and we may be unable to manufacture the products necessary to compete successfully in our targeted market segments.

Additional financing, if needed, to fund our working capital, growth or other business requirements may not be available on reasonable terms, or at all.

If the cash needed for working capital or to fund our growth or other business requirements increases to a level that exceeds the amount of cash that we generate from operations and have available through our current credit arrangements, we will need to seek additional financing. Additional or new borrowings may not be available on reasonable terms, or at all. Our ability to raise money by issuing and selling shares of our common or preferred stock depends on general market conditions and the demand for our stock. If we sell stock, our existing stockholders could experience substantial dilution. Our inability to secure additional financing could prevent the expansion of our business, internally and through acquisitions.

Regulatory Risks

Failure to comply with industry regulations could result in reduced sales and increased costs.

We are subject to environmental laws and regulations governing emissions into the air, discharges into water, and generation, handling, storage, transportation, treatment and disposal of waste materials. We are also subject to other federal and state laws and regulations regarding health and safety matters.

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Our manufacturing operations involve the use of solvents, chemicals, oils and other materials that are regarded as hazardous or toxic. We also use complex and heavy machinery and equipment that can pose severe safety hazards, especially if not properly and carefully used. Some of our products also incorporate materials that are hazardous or toxic in some forms, such as:

zinc and lead used in some steel galvanizing processes;
chemicals used in our acrylic and epoxy anchoring products, our concrete repair, strengthening and protecting products; and
gun powder used in our powder-actuated tools, which is explosive.

We have in the past, and may in the future, need to take steps to remedy our failure to properly label, store, transport, use and manufacture such toxic and hazardous materials.

If we do not obtain all material licenses and permits required by environmental, health and safety laws and regulations, or otherwise fail to comply with applicable laws and regulations, we may be subject to regulatory action by governmental authorities. If our policies and procedures are flawed, or our employees fail or neglect to follow our policies and procedures in all respects, we might incur liability. Relevant laws and regulations could change or new ones could be adopted that require us to incur substantial expense to comply.

Complying or failing to comply with conflict minerals regulations could materially and adversely affect our supply chain, our relationships with customers and suppliers and our financial results.

We are currently subject to conflict mineral disclosure regulations in the U.S. and may be affected by new regulations concerning conflict and similar minerals adopted by other jurisdictions where we operate. While we have been successful to date in adapting to such regulations, we have and will continue to incur added costs to comply with the disclosure requirements, including costs related to determining the source of such minerals used in our products. We may not be able to ascertain the origins of such minerals that we use and may not be able to satisfy requests from customers to certify that our products are free of conflict minerals. These requirements also could constrain the pool of suppliers from which we source such minerals. We may be unable to obtain conflict-free minerals at competitive prices. Such consequences will increase costs and may materially and adversely affect our manufacturing operations and profitability.

When we provide engineering services we are subject to various local, state and federal rules and regulations which can increase our potential liability.

As part of our product offerings, we may provide engineering and design-related services to our clients. Some of these services require us to stamp drawings or otherwise be involved in the engineering process. While we generally attempt to limit our liability through our internal processes and through our legal agreements with third parties to which we provide such services, under various local, state and federal rules and regulations these limitations may not be effective and we may be held liable for engineering failures. Any such liability could materially and adversely affect our profitability.

General Risk Factors

Any issuance of preferred stock may dilute your investment and reduce funds available for dividends.

Our Board of Directors is authorized by our certificate of incorporation to determine the terms of one or more series of preferred stock and to authorize the issuance of shares of any such series on such terms as our Board of Directors may approve. Any such issuance could be used to impede an acquisition of our business that our Board of Directors does not approve, further dilute the equity investments of holders of our common stock and reduce funds available for the payment of dividends to holders of our common stock.

Provisions in our amended and restated certificate of incorporation and bylaws or Delaware law might discourage, delay or prevent a change in control of our company or changes in our management.

Our amended and restated certificate of incorporation and bylaws contain provisions that may discourage, delay or prevent a change in control of our Company or changes in our management that our stockholders may deem advantageous. For example, under our charter documents, our stockholders cannot call special meetings and cannot take action by written consent.

Additionally, we are subject to Section 203 of the Delaware General Corporation Law, which generally prohibits a Delaware corporation from engaging in any of a broad range of business combinations with any “interested” stockholder for a period of three years following the date on which the stockholder became an “interested” stockholder and which may discourage, delay or
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prevent a change in control of our company. Delaware law and our corporate governance documents could deter takeover attempts that might otherwise be beneficial to our stockholders.

If we were required to write down all or part of our goodwill or other indefinite-lived intangible assets, our results of operations or financial condition could be materially adversely affected in a particular period.

Declines in the Company’s business may result in an impairment of the Company’s tangible and intangible assets which could result in a material non-cash charge. At least annually, or at other times when events occur that could affect the value of such assets, we perform impairment tests on our goodwill, indefinite-lived intangible assets and definite-lived intangible assets. To determine whether an impairment has occurred, we compare fair value of each of our reporting units with its carrying value. In the past, these tests have led us to incur significant impairment charges. Significant and unanticipated changes in circumstances, such as significant adverse changes in business climate, adverse actions by regulatory authorities, unanticipated competition, loss of key customers or changes in technology or markets, can require a charge for impairment that can negatively impact our results of operations.

Item 1B. Unresolved Staff Comments.
 
None.
 
Item 1C. Cybersecurity.
 
Risk Management and Strategy

Our cybersecurity risk management efforts are an integral part of our overall risk management processes, and we are deeply committed to safeguarding our digital and information technology environment for our employees, customers and vendors. We employ a robust, global and multi-layered security strategy, known as “defense-in-depth,” to assess, identify and manage cybersecurity risks and protect our cyber work environment from potential threats and vulnerabilities. These risks, threats and vulnerabilities include those that could result in significant operational disruption to the Company, such as production disruption, business downtime or loss of containment, as well as risks that could have significant reputational or compliance/regulatory impact.

The Simpson Information Security Team monitors information security risks that target both technology and manufacturing environments and identifies potential risks to Simpson’s information security posture. Any identified risks are prioritized in terms of impact to Simpson’s information security posture and, if critical, addressed immediately or added to Simpson’s information security roadmap. To supplement our internal cybersecurity resources, we also engage external third parties to perform information security assessments, penetration tests and related services to enhance our information security program.

Risks Associated with Third-Party Service Providers

In addition, we implement robust processes to oversee and manage risks associated with our business arrangements with third-party service providers. All new Simpson third-party business agreements are reviewed and assessed by our Information Security Team. We also perform information security program investigations on the security posture of, and assess any publicly known information security events related to, these third-party service providers. If a third party service provider with a business agreement with Simpson experiences an information security breach or incident, our Information Security Team reviews and assesses such event to understand Simpson’s overall exposure to the security incident.

Insurance

We maintain cybersecurity insurance coverage at industry standard levels as a part of our comprehensive insurance portfolio to help mitigate risk in the event an information security event occurs.

Risks from Cybersecurity Threats

Despite our security measures, our information technology and infrastructure may remain vulnerable to disruptions, including as a result of attacks by increasingly sophisticated intruders or others who attempt to cause harm to, or otherwise interfere with the normal use of our systems. We have experienced targeted and non-targeted cybersecurity attacks and incidents in the past that have resulted in unauthorized persons gaining access to our information systems and computer networks, and we could in the future experience similar attacks. On October 11, 2023, we announced that we had experienced disruptions in our Information Technology (IT) infrastructure and applications resulting from a cybersecurity incident. We identified unauthorized activity in our IT systems and took immediate steps to stop, remediate and investigate such activity. We also notified relevant law enforcement. The incident, which caused disruption of our business operations for approximately three days, has been
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resolved due to steps we took to address the incident. As a result of our ability to restore our operations within three days, we were able to fulfill our backlog of orders caused by the operational disruption within one week, and therefore, we experienced no material financial impact to our business.

We do not believe any risks from cybersecurity threats, including as a result of any previous cybersecurity incident, have materially affected or are reasonably likely to materially affect the Company or our business strategy, results of operations, or financial condition. For additional information regarding the risks from cybersecurity threats we face, see the section captioned “Risks Relating to Our Intellectual Property and Information Technology” under Part I, Item 1A “Risk Factors” above.

Governance

Board and Committee Oversight

Although our full Board of Directors is ultimately responsible for risk oversight, our Board is assisted in discharging its risk oversight responsibility by its committees. The Audit and Finance Committee of the Board is responsible for providing oversight of our information security program and cybersecurity risks. In connection with this oversight role, the Audit and Finance Committee receives information technology updates from management at least quarterly. Cybersecurity risks facing the Company and updates on the Company’s practices and progress to mitigate such risks are also the subject of management reports to the Audit and Finance Committee on a more frequent basis, as necessary or appropriate.

Management’s Role in Assessing and Managing Risk

The Company’s information security efforts are led by our Senior Vice President, Information Technology (“SVP, IT”) and our Director of Information Security (“IT Director”), supported by our executive management team. These efforts are designed to address information security governance and risk, product security, identification and protection of critical assets, third-party risk, security awareness, cyber defense operations and related risk management matters. Our SVP, IT and IT Director have an average of over 35 years of prior work experience in various roles involving information technology, including security, auditing compliance, systems and programming. These individuals have relevant educational and industry experience, including holding similar positions at other large companies.

Our SVP, IT provides relevant cybersecurity and information technology reports to the Audit and Finance Committee, and to the executive leadership team. These reports are provided at quarterly Audit and Finance Committee meetings and at our quarterly Information Technology Steering Committee (“IT Steering Committee”) meetings. These reports typically include analyses of recent significant cybersecurity threats and incidents at the Company and across the industry, as well as a review of our security controls, assessments and program maturity, risk mitigation status, and a review of our third-party service providers as appropriate. Simpson’s information security roadmap and posture are also reviewed quarterly with members of the executive leadership team and the Audit and Finance Committee. In accordance with our information security program, any information security event is assessed and reviewed by our IT Steering Committee.

The IT Steering Committee is responsible for assessing and reviewing our information security program and the Company’s material risks from cybersecurity threats. Additional supervision and management is provided by our IT Leadership team, comprised of our SVP, IT; VP, IT Infrastructure and Operations; VP, IT Enterprise Applications; and International IT Director.

 
Item 2. Properties.
 
Our headquarters and principal executive offices in Pleasanton, California, and our principal U.S. manufacturing facilities in Stockton and San Bernardino County, California, McKinney, Texas, West Chicago, Illinois, Columbus, Ohio, and Gallatin, Tennessee are located in owned premises. The principal manufacturing facilities located outside the U.S., the majority of which we own, are in France, Italy, Denmark, Germany, Poland, Switzerland, Sweden, Portugal and China. We also own and lease smaller manufacturing facilities, warehouses, research and development facilities and sales offices in the U.S., Canada, the United Kingdom, Europe, Asia, Australia, New Zealand, and Chile. As of February 27, 2024, the Company’s owned and leased facilities were as follows:
 
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 Number   
 OfApproximate Square Footage
 PropertiesOwnedLeasedTotal
  (in thousands of square feet)
North America32 2,235 1,271 3,506 
Europe38 1,886 668 2,554 
Asia/Pacific175 41 216 
Administrative and all other89 — 89 
Total80 4,385 1,980 6,365 
 
We believe that our properties are maintained in good operating condition. Our manufacturing facilities are equipped with specialized equipment and use extensive automation. Our leased facilities typically have renewal options and have expiration dates through 2036. We believe we will be able to extend leases on our various facilities as necessary, or as they expire. Currently, our manufacturing facilities are being operated with at least one full-time shift. Based on current information and subject to future events and circumstances, we anticipate that we may require additional facilities to accommodate possible future growth.


Item 3. Legal Proceedings.

From time to time, the Company is involved in various legal proceedings and other matters arising in the normal course of business. Corrosion, hydrogen embrittlement, 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 Company currently is not a party to any legal proceedings which the Company expects individually or in the aggregate to have a material adverse effect on the Company’s financial condition, cash flows or results of operations. Nonetheless, the resolution of any claim or litigation is subject to inherent uncertainty and we could in the future incur judgments, enter into settlements of claims or revise our expectations regarding the outcome of the various legal proceedings and other matters we are currently involved in, which could materially impact our financial condition, cash flows or results of operations. Refer to Note 15, “Commitments and Contingencies,” to the Company’s consolidated financial statements included in this Annual Report on Form 10-K for a discussion of recent developments related to certain of the legal proceedings in which we are involved.

Item 4. Mine Safety Disclosures.
 
Not applicable.
 
PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
 
Market Information for Common Stock

The Company’s common stock is listed on the NYSE under the symbol “SSD.”

As of February 22, 2024 there were 61,712 holders of record of the Company’s common stock, although we believe that there are a significantly larger number of beneficial owners of our common stock.

Dividends
 
During 2023, the Company paid a total of $45.2 million in cash dividends. On January 19, 2024, the Company declared a quarterly cash dividend of $0.27 per share of common stock to be paid on April 25, 2024 to stockholders of record as of April 4, 2024. See "Note 20 — Subsequent Events" to the Company's consolidated financial statements. Future dividends, if any, will be determined by the Company’s Board of Directors, based on the Company’s future earnings, cash flows, financial
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condition and other factors deemed relevant by the Board of Directors. See “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
 
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Stock Performance Graph

The following graph compares the cumulative total stockholder return on the Company’s common stock from December 31, 2017, through December 31, 2023, with the cumulative total return on the S&P 500 Index (a broad equity market index), the Dow Jones U.S. Building Materials & Fixtures Index (a published industry or line-of-business index) and a Peer Group Index over the same period (assuming the investment of $100 in the Company’s common stock and in each of the indices on December 31, 2017, and reinvestment of all dividends into additional shares of the same class of equity securities at the frequency with which dividends are paid on such securities during the applicable fiscal year). To provide an additional comparison to our performance, we included an index consisting of companies in the building products or construction materials industries that are most comparable to us in terms of size and nature of operations, which group has also been referenced by us in connection with setting our executive compensation. The Peer Group Index below consisted of AAON, Inc., Advance Drainage Systems, Inc.; Allegion Plc; American Woodmark Corp.; Apogee Enterprises, Inc.; Armstrong World Industries, Inc.; Atkore, Inc.; Axek Company, Inc.; Azek Company, Inc.; Eagle Materials, Inc.; Gibraltar Industries, Inc.; Masonite International Corp.; Patrick Industries, Inc.; PGT Innovations, Inc.; Quanex Building Products Corp.; Summit Materials, Inc.; and Trex Company, Inc.


 SSD Performance Stock Performance Graph and Peer Co.jpg

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Purchases of Equity Securities by the Issuer and Affiliated Purchasers

The table below shows the monthly repurchases of shares of the Company's common stock in the fourth quarter of 2023.

(a)(b)(c)(d)
PeriodTotal Number of Shares PurchasedAverage Price Paid per Share1Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
Approximate Value of Shares that May Yet Be Purchased Under the Plans or Programs
(in thousands)2
October 1 - October 31, 2023128,093 $133.12 128,000 $82,962
November 1 - November 30, 2023232,746 $141.62 232,746 $50,000
December 1 - December 31, 202373 $166.97 — $50,000
     Total360,912 

Approximately 66 thousand shares of the Company's common stock were repurchased in 2023, in connection with the withholding of shares to cover payroll taxes on vesting of stock-based compensation awards vested and for retirement eligible employees who retired during 2023.

Approximately 361 thousand shares of the Company's common stock were repurchased in 2023 for a total amount of $50.0 million pursuant to the Board’s $100.0 million repurchase authorization that was publicly announced on December 15, 2022, which authorization expired on December 31, 2023.

On October 19, 2023, the Board of Directors authorized the repurchase up to $100.0 million of the Company’s common stock from January 1, 2024 through December 31, 2024.

Item 6. [Reserved]


1 Average price paid per share of common shares repurchased excludes excise tax. As of January 1, 2023, the Company's share repurchases are subjected to a 1% excise tax enacted by the Inflation Reduction Act of 2022. The amount of excise tax incurred is included in the Company's Consolidated Statement of Stockholders' Equity for the year ended December 31, 2023.
2 Pursuant to the $100.0 million repurchase authorization from the Board of Directors on December 15, 2022, and which expired on December 31,
2023. See "Note 5 — Stockholder's Equity".
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
 
Each of the terms the “Company,” “we,” “our,” “us” and similar terms used herein refer collectively to Simpson Manufacturing Co., Inc., a Delaware corporation, and its wholly-owned subsidiaries, including Simpson Strong-Tie Company Inc., unless otherwise stated. The Company regularly uses its website to post information regarding its business and governance. The Company encourages investors to use http://www.simpsonmfg.com as a source of information about the Company. The information on our website is not incorporated by reference into this report or other material we file with or furnish to the SEC, except as explicitly noted or as required by law.

The following discussion and analysis provides information which management believes is relevant to an assessment and understanding of the Company’s consolidated financial condition and results of operations. This discussion should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and notes thereto included in this report.

“Strong-Tie” and our other trademarks appearing in this report are our property. This report contains additional trade names and trademarks of other companies. We do not intend our use or display of other companies’ trade names or trademarks to imply an endorsement or sponsorship of us by such companies, or any relationship with any of these companies.

Overview
 
We design, manufacture and sell building construction products that are of high quality and performance, easy to use and cost-effective for customers. We operate in three business segments determined by geographic region: North America, Europe and Asia/Pacific.

In 2021, we shared our strategy for continuing to achieve above market revenue growth through a combination of organic and inorganic opportunities. Our organic opportunities focused on expanding our product line with our current customers while also identifying new opportunities within our core competencies of wood and concrete products. These new growth opportunities focused on gaining share with OEM customers, DIY and construction contractors, and providing more solutions for mass timber, concrete and structural steel construction.

In order to grow in these markets, we aspire to be among the leaders in engineered load-rated construction building products and systems and digital product offerings while leveraging our engineering expertise, deep-rooted relationships with top builders, engineers, contractors, code officials and distributors, along with our ongoing commitment to testing, research and innovation. Importantly, we currently have existing products, testing results, distribution and manufacturing capabilities to support our growth ambitions. This will ultimately be a function of expanding our sales and/or marketing functions to promote our products to different end users and distribution channels, expanding our customer base, and potentially introducing new products in the future.

Our commitment to continuous improvement has fostered our core Company ambitions, which we continue to pursue including:

Strengthen our values-based culture;
Be the partner of choice;
Be an innovative leader in the markets we operate;
Above market growth relative to the United States housing starts;
An operating income margin within the top quartile of our proxy peers;
Remain within the top quartile of our proxy peers for operating income margin; and
Integrate ETANCO and restoring our return on invested capital to be within the top quartile of our proxy peers.

We have made progress towards our key growth initiatives since they were first announced in 2021. A few recent examples include:

The acquisition and integration of ETANCO which has resulted in additional scale for our legacy European operations, as well as the opportunity to realize synergies in those operations;
Converted component manufacturers to using our truss software and purchasing our truss plate and connectors solution sets, including a major component manufacturer;
Our announced alliance with Structural Technologies drove record revenue of our concrete strengthening solutions, while our field support and strong industry relationships continued to drive specifications of our anchors, fasteners, cold-formed steel, and structural steel products on commercial projects;
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Expansion of our Outdoor Accents® decorative hardware, fasteners and anchors product lines, which contributed to our growth in the DIY or construction contractor segments of our national retail market;
Designed, manufactured, and installed many critical connections in the construction of a 112-foot wood building that was used for the world’s tallest shake table test;
Completed strategic asset acquisitions to accelerate the expansion of our product line to meet our customer needs;
Made strategic investments in software development critical to the component manufacturing market segment as well as other digital product offerings to support customers in our residential and national retail markets;
Achieved an industry-leading product fulfillment rate and increased our same day delivery service in North America;
Completed our path-to-market shift away from two-step distribution in North America, enabling us to sell our complete product line and drive additional market share gains;
Continued growing United States sales volumes above United States housing starts growth;
Rolled out over 50 new products during 2023 (a Company record);
Re-aligned our North America sales team to be customer market focused with the five groups: residential, commercial, OEM, national retail and component manufacturers; and
Invested in venture capital funds and other companies focused on the home building industry and related new technologies.

We believe this progress is the result of our high service levels, increasingly diverse portfolio of products and software as well as our commitment to innovation and developing complete solutions for the markets we serve. As we continue to make progress on our growth initiatives, we believe we can continue to achieve above market growth in the United States relative to United States housing starts for fiscal 2024 and beyond. These examples further emulate our Founder, Barclay Simpson’s, nine principles of doing business, and more specifically the focus and obsession on customers and users.

Factors Affecting Our Results of Operations

The Company’s business, financial condition and results of operations depends in large part on the level of United States housing starts and residential construction activity. Both single-family and multi-family housing starts decreased during 2023 compared to the prior two years, primarily due to interest rate increases and inflation. Lower housing starts could result in lower demand, which would affect the Company's sales and possibly operating profit,

Unlike lumber or other products that have a more direct correlation to United States housing starts, our products are used to a greater extent in areas that are subject to natural forces, such as seismic or wind events. Our products are generally used in a sequential progression that follows the construction process. Residential and commercial construction begins with the foundation, followed by the wall and the roof systems, and then the installation of our products, which flow into a project or a house according to these schedules.

In prior years, our sales were heavily seasonal with operating results varying from quarter to quarter depending on weather conditions that could delay construction starts. Our sales and income have historically been lower in the first and fourth quarters than in the second and third quarters of a fiscal year. Due to efforts in diversifying our global footprint with the acquisition of ETANCO and changing our path to market in the United States, sales from our product line, customer base and customer purchases are becoming less seasonal. Political and economic events such as rising energy costs, volatility in the steel market, stressed product transportation systems and increasing interest rates can also have an effect on our gross and operating profits as well. Changes in raw material cost could impact the amount of inventory on-hand, and negatively affect our gross profit and operating margins depending on the timing of raw material purchases or how much sales prices can be increased to offset any increases in raw material costs.

Our operations also expose us to risks associated with pandemics, epidemics or other public health crises.

Business Segment Information

Historically, our North America segment has generated more revenues from wood construction products compared to concrete construction products. North America sales increased 0.9% for the year ended December 31, 2023 compared to December 31, 2022. Our wood construction product sales decreased 0.9% for the year ended December 31, 2023 compared to December 31, 2022, primarily due to product price decreases implemented during the first quarter of 2023, partly offset by increased sales volumes. Our concrete construction product sales increased 9.9% over the same periods due to product price increases to offset rising raw material costs and higher sales volumes. Over the last several years, our historical average volume growth in North America has exceeded the housing starts market growth by approximately 250 basis points. We believe 2024 North America sales volumes will continue to outpace the housing starts market with 2024 housing starts projected to grow in the low single digits relative to fiscal year 2023 housing starts.
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During 2023, work continued on the Columbus facility expansion and work commenced on replacing our Gallatin facility. We expect the expansion and replacement facility will improve our overall service, production efficiencies and safety in the workplace, as well as reduce our reliance on certain outsourced finished goods and component products and continue to ensure we have ample capacity to meet our customer needs. These investments reinforce our core business model differentiators to remain the partner of choice as we continue to produce products locally and ensure superior levels of customer service.

Europe's operating results for the fiscal year ending December 31, 2023 includes twelve months of ETANCO operating results, while fiscal year ending December 31, 2022 includes the results of ETANCO as of the April 1, 2022 acquisition date. Europe sales increased 20.1% for the year ended December 31, 2023 compared to December 31, 2022, primarily due to ETANCO as well as the positive effect of $12.7 million in foreign currency translation related mostly to Europe's currencies strengthening against the United States dollar. Gross profit increased $51.4 million primarily due to the acquisition of ETANCO as well as due to lower material costs. Cost of sales in the prior year period included a $13.6 million inventory fair-value adjustment as a result of purchase accounting with respect to the acquisition of ETANCO. Operating income increased $34.9 million, primarily due to ETANCO. Operating income in the prior period was negatively impacted by the $13.6 million in non-recurring fair-value adjustments noted above and $12.7 million in higher acquisition and integration costs. Fiscal 2024 operating margins will include anticipated integration costs estimated to range between $4.0 million to $5.0 million.

Our Asia/Pacific segment has generated revenues from both wood and concrete construction products. We believe that the Asia/Pacific segment is not significant to our overall performance.

Business Outlook

Based on business trends and conditions, the Company's outlook for the full fiscal year ending December 31, 2024 is as follows:

Operating margin is estimated to be in the range of 20.0% to 21.5%, including $86.1 million in depreciation and amortization expense.

The effective tax rate is estimated to be in the range of 25.0% to 26.0%, including both federal and state income tax rates as well as international income tax rates, and assuming no tax law changes are enacted.

Capital expenditures are estimated to be approximately $200.0 million, which includes $120.0 million for the Columbus, Ohio facility expansion and the new Gallatin, Tennessee fastener facility construction, some of which may carry over to fiscal year 2025.

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Results of Operations
 
Our discussion of our results focuses on 2023 and 2022 and year-to-year comparisons between those periods. Discussions of 2021 results and year-to-year comparison between 2022 and 2021 results are not included in this Annual Report on Form 10-K and can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022. The following table sets forth, for the years indicated, the Company’s operating results as a percentage of net sales for the years ended December 31, 2023, 2022 and 2021, respectively:
 Years Ended December 31,
 202320222021
Net sales100.0 %100.0 %100.0 %
Cost of sales52.9 %55.5 %52.0 %
Gross profit47.1 %44.5 %48.0 %
Research and development and other engineering expenses
4.2 %3.2 %3.8 %
Selling expense9.2 %8.0 %8.6 %
General and administrative expense12.1 %10.8 %12.3 %
Total operating expense25.5 %22.0 %24.7 %
Acquisition and integration related costs0.2 %0.8 %— %
Net gain on disposal of assets— %(0.1)%— %
Income from operations21.4 %21.8 %23.3 %
Interest expense, net and other0.2 %(0.4)%(0.2)%
Other and foreign exchange loss, net(0.1)%(0.2)%(0.4)%
Income before taxes21.5 %21.2 %22.8 %
Provision for income taxes5.5 %5.4 %5.9 %
Net income16.0 %15.8 %16.9 %

Comparison of the Years Ended December 31, 2023 and 2022
 
Unless otherwise stated, the results announced below results, when providing comparisons (which are generally indicated by words such as “increased,” “decreased,” “unchanged” or “compared to”), compare the results of operations for the year ended December 31, 2023, against the results of operations for the year ended December 31, 2022 and include the results of the acquisition of FIXCO Invest S.A.S ("ETANCO") on April 1, 2022. 2023 full year comparisons include twelve months of ETANCO operating results for the fiscal year ending December 31, 2023 compared to nine months for the fiscal year ending December 31, 2022. Unless otherwise stated, the results announced below, when referencing “both years,” refer to the year ended December 31, 2022 and the year ended December 31, 2023.

Beginning in 2022, the Company changed its presentation for both the North America and the Administrative and all other segment's statement of operations to display allocated expenses and management fees as a separate item below income from operations. During 2021, allocated expenses and management fees between the two segments were previously included in gross profit, operating expenses and in income from operations and have been adjusted herein to conform to the 2022 presentation. Consolidated income from operations, income before tax and net income for all periods presented below are not affected by the change in presentation

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The following table shows the change in the Company’s operations from 2022 to 2023, and the increases or decreases from the prior year, for each category by segment:
 
  Increase (Decrease) in Operating Segment 
  North America Asia/
Pacific
Admin &
All Other
 
 (in thousands)
2022Europe2023
Net sales$2,116,087 $15,381 $80,453 $1,882 $— $2,213,803 
Cost of sales1,174,794 (36,446)29,021 1,113 1,566 1,170,048 
   Gross profit941,293 51,827 51,432 769 (1,566)1,043,755 
Operating expenses:
Research and development and other engineering expense68,354 21,905 2,057 (149)— 92,167 
Selling expense169,378 23,634 10,681 302 (15)203,980 
General and administrative expense228,468 18,892 15,621 767 4,355 268,103 
   Operating expenses466,200 64,431 28,359 920 4,340 564,250 
Net gain (loss) on disposal of assets(1,317)66 908 39 28 (276)
Acquisition and integration related costs17,343 — (12,711)— — 4,632 
Income from operations459,067 (12,670)34,876 (190)(5,934)475,149 
Interest income (expense), net and other financing costs(7,594)(639)(3,354)239 14,739 3,391 
Other & foreign exchange gain (loss), net(3,408)4,729 2,306 (98)(5,522)(1,993)
Income before taxes
448,065 (8,580)33,828 (49)3,283 476,547 
Provision for income taxes114,070 (2,815)10,243 222 840 122,560 
Net income$333,995 $(5,765)$23,585 $(271)$2,443 $353,987 
 
Net Sales increased 4.6% to $2,213.8 million from $2,116.1 million primarily due to the acquisition and integration of ETANCO as well as the positive effect of $12.7 million in foreign currency translation related mostly to Europe's currencies weakening against the United States dollar. Wood construction product net sales, including sales of connectors, truss plates, fastening systems, fasteners and shearwalls, represented 85% and 87% of the Company’s total net sales for the years ended December 31, 2023 and 2022, respectively. Concrete construction product net sales, including sales of adhesives, chemicals, mechanical anchors, powder actuated tools and reinforcing fiber materials, represented 15% and 13% of the Company’s total net sales for the years ended December 31, 2023 and 2022, respectively.

Gross profit increased to $1,043.8 million from $941.3 million, primarily due to the acquisition and integration of ETANCO. Gross margins increased to 47.1% from 44.5%, primarily due to lower material costs. Cost of sales in the prior year period included a $13.6 million inventory fair-value adjustment as a result of purchase accounting with respect to the acquisition of ETANCO. Gross margins, including some inter-segment expenses, which were eliminated upon consolidation, and excluding certain expenses that are allocated according to product group, increased from 44.4% to 47.2% for wood construction products and increased from 43.9% to 46.0% for concrete construction products.

Research and development and other engineering expense increased 34.8% to $92.2 million from $68.4 million, primarily due increased personnel costs of $11.7 million and professional fees of $5.7 million associated with our strategic growth initiatives and to further our Building Technologies offering, $3.2 million in variable compensation, and $1.2 million in depreciation and amortization.

Selling expense increased 20.4% to $204.0 million from $169.4 million, primarily due to increases of $14.0 million in personnel costs, $7.3 million in sales commission expense, $2.8 million in travel-related expenses, $2.8 million in professional fees, and $2.5 million in other variable compensation.

General and administrative expense increased 17.3% to $268.1 million from $228.5 million, primarily due to increases of $12.5 million in personnel costs, $7.6 million in depreciation and amortization, $6.0 million in variable compensation, and $1.6 million in travel costs.

Our effective income tax rate increased to 25.7% from 25.5%.

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Net income was $354.0 million compared to $334.0 million. Diluted net income per share of common stock was $8.26 compared to $7.76.

Net Sales

The following table shows net sales by segment for the years ended December 31, 2022 and 2023, respectively: 

(in thousands) North
America
EuropeAsia/
Pacific
Total
December 31, 2022$1,701,041 $400,303 $14,743 $2,116,087 
December 31, 20231,716,422480,756 16,625 2,213,803
Increase$15,381$80,453 $1,882 $97,716
Percentage increase0.9 %20.1 %12.8 %4.6 %
 
The following table shows segment net sales as percentages of total net sales for the years ended December 31, 2022 and 2023, respectively:
North
America
EuropeAsia/
Pacific
Total
Percentage of total 2022 net sales80 %19 %%100 %
Percentage of total 2023 net sales78 %22 %— %100 %

Gross Profit
 
The following table shows gross profit by segment for the years ended December 31, 2022 and 2023, respectively:

(in thousands)North
America
EuropeAsia/
Pacific
Admin &
All Other
Total
December 31, 2022$810,730 $125,616 $4,910 $37 $941,293 
December 31, 2023862,557 177,048 5,679 (1,529)1,043,755 
Increase$51,827 $51,432 $769 $(1,566)$102,462 
Percentage increase6.4 %40.9 %**10.9 %
* The statistic is not meaningful or material.

The following table shows gross margins by segment for the years ended December 31, 2022 and 2023, respectively:
 
North
America
EuropeAsia/
Pacific
Admin &
All Other
Total
2022 gross margin47.7 %31.4 %33.3 %*44.5 %
2023 gross margin50.3 %36.8 %34.2 %*47.1 %
* The statistic is not meaningful or material.

North America

Net sales increased 0.9% primarily due to higher sales volumes, partly offset by price decreases implemented during the first quarter of 2023.
Gross margin increased to 50.3% from 47.7%, primarily due to lower raw material and labor costs as a percentage of net sales.

Research and development and engineering expense increased $21.9 million, primarily due increased personnel costs of $7.0 million and professional fees of $5.8 million associated with our strategic growth initiatives and to further our Building Technologies offering, $3.1 million in variable compensation, and $1.0 million in depreciation and amortization.

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Selling expense increased $23.6 million, primarily due to increases of $10.5 million in personnel costs, $5.0 million in sales commission expense, $2.2 million in professional fees, $2.1 million in travel-related expenses, and $1.6 million in other variable compensation.

General and administrative expense increased $18.9 million, primarily due to increases of $6.9 million in personnel costs, $4.3 million in computer software and hardware costs, $2.7 million in variable compensation, and $1.4 million in depreciation and amortization.

Income from operations decreased $12.7 million, primarily due to higher operating expenses including personnel costs, professional fees, variable compensation, sales commission expense, and computer software and hardware costs.

Europe

Net sales increased 20.1%, primarily due to the acquisition and integration of ETANCO as well as the positive effect of $12.7 million in foreign currency translation related mostly to Europe's currencies strengthening against the United States dollar.

Gross margin increased to 36.8% from 31.4% resulting in an increase in gross profit of $51.4 million, primarily due to lower raw material costs as a percentage of net sales. Cost of sales in the prior year included a $13.6 million non-recurring fair-value adjustment for inventory costs as a result of purchase accounting with respect to the acquisition of ETANCO.

Income from operations increased $34.9 million, primarily due to higher gross profit and lower acquisition and integration costs. Prior year costs included a $13.6 million non-recurring fair-value adjustment for inventory costs as a result of purchase accounting with respect to the acquisition of ETANCO.

Asia/Pacific

For information about the Company’s Asia/Pacific segment, please refer to the table above setting forth changes in our operating results for the years ended December 31, 2023 and 2022.

Administrative and All Other

General and administrative expense increased $4.4 million, primarily due to increases of $1.2 million in variable compensation, $1.0 million in personnel costs, and $1.0 million professional and legal fees.




Critical Accounting Policies and Estimates
 
The critical accounting policies described below affect the Company’s more significant judgments and estimates used in the preparation of the Company’s consolidated financial statements. If the Company’s business conditions change or if it uses different assumptions or estimates in the application of these and other accounting policies, the Company’s future results of operations could be adversely affected.
 
Inventory Valuation
 
Inventories are stated at the lower of cost or net realizable value (market). Cost includes all costs incurred in bringing each product to its present location and condition, as follows:
 
Raw materials and purchased finished goods — principally valued at cost determined on a weighted average basis; and
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 makes estimates for obsolescence to the gross value of inventory. The Company estimates net realizable value based on estimated selling price less further costs through 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. The Company believes that this approach is suitable for impairments of slow-moving and obsolete inventory. When impairments are established, a new cost basis of the inventory is created. Unexpected changes in market demand, building codes or buyer preferences could reduce the rate of inventory turnover and require the Company to recognize more obsolete inventory.

Business Combinations.

Accounting for business combinations requires us to make significant estimates and assumptions. We use our best estimates and assumptions to accurately assign fair value to the tangible and intangible assets acquired and liabilities assumed at the acquisition date as well as the useful lives of those acquired intangible assets.

Critical estimates in valuing certain of the intangible assets and goodwill we have acquired are:

future expected cash flows from operations;
historical and expected customer attrition rates and anticipated growth in revenue from acquired customers;
assumptions about the period of time the acquired trade name will continue to be used in our offerings; and
discount rates.

Unanticipated events and circumstances may occur that may affect the accuracy or validity of such assumptions, estimates or actual results.

Goodwill and Other Intangible Assets

Our goodwill balance is not amortized to expense, and we may assess quantitative or qualitative factors to determine whether it is more likely than not that the fair value of each reporting unit is less than its carrying amount as a basis for determining whether it is necessary to complete quantitative impairment assessments. The Company evaluates the recoverability of goodwill in accordance with Accounting Standard Codification (“ASC”) Topic 350, “Intangibles - Goodwill and Other,” annually, or more frequently if an event occurs or circumstances change in the interim that would more likely than not reduce the fair value of the asset below its carrying amount.

Intangible assets acquired are recognized at their fair value at the date of acquisition. Finite-lived intangibles are amortized over their applicable useful lives. We monitor conditions related to these assets to determine whether events and circumstances warrant a revision to the remaining amortization or depreciation period. We test these assets for potential impairment annually and whenever management concludes events or changes in circumstances indicate that the carrying amount may not be recoverable.

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.

During fiscal year 2023, we re-evaluated our European reporting units after a full year of operations from our acquisition of ETANCO as it has become further integrated into our other European operations resulting in changes to the management, product distribution, and operations structure of our European operations. As a result of this re-evaluation, all European reporting units were consolidated for reporting purposes into one overall Europe reporting unit. A qualitative assessment was performed immediately preceding the reporting unit change and determined that it was not more likely than not that any impairment existed prior to the reporting unit change.

We determined that the U.S. reporting unit includes four components: Northwest United States, Southwest United States, Northeast United States and Southeast United States. The Australia reporting unit includes two components: Australia and New Zealand. For each of these reporting units, the Company aggregated the components because management concluded that they are economically similar, and that the goodwill is recoverable from these components working in concert.

We applied the ("Step 1") approach where the Company compares the fair value of the reporting unit to its carrying value during the annual impairment assessment performed in the fourth quarter of 2023. For this qualitative assessment, we assessed various assumptions, events and circumstances that would have affected the estimated fair value of the reporting units as
37



compared to their quantitative fair value measurement determined in the fourth quarter of 2023. The fair value calculation uses both the income approach (discounted cash flow method) and the market approach, equally weighted. If the Company determines that the carrying value of the net assets assigned to the reporting unit, including goodwill, exceeds the fair value of the reporting unit, no further action is taken. If the Company determines that the carrying value of a reporting unit’s goodwill exceeds its implied fair value, the Company will record an impairment charge equal to the difference between the implied fair value of the goodwill and the carrying value.

We completed our annual impairment assessment by performing a qualitative assessment during the annual impairment assessment performed in the fourth quarter of 2022. For this qualitative assessment, we assessed various assumptions, events and circumstances that would have affected the estimated fair value of the reporting units. Based on the qualitative assessment performed, the Company concluded that there was no evidence of events or circumstances that would indicate a material change from the Company’s prior year quantitative assessment by reporting unit and therefore, it was more likely than not that the estimated fair value of reporting units exceeded their respective carrying values

The 2023 and 2022 annual testing of goodwill for impairment did not result in impairment charges.

Revenue from Contracts with Customers

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 general shipping terms are Incoterm C.P.T. (F.O.B. shipping point), where the title, and risk and rewards of ownership transfer at the point when the products are no longer on the Company's premises. Other Incoterms are allowed as exceptions depending on the product or service being sold and the nature of the sale. 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).

Volume rebates, discounts and rights of return are accounted for as variable considerations because the transaction price is either uncertain until the customer completes or fails the specified volumes or returned product are not returned by the return period. The Company estimates allowances based on historical experience from prior periods and the customer’s historical purchasing pattern. These estimates are deducted from revenues and are reevaluated periodically during the reporting period.

Effect of New Accounting Standards

See "Note 1 — Operations and Summary of Significant Accounting Policies" for effects of new accounting standards on the Company’s consolidated financial statements.

Liquidity and Capital Resources

We have historically met our capital needs through a combination of cash flows from operating activities and, when necessary, borrowings under our credit facilities. Our principal uses of capital include the costs and expenses associated with our operations, including financing working capital requirements and continuing our capital allocation strategy, which includes supporting capital expenditures, paying cash dividends, repurchasing the Company's common stock, and financing other investment opportunities from time to time.

On March 30, 2022, the Company entered into an Amended and Restated Credit Agreement. The Amended and Restated Credit Agreement provides for a 5-year revolving credit facility of $450.0 million, which includes a letter of credit-sub-facility up to $50.0 million, and for a 5-year term loan facility of $450.0 million. As of December 31, 2023, the Company had borrowings of $75.0 million under the revolving credit facility and $410.6 million under the term loan facility, and has $375.0 million available to borrow under the revolving credit facility.

The Company has certain contractual obligations, primarily debt interest, operating leases and purchase obligations, which include annual facility fees. Refer to "Note 12 - Leases", "Note 14 - Debt" and "Note 15 - Commitment and Contingencies" in Part II, Item 8 for details related to the Company's obligations and debt annual facility fees. The Company did not have any significant off-balance sheet commitments as of December 31, 2023.

As of December 31, 2023, our cash and cash equivalents consisted of deposits and money market funds held with established national financial institutions, and includes $106.4 million held in the local currencies of our foreign operations and could be subject to additional taxation if repatriated to the U.S. The Company is maintaining a permanent reinvestment assertion on its foreign earnings relative to remaining cash held outside the United States.

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The following table presents selected financial information as of December 31, 2023, 2022 and 2021, respectively:
As of December 31,
(in thousands)202320222021
Cash and cash equivalents$429,822 $300,742 $301,155 
Property, plant and equipment, net418,612 361,555 259,869 
Equity investment, goodwill and intangible assets883,079 872,699 170,309 
Net working capital
521,362 529,945 453,078 

The following table presents the significant categories of cash flows for the twelve months ended December 31, 2023, 2022 and 2021, respectively:

Years Ended December 31,
(in thousands)202320222021
Net cash provided by (used in):
  Operating activities$427,022 $399,821 $151,295 
  Investing activities(103,251)(870,244)(58,805)
  Financing activities(199,034)465,526 (71,616)

Cash flows from operating activities result primarily from our earnings, and are also affected by changes in operating assets and liabilities which consist primarily of working capital balances. Our revenues are derived from manufacturing and sales of building construction materials. Our operating cash flows are subject to seasonality and are cyclically associated with the volume and timing of construction project starts. For example, trade accounts receivable is generally at its lowest at the end of the fourth quarter and increases during the first, second and third quarters.

In 2023, operating activities provided $427.0 million in cash and cash equivalents as a result of $354.0 million from net income and adding back $101.8 million for non-cash adjustments from net income which includes depreciation and amortization, stock-based compensation and non-cash lease expense, partially offset by a decrease of $28.8 million for the net change in operating assets and liabilities.

Cash used in investing activities of $103.3 million during the year ended December 31, 2023, was mostly for capital spending of $88.8 million, which was primarily used for machinery and equipment purchases and facility expansion projects including a land purchase. Based on current information and subject to future events and circumstances, capital expenditures are estimated to be approximately $200.0 million for 2024 including the expected spend of $120.0 million on our previously announced Columbus, Ohio facility expansion and replacement of Gallatin, Tennessee facility, with some spend potentially may carrying over to 2025. The remaining $80.0 million in capital expenditures will be primarily focused on purchases of new equipment to support increased productivity and efficiencies, enhancements to our existing facilities to expand our manufacturing footprint in-line with increasing customer needs, as well as investments for adjacencies and key growth initiatives.

Cash used in financing activities of $199.0 million during the year ended December 31, 2023, consisted primarily of $98.7 million in loan principal payments, $50.0 million for the repurchase of the Company’s common stock and $45.2 million used to pay cash dividends. During 2023, we purchased and received approximately 361 thousand shares of the Company’s common stock on the open market at an average price of $138.60 per share, for a total of $50.0 million under a previously announced $100.0 million share repurchase authorization (which expired at the end of 2023).

On October 19, 2023, the Company's Board of Directors (the "Board") authorized the Company to repurchase up to $100.0 million of the Company's common stock, effective January 1, 2024 through December 31, 2024. Further, on January 19, 2024, the Board declared a quarterly cash dividend of $0.27 per share payable on April 25, 2024 to stockholders of record on April 4, 2024, and estimated to be $11.5 million in total.

For the fiscal year ended December 31, 2023, the Company returned $95.2 million to the Company's stockholders, which represents 28.1% of our free cash flow from operations during the same period. Since the beginning of 2021 to the fiscal year ended December 31, 2023, we have returned $283.5 million to stockholders, which represents 36.2% of our free cash flow and
39



over the same period the Company has repurchased over $1.4 million shares of the Company's common stock, which represents approximately 3.2% of the outstanding shares of the Company's common stock.

Cash flows from operating activities years ended December 31, 2022 and 2021 are incorporated by reference to Form 10-K 2022 filing.

Contingencies

From time to time, we are subject to various claims, lawsuits, legal proceedings (including litigation, arbitration or regulatory actions) and other matters arising in the ordinary course of business. Periodically, we evaluate the status of each matter and assess our potential financial exposure.

The Company records a liability when we believe that it is both probable that a loss has been incurred, and the amount is reasonably estimable. Significant judgment is required to determine both probability of a loss and the estimated amount. The outcomes of claims, lawsuits, legal proceedings and other matters brought against the Company are subject to significant uncertainty, some of which are inherently unpredictable and/or beyond our control. Therefore, although management considers the likelihood of such an outcome to be remote, if one or more of these matters were resolved against the Company for amounts in excess of management’s expectations, they could have a material adverse impact on our business, results of operations, financial position and liquidity.

See “Item 3 — Legal Proceedings” above and “Note 15 — Commitments and Contingencies” to the Company’s consolidated financial statements.

Inflation and Raw Materials
 
Inflation rates increased during fiscal year 2023, which have negatively affected labor costs and other costs of doing business, and as such may adversely affect our operating profits if we cannot recover the higher costs through price increases. Our main raw material is steel, and as such, increases in steel prices may adversely affect our gross margin if we cannot recover the higher costs through price increases. See “Item 1 — Raw Materials” and “Item 1A — Risk Factors.”
 
Indemnification
 
In the normal course of business, to facilitate transactions of services and products, we have agreed to indemnify certain parties with respect to certain matters. These agreements may limit the time within which an indemnification claim can be made and the amount of the claim. In addition, we have entered into indemnification agreements with our officers and directors, and the Company’s bylaws as permitted by the Company’s certificate of incorporation require the Company to indemnify corporate servants, including our officers and directors, to the fullest extent permitted by law. The Company maintains directors and officers liability insurance coverage to reduce its exposure to such obligations. The Company has not incurred significant obligations under indemnification provisions historically, and does not expect to incur significant obligations in the future. It is not possible to determine the maximum potential amount under these indemnities due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement. Accordingly, the Company has not recorded any liability for costs related to these indemnities through December 31, 2023.
 
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
 
We have operations both within the U.S. and internationally, and we are exposed to market risks in the ordinary course of our business, including changes to foreign currency exchange rates and interest rates and fluctuations in commodity prices.

Foreign Exchange Risk

We have foreign exchange rate risk in our international operations, and through purchases from foreign vendors. Changes in the values of currencies of foreign countries affect our financial position, income statement and cash flows when translated into U.S. Dollars. We estimate that if the exchange rate were to change by 10% in any one country where we have our operations, the change in net income would not be material to our operations taken as a whole.

We may manage our exposure to transactional exposures by entering into foreign currency forward contracts for forecasted transactions and projected cash flows for foreign currencies in future periods. In 2022 and 2023, we entered into financial
40



contracts at various times to hedge the risk of fluctuations associated with the Euro and the Chinese Yuan. Refer to “Note 9 — Derivative Instruments” to the Company’s consolidated financial statements.

Foreign currency translation adjustments on our underlying assets and liabilities resulted in an accumulated other comprehensive gain of $19.7 million for the year ended December 31, 2023, due to the effects of the strengthening United States Dollar in relation to almost all other countries. The gain was partially offset by $25.7 million in accumulated other comprehensive losses from foreign currency forward contracts. Refer to “Note 5 — Stockholders Equity” to the Company’s consolidated financial statements.

Interest Rate Risk

Our primary exposure to interest rate risk results from outstanding borrowings under the Amended and Restated Credit Agreement, which bears interest at variable rates. As of December 31, 2023, the outstanding debt under the Amended and Restated Credit Agreement subject to interest rate fluctuations was $485.7 million. The variable interest rates on the Credit Agreement fluctuate and expose us to short-term changes in market interest rates as our interest obligation on this instrument is based on prevailing market interest rates. Interest rates fluctuate as a result of many factors, including governmental monetary and tax policies, domestic and international economic and political considerations and other factors that are beyond our control.

We have entered into an interest rate swap agreement to convert the variable interest rate on our revolver and term loan to fixed interest rates. The objective of the interest rate swap agreement is to eliminate the variability of the interest payment cash flows associated with the variable interest rate outstanding under the borrowings. We designated the interest rate swaps as cash flow hedges. Refer to Note 9, "Derivatives Instruments" to the Company’s consolidated financial statements, for further information on our interest rate swap contracts in effect as of December 31, 2023.

Commodity Price Risk

In the normal course of business, we are exposed to market risk related to our purchase of steel, a significant raw material upon which our manufacturing depends. Steel cost started decreasing at the end of 2022 with prices stabilizing by the end of 2023. While steel is typically available from numerous suppliers, the price of steel is a commodity subject to fluctuations that apply across broad spectrums of the steel market. We do not use any derivative or hedging instruments to manage steel price risk. If the price of steel increases, our variable costs would also increase. While historically we have successfully mitigated these increased costs through the implementation of price increases, in the future we may not be able to successfully mitigate these costs, which could cause our operating margins to decline.

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Item 8. Consolidated Financial Statements and Supplementary Data.
 
SIMPSON MANUFACTURING CO., INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Consolidated financial statements
Financial Statement Schedule


42



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders
Simpson Manufacturing Co., Inc.

Opinion on the financial statements
We have audited the accompanying consolidated balance sheets of Simpson Manufacturing Co., Inc. (a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2023, and the related notes and financial statement schedule included under Item 15 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated February 27, 2024 expressed an unqualified opinion.

Basis for opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical audit matters
Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.




/s/ Grant Thornton LLP

We have served as the Company’s auditor since 2015.

San Francisco, California
February 27, 2024

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 
Board of Directors and Stockholders
Simpson Manufacturing Co., Inc.

Opinion on internal control over financial reporting
We have audited the internal control over financial reporting of Simpson Manufacturing Co., Inc. (a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2023, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in the 2013 Internal Control—Integrated Framework issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of and for the year ended December 31, 2023, and our report dated February 27, 2024 expressed an unqualified opinion on those financial statements.

Basis for opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting (“Management’s Report”). Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and limitations of internal control over financial reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.


/s/ Grant Thornton LLP

San Francisco, California
February 27, 2024
44



Simpson Manufacturing Co., Inc. and Subsidiaries
Consolidated Balance Sheets
(In thousands, except per share data)
 
 December 31,
 20232022
ASSETS  
Current assets  
Cash and cash equivalents$429,822 $300,742 
Trade accounts receivable, net283,975 269,124 
Inventories551,575 556,801 
Other current assets47,069 52,583 
Total current assets1,312,441 1,179,250 
Property, plant and equipment, net418,612 361,555 
Operating lease right-of-use assets68,792 57,652 
Goodwill502,550 495,672 
Intangible assets, net365,339 362,917 
Other noncurrent assets36,990 46,925 
Total assets$2,704,724 $2,503,971 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Trade accounts payable$107,524 $97,841 
Accrued liabilities and other current liabilities231,233 228,222 
Long-term debt, current portion22,500 22,500 
Total current liabilities361,257 348,563 
Long-term debt, net of current portion and issuance costs458,791 554,539 
Operating lease liabilities, net of current portion
55,324 46,882 
Deferred income tax
98,170 112,901 
Other long-term liabilities
51,436 27,707 
Total liabilities1,024,978 1,090,592 
Commitments and contingencies (see Note 15)
Stockholders’ equity
Common stock, par value $0.01; authorized shares, 160,000; issued and outstanding shares, 42,323 and 42,560 at December 31, 2023 and 2022, respectively
426 425 
Additional paid-in capital313,119 298,983 
Retained earnings1,426,554 1,118,030 
Treasury stock(50,363) 
Accumulated other comprehensive loss(9,990)(4,059)
Total stockholders’ equity1,679,746 1,413,379 
Total liabilities and stockholders’ equity$2,704,724 $2,503,971 
 

The accompanying notes are an integral part of these consolidated financial statements
45




Simpson Manufacturing Co., Inc. and Subsidiaries
Consolidated Statements of Operations
(In thousands, except per share data)
 
 Years Ended December 31,
 202320222021
Net sales$2,213,803 $2,116,087 $1,573,217 
Cost of sales1,170,048 1,174,794 818,187 
Gross profit1,043,755 941,293 755,030 
Operating expenses:   
Research and development and other engineering92,167 68,354 59,381 
Selling203,980 169,378 135,004 
General and administrative268,103 228,468 193,176 
 Total operating expenses564,250 466,200 387,561 
Acquisition and integration related costs4,632 17,343  
       Net gain on disposal of assets
(276)(1,317)(324)
Income from operations$475,149 $459,067 $367,793 
 Interest income (expense), net and other financing costs
3,391 (7,594)(1,386)
 Other & foreign exchange loss, net(1,993)(3,408)(7,858)
Income before taxes476,547 448,065 358,549 
 Provision for income taxes122,560 114,070 92,102 
Net income$353,987 $333,995 $266,447 
Other comprehensive income
Translation adjustment and other, net of tax19,690 (20,733)(7,313)
Unamortized pension adjustments, net of tax73 2,065 404 
       Cash flow hedge adjustment, net of tax
(25,694)32,214 (268)
Comprehensive income$348,056 $347,541 $259,270 
Net income per common share:
Basic$8.31 $7.78 $6.15 
  Diluted$8.26 $7.76 $6.12 
 Weighted average number of shares of common stock outstanding   
  Basic42,598 42,925 43,325 
  Diluted42,837 43,047 43,532 
 

The accompanying notes are an integral part of these consolidated financial statements
46




Simpson Manufacturing Co., Inc. and Subsidiaries
Consolidated Statements of Stockholders’ Equity
For the years ended December 31, 2021, 2022 and 2023
(In thousands, except per share data)
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
 Common StockRetained
Earnings
Treasury
Shares
 
 SharesPar ValueTotal
Balance as of January 1, 202143,326 $433 $284,007 $720,441 $(10,428)$(13,510)$980,943 
Net income— — — 266,447 — 266,447 
Translation adjustment and other, net of tax— — — — (7,313)(7,313)
Pension adjustment, net of tax— — — — 404 404 
Cash flow hedges, net of tax
— — — — (268)(268)
Stock-based compensation expense— — 15,029 — — 15,029 
Repurchase of common stock(222)—  — — (24,125)(24,125)
Retirement of common stock— (3)— (37,632)— 37,635  
Cash dividends declared on common stock, $0.98 per share— — — (42,415)— (42,415)
Shares issued from release of restricted stock units106 2 (5,397)— — (5,395)
Common stock issued at $93.45 per share7 — 691 — — 691 
Balance as of December 31, 202143,217 432 294,330 906,841 (17,605) 1,183,998 
Net income— — — 333,995 — 333,995 
Translation adjustment and other, net of tax— — — — (20,733)— (20,733)
Pension adjustment, net of tax— — — — 2,065 — 2,065 
Cash flow hedges, net of tax
— — — — 32,214 — 32,214 
Stock-based compensation expense— — 12,422 — — — 12,422 
Repurchase of common stock(811)—  — — (78,622)(78,622)
Retirement of common stock— (8)— (78,614)— 78,622  
Cash dividends declared on common stock, $1.03 per share— — — (44,192)— — (44,192)
Shares issued from release of restricted stock units138 1 (9,553)— — — (9,552)
Common stock issued at $110.13 per share16 — 1,784 — — — 1,784 
Balance as of December 31, 202242,560 425 298,983 1,118,030 (4,059) 1,413,379 
Net income— — — 353,987 — 353,987 
Translation adjustment and other, net of tax— — — — 19,690 — 19,690 
Pension adjustment, net of tax— — — — 73 — 73 
Cash flow hedges, net of tax
— — — — (25,694)— (25,694)
Stock-based compensation expense— — 19,627 — — — 19,627 
Repurchase of common stock including excise tax(361)— — — — (50,363)(50,363)
Cash dividends declared on common stock, $1.07 per share— — — (45,463)— — (45,463)
Shares issued from release of restricted stock units114 1 (7,431)— — — (7,430)
Common stock issued at $197.98 per share10 — 1,940 — — — 1,940 
Balance at December 31, 202342,323 $426 $313,119 $1,426,554 $(9,990)$(50,363)$1,679,746 
The accompanying notes are an integral part of these consolidated financial statements
47




Simpson Manufacturing Co., Inc. and Subsidiaries
Consolidated Statements of Cash Flows

(In thousands)
 Years Ended December 31,
 202320222021
Cash flows from operating activities   
Net income$353,987 $333,995 $266,447 
Adjustments to reconcile net income to net cash provided by operating activities:   
Gain on sale of assets and other(558)(1,317)(160)
Depreciation and amortization74,707 60,890 42,477 
Noncash lease expense14,205 11,327 9,562 
Inventory step-up expense 13,572  
Loss (income) in equity method investment, before tax281 (914)2,276 
Deferred income taxes(7,541)(13,156)(915)
Noncash compensation related to stock plans23,859 14,980 17,715 
Provision for doubtful accounts
730 1,146 393 
Deferred hedge gain(3,860)(2,690) 
Changes in operating assets and liabilities, (net of amounts acquired from ETANCO see Note 3)
   
Trade accounts receivable(13,051)19,763 (67,993)
Inventories15,656 (28,421)(164,202)
Other current assets734 (6,107)(1,951)
Trade accounts payable(3,066)(4,016)10,235 
Accrued liabilities and other current liabilities(2,806)20,394 50,548 
Other noncurrent assets and liabilities(26,255)(19,625)(13,137)
Net cash provided by operating activities427,022