Delaware | 1-13429 | 94-3196943 | ||
(State or other jurisdiction of incorporation) | (Commission file number) | (I.R.S. Employer Identification No.) |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-2) | |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240. 13e-4(c)) |
Simpson Manufacturing Co., Inc. | |||
(Registrant) | |||
DATE: October 23, 2014 | By | /s/ Brian J. Magstadt | |
Brian J. Magstadt | |||
Chief Financial Officer |
• | Segment net sales: |
◦ | North America – Net sales increased 8.8% in the third quarter of 2014 compared to the third quarter of 2013, primarily due to increased sales volumes, partly offset by the effects of foreign currency translation. |
◦ | Europe – Net sales increased 2.2% in the third quarter of 2014 compared to the third quarter of 2013, mostly due to the effects of foreign currency translations and increased sales volumes, partly offset by slightly lower average selling prices. Net sales in some regions of the segment are trending down from prior quarters due to weakening economic conditions in the region. |
• | Consolidated net sales channels and product groups: |
◦ | Net sales to contractor distributors, dealer distributors, home centers and lumber dealers increased in the third quarter of 2014, compared to the third quarter of 2013 due to increased home construction activity. |
◦ | Wood construction product net sales, including connectors, truss plates, fastening systems, fasteners and shearwalls, represented 84% of total Company net sales in the third quarter of both 2014 and 2013. |
◦ | Concrete construction product sales, including adhesives, chemicals, mechanical anchors, powder actuated tools and reinforcing fiber materials, represented 16% of total Company net sales in the third quarter of both 2014 and 2013. |
• | North America – Gross profit margin decreased from 47.9% in the third quarter of 2013 to 47.3% in the third quarter of 2014, primarily as a result of increases in factory overhead as a percentage of sales caused by increased costs on flat production volumes. |
• | Europe – Gross profit margin decreased from 40.6% in the third quarter of 2013 to 39.7% in the third quarter of 2014, as a result of increases in warehousing costs, factory overhead, on decreased production volumes, and in labor costs each as a percentage of sales. |
• | Product mix – The gross profit margin differential between wood construction products and concrete construction products, which have lower gross profit margins, was 12% and 13% in the third quarter of 2014 and 2013, respectively. |
• | North America – Research and development and engineering expense increased $0.6 million, primarily due to increases of $1.3 million in personnel costs, which was mostly due to a reduction of capitalized personnel costs related to software |
• | North America – Selling expense increased $2.9 million, primarily due to increases of $0.9 million in personnel costs related to the addition of staff and pay rate increases instituted in January 2014, $0.7 million in professional fees, $0.6 million in cash profit sharing and commissions and $0.6 million in advertising and promotions. |
• | North America – General and administrative expense increased $0.8 million, primarily due to increases of $0.6 million in amortization expense, $0.3 million in depreciation expense and $0.3 million in personnel expense, partly offset by decreases of $0.5 million in professional fees and $0.2 million in bad debt expense. |
• | Europe – General and administrative expense increased by $0.5 million, primarily due to increases of $1.3 million in unrealized foreign currency losses, partly offset by a $0.4 million gain resulting from a reduction of a contingent liability related to the Bierbach acquisition in 2013, as well as decreases of $0.3 million in professional fees and $0.2 million in bad debt expense. |
• | Segment net sales: |
◦ | North America – Net sales increased 7.1% in the first nine months of 2014, compared to the first nine months of 2013, primarily due to increased sales volumes, partly offset by slightly lower average selling prices and the effects of foreign currency translation. |
◦ | Europe – Net sales increased 8.3% in the first nine months of 2014 compared to the first nine months of 2013, mostly due to increased sales volumes and the effects of foreign currency translations, partly offset by slightly lower average selling prices. However, sales growth has trended lower in the most recent two quarters of 2014, consistent with declining economic activity in the region. |
• | Consolidated net sales channels and product groups: |
◦ | Net sales to contractor distributors, dealer distributors and lumber dealers increased in the first nine months of 2014, compared to the first nine months of 2013. |
◦ | Wood construction product net sales represented 85% of total Company net sales in the first nine months of both 2014 and 2013. |
◦ | Concrete construction product net sales represented 15% of total Company net sales in the first nine months of both 2014 and 2013. |
• | North America – Gross profit margin increased to 48.0% in the first nine months of 2014 from 46.9% in the first nine months of 2013, as a result of decreases as a percentage of sales in all elements of costs, with the largest decreases as a percentage of sales in material and in factory overhead elements (caused by increased volumes). In the first nine months of 2014, the gross profit margin was affected by an atypical non-recurring $3.0 million pension charge that resulted from the Company's withdrawal from a multi-employer union-based defined-benefit pension plan, partly offset by an atypical non-recurring $2.5 million correction to workers' compensation expense in states where the Company is not self-insured. |
• | Europe – Gross profit margin increased to 38.8% in the first nine months of 2014 from 37.4% in the first nine months of 2013, as a result of decreases as a percentage of sales in factory overhead (caused by increased volumes), shipping and warehouse costs and material costs. |
• | Product mix – The gross profit margin differential between wood construction products and concrete construction products, which have lower gross profit margins, was 13% and 12% in the first nine months of 2014 and 2013, respectively. This negatively affected gross margins in North America, with concrete construction products representing 13% of North America net sales in the first nine months of both 2014 and 2013, and in Europe, with concrete construction products at 20% and 19% of Europe net sales in the first nine months of 2014 and 2013, respectively. |
• | Steel prices – The Company expects the market price for steel to remain flat for the remainder of 2014. |
• | North America – Research and development and engineering expense increased $2.1 million, primarily due to increases of $1.1 million in personnel costs and $0.8 million in cash profit sharing. |
• | Europe – Research and development and engineering expense increased $0.3 million, primarily due to an increase in professional fees. |
• | North America – Selling expense increased $5.2 million, primarily due to increases of $1.9 million in personnel costs related to the addition of staff in support of product and software development and pay rate increases instituted in January 2014, $1.8 million in professional fees, $0.7 million in advertising and promotional costs and $0.7 million in cash profit sharing and commissions. |
• | Europe – Selling expense increased $0.6 million, primarily due to increases of $0.4 million in personnel costs and $0.2 million in cash profit sharing and commissions. |
• | North America – General and administrative expense increased $4.5 million, primarily due to increases of $1.6 million in cash profit sharing, $1.1 million in personnel costs related to the addition of administrative and information technology staff and pay rate increases instituted in January 2014, $0.9 million in depreciation expense and $0.3 million in unrealized foreign currency losses. |
• | Europe – General and administrative expense decreased by $1.1 million, primarily due to $1.0 million in impairment of fixed assets in 2013, a $0.4 million gain resulting from a reduction of a contingent liability related to the Bierbach acquisition and a decrease of $0.6 million in professional fees, partly offset by increases of $0.7 million in unrealized foreign currency losses and $0.4 million in personnel costs. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
(Amounts in thousands, except per share data) | 2014 | 2013 | 2014 | 2013 | |||||||||||
Net sales | $ | 209,320 | $ | 195,619 | $ | 585,518 | $ | 545,248 | |||||||
Cost of sales | 113,767 | 105,724 | 316,285 | 301,461 | |||||||||||
Gross profit | 95,553 | 89,895 | 269,233 | 243,787 | |||||||||||
Research and development and engineering expenses | 9,711 | 9,226 | 29,505 | 27,018 | |||||||||||
Selling expenses | 23,592 | 20,630 | 69,623 | 63,654 | |||||||||||
General and administrative expenses | 29,557 | 28,523 | 85,993 | 82,906 | |||||||||||
Impairment of goodwill | 492 | — | 492 | — | |||||||||||
Loss (gain) on disposal of assets | (17 | ) | 631 | (336 | ) | 634 | |||||||||
Income from operations | 32,218 | 30,885 | 83,956 | 69,575 | |||||||||||
Interest (expense) income, net | (27 | ) | (9 | ) | 44 | 32 | |||||||||
Income before taxes | 32,191 | 30,876 | 84,000 | 69,607 | |||||||||||
Provision for income taxes | 11,577 | 10,870 | 30,849 | 26,304 | |||||||||||
Net income | $ | 20,614 | $ | 20,006 | $ | 53,151 | $ | 43,303 | |||||||
Earnings per common share: | |||||||||||||||
Basic | $ | 0.42 | $ | 0.41 | $ | 1.09 | $ | 0.89 | |||||||
Diluted | $ | 0.42 | $ | 0.41 | $ | 1.08 | $ | 0.89 | |||||||
Weighted average shares outstanding: | |||||||||||||||
Basic | 49,010 | 48,377 | 48,972 | 48,482 | |||||||||||
Diluted | 49,227 | 48,551 | 49,172 | 48,603 | |||||||||||
Other data: | |||||||||||||||
Depreciation and amortization | $ | 7,320 | $ | 6,853 | $ | 22,105 | $ | 21,631 | |||||||
Pre-tax impairments | 492 | — | 492 | 1,025 | |||||||||||
Pre-tax equity-based compensation expense | 3,306 | 3,105 | 9,508 | 9,106 | |||||||||||
Cash dividend declared per common share | $ | 0.140 | $ | 0.125 | $ | 0.405 | $ | 0.250 |
September 30, | December 31, | |||||||||||
(Amounts in thousands) | 2014 | 2013 | 2013 | |||||||||
Cash and short-term investments | $ | 258,238 | $ | 215,764 | $ | 251,208 | ||||||
Trade accounts receivable, net | 127,495 | 118,895 | 90,017 | |||||||||
Inventories | 198,420 | 187,255 | 197,728 | |||||||||
Other current assets | 26,126 | 24,849 | 29,153 | |||||||||
Total current assets | 610,279 | 546,763 | 568,106 | |||||||||
Property, plant and equipment, net | 206,134 | 209,641 | 209,533 | |||||||||
Goodwill | 125,228 | 130,270 | 129,218 | |||||||||
Other noncurrent assets | 40,202 | 47,502 | 46,756 | |||||||||
Total assets | $ | 981,843 | $ | 934,176 | $ | 953,613 | ||||||
Trade accounts payable | $ | 24,729 | $ | 33,450 | $ | 34,933 | ||||||
Notes payable and lines of credit | 38 | 956 | 103 | |||||||||
Other current liabilities | 79,729 | 69,507 | 68,169 | |||||||||
Total current liabilities | 104,496 | 103,913 | 103,205 | |||||||||
Other long-term liabilities | 13,224 | 7,803 | 9,129 | |||||||||
Stockholders' equity | 864,123 | 822,460 | 841,279 | |||||||||
Total liabilities and stockholders' equity | $ | 981,843 | $ | 934,176 | $ | 953,613 |
Three Months Ended | Nine Months Ended | ||||||||||||||||||||
September 30, | % | September 30, | % | ||||||||||||||||||
(Amounts in thousands) | 2014 | 2013 | change | 2014 | 2013 | change | |||||||||||||||
Net Sales by Reporting Segment | |||||||||||||||||||||
North America | $ | 171,064 | $ | 157,278 | 9% | $ | 476,546 | $ | 444,772 | 7% | |||||||||||
Europe | 34,609 | 33,866 | 2% | 97,297 | 89,855 | 8% | |||||||||||||||
Asia/Pacific | 3,647 | 4,475 | (19)% | 11,675 | 10,621 | 10% | |||||||||||||||
Total | $ | 209,320 | $ | 195,619 | 7% | $ | 585,518 | $ | 545,248 | 7% | |||||||||||
Net Sales by Product Group* | |||||||||||||||||||||
Wood Construction | $ | 175,522 | $ | 164,091 | 7% | $ | 496,564 | $ | 462,751 | 7% | |||||||||||
Concrete Construction | 33,704 | 31,488 | 7% | 88,735 | 82,323 | 8% | |||||||||||||||
Other | 94 | 40 | N/M | 219 | 174 | N/M | |||||||||||||||
Total | $ | 209,320 | $ | 195,619 | 7% | $ | 585,518 | $ | 545,248 | 7% | |||||||||||
Gross Profit by Reporting Segment | |||||||||||||||||||||
North America | $ | 80,906 | $ | 75,369 | 7% | $ | 228,895 | $ | 208,497 | 10% | |||||||||||
Europe | 13,757 | 13,733 | —% | 37,729 | 33,591 | 12% | |||||||||||||||
Asia/Pacific | 931 | 863 | 8% | 2,537 | 2,190 | 16% | |||||||||||||||
Administrative and all other | (41 | ) | (70 | ) | N/M | 72 | (491 | ) | N/M | ||||||||||||
Total | $ | 95,553 | $ | 89,895 | 6% | $ | 269,233 | $ | 243,787 | 10% | |||||||||||
Income (Loss) from Operations | |||||||||||||||||||||
North America | $ | 29,914 | $ | 28,659 | 4% | $ | 82,598 | $ | 73,582 | 12% | |||||||||||
Europe | 3,447 | 3,682 | (6)% | 6,283 | 1,742 | N/M | |||||||||||||||
Asia/Pacific | (148 | ) | (649 | ) | 77% | (1,783 | ) | (1,878 | ) | 5% | |||||||||||
Administrative and all other | (995 | ) | (807 | ) | N/M | (3,142 | ) | (3,871 | ) | N/M | |||||||||||
Total | $ | 32,218 | $ | 30,885 | 4% | $ | 83,956 | $ | 69,575 | 21% |
* | The Company manages its business by geographic segment but is presenting sales by product group as additional information. | |
N/M | Statistic is not material or not meaningful. |