Simpson Manufacturing Co., Inc. Announces 2019 Third Quarter Financial Results
PLEASANTON, Calif., Oct. 28, 2019 /PRNewswire/ --
-- Net sales of $309.9 million increased 9.1% year-over-year on stronger
sales volumes
-- Europe operating income of $5.4 million increased 36.3% year-over-year
on reduced operating expenses
-- Repurchased $21.4 million of the Company's common stock during the
quarter
-- Declared a $0.23 per share cash dividend
Simpson Manufacturing Co., Inc. (the "Company") (NYSE: SSD), an industry leader in engineered structural connectors and building solutions, today announced its financial results for the third quarter of 2019. Refer to the "Segment and Product Group Information" table below for additional segment information (including information about the Company's Asia/Pacific segment and Administrative and All Other segment).
All comparisons below (which are generally indicated by words such as "increased," "decreased," "remained," or "compared to"), unless otherwise noted, are comparing the quarter ended September 30, 2019 with the quarter ended September 30, 2018 or the nine months ended September 30, 2019 with the nine months ended September 30, 2018.
2019 Third Quarter Financial Highlights
-- Consolidated net sales of $309.9 million increased 9.1% from $284.2
million.
-- North America net sales of $265.5 million increased 10.7% from
$239.9 million, primarily due to increased sales volume and higher
average product prices. Canada's net sales were negatively affected
by foreign currency translation.
-- Europe net sales of $42.2 million increased 0.5% from $42.0 million
despite approximately $2.3 million of negative foreign currency
translations resulting from some Europe currencies weakening against
the United States dollar. In local currency, Europe net sales
increased primarily due to increases in both volume and average
product prices.
-- Consolidated gross profit of $137.6 million increased 2.8% from $133.9
million. Gross margin decreased to 44.4% from 47.1%.
-- North America gross margin decreased to 45.6% from 48.8%, primarily
due to increases in material costs, factory and overhead costs (on
lower production) and labor costs, each as a percentage of net
sales.
-- Europe gross margin increased to 38.4% from 38.2%. Europe gross
profit was also negatively affected by foreign currency translation.
-- Consolidated income from operations of $61.0 million increased 2.2% from
$59.7 million. The increase in income from operations was primarily due
to the increase in gross profit, partially offset by increases in
personnel expense. Consolidated operating margin decreased to 19.7% from
21.0%.
-- North America income from operations of $56.8 million increased
slightly from $56.3 million, primarily due to the increase in gross
profit, partly offset by increased personnel expense.
-- Europe income from operations of $5.4 million increased 36.3% from
$4.0 million, primarily due to lower operating expenses such as cash
profit sharing and a non-recurring severance expense recorded in
2018.
-- The Company's effective income tax rate decreased to 26.2% from 27.1%.
-- Consolidated net income was $43.7 million, or $0.97 per diluted share of
the Company's common stock, compared to net income of $44.4 million, or
$0.95 per diluted share.
Year-to-Date (9-month) 2019 Financial Highlights
-- Consolidated net sales of $874.0 million increased 4.4% from $837.0
million.
-- North America net sales of $746.0 million increased 5.7% from $705.9
million primarily due to increased average product prices, partly
offset by lower sales volumes. Canada's net sales were negatively
affected by approximately $1.2 million due to foreign currency
translation. In local currency, Canada net sales increased primarily
due to increases in average product prices.
-- Europe net sales of $121.6 million decreased 2.0% from $124.1
million, primarily due to approximately $8.2 million of negative
foreign currency translations resulting from some Europe currencies
weakening against the United States dollar. In local currency,
Europe net sales increased primarily due to increases in both
average product prices and volume.
-- Consolidated gross profit of $382.1 million was flat compared to 2018.
Gross margin decreased to 43.7% from 45.7%.
-- North America gross margin decreased to 45.1% from 47.5%, primarily
due to increases in material costs, labor costs and factory and
overhead costs (on lower production), each as a percentage of net
sales.
-- Europe gross margin decreased slightly to 36.1% from 36.3%,
primarily due to an increase in material costs as a percentage of
net sales, partly offset by lower shipping and warehouse costs.
Europe gross profit was negatively affected by foreign currency
translation.
-- Consolidated income from operations of $144.6 million decreased 6.0%
from $153.8 million. The decrease in income from operations was
primarily due to increased general and administrative expenses and
research and development and engineering costs, including $4.9 million
in higher consulting and legal fees. Consolidated operating margin
decreased to 16.5% from 18.4%.
-- North America income from operations of $139.5 million decreased
8.7% from $152.7 million, primarily due to increased operating
costs.
-- Europe income from operations of $9.6 million increased 59.3% from
$6.1 million, primarily due to lower operating expenses such as
non-recurring severance expense recorded in 2018.
-- The Company's effective income tax rate decreased to 25.5% from 26.1%.
-- Consolidated net income was $105.9 million, or $2.35 per diluted share
of the Company's common stock, compared to net income of $113.9 million,
or $2.43 per diluted share.
-- Cash flow provided by operating activities increased approximately $41.4
million to $149.4 million from $108.0 million.
-- Cash flow used in investing activities increased approximately $4.4
million to $25.5 million from $21.2 million. Capital expenditures were
approximately $24.5 million compared to $24.7 million.
Management Commentary
"Our 2019 third quarter net sales of $309.9 million were up 9% year-over-year primarily due to higher sales volume throughout almost all areas of our company and despite the strike at our Stockton facility during the month of September," commented Karen Colonias, President and Chief Executive Officer of Simpson Manufacturing Co., Inc. "U.S. housing starts, which are a leading indicator for approximately 60% of our business, grew by approximately 4.1% versus the comparable period last year. Notably, in the south where we provide a meaningful amount of content into homes, starts grew 8.3% year-over-year. We also experienced an increase in volumes over the second quarter of 2019 due primarily to unusually wet and cold weather conditions across the U.S. in the first half of 2019."
Mrs. Colonias concluded, "As anticipated our third quarter gross margins were impacted by higher labor, factory and overhead, and material costs which we expect to continue for the remainder of 2019. That said, we are pleased with our third quarter results, including solid progress in Europe and our inventory management. We are cautiously optimistic U.S. housing starts will continue to improve, helping to drive our sales higher. We remain confident in our ability to execute against our key operating initiatives and 2020 Plan goals to drive long-term shareholder value and improved earnings power."
Corporate Developments
-- On October 24, 2019, the Company's Board of Directors declared a
quarterly cash dividend of $0.23 per share. The dividend will be payable
on January 23, 2020 to the Company's stockholders of record as of
January 2, 2020.
-- During the third quarter of 2019, the Company repurchased 348,901 shares
of the Company's common stock in the open market at an average price of
$61.44 per share, for a total of $21.4 million. For the year, the
Company repurchased 854,349 shares of the Company's common stock in the
open market at an average price of $60.21 for a total of $51.4 million.
As of September 30, 2019, approximately $48.6 million remained available
for repurchase under the previously announced $100.0 million share
repurchase authorization (which expires at the end of 2019).
-- In September 2019, the Company contracted to sell a facility that is
currently used for mostly selling and distribution activities. The
operation will relocate to a leased facility in the same general area.
The sale is expected to close in November 2019. The Company estimates it
will receive net proceeds between $8.0 to $10.0 million, after closing
costs and sales price adjustments.
Business Outlook
Based on current business trends and conditions, the Company's outlook for the full fiscal year ending December 31, 2019 is as follows:
-- Gross margin is estimated to be in the range of approximately 43.5% to
44.0%.
-- Operating expenses, as a percentage of net sales, are estimated to be in
the range of approximately 27.5% to 28.5%.
-- The effective tax rate is estimated to be in the range of approximately
25.5% to 26.5%, including both federal and state income tax rates.
Conference Call Details
Investors, analysts and other interested parties are invited to join the Company's third quarter 2019 financial results conference call on Monday, October 28, 2019, at 5:00 pm Eastern Time (2:00 pm Pacific Time). To participate, callers may dial (877) 407-0792 (U.S. and Canada) or (201) 689-8263 (International) approximately 10 minutes prior to the start time. The call will be webcast simultaneously and can be accessed through http://public.viavid.com/index.php?id=136344 or a link on the Company's website at www.simpsonmfg.com/financials/events.html. For those unable to participate during the live broadcast, a replay of the call will also be available beginning that same day at 8:00 p.m. Eastern Time until 11:59 p.m. Eastern Time on Monday, November 11, 2019, by dialing (844) 512-2921 (U.S. and Canada) or (412) 317-6671 (International) and entering the conference ID: 13695131. The webcast will remain posted on the Investor Relations section of the Company's website for 90 days.
A copy of this earnings release will be available prior to the call, accessible through the Investor Relations section of the Company's website at www.simpsonmfg.com.
About Simpson Manufacturing Co., Inc.
Simpson Manufacturing Co., Inc., headquartered in Pleasanton, California, through its subsidiary, Simpson Strong-Tie Company Inc., designs, engineers and is a leading manufacturer of wood construction products, including connectors, truss plates, fastening systems, fasteners and shearwalls, and concrete construction products, including adhesives, specialty chemicals, mechanical anchors, powder actuated tools and reinforcing fiber materials. The Company's common stock trades on the New York Stock Exchange under the symbol "SSD."
Copies of Simpson Manufacturing's Annual Report to Stockholders and its proxy statements and other SEC filings, including Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, are made available free of charge on the company's Web site on the same day they are filed with the SEC. To view these filings, visit the Investor Relations section of the Company's Web site.
Cautionary Note Regarding Forward-Looking Statements
This press release contains 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, and Section 2 IE of the Securities Exchange Act of 1934, as amended. 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 that concern our strategy, plans, expectations or intentions. Forward-looking statements 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 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 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 and other statements that are not historical facts. Although we believe that the expectations, opinions, projections and comments reflected in these forward-looking statements are reasonable, such statements involve risks and uncertainties and we can give no assurance that such statements will prove to be correct. Actual results may differ materially from those expressed or implied in such statements.
Forward-looking statements are subject to inherent uncertainties, risk 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 our forward-looking statements include, among others, those discussed under Item 1A. Risk Factors and Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations in our most recent Annual Report on Form 10-K and subsequent filings with the SEC.
We caution that you should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise. Readers are urged to carefully review and consider the various disclosures made in our reports filed with the SEC that advise of the risks and factors that may affect our business, results of operations and financial condition.
Simpson Manufacturing Co., Inc. and Subsidiaries
UNAUDITED Consolidated Statements of Operations
(In thousands, except per share data)
Three Months Ended
Nine Months Ended
September 30, September 30,
(Amounts in thousands,
except per share
data) 2019 2018 2019 2018
---
Net sales $
309,932 $
284,178 $
874,029 $
836,964
Cost of sales 172,288 150,282 491,952 454,881
Gross profit 137,644 133,896 382,077 382,083
Research and
development and
engineering expense 11,972 10,441 35,287 32,840
Selling expense 27,672 26,879 84,471 83,653
General and
administrative
expense 37,047 37,358 117,941 113,565
Total operating
expenses 76,691 74,678 237,699 230,058
Gain on disposal of
assets (14) (460) (265) (1,769)
Income from operations 60,967 59,678 144,643 153,794
Interest expense, net
and other (1,778) 1,156 (2,394) 284
Income before taxes 59,189 60,834 142,249 154,078
Provision for income
taxes 15,503 16,473 36,324 40,202
Net income $
43,686 $
44,361 $
105,925 $
113,876
Earnings per common share:
Basic $
0.98 $
0.96 $
2.37 $
2.46
Diluted $
0.97 $
0.95 $
2.35 $
2.43
Weighted average shares outstanding:
Basic 44,477 46,192 44,673 46,375
Diluted 44,814 46,622 44,995 46,770
Cash dividend declared
per common share $
0.23 $
0.22 $
0.68 $
0.65
Other data:
Depreciation and
amortization $
9,529 $
9,416 $
29,044 $
29,049
Pre-tax equity-based
compensation expense $
2,099 $
2,753 $
8,699 $
8,773
Simpson Manufacturing Co., Inc. and Subsidiaries
UNAUDITED Consolidated Condensed Balance Sheets
(In thousands)
September 30, December 31,
(Amounts in thousands) 2019 2018 2018
Cash and cash equivalents $
194,061 $
166,961 $
160,180
Trade accounts receivable, net 180,898 192,981 146,052
Inventories 242,730 279,503 276,088
Assets held for sale 9,251
Other current assets 17,565 12,220 17,209
Total current assets 635,254 660,916 599,529
Property, plant and equipment, net 250,950 257,679 254,597
Operating lease right-of-use assets 34,463
Goodwill 131,191 136,459 130,250
Other noncurrent assets 34,450 39,559 37,287
Total assets $
1,086,308 $
1,094,613 $
1,021,663
Trade accounts payable $
40,861 $
42,734 $
34,361
Accrued liabilities and other current liabilities 125,006 124,717 117,219
Total current liabilities 165,867 167,451 151,580
Operating lease liabilities, net of current portion 27,256
Deferred income tax and other long-term liabilities 16,238 13,743 14,569
Stockholders' equity 876,947 913,419 855,514
Total liabilities and stockholders' equity $
1,086,308 $
1,094,613 $
1,021,663
Simpson Manufacturing Co., Inc. and Subsidiaries
UNAUDITED Segment and Product Group Information
(In thousands)
Three Months Ended
Nine Months Ended
September 30, %
September 30, %
(Amounts in thousands) 2019 2018 change* 2019 2018 change*
Net Sales by Reporting Segment
North America $
265,505 $
239,898 10.7 $
746,009 $
705,932 5.7
% %
Percentage of total net sales 85.7 84.4 85.4 84.3
%
%
%
%
Europe 42,219 42,020 0.5 121,647 124,096 (2.0)
% %
Percentage of total net sales 13.6 14.8 13.9 14.8
%
%
%
%
Asia/Pacific 2,208 2,260 (2.3) 6,373 6,936 (8.1)
% %
$
309,932 $
284,178 9.1 $
874,029 $
836,964 4.4
% %
Net Sales by Product Group**
Wood Construction $
255,869 $
238,230 7.4 $
731,898 $
710,880 3.0
% %
Percentage of total net sales 83 84 84 85
% % %
%
Concrete Construction 53,947 45,832 17.7 141,883 125,847 12.7
% %
Percentage of total net sales 17 16 16 15
% % %
%
Other 116 116 N/M 248 237 N/M
$
309,932 $
284,178 9.1 $
874,029 $
836,964 4.4
% %
Gross Profit (Loss) by Reporting Segment
North America $
120,974 $
116,969 3.4 $
336,251 $
335,497 0.2
% %
North America gross margin 45.6 48.8 45.1 47.5
%
%
%
%
Europe 16,214 16,034 1.1 43,900 45,082 (2.6)
% %
Europe gross margin 38.4 38.2 36.1 36.3
%
%
%
%
Asia/Pacific 455 893 (49.0) 1,924 1,423 35.2
% %
Administrative and all other 1 N/M 2 81 N/M
$
137,644 $
133,896 2.8
% $
382,077 $
382,083 %
Income (Loss) from Operations***
North America $
56,844 $
56,280 1.0 $
139,489 $
152,724 (8.7)
% %
North America operating margin 21.4 23.5 18.7 21.6
%
%
%
%
Europe 5,386 3,953 36.3 9,645 6,053 59.3
% %
Europe operating margin 12.8 9.4 7.9 4.9
%
%
%
%
Asia/Pacific (481) (86) N/M (837) (1,749) 52.1
%
Administrative and all other (782) (469) N/M (3,654) (3,234) N/M
$
60,967 $
59,678 2.2 $
144,643 $
153,794 (6.0)
% %
* Unfavorable percentage changes
are presented in parentheses, if
any.
** The Company manages its business
by geographic segment but is
presenting sales by product
group as additional information.
*** Beginning in the first quarter of
2019, income from inter-segment
sales, previously included in
income from operations for
segment reporting, is now
presented below income from
operations. Income from inter-
segment sales eliminates in
consolidation but was an expense
in the North America and Europe
segment and income in the Asia/
Pacific segment.
N/M Statistic is not material or not
meaningful.
CONTACT:
Addo Investor Relations
investor.relations@strongtie.com
(310) 829-5400
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SOURCE Simpson Manufacturing Co., Inc.
