Simpson Manufacturing Co., Inc. Announces Second Quarter 2017 Financial Results

Simpson Manufacturing Co., Inc. Announces Second Quarter 2017 Financial Results

PR Newswire

PLEASANTON, Calif., July 27, 2017 /PRNewswire/ --

Second quarter highlights

  • Consolidated net sales of $263.0 million increased 14% year-over-year
  • Diluted earnings per share of $0.59 per share increased 9% year-over-year
  • Declared quarterly cash dividend of $0.21 per share

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 second quarter 2017. Unless otherwise stated, the Company's results below, when referencing "recently acquired businesses" or "acquired net sales" refer to Multi Services Dêcoupe S.A. (acquired August 2016), Gbo Fastening Systems AB (acquired January 2017), and CG Visions, Inc. (acquired January 2017), or net sales of such acquired businesses, respectively. Refer to the "Segment Reporting" table below for additional segment information (including information about the Company's Asia/Pacific segment and Administrative and All Other segment).

Second Quarter 2017 Financial Highlights
All comparisons below (which are generally indicated by words such as "increased," "decreased," "remained," or "compared to"), unless otherwise noted, are comparing the second quarter of 2017 with the second quarter of 2016.

  • Consolidated net sales of $263.0 million increased 14% compared to $230.0 million. Recently acquired businesses as a whole accounted for $15.0 million (45%) of the increased net sales.
    • North America net sales of $215.7 million increased 9% compared to $197.3 million, primarily due to increases in sales volumes as well as in average net sales unit prices. Canada's net sales were flat for the quarter, primarily due to the negative effect of foreign currency translations from the weakening Canadian dollar against the United States dollar. In local currency, Canada net sales increased, primarily due to increases in sales volumes.
    • Europe net sales of $45.2 million increased 47% compared to $30.8 million, primarily due to acquired net sales of $13.5 million, which accounted for 94% of the increased net sales in Europe. Net sales were negatively affected by approximately $1.1 million in foreign currency translations primarily related to the weakening of the British pound against the United States dollar. In local currency, Europe net sales increased due to increases in sales volumes as well as in average net sales unit prices.

  • Consolidated gross profit of $123.5 million increased 11% compared to $111.5 million. Gross profit as a percentage of net sales decreased to 47% from 48%. Recently acquired businesses had an average gross profit margin of 32% in the second quarter of 2017.
    • North America gross profit as a percentage of net sales decreased to 49% from 50%.
    • Europe gross profit as a percentage of net sales decreased to 37% from 41%, primarily due to the recently acquired businesses.

  • Consolidated income from operations of $45.1 million increased 10% compared to $40.9 million. As a percentage of net sales, consolidated income from operations decreased to 17% from 18%. Recently acquired businesses as a whole recorded $0.1 million in operating losses in the second quarter of 2017, primarily due to purchase accounting adjustments such as intangible amortization expense.
    • North America income from operations of $42.0 million increased 5% compared to $40.1 million.
    • Europe income from operations of $4.1 million increased 118% compared to $1.9 million.

  • Consolidated net income was $28.2 million, or $0.59 per diluted share of the Company's common stock, compared to net income of $26.2 million, or $0.54 per diluted share of the Company's common stock. Recently acquired businesses as a whole recorded a net loss of $0.3 million in the second quarter of 2017.

Year-to-Date (6-month) 2017 Financial Highlights
All comparisons below (which are generally indicated by words such as "increased," "decreased," "remained," or "compared to"), unless otherwise noted, are comparing the six months ended June 30, 2017 with the six months ended June 30, 2016.

  • Consolidated net sales of $482.9 million increased 12% compared to $429.5 million. Recently acquired businesses as a whole accounted for $27.6 million (52%) of the increased net sales.
    • North America net sales of $399.5 million increased 7% compared to $371.7 million, primarily due to increases in sales volumes, as well as average net sales unit prices. Canada's net sales increased, primarily due to increased volumes.
    • Europe net sales of $79.6 million increased 46% compared to $54.5 million, primarily due to acquired net sales of $24.6 million, which accounted for 98% of the increased net sales. Net sales were negatively affected by approximately $2.3 million in foreign currency translations, primarily related to the weakening of the British pound against the United States dollar. In local currency, Europe net sales increased due to increases in sales volumes as well as in average net sales unit prices.

  • Consolidated gross profit of $223.7 million increased 10% compared to $204.0 million. Gross profit as a percentage of net sales decreased to 46% from 47%. Recently acquired businesses had an average gross profit margin of 31% in the six months ended June 30, 2017.
    • North America gross profit as a percentage of net sales remained 49%.
    • Europe gross profit as a percentage of net sales decreased to 35% from 39%, primarily due to the recently acquired businesses.

  • Consolidated income from operations of $67.8 million increased slightly compared to $67.6 million. As a percentage of net sales, consolidated income from operations decreased to 14% from 16%. Recently acquired businesses as a whole recorded $0.2 million in operating losses in the six months ended June 30, 2017, primarily due to purchase accounting adjustments such as intangible amortization expense.
    • North America income from operations of $68.8 million decreased 3% compared to $70.6 million.
    • Europe income from operations of $2.3 million increased 720% compared to $0.3 million.

  • Consolidated net income was $51.3 million, or $1.07 per diluted share of the Company's common stock, compared to net income of $42.5 million, or $0.88 per diluted share of the Company's common stock. Recently acquired businesses as a whole contributed net income of $7.8 million in the six months ended June 30, 2017, as a result of an $8.4 million gain on a bargain purchase recorded in the first quarter of 2017.

Management Commentary

"Our second quarter financial results, while fundamentally strong, reflect the various investments we have been making in our business, including the development of our truss software offering, growing our market share in Europe with the associated recent acquisitions and working to deepen our foothold in the concrete repair and protection space," commented Karen Colonias, President and Chief Executive Officer of Simpson Manufacturing Co., Inc. "Beyond these initiatives, with an industry-leading position in the U.S. connector market, the wood construction products are core to our operations and we remain dedicated to continuing to grow our offering in the single and multi-family residential and commercial space. Further, we are intently focused on reducing our total selling, general and administrative expenses as a percentage of net sales which were under 30% for the quarter and down 118 basis points from the prior year quarter. While we do not expect SG&A as a percentage of net sales to be reduced to the 22% level we achieved in 2006, we are focusing on ways to be able to better leverage our expenses as we begin to monetize our various strategic initiatives."

Mrs. Colonias concluded, "We continue to have a strong financial position which affords us the flexibility and capability to continue investing in our long-term strategy to increase shareholder value and to return capital to our valued shareholders. Despite maintaining an industry-leading gross profit margin and operating income margin, the investments we have been making in our strategic initiatives have yet to fully materialize and reflect the operating leverage and earnings power that Simpson Manufacturing strives to achieve. Over the coming quarters, we plan to provide additional metrics and targets to help our investors to better measure our success and progress on these initiatives."

Corporate Developments

  • On July 13, 2017, the Company's Board of Directors (the "Board") declared a cash dividend of $0.21 per share. The dividend will be payable on October 26, 2017 to shareholders of record as of October 5, 2017.

  • During the second quarter of 2017, the Company repurchased 425,000 shares of the Company's common stock pursuant to an accelerated stock repurchase program, at an average price of $41.28 per share, for a total of $17.5 million. At June 30, 2017, approximately $54.0 million remained available for repurchase under the August 2016 Board authorization for repurchasing shares of the Company's common stock having an aggregate value of up to $125.0 million through December 31, 2017.

  • At the Company's annual meeting on May 16, 2017, Mr. Michael Bless was elected as an independent director to the Board. On the same day, Mr. Bless was appointed by the Board to both the Audit and Acquisitions and Strategy Committees. Mr. Bless has extensive board and operational experience and currently serves as President and Chief Executive Officer of Century Aluminum Co., a company in a related industry which complements Simpson's existing Board membership. The Board believes he will provide valuable perspectives and insights to enhance the execution of the Company's growth strategies.

Business Outlook

The Company is currently uncertain whether the market price for steel will remain stable during the third quarter of 2017.

Subject to changing economic conditions, future events and circumstances, the Company is reiterating its outlook for gross profit margin to be in the range of 45% to 46% for the full year ending December 31, 2017.

Conference Call Details

Investors, analysts and other interested parties are invited to join the Company's second quarter 2017 financial results conference call on Friday, July 28, 2017 at 9:00 am Eastern Time (6:00 am 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 a link on the Company's website at www.simpsonmfg.com. The webcast will remain posted on the Company's website for 90 days.

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."

Forward-Looking Statements

This document contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, based on numerous assumptions and subject to risks and uncertainties (some of which are beyond our control), such as statements above regarding steel prices and the Company's gross profit margin outlook. Forward-looking statements are necessarily speculative in nature, and it can be expected that some or all of the assumptions of the forward-looking statements we furnish will not materialize or will vary significantly from actual results. Although the Company believes that these forward-looking statements are reasonable, it does not and cannot give any assurance that its beliefs and expectations will prove to be correct, and our actual results might differ materially from results suggested by any forward-looking statement in this document. 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 business cycles and construction business conditions; (ii) customer acceptance of the Company's products; (iii) product liability claims, contractual liability, engineering and design liability and similar liabilities or claims, (iv) relationships with key customers; (v) materials and manufacturing costs; (vi) the financial condition of customers, competitors and suppliers; (vii) technological developments including software development; (viii) increased competition; (ix) changes in industry practices or regulations; (x) litigation risks and actions by activist shareholders, (xi) changes in capital and credit market conditions; (xii) governmental and business conditions in countries where the Company's products are manufactured and sold; (xiii) changes in trade regulations; (xiv) the effect of acquisition activity; (xv) changes in the Company's plans, strategies, objectives, expectations or intentions; and (xvi) other risks and uncertainties indicated from time to time in the Company's filings with the U.S. Securities and Exchange Commission including in the Company's most recent Annual Report on Form 10-K under the heading "Item 1A - Risk Factors." Actual results might differ materially from results suggested by any forward-looking statements in this document. Except as required by law, the Company undertakes no obligation to publicly release any update or revision to these forward-looking statements, whether as a result of the receipt of new information, the occurrence of future events or otherwise. The information in this document speaks as of the date hereof and is subject to change. Any distribution of this document after the date hereof is not intended and should not be construed as updating or confirming such information. In light of the foregoing, investors are urged not to rely on our forward-looking statements in making an investment decision about our securities. We further do not accept any responsibility for any projections or reports published by analysts, investors or other third parties. The financial information set forth herein is presented on a preliminary unreviewed and unaudited basis; reviewed and unaudited data will be included in the Company's Quarterly Report on Form 10-Q for the period ended June 30, 2017, when filed.

 

Simpson Manufacturing Co., Inc. and Subsidiaries
UNAUDITED Consolidated Statements of Operations
(In thousands, except per share data)






Three Months Ended
June 30,


Six Months Ended
June 30,

(Amounts in thousands, except per share data)

2017


2016


2017


2016

Net sales

$

263,002


$

229,973


$

482,869


$

429,496

Cost of sales

139,477


118,486


259,188


225,486

Gross profit

123,525


111,487


223,681


204,010

Research and development and engineering expense

13,264


11,452


26,371


22,875

Selling expense

28,511


24,822


57,994


50,009

General and administrative expense

36,563


34,945


71,549


64,243

Loss (gain) on disposal of assets

50


(656)


(1)


(682)

Income from operations

45,137


40,924


67,768


67,565

Loss in equity method investment, before tax

(12)



(41)


Interest expense, net

(199)


(83)


(388)


(318)

Gain on bargain purchase of a business



8,388


Income before taxes

44,926


40,841


75,727


67,247

Provision for income taxes

16,712


14,640


24,392


24,703

Net income

$

28,214


$

26,201


$

51,335


$

42,544

Earnings per common share:








Basic

$

0.59


$

0.54


$

1.08


$

0.88

Diluted

$

0.59


$

0.54


$

1.07


$

0.88

Weighted average shares outstanding:








Basic

47,634


48,399


47,634


48,353

Diluted

47,920


48,605


47,922


48,533

Cash dividend declared per common share

$

0.21


$

0.18


$

0.39


$

0.34

Other data:








Depreciation and amortization

$

8,572


$

7,442


$

16,935


$

14,878

Pre-tax equity-based compensation expense

$

3,209


$

3,573


$

11,185


$

6,323









 

Simpson Manufacturing Co., Inc. and Subsidiaries
UNAUDITED Consolidated Condensed Balance Sheets
(In thousands)




June 30,


December 31,

(Amounts in thousands)


2017


2016


2016

Cash and cash equivalents


$

140,950


$

246,337


$

226,537

Trade accounts receivable, net


172,331


144,916


112,423

Inventories


265,293


218,164


232,274

Assets held for sale


308



Other current assets


17,457


11,482


14,013

Total current assets


596,339


620,899


585,247

Property, plant and equipment, net


261,362


219,391


232,810

Goodwill


137,160


124,993


124,479

Other noncurrent assets


46,616


34,256


37,438

Total assets


$

1,041,477


$

999,539


$

979,974

Trade accounts payable


$

37,742


$

27,069


$

27,674

Capital lease obligation - current portion


525



Other current liabilities


95,989


85,274


81,122

Total current liabilities


134,256


112,343


108,796

Other long-term liabilities - net of current portion


7,810


4,920


5,336

Stockholders' equity


899,411


882,276


865,842

Total liabilities and stockholders' equity


$

1,041,477


$

999,539


$

979,974

 

Simpson Manufacturing Co., Inc. and Subsidiaries
UNAUDITED Segment and Product Group Sales Information
(In thousands)














Three Months Ended




Six Months Ended






June 30,


%


June 30,


%

(Amounts in thousands)

2017


2016


change
*


2017


2016


change
*

Net Sales by Reporting Segment













North America

$

215,739


$

197,284


9%


$

399,510


$

371,738


7%


Europe

45,234


30,820


47%


79,615


54,518


46%


Asia/Pacific

2,029


1,869


9%


3,744


3,240


16%



Total

$

263,002


$

229,973


14%


$

482,869


$

429,496


12%

Net Sales by Product Group**













Wood Construction

$

224,013


$

196,734


14%


$

414,890


$

368,512


13%


Concrete Construction

38,917


33,239


17%


67,734


60,983


11%


Other

72



N/M


245


1


N/M



Total

$

263,002


$

229,973


14%


$

482,869


$

429,496


12%

Gross Profit (Loss) by Reporting Segment













North America

$

106,484


$

97,703


9%


$

195,474


$

181,416


8%


Europe

16,809


12,684


33%


27,865


21,246


31%


Asia/Pacific

326


1,050


(69)%


455


1,356


(66)%


Administrative and all other

(94)


50


N/M


(113)


(8)


N/M



Total

$

123,525


$

111,487


11%


$

223,681


$

204,010


10%

Income (Loss) from Operations













North America

$

42,011


$

40,116


5%


$

68,778


$

70,568


(3)%


Europe

4,138


1,899


118%


2,304


281


720%


Asia/Pacific

71


852


(92)%


(124)


1,007


(112)%


Administrative and all other

(1,083)


(1,943)


N/M


(3,190)


(4,291)


N/M



Total

$

45,137


$

40,924


10%


$

67,768


$

67,565


—%





*

Unfavorable percentage changes are presented in parentheses.


**

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.

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