THIS PAPER FORMAT DOCUMENT IS BEING SUBMITTED PURSUANT TO RULE 902(g) OF REGULATION S-T UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly period ended: MARCH 31, 1996 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission file number: 0-23804 SIMPSON MANUFACTRUING CO., INC. ------------------------------------------------------------ (Exact name of registrant as specified in its charter) CALIFORNIA 94-3196943 ------------------------------- ------------------------------ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 4637 CHABOT DRIVE, SUITE 200, PLEASANTON, CA 94588 ------------------------------------------------------ (Address of principal executive offices) (Registrant's telephone number, including area code): (510)460-9912 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- The number of shares of the Registrant's Common Stock outstanding as of March 31, 1996: 11,420,300
PART I -- FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS. <TABLE> <CAPTION> SIMPSON MANUFACTURING CO., INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS MARCH 31, DECEMBER 31, (UNAUDITED) 1996 1995 1995 ------------ ------------ ------------ ASSETS <S> <C> <C> <C> Current assets Cash and cash equivalents $ 6,191,487 $ 4,784,455 $ 6,955,788 Trade accounts receivable, net 26,280,550 21,324,305 20,732,880 Inventories 34,335,990 34,226,389 34,471,250 Deferred income taxes 2,357,455 2,487,455 2,750,455 Other current assets 1,361,923 1,383,281 1,986,446 ------------ ------------ ------------ Total current assets 70,527,405 64,205,885 66,896,819 Net property, plant and equipment 26,233,565 20,617,021 26,420,004 Investments 1,329,715 679,104 1,357,457 Other noncurrent assets 1,824,959 845,982 1,967,779 ------------ ------------ ------------ Total assets $ 99,915,644 $ 86,347,992 $ 96,642,059 ============ ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Notes Payable $ - $ - $ 20,037 Trade accounts payable 5,869,968 9,240,490 7,375,014 Accrued liabilities 3,112,278 2,497,850 3,386,527 Accrued profit sharing trust contributions 2,626,226 2,296,130 1,999,739 Accrued cash profit sharing and commissions 1,307,125 952,680 1,289,144 Income taxes payable 951,393 1,568,764 - Accrued workers' compensation 842,125 897,125 842,125 ------------ ------------ ------------ Total current liabilities 14,709,115 17,453,039 14,912,586 Deferred income taxes and long-term liabilities 133,783 35,783 176,783 ------------ ------------ ------------ Total liabilities 14,842,898 17,488,822 15,089,369 ------------ ------------ ------------ Commitments and contingencies (Note 6) Shareholders' equity Common stock 30,789,607 29,580,365 30,415,716 Retained earnings 54,404,772 39,429,800 51,142,268 Cumulative translation adjustment (121,633) (150,995) (5,294) ------------ ------------ ------------ Total shareholders' equity 85,072,746 68,859,170 81,552,690 ------------ ------------ ------------ Total liabilities and shareholders' equity $ 99,915,644 $ 86,347,992 $ 96,642,059 ============ ============ ============ </TABLE> The accompanying notes are an integral part of these condensed consolidated financial statements.
<TABLE> <CAPTION> SIMPSON MANUFACTURING CO., INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) THREE MONTHS ENDED MARCH 31, 1996 1995 ------------ ------------ <S> <C> <C> Net sales $ 43,457,448 $ 35,774,956 Cost of sales 28,355,992 24,035,766 ------------ ------------ Gross profit 15,101,456 11,739,190 Operating expenses: Selling 4,510,033 3,858,727 General and administrative 5,128,446 3,834,371 ------------ ------------ 9,638,479 7,693,098 ------------ ------------ Income from operations 5,462,977 4,046,092 Interest income, net 53,527 65,325 ------------ ------------ Income before income taxes 5,516,504 4,111,417 Provision for income taxes 2,254,000 1,702,000 ------------ ------------ Net income $ 3,262,504 $ 2,409,417 ============ ============ Net income per common share $ 0.28 $ 0.21 ============ ============ Weighted average shares outstanding 11,621,429 11,389,259 ============ ============ </TABLE> The accompanying notes are an integral part of these condensed consolidated financial statements.
<TABLE> <CAPTION> SIMPSON MANUFACTURING CO., INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) THREE MONTHS ENDED MARCH 31, 1996 1995 ------------ ------------ <S> <C> <C> CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 3,262,504 $ 2,409,417 ------------ ------------ Adjustments to reconcile net income to net cash provided by operating activities: Gain on sale of capital equipment (20,397) (738) Depreciation and amortization 1,445,241 1,305,372 Deferred income taxes 350,000 187,000 Equity in losses of affiliates 16,000 37,000 Changes in operating assets and liabilities, net of effects of acquisitions: Trade accounts receivable (5,609,415) (4,117,629) Inventories 135,260 (3,087,284) Other current assets (127,310) (401,950) Other noncurrent assets (27,450) (21,060) Trade accounts payable (1,566,792) 2,898,090 Accrued liabilities (274,249) (461,344) Accrued profit sharing trust contributions 626,487 575,526 Accrued cash profit sharing and commissions 17,981 (382,446) Income taxes payable 1,703,227 1,068,103 ------------ ------------ Total adjustments (3,331,417) (2,401,360) ------------ ------------ Net cash (used in) provided by operating activities (68,913) 8,057 ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures (1,067,445) (1,034,195) Proceeds from sale of equipment 29,840 - Equity investments (11,637) - ------------ ------------ Net cash used in investing activities (1,049,242) (1,034,195) ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES Principal payments on long-term debt (20,037) - Issuance of Company's common stock 373,891 - ------------ ------------ Net cash provided by financing activities 353,854 - ------------ ------------ Net decrease in cash and cash equivalents (764,301) (1,026,138) Cash and cash equivalents at beginning of period 6,955,788 5,810,593 ------------ ------------ Cash and cash equivalents at end of period $ 6,191,487 $ 4,784,455 ============ ============ </TABLE> The accompanying notes are an integral part of these condensed consolidated financial statements.
SIMPSON MANUFACTURING CO., INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. Basis of Presentation Interim Period Reporting The accompanying unaudited interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations for reporting on Form 10-Q. Accordingly, certain information and footnotes required by generally accepted accounting principles have been condensed or omitted. These interim statements should be read in conjunction with the consolidated financial statements and the notes thereto included in Simpson Manufacturing Co., Inc.'s (the "Company's") 1995 Annual Report on Form 10-K (the "1995 Annual Report"). The unaudited quarterly condensed consolidated financial statements have been prepared on the same basis as the audited annual consolidated financial statements, and in the opinion of management, contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the financial information set forth therein, in accordance with generally accepted accounting principles. The year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles. The Company's quarterly results may be subject to fluctuations. As a result, the Company believes the results of operations for the interim periods are not necessarily indicative of the results to be expected for any future period. Net Income Per Common Share Net income per common share is computed based upon the weighted average number of common shares outstanding. Common equivalent shares, using the treasury stock method, are included in the per-share calculations for all periods since the effect of their inclusion is dilutive. The number of shares used in computing primary and fully diluted net income per common share did not differ materially for the three months ended March 31, 1996 and 1995.
2. Trade Accounts Receivable Trade accounts receivable consist of the following: <TABLE> <CAPTION> AT MARCH 31, DECEMBER 31, 1996 1995 1995 ------------ ------------ ------------ <S> <C> <C> <C> Trade accounts receivable $ 27,522,716 $ 22,712,357 $ 21,832,701 Allowance for doubtful accounts (1,039,728) (1,231,052) (931,321) Allowance for sales discounts (202,438) (157,000) (168,500) ------------ ------------ ------------ $ 26,280,550 $ 21,324,305 $ 20,732,880 ============ ============ ============ </TABLE> 3. Inventories The components of inventories consist of the following: <TABLE> <CAPTION> AT MARCH 31, DECEMBER 31, 1996 1995 1995 ------------ ------------ ------------ <S> <C> <C> <C> Raw materials $ 12,043,223 $ 11,369,378 $ 13,424,828 In-process products 3,716,719 3,014,738 3,180,416 Finished products 18,576,048 19,842,273 17,866,006 ------------ ------------ ------------ $ 34,335,990 $ 34,226,389 $ 34,471,250 ============ ============ ============ </TABLE> At March 31, 1996 and 1995, and December 31, 1995, the replacement value of LIFO inventories exceeded LIFO cost by approximately $3,793,000, $2,883,000 and $4,178,000, respectively. 4. Net Property, Plant and Equipment Net property, plant and equipment consists of the following: <TABLE> <CAPTION> AT MARCH 31, DECEMBER 31, 1996 1995 1995 ------------ ------------ ------------ <S> <C> <C> <C> Land $ 2,065,682 $ 1,340,682 $ 2,065,682 Buildings and site improvements 10,382,039 5,268,537 10,379,901 Leasehold improvements 2,859,053 4,004,321 2,688,430 Machinery and equipment 40,806,558 35,184,762 40,393,578 ------------ ------------ ------------ 56,113,332 45,798,302 55,527,591 Less accumulated depreciation and amortization (31,546,682) (26,862,774) (30,419,484) ------------ ------------ ------------ 24,566,650 18,935,528 25,108,107 Capital projects in progress 1,666,915 1,681,493 1,311,897 ------------ ------------ ------------ $ 26,233,565 $ 20,617,021 $ 26,420,004 ============ ============ ============ </TABLE>
5. Debt As of March 31, 1996, the Company had no outstanding debt. The Company has available to it credit facilities which consist of the following: <TABLE> <CAPTION> AMOUNT OF FACILITY ------------ <S> <C> Revolving line of credit, interest at bank's reference rate (at March 31, 1996, the bank's reference rate was 8.25%), expires June 1997 $ 11,274,437 Revolving line of credit, interest at bank's prime rate (at March 31, 1996, the bank's prime rate was 8.25%), expires June 1997 4,000,000 Revolving term commitment, interest at bank's prime rate (at March 31, 1996, the bank's prime rate was 8.25%), expires June 1997 4,000,000 Revolving lines of credit, interest rate at the bank's base rate of interest plus 2%, expires May 1996 687,375 Standby letter of credit facilities 1,781,493 ------------ Total credit facilities 21,743,305 Standby letters of credit issued and outstanding (1,781,493) ------------ Total credit available $ 19,961,812 ============ </TABLE> The Company has four outstanding standby letters of credit. Two of these letters of credit, in the aggregate amount of $1,055,930, are used to support the Company's self-insured workers' compensation insurance requirements while the other two, in the aggregate amount of $725,563, are used to support working capital needs of its European operations. 6. Commitments and Contingencies Note 10 to the consolidated financial statements in the Company's 1995 Annual Report provides information concerning commitments and contingencies relating to pending or possible claims, legal actions and proceedings against the Company and its subsidiaries. Management believes that the final resolution of these matters, individually or in the aggregate, is not expected to have a material adverse effect on the financial position of the Company.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The following is a discussion and analysis of the consolidated financial condition and results of operations for the Company for the three months ended March 31, 1996 and 1995. The following should be read in conjunction with the interim Condensed Consolidated Financial Statements and related Notes appearing elsewhere herein. Results of Operations for the Three Months Ended March 31, 1996, Compared with the Three Months Ended March 31, 1995 Sales increased 21.5% from the first quarter of 1995 to the first quarter of 1996. The increase reflected solid growth in the Western United States, particularly in California, due in large part to higher sales in the region in the first quarter of 1996 compared to the first quarter of 1995 when heavy rainfall decreased construction activity in California. Sales decreased slightly in the Northeast where harsh winter weather has negatively affected both construction and do-it-yourself activity. Simpson Strong-Tie's sales increased 22.0% while Simpson Dura-Vent's sales increased 20.0%. Contractor distributors were the fastest growing connector sales channel, representing over one-third of the increase in Simpson Strong-Tie sales. Homecenter connector sales were relatively flat as compared to the same period in the prior year. The sales growth rate of seismic and high wind products led Simpson Strong-Tie sales with above average increases, while Simpson Dura-Vent sales of Direct-Vent products, sold to OEMs and through Simpson Dura-Vent's distribution system, continued to experience high growth. Simpson Strong-Tie's core products performed well and epoxy products, while representing less than 2% of Simpson Strong-Tie sales, had a growth rate of approximately 45% over the comparable period in the prior year, excluding the sales increases resulting from the acquisition of Ackerman Johnson Fastening Systems Inc. in September 1995. First quarter sales were also positively influenced by sales at the businesses acquired in the second half of 1995. The acquisitions accounted for 1.6% of first quarter of 1996 sales or approximately 9% of the aggregate increase in sales as compared to the first quarter of 1995. Income from operations increased 35.0% from $4,046,092 in the first quarter of 1995 to $5,462,977 in the first quarter of 1996. This increase was primarily due to higher gross margins and lower selling expenses as a percentage of sales, partially offset by increased general and administrative expenses. The increase in gross margins resulted from lower raw material costs and better absorption of fixed overhead costs as a result of increased production, partially offset by lower margins on businesses acquired in late 1995. Selling expenses increased 16.9% in total from $3,858,727 in the first quarter of 1995 to $4,510,033 in the first quarter of 1996. This increase was primarily due to increased advertising and promotional expenses, including new retail displays and product packaging. The Company also hired additional merchandisers to better support the homecenter business. General and administrative expenses increased 33.7% from $3,834,371 in the first quarter of 1995 to $5,128,446 in the first quarter of 1996. This increase was primarily due to increased cash profit sharing, as a result of higher operating profit, and higher personnel and overhead costs. In addition, the Company's provision for possible losses on delinquent accounts increased as compared to the same quarter last year. The effective tax rate decreased from 41.4% in the first quarter of 1995 to 40.9% in the first quarter of 1996, primarily due to lower estimated effective state tax rates. Liquidity and Sources of Capital As of March 31, 1996, working capital was $55.8 million as compared to $46.8 million at March 31, 1995, and $52.0 million at December 31, 1995. The principal components of the increase in working capital from December 31, 1995, include an increase in trade accounts receivable, which increased to support the higher level of sales and seasonal buying programs, and a decrease in trade accounts payable, which was primarily due to the timing of purchases near the end of the quarter. Offsetting these increases was an increase in income taxes payable, which resulted from higher taxable income and utilization of the Company's prepaid tax balance as of December 31, 1995. In addition, accrued contributions to the Company's profit sharing trust increased principally due to the increase in the number of employees as well as an overall increase in salaries and wages upon which they are based. This increase in working capital combined with net income and noncash expenses, such as depreciation and amortization, resulted in the use of $0.1 million cash from operating activities. As of March 31, 1996, the Company had unused credit facilities available of nearly $20.0 million. In its investing activities, the Company used $1.1 million in cash to purchase capital equipment, approximately the same rate of expenditures as in the first three months of 1995. Financing activities provided an additional $0.4 million in cash primarily as a result of the issuance of Common Stock upon the exercise of stock options by current and former employees. There were no borrowings outstanding on long-term debt as of March 31, 1996. The Company believes that cash generated by operations and borrowings available under its existing credit agreements will be sufficient for the Company's working capital needs and planned capital expenditures through 1996. Depending on the Company's future growth, it may become necessary to secure additional sources of financing.
PART II -- OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. The Company is involved in various legal proceedings and other matters arising in the normal course of business. In the opinion of management, none of such matters when ultimately resolved will have a material adverse effect on the Company's financial position or results of operations. ITEM 2. CHANGES IN SECURITIES. None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES. None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None. ITEM 5. OTHER INFORMATION. None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. <TABLE> <CAPTION> a. Exhibits. EXHIBIT NO DESCRIPTION ------- ----------------------------------------------------------- <S> <C> 10.1 Standby Letter of Credit Agreement and Arbitration Agreement, dated March 21, 1996, between Simpson Manufacturing Co., Inc. and Union Bank 10.2 Independent Agreement, effective January 1, 1996, through December 31, 1998, dated April 18, 1996, between Simpson Strong-Tie Company Inc. and Tool and Die Craftsman Association 11 Statement re computation of earnings per share 27 Financial Data Schedule, which is submitted electronically to the Securities and Exchange Commission for information only and not filed. </TABLE> b. Reports on Form 8-K No reports of Form 8-K were filed during the quarter for which this report is filed.
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SIMPSON MANUFACTURING CO., INC. ------------------------------- (Registrant) DATE: May 13, 1996 By /s/Stephen B. Lamson ------------------------------- Stephen B. Lamson Chief Financial Officer