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: September 30, 1998 ------------------ 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 Manufacturing 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): (925)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 September 30, 1998: 11,571,943 ----------
PART I -- FINANCIAL INFORMATION Item 1. Financial Statements. <TABLE> <CAPTION> SIMPSON MANUFACTURING CO., INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS September 30, December 31, ---------------------------- (Unaudited) 1998 1997 1997 ------------ ------------ ------------ <S> <C> <C> <C> ASSETS Current assets Cash and cash equivalents $ 34,515,012 $ 15,336,889 $ 19,418,689 Trade accounts receivable, net 38,265,344 36,272,399 24,625,568 Inventories 51,699,130 54,342,293 54,982,945 Deferred income taxes 3,289,767 3,462,455 3,536,750 Other current assets 1,504,676 1,055,616 1,723,586 ------------ ------------ ------------ Total current assets 129,273,929 110,469,652 104,287,538 Net property, plant and equipment 53,462,633 37,358,613 42,925,088 Investments 535,773 537,509 559,200 Other noncurrent assets 2,993,033 3,270,224 2,993,114 ------------ ------------ ------------ Total assets $186,265,368 $151,635,998 $150,764,940 ============ ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Notes Payable and current portion of long-term debt $ 331,724 $ 29,943 $ 29,605 Trade accounts payable 14,166,453 12,650,774 8,813,196 Accrued liabilities 5,416,675 5,845,211 5,506,903 Income taxes payable 1,304,227 1,582,591 - Accrued profit sharing trust contributions 2,463,741 2,251,234 2,886,875 Accrued cash profit sharing and commissions 5,009,136 4,770,529 3,094,834 Accrued workers' compensation 779,272 809,272 659,272 ------------ ------------ ------------ Total current liabilities 29,471,228 27,939,554 20,990,685 Long-term debt, net of current portion 2,722,720 - - Deferred income taxes and long-term liabilities 592,453 905,183 823,732 ------------ ------------ ------------ Total liabilities 32,786,401 28,844,737 21,814,417 ------------ ------------ ------------ Commitments and contingencies (Notes 5 and 6) Shareholders' equity Common stock 33,607,488 32,044,605 32,377,563 Retained earnings 120,118,389 90,829,387 96,848,685 Accumulated other comprehensive income (246,910) (82,731) (275,725) ------------ ------------ ------------ Total shareholders' equity 153,478,967 122,791,261 128,950,523 ------------ ------------ ------------ Total liabilities and shareholders' equity $186,265,368 $151,635,998 $150,764,940 ============ ============ ============ </TABLE> The accompanying notes are an integral part of these condensed consolidated financial statements.
SIMPSON MANUFACTURING CO., INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) <TABLE> <CAPTION> Three Months Ended Nine Months Ended September 30, September 30, ---------------------------- ---------------------------- 1998 1997 1998 1997 ------------ ------------ ------------ ------------ <S> <C> <C> <C> Net sales $ 77,207,820 $ 68,824,611 $207,248,839 $186,306,707 Cost of sales 47,024,623 40,363,583 126,114,476 112,200,433 ------------ ------------ ------------ ------------ Gross profit 30,183,197 28,461,028 81,134,363 74,106,274 ------------ ------------ ------------ ------------ Operating expenses: Selling 6,550,624 5,892,494 18,304,870 17,467,520 General and administrative 8,584,612 8,665,462 24,365,243 22,969,505 Compensation related to stock plans 18,000 290,000 120,000 290,000 ------------ ------------ ------------ ------------ 15,153,236 14,847,956 42,790,113 40,727,025 ------------ ------------ ------------ ------------ Income from operations 15,029,961 13,613,072 38,344,250 33,379,249 Interest income, net 232,500 106,144 553,454 248,233 ------------ ------------ ------------ ------------ Income before income taxes 15,262,461 13,719,216 38,897,704 33,627,482 Provision for income taxes 6,027,000 5,531,001 15,628,000 13,661,001 ------------ ------------ ------------ ------------ Net income $ 9,235,461 $ 8,188,215 $ 23,269,704 $ 19,966,481 ============ ============ ============ ============ Net income per common share Basic $ 0.80 $ 0.71 $ 2.01 $ 1.74 Diluted $ 0.77 $ 0.68 $ 1.93 $ 1.67 Number of shares outstanding Basic 11,570,904 11,475,850 11,554,623 11,464,393 Diluted 12,028,293 12,012,522 12,047,356 11,946,675 </TABLE> SIMPSON MANUFACTURING CO., INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) <TABLE> <CAPTION> Three Months Ended Nine Months Ended September 30, September 30, ---------------------------- ---------------------------- 1998 1997 1998 1997 ------------ ------------ ------------ ------------ <S> <C> <C> <C> Net income $ 9,235,461 $ 8,188,215 $ 23,269,704 $ 19,966,481 Other comprehensive income, net of tax: Foreign currency translation adjustments 92,451 (98,401) 28,815 (283,185) ------------ ------------ ------------ ------------ Comprehensive income $ 9,327,912 $ 8,089,814 $ 23,298,519 $ 19,683,296 ============ ============ ============ ============ </TABLE> The accompanying notes are an integral part of these condensed consolidated financial statements.
SIMPSON MANUFACTURING CO., INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED) <TABLE> <CAPTION> Nine Months Ended September 30, ---------------------------- 1998 1997 ------------ ------------ <S> <C> <C> CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 23,269,704 $ 19,966,481 ------------ ------------ Adjustments to reconcile net income to net cash provided by operating activities: Loss (gain) on sale of capital equipment 17,918 (15,368) Depreciation and amortization 6,476,887 5,459,743 Deferred income taxes and long-term liabilities 15,702 (790,798) Equity in income of affiliates (9,000) (110,000) Noncash compensation related to stock plans 169,894 103,500 Changes in operating assets and liabilities, net of effects of acquisitions: Trade accounts receivable (13,609,741) (14,187,289) Trade accounts payable 5,353,257 1,342,138 Income taxes payable 1,859,638 1,695,718 Inventories 3,297,761 (6,000,885) Accrued liabilities (90,228) 720,500 Accrued profit sharing trust contributions (423,134) (194,767) Accrued cash profit sharing and commissions 1,914,302 2,478,472 Other current assets 218,911 (32,566) Other noncurrent assets (180,252) (46,878) Accrued workers' compensation 120,000 - ------------ ------------ Total adjustments 5,131,915 (9,578,480) ------------ ------------ Net cash provided by operating activities 28,401,619 10,388,001 ------------ ------------ Cash flows from investing activities Capital expenditures (16,874,152) (9,679,324) Proceeds from sale of equipment 39,397 56,021 Proceeds from sale of short-term investments - 3,995,333 Acquisitions, net of cash and equity interest already owned - (9,334,340) ------------ ------------ Net cash used in investing activities (16,834,755) (14,962,310) ------------ ------------ Cash flows from financing activities Issuance of debt, net of repayments 3,024,839 (260,304) Issuance of Company's common stock 504,620 356,205 ------------ ------------ Net cash provided by financing activities 3,529,459 95,901 ------------ ------------ Net increase (decrease) in cash and cash equivalents 15,096,323 (4,478,408) Cash and cash equivalents at beginning of period 19,418,689 19,815,297 ------------ ------------ Cash and cash equivalents at end of period $ 34,515,012 $ 15,336,889 ============ ============ </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") 1997 Annual Report on Form 10-K (the "1997 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 Basic 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 diluted per-share calculations for all periods when the effect of their inclusion is dilutive. The following is a reconciliation of basic earnings per share ("EPS") to diluted EPS: <TABLE> <CAPTION> Three Months Ended Three Months Ended September 30, 1998 September 30, 1997 ---------------------------------- ---------------------------------- Per Per Income Shares Share Income Shares Share ------------ ------------ ------ ------------ ------------ ------ <S> <C> <C> <C> <C> <C> <C> Basic EPS Income available to common shareholders $ 9,235,461 11,570,904 $ 0.80 $ 8,188,215 11,475,850 $ 0.71 Effect of Dilutive Securities Stock options - 457,389 (0.03) - 536,672 (0.03) ------------ ------------ ------ ------------ ------------ ------ Diluted EPS Income available to common shareholders $ 9,235,461 12,028,293 $ 0.77 $ 8,188,215 12,012,522 $ 0.68 ============ ============ ====== ============ ============ ====== Nine Months Ended Nine Months Ended September 30, 1998 September 30, 1997 ---------------------------------- ---------------------------------- Per Per Income Shares Share Income Shares Share ------------ ------------ ------ ------------ ------------ ------ Basic EPS Income available to common shareholders $ 23,269,704 11,554,623 $ 2.01 $ 19,966,481 11,464,393 $ 1.74 Effect of Dilutive Securities Stock options - 492,733 (0.08) - 482,282 (0.07) ------------ ------------ ------ ------------ ------------ ------ Diluted EPS Income available to common shareholders $ 23,269,704 12,047,356 $ 1.93 $ 19,966,481 11,946,675 $ 1.67 ============ ============ ====== ============ ============ ====== </TABLE>
Newly Issued Accounting Standards In June 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 131, "Disclosures About Segments of an Enterprise and Related Information." SFAS No. 131 specifies revised guidelines for determining an entity's operating segments and the type and level of financial information to be disclosed. SFAS No. 131 is effective for annual financial statements issued for periods beginning after December 15, 1997, and accordingly, management has not determined the effect, if any, on the Company's financial statements for the three and nine months ended September 30, 1998. As of January 1, 1998, the Company adopted SFAS No. 130, "Reporting Comprehensive Income" and has presented Condensed Consolidated Statements of Comprehensive Income for the three and nine month periods ended September 30, 1998 and 1997. The accompanying balance sheets include accumulated other comprehensive income amounts which consist entirely of foreign currency translation adjustments. Certain prior year amounts have been reclassified to conform to the 1998 presentation with no effect on net income as previously reported. 2. Trade Accounts Receivable Trade accounts receivable consist of the following: <TABLE> <CAPTION> At At September 30, December 31, ---------------------------- 1998 1997 1997 ------------ ------------ ------------ <S> <C> <C> <C> Trade accounts receivable $ 39,858,760 $ 38,189,407 $ 26,398,046 Allowance for doubtful accounts (1,243,048) (1,622,209) (1,539,691) Allowance for sales discounts (350,368) (294,799) (232,787) ------------ ------------ ------------ $ 38,265,344 $ 36,272,399 $ 24,625,568 ============ ============ ============ </TABLE> 3. Inventories The components of inventories consist of the following: <TABLE> <CAPTION> At At September 30, December 31, ---------------------------- 1998 1997 1997 ------------ ------------ ------------ <S> <C> <C> <C> Raw materials $ 16,941,620 $ 17,980,381 $ 17,882,930 In-process products 5,308,232 6,092,749 5,384,709 Finished products 29,449,278 30,269,163 31,715,306 ------------ ------------ ------------ $ 51,699,130 $ 54,342,293 $ 54,982,945 ============ ============ ============ </TABLE> Approximately 89% of the Company's inventories are valued using the LIFO (last-in, first-out) method. Because inventory determination under the LIFO method is only made at the end of each year based on the inventory levels and costs at that time, interim LIFO determinations must necessarily be based on management's estimates of expected year-end inventory levels and costs. Since future estimates of inventory levels and costs are subject to change, interim financial results reflect the Company's most recent estimate of the effect of LIFO and are subject to adjustment based upon final year-end inventory amounts. At September 30, 1998 and 1997, and December 31, 1997, the replacement value of LIFO inventories exceeded LIFO cost by approximately $438,000, $386,000 and $852,000, respectively. 4. Net Property, Plant and Equipment Net property, plant and equipment consists of the following: <TABLE> <CAPTION> At At September 30, December 31, ---------------------------- 1998 1997 1997 ------------ ------------ ------------ <S> <C> <C> <C> Land $ 3,891,519 $ 2,785,668 $ 3,366,519 Buildings and site improvements 18,704,333 13,027,998 17,165,509 Leasehold improvements 3,380,305 3,050,405 3,474,278 Machinery and equipment 59,631,004 54,486,765 55,400,034 ------------ ------------ ------------ 85,607,161 73,350,836 79,406,340 Less accumulated depreciation and amortization (48,146,143) (40,937,929) (41,986,005) ------------ ------------ ------------ 37,461,018 32,412,907 37,420,335 Capital projects in progress 16,001,615 4,945,706 5,504,753 ------------ ------------ ------------ $ 53,462,633 $ 37,358,613 $ 42,925,088 ============ ============ ============ </TABLE> 5. Debt Outstanding debt at September 30, 1998 and 1997, and the available credit at September 30, 1998, consisted of the following: <TABLE> <CAPTION> Available Debt Outstanding Credit at At September 30, September 30, ---------------------------- 1998 1998 1997 ------------ ------------ ------------ <S> <C> <C> <C> Revolving line of credit, interest at bank's reference rate (at September 30, 1998, the bank's reference rate was 8.25%), expires June 2000 $ 12,667,237 $ - $ - Revolving term commitment, interest at bank's prime rate (at September 30, 1998, the bank's prime rate was 8.25%), expires June 2000 8,866,004 - - Revolving line of credit, interest rate at the bank's base rate of interest plus 2%, expires June 1999 424,875 - - Revolving line of credit, interest rate at the weighted average French interbank rate of interest plus 1%, expires February 1999 178,603 - - Standby letter of credit facilities 1,466,760 - - Term loan, interest at LIBOR plus 1.375% (at October 1, 1998, the LIBOR plus 1.375% was 6.7188%), expires May 2008 - 3,000,000 - Other notes payable and long-term debt - 54,444 29,943 ------------ ------------ ------------ 23,603,479 3,054,444 29,943 Less current portion - 331,724 29,943 ------------ ------------ ------------ $ 23,603,479 $ 2,722,720 $ - ============ ============ Standby letters of credit issued and outstanding (1,466,760) ------------ $ 22,136,719 ============ </TABLE> The Company has three outstanding standby letters of credit. Two of these letters of credit, in the aggregate amount of $667,995, are used to support the Company's self-insured workers' compensation insurance requirements. The third, in the amount of $798,765, is used to guarantee performance on the Company's leased facility in the UK. In June 1998, the Company's subsidiary, Simpson Dura-Vent Company, Inc., borrowed $3,000,000 to finance the construction of its new facility in Ceres, Mississippi. Other notes payable represent debt associated with foreign businesses acquired in March 1997. 6. Commitments and Contingencies Note 9 to the consolidated financial statements in the Company's 1997 Annual Report provides information concerning commitments and contingencies. From time to time, the Company is involved in various legal proceedings and other matters arising in the normal course of business.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Certain matters discussed below are forward-looking statements that involve risks and uncertainties, certain of which are discussed in this report and in other reports filed by the Company with the Securities and Exchange Commission. Actual results might differ materially from results suggested by any forward-looking statements in this report. The following is a discussion and analysis of the consolidated financial condition and results of operations for the Company for the three and nine months ended September 30, 1998 and 1997. 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 September 30, 1998, Compared with the Three Months Ended September 30, 1997 Net sales increased 12.2% in the third quarter of 1998 as compared to the third quarter of 1997. The increase reflected sales growth throughout the United States and abroad, particularly in California. Simpson Strong-Tie's third quarter sales increased 13.5% over the same quarter last year, while Simpson Dura-Vent's sales increased 7.1%. Homecenters and contractor distributors were the fastest growing connector sales channels. The growth rate of Simpson Strong-Tie's seismic and high wind and connectors for engineered wood products was strong. Sales of the Company's Anchoring Systems products increased. Simpson Dura-Vent sales of Direct-Vent products increased significantly and the growth rate in the sales of gas vent products was positive, while chimney and pellet stove products declined. Income from operations increased 10.4% from $13,613,072 in the third quarter of 1997 to $15,029,961 in the third quarter of 1998. Gross margins decreased from 41.4% in the third quarter of 1997 to 39.1% in the third quarter of 1998 as a result of higher costs, with factory overhead costs associated with recently added capacity being the most significant item. Selling expenses increased 11.2% from $5,892,494 in the third quarter of 1997 to $6,550,624 in the third quarter of 1998. The increase was primarily due to higher promotional expenses as well as higher costs related to an increase in the number of sales and marketing personnel. General and administrative expenses decreased 1.0% from $8,665,462 in the third quarter of 1997 to $8,584,612 in the third quarter of 1998. The effective tax rate decreased from 40.3% in the third quarter of 1997 to 39.5% in the third quarter of 1998, primarily as a result of the expected realization of additional investment tax credits in 1998. Results of Operations for the Nine Months Ended September 30, 1998, Compared with the Nine Months Ended September 30, 1997 Net sales increased 11.2% in the first nine months of 1998 as compared to the first nine months of 1997. The increase reflected sales growth throughout the United States, particularly in the Southeastern region of the country and in California. International sales also increased at an above average rate, a portion of which was related to the businesses purchased in March 1997. Simpson Strong-Tie's sales for the first nine months of 1998 increased 13.1% over the same period in the prior year, while Simpson Dura-Vent's sales increased 3.9%. Homecenters and contractor distributors were the fastest growing connector sales channels. The growth rate of Simpson Strong-Tie's seismic and high wind and connectors for engineered wood product sales was strong. Anchoring Systems products also contributed significantly to the increase in sales. Direct-Vent products led Simpson Dura-Vent's sales with a strong growth rate as compared to the same period in the prior year. Income from operations increased 14.9% from $33,379,249 in the first nine months of 1997 to $38,344,250 in the first nine months of 1998. Gross margins decreased from 39.8% in the first nine months of 1997 to 39.1% in the first nine months of 1998. Selling, general and administrative expenses increased in the first nine months of 1998, but were lower as a percentage of sales. Selling expenses increased 4.8% from $17,467,520 in the first nine months of 1997 to $18,304,870 in the first nine months of 1998. The increase was primarily due to higher expenses related to the increase in the number of sales and marketing personnel, offset partially by higher costs associated with acquiring additional homecenter business in 1997. General and administrative expenses increased 6.1% from $22,969,505 in the first nine months of 1997 to $24,365,243 in the first nine months of 1998. The increase was primarily due to increased cash profit sharing resulting from higher operating income. The effective tax rate decreased from 40.6% in the first nine months of 1997 to 40.2% in the first nine months of 1998.
Liquidity and Sources of Capital As of September 30, 1998, working capital was $99.8 million as compared to $82.5 million at September 30, 1997, and $83.3 million at December 31, 1997. The principal components of the increase in working capital from December 31, 1997, were increases in cash and cash equivalents of approximately $15.1 million and in the Company's trade accounts receivable totaling approximately $13.6 million, primarily due to higher sales levels and seasonal buying programs. Partially offsetting these increases were increases in certain liability accounts, including trade accounts payable, accrued cash profit sharing and commissions and income taxes payable. These accounts increased an aggregate of approximately $8.6 million as well as a decrease in inventory levels of approximately $3.3 million. The balance of the change in working capital was due to the fluctuation of various other asset and liability accounts. The working capital change combined with net income and noncash expenses, such as depreciation, amortization and the issuance of stock under the Company's stock bonus plan, totaling approximately $29.9 million, resulted in net cash provided by operating activities of approximately $28.4 million. As of September 30, 1998, the Company had unused credit facilities available of approximately $22.1 million. The Company used approximately $16.8 million in its investing activities, primarily to purchase the capital equipment and property needed to expand its capacity. The Company plans to continue this expansion throughout the remainder of the year and into 1999. Financing activities provided the Company with approximately $3.5 million in cash. This resulted primarily from the issuance of $3.0 million in debt which the Company's subsidiary, Simpson Dura-Vent Company, Inc., used to finance the construction of its new facility in Ceres, Mississippi. The balance of the cash was generated by the issuance of stock upon the exercise of stock options by current and former employees. 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 the remainder of 1998 and into 1999. Depending on the Company's future growth, it may become necessary to secure additional sources of financing. Year 2000 Issue The year 2000 issue is primarily the result of computer programs and computer controlled equipment using two digits rather than four to define the applicable year. Such software may recognize a date using "00" as the year 1900 rather than the year 2000. This could potentially result in system failures or miscalculations leading to disruptions in the Company's activities or those of its significant customers, suppliers and banks. The Company does not produce or sell any computer components, software or electronic parts in its normal business environment, and therefore, does not believe that it has any material risk of product liability or obsolescence resulting from the year 2000 issue. In 1998, the Company established a Year 2000 Committee (the "Committee") to evaluate the extent, if any, of its year 2000 and associated problems, to make any required changes and to establish contingency plans. The Company's computer systems are PC based with few interfaces to other internal systems. These systems use a date handling routine that the Company believes to be year 2000 compliant. The Company has conducted preliminary tests of its internal software which do not demonstrate a significant risk from the year 2000 issue. The Company plans additional tests of these systems to validate the preliminary test results. Should any year 2000 or associated problems be discovered, the Company intends to fix or replace any non-compliant internal software with code or software that is year 2000 compliant. The Company's current target is to identify and resolve any compliance issues in its important business information systems by early 1999. The Company is also focusing on major customers, suppliers and equipment used in its operations to assess compliance. The Committee will continue to evaluate these areas of exposure and, where necessary, will develop contingency plans and alternative sources in order to avoid any interruptions in the Company's business. Nevertheless, the Company cannot give any assurance that there will not be a material adverse effect on the Company if third parties with whom the Company conducts business do not adequately address the year 2000 issue and, therefore, are unable to conduct their operations without interruption.
Costs related to the year 2000 issue are funded through operating cash flows. The Committee estimates that the costs of conversion is expected to be less than $100,000. The Company presently expects that the total cost of achieving year 2000 compliant systems will not be material to its financial condition, liquidity or results of operations. Time and cost estimates are based on currently available information. Developments that could affect estimates include, but are not limited to, the availability and cost of trained personnel, the ability to locate and correct all relevant computer code and systems, and remediation success of the Company's customers, suppliers and banks.
PART II -- OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. From time to time, the Company is involved in various legal proceedings and other matters arising in the normal course of business. 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. Alan R. McKay, an outside Director since the Company's initial public offering in May 1994, resigned from the Board of Directors (the "Board") in September 1998. His services will be missed as he provided the Board with the insights of a highly respected structural engineer. The search for a suitable replacement is underway. If any shareholder should submit a proposal for a vote at the Company's Annual Meeting of Shareholders in 1999 and if the proponent does not request that the proposal be included in the Company's proxy materials, the proxies solicited by the Company's management will confer discretionary authority to vote for or against the proposal unless the Company receives notice of the proposal on or before February 28, 1999. Item 6. Exhibits and Reports on Form 8-K. <TABLE> <CAPTION> a. Exhibits. EXHIBIT NO DESCRIPTION ------- ------------------------------------------------------ <S> <C> 10.1 Lease, dated May 26, 1998, between Minuk Developments Inc. and Simpson Strong-Tie Canada Limited. 11 Statements 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. b. Reports on Form 8-K </TABLE> No reports on 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: NOVEMBER 13, 1998 By: /s/Stephen B. Lamson ------------------ ------------------------------- Stephen B. Lamson Chief Financial Officer