Simpson Manufacturing Co., Inc. Announces 2020 Third Quarter Financial Results

PLEASANTON, Calif., Oct. 26, 2020 /PRNewswire/ --

    --  Net sales of $364.3 million increased 17.5% year-over-year
    --  Strong gross margin of 47.6% improved 3.2% year-over-year
    --  Income from operations of $91.3 million increased 49.8% year-over-year,
        operating margin of 25.1% increased 5.4% year-over-year
    --  Diluted earnings per share of $1.54 increased 58.8% year-over-year
    --  Updating full year 2020 financial guidance on improved demand outlook
    --  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 2020. 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, 2020 with the quarter ended September 30, 2019.

2020 Third Quarter Financial Highlights

    --  Consolidated net sales of $364.3 million increased 17.5% from $309.9
        million.
        --  North America net sales of $316.9 million increased 19.4% from
            $265.5 million due to higher sales volumes to the home center
            channel, primarily due to the return of a home center customer and
            increased repair and remodel activity, as well as from other sales
            distributor channels, which experienced increased new housing starts
            and repair and remodel activity. Canada's net sales increased,
            primarily due to higher sales volumes. Canada's net sales were
            adversely impacted by negative foreign currency translation. In
            local currency, Canada sales increased.


        --  Europe net sales of $44.8 million increased 6.0% from $42.2 million,
            primarily due to slightly higher sales volumes along with the
            positive impact of foreign currency translation of approximately
            $2.1 million from some Europe currencies strengthening against the
            United States dollar. In local currency, Europe net sales increased
            due to higher sales volumes.
    --  Consolidated gross profit of $173.2 million increased 25.9% from $137.6
        million. Gross margin increased to 47.6% from 44.4%.
        --  North America gross margin increased to 48.9% from 45.6%, primarily
            due to decreases in material and labor costs, partly offset by
            higher warehouse and shipping costs, each as a percentage of net
            sales.


        --  Europe gross margin decreased to 37.9% from 38.4%, primarily due to
            increased labor, warehouse and shipping costs, partly offset by
            lower material and factory and overhead costs.
    --  Consolidated income from operations of $91.3 million increased 49.8%
        from $61.0 million. The increase was primarily due to the increase in
        gross profit, partly offset by higher operating expenses including cash
        profit sharing and stock-based compensation expense. Consolidated
        operating margin increased to 25.1% from 19.7%.
        --  North America income from operations of $87.4 million increased from
            $56.8 million, primarily due to the increase in gross profit, partly
            offset by higher operating expenses.


        --  Europe income from operations of $6.1 million increased from $5.4
            million, primarily due to increased gross profit.


    --  The Company's effective income tax rate was 26.2% for both quarters.


    --  Net income was $67.1 million, or $1.54 per diluted share of the
        Company's common stock, compared to net income of $43.7 million, or
        $0.97 per diluted share.


    --  Cash flow provided by operating activities decreased approximately $8.9
        million to $86.8 million from $95.7 million.
    --  Cash flow used in investing activities decreased approximately $1.2
        million to $8.1 million from $9.3 million. Capital expenditures were
        approximately $6.8 million compared to $9.2 million.

Management Commentary

"We delivered strong third quarter results with our sales increasing 17.5% year-over-year and 11.7% quarter-over-quarter to $364.3 million on significantly higher volume," commented Karen Colonias, the Company's President and Chief Executive Officer. "Our sales volume improved primarily due to ongoing momentum in our home center and co-op customers as we have continued to benefit from the shift in consumer behavior toward home renovations as a result of the COVID-19 pandemic. Sales volumes were supported by the return of Lowe's as a home center customer in the second quarter of 2020. By the end of October, we expect nearly all 1,737 Lowe's stores will be set with our industry-leading connectors, mechanical anchor and fastener product solutions. Our sales were further supported by improving U.S. housing starts and the recovery in Europe following government shutdowns in the United Kingdom and France due to COVID-19 in late March. In addition, we achieved a considerable improvement in our gross margin to 47.6% in the third quarter of 2020 from 44.4% in the third quarter of 2019. The strength in our gross margin, combined with our effective expense management, helped drive a 49.8% year-over-year increase in our income from operations to $91.3 million and strong earnings of $1.54 per diluted share."

Mrs. Colonias continued, "While our focus over the past seven months has been on cash preservation to ensure our working capital needs could be met in the near-term due to uncertainty related to COVID-19, we have been grateful to be able to operate as a supplier to other essential businesses with minimal disruptions. As such, we are continuing to support our growth strategy in identifying M&A opportunities that would complement our existing product offering and manufacturing footprint or strengthen our software capabilities. In-line with this initiative, we recently made two strategic asset purchases including the acquisition of a small connector manufacturer in the United Kingdom that we expect to improve our market share in Europe and a small software application that we believe will strengthen our value proposition for builders."

Mrs. Colonias concluded, "At Simpson, we value our employees' health, safety and wellbeing as our top priority and strive for continuous improvement to ensure our Company remains a safe and rewarding place to work. Our diligence, including strict adherence to protocols to help minimize the spread of COVID-19, has enabled us to continue operating our business, while executing against our strategic, operational and financial initiatives in order to maximize shareholder value."

Corporate Developments

    --  During the quarter, the Company paid down $75 million of the $150
        million borrowed from its $300 million revolving credit facility.


    --  On October 13, 2020, the Company announced Michael Olosky as its Chief
        Operating Officer, effective November 30, 2020. Mr. Olosky will
        primarily be responsible for overseeing Simpson's sales and operations
        globally, and will report directly to the Company's President and Chief
        Executive Officer, Karen Colonias. Mr. Olosky succeeds Simpson's former
        Chief Operating Officer Ricardo Arevalo, who retired in February 2020
        after 20 years of service to the Company.
    --  On October 23, 2020, the Company's Board of Directors declared a
        quarterly cash dividend of $0.23 per share. The dividend will be payable
        on January 28, 2021 to the Company's stockholders of record as of
        January 7, 2021.

Business Outlook

On July 27, 2020, the Company reinstated its 2020 full-year outlook originally provided on February 3, 2020. The Company is updating its full year outlook, primarily reflecting three quarters of actual results, as well as improved visibility on the progression of pandemic-related restrictions and the impact of those restrictions on the Company's operations. Based on business trends and conditions as of today, October 26, the Company's outlook for the full fiscal year ending December 31, 2020 is as follows:

    --  Net sales are estimated to increase in the range of 9.0% to 10.0%
        compared to the full year ended December 31, 2019.


    --  Gross margin is estimated to be in the range of 45.0% to 46.0%.


    --  Operating expenses, as a percentage of net sales, are estimated to be in
        the range of 25.0% to 26.5%.
    --  The effective tax rate is estimated to be in the range of 24.5% to
        26.0%, including both federal and state income tax rates.

While the magnitude and duration of the COVID-19 pandemic and its impact on general economic conditions remains uncertain, the Company is continuing to monitor the impact of the outbreak on its operations and financial condition, which was not significantly adversely impacted in the second quarter or third quarter of 2020. Please note that ongoing uncertainties surrounding the impact of COVID-19 on the Company's business, which may include the economic impact on its operations, raw material costs, consumers, suppliers, vendors, and other factors outside of its control, may have a material adverse impact on the Company's financial outlook.

Conference Call Details

Investors, analysts and other interested parties are invited to join the Company's third quarter 2020 financial results conference call on Monday, October 26, 2020, 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=141698 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 9, 2020, by dialing (844) 512-2921 (U.S. and Canada) or (412) 317-6671 (International) and entering the conference ID: 13711219. 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 the impact of COVID-19 on our operations and supply chain, and the operations of our customers, suppliers and business partners and those discussed under Part I - 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, Part II - Other Information - Item 1.A. Risk Factors in our Form 10-Qs for the quarters ended March 31, 2020 and June 30, 2020 and subsequent filings with the SEC. To the extent that COVID-19 adversely affects our business and financial results, it may also have the effect of heightening many of such risk and other factors.

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 September                               Nine Months Ended September
                                                                                                                  30,                                                         30,

                                                                                                                                                     ---


     
              (Amounts in thousands, except per share data)           2020                             2019                      2020                        2019

                                                                                                                                                              ---


     Net sales                                                                 $
            364,304                                        $
        309,932                            $
          974,048  $
        874,029



     Cost of sales                                                   191,061                                      172,288                                  521,339                        491,952




     Gross profit                                                    173,243                                      137,644                                  452,709                        382,077




     Research and development and engineering expense                 12,287                                       11,972                                   37,860                         35,287



     Selling expense                                                  29,396                                       27,672                                   84,757                         84,471



     General and administrative expense                               40,289                                       37,047                                  117,396                        117,941




     Total operating expenses                                         81,972                                       76,691                                  240,013                        237,699



     Gain on disposal of assets                                         (72)                                        (14)                                   (209)                         (265)




     Income from operations                                           91,343                                       60,967                                  212,905                        144,643



     Interest expense, net and other                                   (518)                                     (1,778)                                 (3,202)                       (2,394)



     Income before taxes                                              90,825                                       59,189                                  209,703                        142,249



     Provision for income taxes                                       23,768                                       15,503                                   52,341                         36,324




     Net income                                                                 $
            67,057                                         $
        43,686                            $
          157,362  $
        105,925




     Earnings per common share:



     Basic                                                                        $
            1.54                                           $
        0.98                               $
          3.60     $
        2.37



     Diluted                                                                      $
            1.54                                           $
        0.97                               $
          3.59     $
        2.35



     Weighted average shares outstanding:



     Basic                                                            43,474                                       44,477                                   43,683                         44,673



     Diluted                                                          43,683                                       44,814                                   43,873                         44,995



     Cash dividend declared per common share                                      $
            0.23                                           $
        0.23                               $
          0.68     $
        0.68



     Other data:



     Depreciation and amortization                                              $
            10,349                                          $
        9,529                             $
          30,088   $
        29,044



     Pre-tax equity-based compensation expense                                   $
            4,031                                          $
        2,099                              $
          9,459    $
        8,699


                                                          
     
       Simpson Manufacturing Co., Inc. and Subsidiaries

                                                          
     
       UNAUDITED Consolidated Condensed Balance Sheets

                                                              
         
                (In thousands)




                                                                       
              
                September 30,               December 31,




     
                (Amounts in thousands)                             2020                                        2019                   2019




     Cash and cash equivalents                                                $
              311,465                         $
              194,061           $
        230,210



     Trade accounts receivable, net                               226,447                                       180,898                       139,364



     Inventories                                                  260,054                                       242,730                       251,907



     Other current assets                                          22,439                                        17,565                        19,426




     Total current assets                                         820,405                                       635,254                       640,907



     Property, plant and equipment, net                           246,472                                       250,950                       249,012



     Operating lease right-of-use assets                           41,453                                        34,463                        35,436



     Goodwill                                                     133,734                                       131,191                       131,879



     Other noncurrent assets                                       35,801                                        34,450                        38,132




     Total assets                                                           $
              1,277,865                       $
              1,086,308         $
        1,095,366




     Trade accounts payable                                                    $
              42,271                          $
              40,861            $
        33,351



     Accrued liabilities and other current liabilities            148,890                                       125,006                       125,556




     Total current liabilities                                    191,161                                       165,867                       158,907



     Operating lease liabilities, net of current portion           33,354                                        27,256                        27,930



     Long-term debt, net of current portion                        75,000



     Deferred income tax and other long-term liabilities           17,550                                        16,238                        16,572



     Stockholders' equity                                         960,800                                       876,947                       891,957




     Total liabilities and stockholders' equity                             $
              1,277,865                       $
              1,086,308         $
        1,095,366


                                                                                       
            
             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)                            2020                           2019                                     change*                       2020                  2019                      change*

                                                                                                                                                                                                                   ---


     
       Net Sales by Reporting Segment


        
       North America                                            $
        316,902                                          $
              265,505                             19.4%                   $
       852,759                       $
       746,009           14.3%


        
       
                Percentage of total net sales        87.0                                    85.7                                                                               87.5                            85.4
                                                         
           %                                
         %                                                                          
            %                     
            %


        
       Europe                                          44,766                                  42,219                                                 6.0%           114,877                         121,647              (5.6)%


        
       
                Percentage of total net sales        12.3                                    13.6                                                                               11.8                            13.9
                                                         
           %                                
         %                                                                          
            %                     
            %


        
       Asia/Pacific                                     2,636                                   2,208                                                19.4%             6,412                           6,373                0.6%


                                                                   $
        364,304                                          $
              309,932                             17.5%                   $
       974,048                       $
       874,029           11.4%




     
       Net Sales by Product Group**


        
       Wood Construction                                        $
        311,167                                          $
              255,869                             21.6%                   $
       834,411                       $
       731,898           14.0%


        
       
                Percentage of total net sales          85                                      84                                                                                 86                              84
                                                                 %                                      %                                                                                   %                              %


        
       Concrete Construction                           52,983                                  53,947                                               (1.8)%           139,299                         141,883              (1.8)%


        
       
                Percentage of total net sales          15                                      16                                                                                 14                              16
                                                                 %                                      %                                                                                   %                              %


        
       Other                                              154                                     116                                                           N/M                  338                             248                           N/M



                                                                   $
        364,304                                          $
              309,932                             17.5%                   $
       974,048                       $
       874,029           11.4%




     
       Gross Profit (Loss) by Reporting Segment


        
       North America                                            $
        155,045                                          $
              120,974                             28.2%                   $
       409,864                       $
       336,251           21.9%


        
       
                 North America gross margin          48.9                                    45.6                                                                               48.1                            45.1
                                                         
           %                                
         %                                                                          
            %                     
            %


        
       Europe                                          16,980                                  16,214                                                 4.7%            40,787                          43,900              (7.1)%


        
       
                Europe gross margin                  37.9                                    38.4                                                                               35.5                            36.1
                                                         
           %                                
         %                                                                          
            %                     
            %


        
       Asia/Pacific                                     1,376                                     455                                                           N/M                2,026                           1,924                 5.3%


        
       Administrative and all other                     (158)                                      1                                                           N/M                   32                               2                           N/M



                                                                   $
        173,243                                          $
              137,644                             25.9%                   $
       452,709                       $
       382,077           18.5%




     
       Income (Loss) from Operations


        
       North America                                             $
        87,378                                           $
              56,844                             53.7%                   $
       213,135                       $
       139,489           52.8%


        
       
                 North America operating margin      27.6                                    21.4                                                                               25.0                            18.7
                                                         
           %                                
         %                                                                          
            %                     
            %


        
       Europe                                           6,074                                   5,386                                                12.8%             7,100                           9,645             (26.4)%


        
       
                Europe operating margin              13.6                                    12.8                                                                                6.2                             7.9
                                                         
           %                                
         %                                                                                   %                              %


        
       Asia/Pacific                                       519                                   (481)                                                          N/M                (160)                          (837)                          N/M


        
       Administrative and all other                   (2,628)                                  (782)                                                          N/M              (7,170)                        (3,654)                          N/M



                                                                    $
        91,343                                           $
              60,967                             49.8%                   $
       212,905                       $
       144,643           47.2%


               
              *                 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.


                           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.