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

·16 min read

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.

  • Consolidated gross profit of $173.2 million increased 25.9% from $137.6 million. Gross margin increased to 47.6% from 44.4%.

  • 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%.

  • 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
30,


Nine Months Ended September
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

Simpson Manufacturing Co., Inc. Logo (PRNewsfoto/Simpson Manufacturing Co., Inc.)
Simpson Manufacturing Co., Inc. Logo (PRNewsfoto/Simpson Manufacturing Co., Inc.)
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SOURCE Simpson Manufacturing Co., Inc.