Simpson Manufacturing Co., Inc. Announces Third Quarter Results

• Press Release
• Source: Simpson Manufacturing Co., Inc.
• On 5:00 pm EDT, Thursday October 29, 2009

PLEASANTON, Calif., Oct. 29 /PRNewswire-FirstCall/ -- Simpson Manufacturing Co., Inc. (the "Company") announced today that its third quarter 2009 net sales decreased 23.9% to $167.2 million compared to net sales of $219.8 million for the third quarter of 2008. The Company had net income of $12.8 million for the third quarter of 2009 compared to net income of $23.4 million for the third quarter of 2008. Diluted net income per common share was $0.26 for the third quarter of 2009 compared to diluted net income per common share of $0.48 for the third quarter of 2008. In the first nine months of 2009, net sales decreased 25.4% to $452.4 million as compared to net sales of $606.7 million for the first nine months of 2008. Net income was $15.0 million for the first nine months of 2009 as compared to net income of $52.1 million for the first nine months of 2008. Diluted net income per common share was $0.31 for the first nine months of 2009 as compared to $1.06 for the first nine months of 2008.

In the third quarter of 2009, sales declined throughout the United States. Sales during the quarter also decreased throughout Europe, with the exception of France, and decreased in the United Kingdom and Canada. Sales in France were up primarily due to the acquisition of Agence Internationale Commerciale et Industrielle, S.A.S. ("Aginco") in April 2009. Simpson Strong-Tie's third quarter sales decreased 22.0% from the same quarter last year, while Simpson Dura-Vent's sales decreased 37.5%. Simpson Strong-Tie's sales to contractor distributors and dealer distributors decreased significantly as home-building activity, and general economic conditions, remained weak. Sales to home centers also decreased. Sales decreased across all of Simpson Strong-Tie's major product lines, particularly those used in new home construction. Simpson Dura-Vent's sales decreased across most of its product lines, with the exception of special gas vent products which were up slightly.

Income from operations decreased 43.5% from $37.2 million in the third quarter of 2008 to $21.0 million in the third quarter of 2009. Gross margins decreased from 40.8% in the third quarter of 2008 to 36.4% in the third quarter of 2009. The decrease in gross margins was primarily due to reduced absorption of fixed overhead, as a result of lower production volumes, as well as higher manufacturing costs, including higher costs of material and labor. The decline in steel prices slowed in the second quarter of 2009 and prices again started to rise in the third quarter of 2009. The Company expects steel prices to continue to increase as demand returns to the market. Through the first nine months of 2009, inventories decreased 29.2% from $251.9 million at December 31, 2008, to $178.2 million at September 30, 2009.

Research and development expense decreased 12.2% from $5.7 million in the third quarter of 2008 to $5.0 million in the third quarter of 2009, primarily due to a $0.4 million decrease in personnel expenses. Selling expense decreased 27.0% from $21.3 million in the third quarter of 2008 to $15.6 million in the third quarter of 2009, which resulted primarily from a $3.6 million decrease in expenses associated with sales and marketing personnel, most of which was related to cost-cutting measures, a $1.1 million decrease in promotional expenditures and a $0.6 million decrease in commissions paid to selling agents. General and administrative expense decreased 24.2% from $25.5 million in the third quarter of 2008 to $19.4 million in the third quarter of 2009. This decrease resulted from several factors, including a $1.8 million decrease in administrative personnel expenses, related in part to cost-cutting measures, a $1.7 million decrease in cash profit sharing, a $1.6 million decrease in legal and professional service expenses and a $0.9 million decrease in the provision for bad debt, partly offset by a $0.5 million increase in amortization of intangible assets, primarily related to the acquisition of Aginco. Interest income decreased primarily due to lower interest rates. The effective tax rate was 39.3% in the third quarter of 2009, up from 38.1% in the third quarter of 2008.

In the first nine months of 2009, sales declined throughout the United States. California and the western and southeastern regions had the largest decreases in sales. Sales during the period also decreased in Europe, the United Kingdom and Canada. Simpson Strong-Tie's sales for the first nine months of the year decreased 25.5% from the same period last year, while Simpson Dura-Vent's sales decreased 24.6%. Simpson Strong-Tie's sales to contractor distributors and dealer distributors decreased as a result of the weakness in the U.S. housing market. Sales to home centers also decreased. Sales decreased across all of Simpson Strong-Tie's major product lines, particularly those used in new home construction. Sales of Simpson Dura-Vent's Direct-Vent and gas vent, hearth and pellet vent product lines decreased, while sales of special gas vent and relining products increased, primarily as a result of the acquisition of ProTech in June 2008.

Income from operations decreased 64.4% from $83.0 million in the first nine months of 2008 to $29.6 million in the first nine months of 2009. Gross margins decreased from 37.9% in the first nine months of 2008 to 33.8% in the first nine months of 2009. The decrease in gross margins was primarily due to reduced absorption of fixed overhead, as a result of lower production volumes, as well as higher manufacturing costs, including higher costs of material and labor.

Research and development expense decreased 8.4% from $16.4 million in the first nine months of 2008 to $15.0 million in the first nine months of 2009, primarily due to a $0.7 million decrease in professional service fees and a $0.6 million decrease in personnel expenses. Selling expense decreased 23.4% from $63.3 million in the first nine months of 2008 to $48.4 million in the first nine months of 2009. This decrease resulted primarily from an $8.6 million decrease in expenses associated with sales and marketing personnel, most of which was related to cost-cutting measures, a $4.0 million decrease in promotional expenditures and a $1.0 million decrease in commissions paid to selling agents. General and administrative expense decreased 10.9% from $67.2 million in the first nine months of 2008 to $59.8 million in the first nine months of 2009. This decrease resulted primarily from a $6.1 million decrease in cash profit sharing, a $1.7 million decrease in administrative personnel expenses, related in part to cost-cutting measures, and a $1.5 million decrease in legal and professional service expenses, partly offset by a $1.3 million increase in bad debt charges, most of which was recorded in the first quarter of 2009, and a $1.5 million increase in amortization of intangible assets, primarily related to the businesses acquired since June 2008. Interest income decreased from $2.2 million in the first nine months of 2008 to $64 thousand in the first nine months of 2009, primarily due to lower interest rates. The effective tax rate was 48.9% in the first nine months of 2009, up from 38.9% in the first nine months of 2008. The effective tax rate is higher than the statutory rate primarily due to the valuation allowances taken on foreign losses and a reduced benefit from the reduction or loss of enterprise zone tax credits at two of the Company's facilities in California.

At its meeting on October 21, 2009, the Company's Board of Directors declared a cash dividend of $0.10 per share. The record date for the dividend will be January 7, 2010, and it will be paid on January 28, 2010.

Investors, analysts and other interested parties are invited to join the Company's conference call on Friday, October 30, 2009, at 6:00 am Pacific Time. To participate, callers may dial 800-894-5910. The call will be webcast simultaneously and will be available for one month through a link on the Company's website at www.simpsonmfg.com.

This document contains forward-looking statements, based on numerous assumptions and subject to risks and uncertainties. Although the Company believes that the forward-looking statements are reasonable, it does not and cannot give any assurance that its beliefs and expectations will prove to be correct. Many factors could significantly affect the Company's operations and cause the Company's actual results to differ substantially from the Company's expectations. Those factors include, but are not limited to: (i) general economic and construction business conditions; (ii) customer acceptance of the Company's products; (iii) relationships with key customers; (iv) materials and manufacturing costs; (v) the financial condition of customers, competitors and suppliers; (vi) technological developments; (vii) increased competition; (viii) changes in capital and credit market conditions; (ix) governmental and business conditions in countries where the Company's products are manufactured and sold; (x) changes in trade regulations; (xi) the effect of acquisition activity; (xii) changes in the Company's plans, strategies, objectives, expectations or intentions; and (xiii) other risks and uncertainties indicated from time to time in the Company's filings with the U.S. Securities and Exchange Commission. Actual results might differ materially from results suggested by any forward-looking statements in this report. The Company does not have an obligation to publicly update any forward-looking statements, whether as a result of the receipt of new information, the occurrence of future events or otherwise.

    The Company's results of operations for the three and nine months ended
    September 30, 2009 and 2008 (unaudited), are as follows:

                                          Three Months       Nine Months
                                      Ended September 30, Ended September 30,
                                     ------------------- -------------------
    (Amounts in thousands, except
     per share data)                   2009      2008       2009     2008
                                       ----      ----       ----     ----
       Net sales                    $167,200  $219,823  $452,446  $606,742
       Cost of sales                 106,299   130,143   299,594   376,939
                                     -------   -------   -------   -------
        Gross profit                  60,901    89,680   152,852   229,803
                                      ------    ------   -------   -------

       Research and development and
        engineering expenses           4,971     5,662    14,997    16,375
       Selling expenses               15,563    21,323    48,440    63,264
       General and administrative
        expenses                      19,351    25,514    59,828    67,155
                                      ------    ------    ------    ------

        Income from operations        21,016    37,181    29,587    83,009

       Loss in equity method
        investment, before tax             -         -      (214)        -
       Interest income, net                -       579        64     2,213
                                         ---       ---        --     -----
        Income before taxes           21,016    37,760    29,437    85,222

       Provision for income taxes      8,258    14,398    14,405    33,126
                                       -----    ------    ------    ------
        Net income                   $12,758   $23,362   $15,032   $52,096
                                      ======    ======    ======    ======

       Net income per share:
        Basic                          $0.26     $0.48     $0.31     $1.07
        Diluted                         0.26      0.48      0.31      1.06

       Cash dividend declared
        per common share               $0.10     $0.10     $0.30     $0.30

       Weighted average shares
        outstanding:
        Basic                         49,195    48,612    49,066    48,593
        Diluted                       49,355    48,946    49,185    48,939

       Other data:
        Depreciation and
         amortization                 $7,493    $7,627   $22,093   $22,634
        Pre-tax stock compensation
         expense                         511       859     1,554     2,715


    The Company's financial position as of September 30, 2009 and 2008, and
    December 31, 2008 (unaudited), is as follows:

                                                 September 30,   December 31,
                                                 -------------   ------------
     (Amounts in thousands)                      2009      2008       2008
                                                 ----      ----       ----
       Cash and short-term investments         $220,139  $163,857  $170,750
       Trade accounts receivable, net           108,005   125,875    76,005
       Inventories                              178,237   251,647   251,878
       Assets held for sale                       7,887     8,429     8,387
       Other current assets                      24,787    18,936    20,577
                                                 ------    ------    ------
        Total current assets                    539,055   568,744   527,597

       Property, plant and equipment, net       191,326   195,062   193,318
       Goodwill                                  81,289    75,799    68,619
       Other noncurrent assets                   45,499    39,096    40,666
                                                 ------    ------    ------
        Total assets                           $857,169  $878,701  $830,200
                                                =======   =======   =======

       Trade accounts payable                   $29,638   $46,113   $21,675
       Line of credit and current portion
        of long-term debt                            29       629        26
       Other current liabilities                 48,175    65,460    50,193
                                                 ------    ------    ------
        Total current liabilities                77,842   112,202    71,894

       Long-term liabilities                      9,019    10,607     9,280
       Stockholders' equity                     770,308   755,892   749,026
                                                -------   -------   -------
        Total liabilities and stockholders'
         equity                                $857,169  $878,701  $830,200
                                                =======   =======   =======

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-to-wood, wood-to-concrete and wood-to-masonry connectors and fastening systems, stainless steel fasteners and pre-fabricated shearwalls. Simpson Strong-Tie also offers a full line of adhesives, mechanical anchors and powder actuated tools for concrete, masonry and steel. The Company's other subsidiary, Simpson Dura-Vent Company, Inc., designs, engineers and manufactures venting systems for gas and wood burning appliances. The Company's common stock trades on the New York Stock Exchange under the symbol "SSD."

For further information, contact Barclay Simpson at (925) 560-9032.

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