Simpson Manufacturing Co., Inc. Announces Second Quarter Results

PLEASANTON, Calif., July 26, 2012 /PRNewswire/ -- Simpson Manufacturing Co., Inc. (the "Company") (NYSE: SSD) today announced its second quarter 2012 results.

For the second quarter of 2012, net sales increased 2.2% to $181.7 million compared to net sales of $177.8 million for the second quarter of 2011. The Company had net income of $15.9 million for the second quarter of 2012 compared to net income of $19.5 million for the second quarter of 2011. Diluted net income per common share was $0.33 for the second quarter of 2012 compared to diluted net income of $0.39 per common share for the second quarter of 2011.

The increase in the Company's second quarter 2012 sales was due to $9.7 million in sales from acquisitions.  Excluding sales from acquisitions, the Company's second quarter 2012 sales decreased. In the second quarter 2012, sales increased in North America, with an above-average increase in the United States, due in part to recent acquisitions. Sales in Europe decreased, primarily due to the European financial crisis which negatively affected sales volumes, partly offset by sales from the recent European acquisition. Effects due to foreign currency translation were not significant. Sales to contractor distributors and lumber dealers increased in the second quarter of 2012, compared to the second quarter of 2011, while sales to dealer distributors were flat and sales to home centers decreased. Wood construction product sales, including connectors, truss plates, fastening systems, fasteners and shearwalls, represented 85% of total Company sales in the second quarter of 2012, down from 90% in the second quarter of 2011. Concrete construction product sales, including adhesives, chemicals, mechanical anchors, powder actuated tools and reinforcing fiber materials, as a percentage of total sales increased to 15% in the second quarter of 2012, from 10% in the second quarter of 2011. The majority of sales from recent acquisitions were attributed to the European acquisition, and mostly in concrete construction products.

Gross profit decreased slightly from $83.5 million in the second quarter of 2011 to $83.1 million in the second quarter of 2012. As a percentage of net sales, gross profit decreased from 47.0% in the second quarter of 2011 to 45.8% in the second quarter of 2012.  The North American gross profit margin decreased from 51.6% in the second quarter of 2011 to 48.2% in the second quarter of 2012, as a result of higher material and labor costs, and increased concrete construction product sales, which have a lower gross margin than wood construction product sales and competitive price pressure.  The European gross profit margin increased to 37.3% in the second quarter of 2012 from 32.5% in the second quarter of 2011, primarily due to lower material and labor costs and the recent European acquisition. Steel prices increased slightly in the second quarter. Due to a number of factors that could affect supply, the Company is uncertain of steel pricing through the second half of 2012.

Unless otherwise noted, changes in operating expenses were mostly attributable to the North American segment. Research and development and engineering expense increased 30.2% from $6.9 million in the second quarter of 2011 to $9.0 million in the second quarter of 2012.  The increase in research and development expense included an increase of $1.5 million for truss software development costs and personnel costs of $0.6 million resulting from additional employees, partly due to the recent North American acquisitions, and a pay rate increase. Selling expense increased 0.3% from $19.8 million in the second quarter of 2011 to $19.9 million in the second quarter of 2012. The slight increase in selling costs was primarily due to increases in personnel costs of $0.7 million, due mostly to the recent North American acquisitions, additional employees and increased pay rates, and to equity-based compensation charges of $0.4 million.  The increases were offset by a reduction in cash profit sharing of $0.5 million due to lower operating income and a reduction in promotional costs of $0.5 million. General and administrative expense increased 6.4% from $25.5 million in the second quarter of 2011 to $27.1 million in the second quarter of 2012. Personnel costs increased $1.1 million primarily due to the recent European acquisition, additional employees and increased pay rates.  Depreciation and amortization expense increased $1.4 million primarily due to recent acquisitions in both North America and Europe. The remaining increases in general and administrative expenses included $0.5 million in equity-based compensation charges, $0.6 million reduction in foreign currency gains, primarily in the European segment, and $0.3 million in bad debt expense.  These increases were partly offset by reductions in cash profit sharing of $1.5 million due to lower operating income and an impairment charge of $1.1 million taken in the prior year related to real estate in North America that was sold in the first quarter of 2012.

The effective tax rate increased from 37.6% in the second quarter of 2011 to 41.7% in the second quarter of 2012, primarily due to valuation allowances taken on certain foreign losses.

In the first half of 2012, net sales increased 9.7% to $340.4 million compared to net sales of $310.3 million for the first half of 2011 due in part to recent acquisitions. The Company had net income of $23.1 million for the first half of 2012 compared to net income of $26.6 million for the first half of 2011. Diluted net income per common share was $0.48 for the first half of 2012 compared to diluted net income of $0.53 per common share for the first half of 2011.

Sales in North America for the first half of 2012 increased, with an above-average increase in the United States, primarily due to increases in volume and partly to recent acquisitions. Sales in the first half of 2012 in Europe increased slightly, due to the recent European acquisition. Foreign currency translation effects were not significant. Sales to contractor distributors, dealer distributers and lumber dealers increased in the first half of 2012 as compared to the same period in 2011, while sales to home centers decreased slightly.  Wood construction product sales represented 86% of total Company sales in the first half of 2012, down from 89% in the first half of 2011. Concrete product sales represented 14% of total sales in the first half of 2012 up from 11% in the first half of 2011, with increases in all geographic segments. Acquisitions made since December 2011 contributed $14.6 million to sales in the first half of 2012, with the majority attributed to the European acquisition, and mostly in concrete construction products.

Gross profit increased to $152.6 million in the first half of 2012 from $140.4 million in the first half of 2011. As a percentage of net sales, gross profit decreased from 45.3% in the first half of 2011 to 44.8% in the first half of 2012.  The North American segment gross profit margin decreased from 49.3% in the first half of 2011 to 47.5% in the first half of 2012, primarily due to higher material and labor costs, partly offset by lower factory overhead and increased absorption of fixed overhead, while the gross profit margin for the European segment increased to 35.3% in in the first half of 2012 from 32.0% in the first half of 2011, primarily due to lower material and labor costs, partly offset by higher factory overhead costs.

Unless otherwise noted, changes in operating expenses were mostly attributable to the North American segment. Research and development and engineering expense increased 41.0% from $12.9 million in the first half of 2011 to $18.2 million in the first half of 2012.  The increase in research and development expense included increases in professional fees of $3.8 million, primarily due to truss software development costs, and personnel costs of $1.2 million resulting from additional employees and a pay rate increase. Selling expense increased 9.3% from $36.9 million in the first half of 2011 to $40.3 million in the first half of 2012. The increase in selling costs was primarily due to increases in personnel costs of $2.2 million, resulting from the recent North American acquisitions, additional employees and increased pay rates, and increased equity-based compensation of $0.8 million. General and administrative expense increased 13.3% from $47.1 million in the first half of 2011 to $53.3 million in the first half of 2012. Personnel costs increased $2.3 million primarily due to the recent European acquisition, additional employees and an increase in pay rates.  Depreciation and amortization expense increased $3.0 million primarily due to recent acquisitions in both North America and Europe. The remaining increases in general and administrative expenses included $1.0 million in equity-based compensation, $0.6 million reduction in foreign currency gains, $0.3 million in computer hardware and license fees, $0.3 million in professional fees due to the recent European acquisition and $0.2 million in insurance premiums.  These increases were partly offset by a reduction in cash profit sharing of $1.0 million due to lower operating income and a decrease in impairment charges of $0.6 million related to real estate in North America that was sold in the first quarter of 2012.

The effective tax rate increased from 39.0% in the first half of 2011 to 43.5% in the first half of 2012, primarily due to $2.3 million in non-deductible acquisition costs, as well as valuation allowances taken on certain foreign losses.

At its meeting on July 18, 2012, the Company's Board of Directors declared a cash dividend of $0.125 per share. The record date for the dividend will be October 4, 2012, and it will be paid on October 25, 2012. 

Investors, analysts and other interested parties are invited to join the Company's conference call on Friday, July 27, 2012, at 6:00 am Pacific Time. To participate, callers may dial 800-895-0198. The call will be webcast simultaneously as well as being 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 six months ended June 30, 2012 and 2011 (unaudited), were as follows:


Three Months

 Six Months


Ended June 30,

Ended June 30,

(Amounts in thousands, except per share data)

2012

2011

2012

2011

     Net sales

$

181,703

$

177,812

$

340,437

$

310,348

     Cost of sales


98,557


94,313


187,886


169,900

       Gross profit


83,146


83,499


152,551


140,448










     Research and development and engineering

     expenses


9,043


6,945


18,240


12,939

     Selling expenses 


19,881


19,819


40,314


36,895

     General and administrative expenses 


27,087


25,454


53,331


47,076

     Loss (gain) on sale of assets


(13)


73


10


48










          Income from operations


27,148


31,208


40,656


43,490










     Loss on equity method investment, before

     tax



(69)



(82)

     Interest income, net


58


108


123


179

          Income before taxes 


27,206


31,247


40,779


43,587

     Provision for income taxes


11,347


11,754


17,719


17,016



















Net income

$

15,859

$

19,493

$

23,060

$

26,571










     Earnings per common share:









          Basic

$

0.33

$

0.39

$

0.48

$

0.53

          Diluted 


0.33


0.39


0.48


0.53










     Weighted average shares outstanding:









          Basic


48,340


49,404


48,307


49,753

          Diluted 


48,419


49,456


48,378


49,809










     Other data:









          Depreciation and amortization

$

7,093

$

5,084

$

13,813

$

10,055

          Pre-tax impairment of assets



1,094


461


1,094

          Pre-tax stock compensation expense


2,116


855


5,300


2,377










     Cash dividend declared per common share 

$

0.125

$

0.125

$

0.25

$

0.25


 

The Company's financial position (unaudited) as of June 30, 2012 and 2011 and December 31, 2011, was as follows:


   June 30,

December 31,

(Amounts in thousands)

2012

2011

2011

     Cash and short-term investments 

$

162,719

$

262,013

$

213,817

     Trade accounts receivable, net 


120,119


117,975


76,420

     Inventories


185,217


166,934


180,129

     Assets held for sale



6,792


6,793

     Other current assets 


26,640


19,697


24,905

          Total current assets 


494,695


573,411


502,064


     Property, plant and equipment, net 


208,685


183,698


195,716

     Goodwill 


127,983


72,111


99,849

     Other noncurrent assets 


47,542


35,355


38,458

          Total assets

$

878,905

$

864,575

$

836,087


     Trade accounts payable 

$

34,740

$

32,060

$

22,033

     Notes payable and lines of credit


4,837



     Other current liabilities 


60,448


60,817


49,554

          Total current liabilities


100,025


92,877


71,587


     Other long-term liabilities


5,936


7,246


6,137

     Stockholders' equity 


772,944


764,452


758,363

          Total liabilities and stockholders' equity

$

878,905

$

864,575

$

836,087

 

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."

For further information, contact Tom Fitzmyers at (925) 560-9030.

SOURCE Simpson Manufacturing Co., Inc.



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http://www.simpsonmfg.com

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