UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly period ended: March 31, 1997
--------------
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: 0-23804
-------
Simpson Manufacturing Co., Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
California 94-3196943
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4637 Chabot Drive, Suite 200, Pleasanton, CA 94588
--------------------------------------------------
(Address of principal executive offices)
(Registrant's telephone number, including area code): (510)460-9912
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 X No
----- -----
The number of shares of the Registrant's Common Stock outstanding as of
March 31, 1997: 11,456,716
----------
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
<TABLE>
<CAPTION>
SIMPSON MANUFACTURING CO., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, December 31,
----------------------------
(Unaudited)
1997 1996 1996
------------ ------------ ------------
ASSETS
<S> <C> <C> <C>
Current assets
Cash and cash equivalents $ 3,812,205 $ 6,191,487 $ 19,815,297
Short-term investments - - 3,896,428
Trade accounts receivable, net 31,334,018 26,280,550 20,930,490
Inventories 53,716,313 34,335,990 42,247,777
Deferred income taxes 3,192,455 2,357,455 2,919,455
Other current assets 1,528,651 1,361,923 956,565
------------ ------------ ------------
Total current assets 93,583,642 70,527,405 90,766,012
Net property, plant and equipment 35,335,825 26,233,565 28,687,635
Investments 507,127 1,329,715 1,382,578
Other noncurrent assets 3,141,989 1,824,959 1,684,548
------------ ------------ ------------
Total assets $132,568,583 $ 99,915,644 $122,520,773
============ ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Notes Payable $ 280,895 $ - $ -
Trade accounts payable 10,919,997 5,869,968 10,063,828
Accrued liabilities 3,525,075 3,112,278 4,137,648
Income taxes payable 3,381,161 951,393 341,626
Accrued profit sharing trust contributions 3,142,402 2,626,226 2,446,001
Accrued cash profit sharing and commissions 2,346,768 1,307,125 2,292,057
Accrued workers' compensation 809,272 842,125 809,272
------------ ------------ ------------
Total current liabilities 24,405,570 14,709,115 20,090,432
Deferred income taxes and long-term liabilities 1,152,981 133,783 133,333
------------ ------------ ------------
Total liabilities 25,558,551 14,842,898 20,223,765
------------ ------------ ------------
Commitments and contingencies (Notes 5 and 6)
Shareholders' equity
Common stock 31,298,619 30,789,607 31,233,648
Retained earnings 75,620,180 54,404,772 70,862,906
Cumulative translation adjustment 91,233 (121,633) 200,454
------------ ------------ ------------
Total shareholders' equity 107,010,032 85,072,746 102,297,008
------------ ------------ ------------
Total liabilities and shareholders' equity $132,568,583 $ 99,915,644 $122,520,773
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE>
<TABLE>
<CAPTION>
SIMPSON MANUFACTURING CO., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
March 31,
----------------------------
1997 1996
------------ ------------
<S> <C> <C>
Net sales $ 51,927,222 $ 43,457,448
Cost of sales 32,608,564 28,355,992
------------ ------------
Gross profit 19,318,658 15,101,456
Operating expenses:
Selling 5,208,264 4,510,033
General and administrative 6,226,376 5,128,446
------------ ------------
11,434,640 9,638,479
------------ ------------
Income from operations 7,884,018 5,462,977
Interest income, net 160,256 53,527
------------ ------------
Income before income taxes 8,044,274 5,516,504
Provision for income taxes 3,287,000 2,254,000
------------ ------------
Net income $ 4,757,274 $ 3,262,504
============ ============
Net income per common share $ 0.40 $ 0.28
============ ============
Weighted average shares outstanding 11,881,875 11,621,429
============ ============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE>
<TABLE>
<CAPTION>
SIMPSON MANUFACTURING CO., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months
Ended March 31,
----------------------------
1997 1996
------------ ------------
<S> <C> <C>
Cash flows from operating activities
Net income $ 4,757,274 $ 3,262,504
------------ ------------
Adjustments to reconcile net income to net cash
provided by operating activities:
Gain on sale of capital equipment (5,000) (20,397)
Depreciation and amortization 1,875,006 1,445,241
Deferred income taxes and long-term liabilities (273,000) 350,000
Equity in (income) losses of affiliates (58,000) 16,000
Changes in operating assets and liabilities, net of
effects of acquisitions:
Trade accounts receivable (9,086,908) (5,609,415)
Inventories (5,397,833) 135,260
Other current assets (525,526) (127,310)
Other noncurrent assets 257,531 (27,450)
Trade accounts payable (264,230) (1,566,792)
Accrued liabilities (1,477,517) (274,249)
Accrued profit sharing trust contributions 696,401 626,487
Accrued cash profit sharing and commissions 54,711 17,981
Income taxes payable 3,081,975 1,703,227
------------ ------------
Total adjustments (11,122,390) (3,331,417)
------------ ------------
Net cash used in operating activities (6,365,116) (68,913)
------------ ------------
Cash flows from investing activities
Capital expenditures (4,758,625) (1,067,445)
Proceeds from sale of equipment 5,000 29,840
Proceeds from sale of short-term investments 3,995,333 -
Acquisitions, net of cash acquired and
equity interest already owned (9,183,110) (11,637)
------------ ------------
Net cash used in investing activities (9,941,402) (1,049,242)
------------ ------------
Cash flows from financing activities
Issuance of debt 280,895 -
Repayment of debt - (20,037)
Issuance of Company's common stock 22,531 373,891
------------ ------------
Net cash provided by financing activities 303,426 353,854
------------ ------------
Net decrease in cash and cash equivalents (16,003,092) (764,301)
Cash and cash equivalents at beginning of period 19,815,297 6,955,788
------------ ------------
Cash and cash equivalents at end of period $ 3,812,205 $ 6,191,487
============ ============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE>
SIMPSON MANUFACTURING CO., INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
Interim Period Reporting
The accompanying unaudited interim condensed consolidated financial
statements have been prepared pursuant to the rules and regulations for
reporting on Form 10-Q. Accordingly, certain information and footnotes
required by generally accepted accounting principles have been condensed or
omitted. These interim statements should be read in conjunction with the
consolidated financial statements and the notes thereto included in Simpson
Manufacturing Co., Inc.'s (the "Company's") 1996 Annual Report on Form 10-K
(the "1996 Annual Report").
The unaudited quarterly condensed consolidated financial statements have
been prepared on the same basis as the audited annual consolidated
financial statements, and in the opinion of management, contain all
adjustments (consisting of only normal recurring adjustments) necessary to
present fairly the financial information set forth therein, in accordance
with generally accepted accounting principles. The year-end condensed
consolidated balance sheet data was derived from audited financial
statements, but does not include all disclosures required by generally
accepted accounting principles. The Company's quarterly results may be
subject to fluctuations. As a result, the Company believes the results of
operations for the interim periods are not necessarily indicative of the
results to be expected for any future period.
Net Income Per Common Share
Net income per common share is computed based upon the weighted average
number of common shares outstanding. Common equivalent shares, using the
treasury stock method, are included in the per-share calculations for all
periods since the effect of their inclusion is dilutive.
The number of shares used in computing primary and fully diluted net income
per common share did not differ materially for the three months ended March
31, 1997 and 1996.
Newly Issued Accounting Standards
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share"
and No. 129, "Disclosure of Information about Capital Structure." SFAS No.
128 establishes standards for computing and presenting earnings per share
("EPS"), replacing the presentation of primary EPS with a presentation of
basic EPS. SFAS No. 129 consolidates the existing disclosure requirements
regarding an entity's capital structure. SFAS No. 128 and 129 are effective
for financial statements issued for periods ending after December 15, 1997,
and accordingly, management has not determined the impact on the Company's
financial statements for the quarter ended March 31, 1997.
2. Trade Accounts Receivable
Trade accounts receivable consist of the following:
<TABLE>
<CAPTION>
March 31, December 31,
----------------------------
1997 1996 1996
------------ ------------ ------------
<S> <C> <C> <C>
Trade accounts receivable $ 33,020,437 $ 27,522,716 $ 22,242,827
Allowance for doubtful accounts (1,386,684) (1,039,728) (1,108,950)
Allowance for sales discounts (299,735) (202,438) (203,387)
------------ ------------ ------------
$ 31,334,018 $ 26,280,550 $ 20,930,490
============ ============ ============
</TABLE>
<PAGE>
3. Inventories
The components of inventories consist of the following:
<TABLE>
<CAPTION>
March 31, December 31,
----------------------------
1997 1996 1996
------------ ------------ ------------
<S> <C> <C> <C>
Raw materials $ 17,577,343 $ 12,043,223 $ 15,107,660
In-process products 4,431,115 3,716,719 3,763,634
Finished products 31,707,855 18,576,048 23,376,483
------------ ------------ ------------
$ 53,716,313 $ 34,335,990 $ 42,247,777
============ ============ ============
</TABLE>
Approximately 90% of the Company's inventories are valued using the LIFO
(last-in, first-out) method. Because inventory determination under the LIFO
method is only made at the end of each year based on the inventory levels
and costs at that time, interim LIFO determinations must necessarily be
based on management's estimates of expected year-end inventory levels and
costs. Since future estimates of inventory levels and costs are subject to
change, interim financial results reflect the Company's most recent
estimate of the effect of inflation and are subject to final year-end LIFO
inventory amounts. At March 31, 1997 and 1996, and December 31, 1996, the
replacement value of LIFO inventories exceeded LIFO cost by approximately
$1,186,000, $3,793,000 and $1,186,000, respectively.
4. Net Property, Plant and Equipment
Net property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
March 31, December 31,
----------------------------
1997 1996 1996
------------ ------------ ------------
<S> <C> <C> <C>
Land $ 2,440,682 $ 2,065,682 $ 2,065,682
Buildings and site improvements 12,584,599 10,382,039 10,379,901
Leasehold improvements 2,953,492 2,859,053 2,869,612
Machinery and equipment 49,633,900 40,806,558 46,311,624
------------ ------------ ------------
67,612,673 56,113,332 61,626,819
Less accumulated depreciation
and amortization (37,646,354) (31,546,682) (35,916,354)
------------ ------------ ------------
29,966,319 24,566,650 25,710,465
Capital projects in progress 5,369,506 1,666,915 2,977,170
------------ ------------ ------------
$ 35,335,825 $ 26,233,565 $ 28,687,635
============ ============ ============
</TABLE>
<PAGE>
5. Debt
The outstanding debt at March 31, 1997 and 1996, and the available credit
at March 31, 1997, consisted of the following:
<TABLE>
<CAPTION>
Available Debt Outstanding
Credit at at March 31,
March 31, ----------------------------
1997 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Revolving line of credit, interest at
bank's reference rate (at March 31,
1997, the bank's reference rate was
8.50%), expires June 1997 $ 12,931,753 $ - $ -
Revolving line of credit, interest at
bank's prime rate (at March 31, 1997,
the bank's prime rate was 8.50%),
expires June 1997 4,783,715 - -
Revolving term commitment, interest at
bank's prime rate (at March 31, 1997,
the bank's prime rate was 8.50%),
expires June 1997 4,000,000 - -
Revolving lines of credit, interest
rate at the bank's base rate of
interest plus 2%, expires June 1997 410,875 - -
Standby letter of credit facilities 1,284,533 - -
Other notes payable - 280,895 -
------------ ------------ ------------
Total credit facilities $ 23,410,876 $ 280,895 $ -
============ ============
Standby letters of credit issued
and outstanding (1,284,533)
------------
Total credit available $ 22,126,343
============
</TABLE>
The Company has three outstanding standby letters of credit. Two of these
letters of credit, in the aggregate amount of $832,570, are used to support
the Company's self-insured workers' compensation insurance requirements
while the other, in the amount of $451,963, is used to support the working
capital needs of its European operations. Other notes payable represent
debt associated with foreign businesses acquired during the quarter.
6. Commitments and Contingencies
Note 10 to the consolidated financial statements in the Company's 1996
Annual Report provides information concerning commitments and contingencies
relating to pending or possible claims, legal actions and proceedings
against the Company and its subsidiaries. Management believes that the
final resolution of these matters, individually or in the aggregate, is not
expected to have a material adverse effect on the financial position of the
Company.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The following is a discussion and analysis of the consolidated financial
condition and results of operations for the Company for the three months
ended March 31, 1997 and 1996. The following should be read in conjunction
with the interim Condensed Consolidated Financial Statements and related
Notes appearing elsewhere herein.
Results of Operations for the Three Months Ended March 31, 1997, Compared
with the Three Months Ended March 31, 1996
Net sales increased 19.5% from the first quarter of 1996 to the first
quarter of 1997. The increase reflected growth throughout the United
States, with above average increases in the Northeast and in California.
Simpson Strong-Tie's first quarter sales increased 23.3% over the same
quarter last year while Simpson Dura-Vent's sales increased 7.4%.
Homecenters and contractor distributors were the fastest growing connector
sales channels, while dealer distributor sales increased but at a slower
rate than overall sales during the quarter. The growth rate of Simpson
Strong-Tie's engineered wood, seismic and epoxy product sales remained
strong, while Simpson Dura-Vent sales of Direct-Vent products, sold both to
OEMs and through distributors, continued to experience strong growth.
Income from operations increased 44.3% from $5,462,977 in the first quarter
of 1996 to $7,884,018 in the first quarter of 1997. This increase was
primarily due to higher gross margins that resulted from lower labor and
overhead costs as a percentage of sales, despite an increase in
depreciation charges which resulted principally from equipment purchased
during 1996. Selling, general and administrative expenses increased from
$9,638,479 in the first quarter of 1996 to $11,434,640 in the first quarter
of 1997, but decreased slightly as a percentage of sales. The increase in
selling, general and administrative expenses was primarily due to increased
cash profit sharing, as a result of higher operating profit. The effective
tax rate remained constant at 40.9% in the first quarter of 1997.
On March 11, 1997, a subsidiary of the Company completed the purchase of
three Canadian companies and a related U.S. company, known as the Isometric
Group, which manufacture and distribute a line of mechanical anchors and
other related products. The acquisition price was approximately $7.3
million in cash plus an earnout based on future sales increases. Also on
March 11, 1997, another of the Company's subsidiaries completed the
purchase, for approximately $1.7 million in cash, of the remaining 66% of
the equity of Patrick Bellion, S.A. ("Bellion"), a French manufacturer of
connector products. Bellion is now a wholly-owned subsidiary of the
Company. These two acquisitions extend the Company's products and
distribution in North America and continental Europe.
<PAGE>
Liquidity and Sources of Capital
As of March 31, 1997, working capital was $69.2 million as compared to
$55.8 million at March 31, 1996, and $70.7 million at December 31, 1996.
The principal components of the decrease in working capital from December
31, 1996, were cash and cash equivalents and short-term investments which,
in the aggregate, decreased a total of $19.9 million, a large portion of
which was used to purchase the Isometric Group, Bellion and capital
equipment. In addition, income taxes payable increased approximately $3.0
million. These decreases were offset by increases in the Company's trade
accounts receivable and inventory balances totaling nearly $21.9 million as
a result of the two acquisitions, higher sales levels and seasonal buying
programs. Without giving effect to the two acquisitions, which are included
in investing activities, the decrease in working capital was partially
offset by net income and noncash expenses, such as depreciation and
amortization, totaling approximately $6.6 million, and resulted in a net
use of cash of $6.4 million. As of March 31, 1997, the Company had unused
credit facilities available of approximately $22.1 million.
The Company used $9.9 million in its investing activities, primarily to
complete the two acquisitions and to purchase capital equipment. The
Company made $4.8 million in capital equipment purchases in the first
quarter of 1997 to expand its capacity. The Company plans to continue this
expansion in 1997. Partially offsetting these expenditures, the Company
sold its short-term investments, which matured in March, for approximately
$4.0 million.
The Company believes that cash generated by operations and borrowings
available under its existing credit agreements will be sufficient for the
Company's working capital needs and planned capital expenditures through
the remainder 1997. Depending on the Company's future growth, it may become
necessary to secure additional sources of financing.
<PAGE>
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company is involved in various legal proceedings and other matters
arising in the normal course of business. In the opinion of management,
none of such matters when ultimately resolved will have a material adverse
effect on the Company's financial position or results of operations.
ITEM 2. CHANGES IN SECURITIES.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
<TABLE>
<CAPTION>
a. Exhibits.
EXHIBIT
NO DESCRIPTION
------- --------------------------------------------------------
<S> <C>
11 Statements re computation of earnings per share
27 Financial Date Schedule, which is submitted
electronically to the Securities and Exchange Commission
for information only and not filed.
</TABLE>
b. Reports on Form 8-K
Report on Form 8-K dated January 7, 1997, reporting under Item 5 the
purchase by Simpson Strong-Tie International, Inc. of the assets of
the Builders Products Division of MiTek Industries Ltd. ("MiTek") and
the signing of a separate supply agreement with MiTek.
Report on Form 8-K dated March 21, 1997, reporting under Item 5 the
purchase by Simpson Strong-Tie Canada, Limited of the Isometric Group
and the purchase by Simpson Strong-Tie France, Limited of Patrick
Bellion, S.A.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Simpson Manufacturing Co., Inc.
-----------------------------------
(Registrant)
DATE: May 14, 1997 By: /s/ Stephen B. Lamson
----------------- -----------------------
Stephen B. Lamson
Chief Financial Officer
<TABLE>
<CAPTION>
SIMPSON MANUFACTURING CO., INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
(UNAUDITED)
EXHIBIT 11
--------------
Primary Earnings per Share
Three Months Ended
March 31,
----------------------------
1997 1996
------------ ------------
<S> <C> <C>
Weighted average number of common
shares outstanding 11,454,126 11,390,002
Shares issuable pursuant to employee stock
option plans, less shares assumed
repurchased at the average fair value
during the period 422,998 228,992
Shares issuable pursuant to the independent
director stock option plan, less shares assumed
repurchased at the average fair value
during the period 4,751 2,435
------------ ------------
Number of shares for computation of primary
net income per share 11,881,875 11,621,429
============ ============
Net income $ 4,757,274 $ 3,262,504
============ ============
Primary net income per share $ 0.40 $ 0.28
============ ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SIMPSON MANUFACTURING CO., INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
(UNAUDITED)
EXHIBIT 11
--------------
Fully Diluted Earnings per Share
Three Months Ended
March 31,
----------------------------
1997 1996
------------ ------------
<S> <C> <C>
Weighted average number of common
shares outstanding 11,454,126 11,390,002
Shares issuable pursuant to employee stock
option plans, less shares assumed
repurchased at the end of period fair value 436,624 276,020
Shares issuable pursuant to the independent
director stock option plan, less shares assumed
repurchased at the end of period fair value 4,863 2,921
------------ ------------
Number of shares for computation of fully
diluted net income per share 11,895,613 11,668,943
============ ============
Net income $ 4,757,274 $ 3,262,504
============ ============
Fully diluted net income per share $ 0.40 $ 0.28
============ ============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Condensed Consolidated Balance Sheet at March 31, 1997, (Unaudited)
and the Condensed Consolidated Statement of Operations for the three
months ended March 31, 1997, (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 3,812,205
<SECURITIES> 0
<RECEIVABLES> 33,020,437
<ALLOWANCES> 1,686,419
<INVENTORY> 53,716,313
<CURRENT-ASSETS> 93,583,642
<PP&E> 72,982,179
<DEPRECIATION> 37,646,354
<TOTAL-ASSETS> 132,568,583
<CURRENT-LIABILITIES> 24,405,570
<BONDS> 0
0
0
<COMMON> 31,298,619
<OTHER-SE> 75,711,413
<TOTAL-LIABILITY-AND-EQUITY> 107,010,032
<SALES> 51,927,222
<TOTAL-REVENUES> 51,927,222
<CGS> 32,608,564
<TOTAL-COSTS> 32,608,564
<OTHER-EXPENSES> 11,434,640
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0<F1>
<INCOME-PRETAX> 8,044,274
<INCOME-TAX> 3,287,000
<INCOME-CONTINUING> 4,757,274
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,757,274
<EPS-PRIMARY> 0.40
<EPS-DILUTED> 0.40
<FN>
<F1>Interest income for the three months ended March 31, 1997,
was $160,256.
</FN>
</TABLE>
