STRONG FOUNDATION. STRONGER FUTURE. Simpson Manufacturing Co., Inc. Investor Presentation January 2022 SIMPSON Manufacturing Safe Harbor This presentation 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," "i ...

Simpson Manufacturing Co., Inc. (NYSE:SSD) Q4 2021 Earnings Conference Call February 7, 2022 5:00 PM ET Company Participants Kimberly Orlando - Managing Director of ADDO Investor Relations Karen Colonias - President and Chief Executive Officer Brian Magstadt - Chief Financial Officer and Treasurer Conference Call Participants Daniel Moore - CJS Securities, Inc. Joshua Chan - Robert W. Baird & Company, Inc. Kurt Yinger - D.A. Davidson & Co. Julio Romero - Sidoti & Company, LLC Operator Greetings. Welcome to ...

PART I — FINANCIAL INFORMATION [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents unaudited condensed consolidated financial statements, including balance sheets, statements of earnings, comprehensive income, stockholders' equity, and cash flows, with detailed accounting policy notes Condensed Consolidated Balance Sheets (in thousands) | ASSETS (in thousands) | Sep 30, 2021 | Sep 30, 2020 | Dec 31, 2020 | | :---------------------- | :----------- | :----------- | :----------- | | Cash and cash equivalents | $294,180 | $311,465 | $274,639 | | Trade accounts receivable, net | 236,535 | 226,447 | 165,128 | | Inventories | 385,512 | 260,054 | 283,742 | | Total current assets | 949,654 | 820,405 | 753,139 | | Property, plant and equipment, net | 255,547 | 246,472 | 255,184 | | Goodwill | 133,495 | 133,734 | 135,844 | | Total assets | $1,422,069 | $1,277,865 | $1,232,569 | | LIABILITIES AND STOCKHOLDERS' EQUITY (in thousands) | | | | | Trade accounts payable | $62,405 | $42,271 | $48,271 | | Total current liabilities | 245,477 | 191,161 | 194,061 | | Total liabilities | 299,066 | 317,065 | 251,626 | | Total stockholders' equity | 1,123,003 | 960,800 | 980,943 | | Total liabilities and stockholders' equity | $1,422,069 | $1,277,865 | $1,232,569 | Condensed Consolidated Statements of Earnings and Comprehensive Income (in thousands except per-share amounts) | (in thousands except per-share amounts) | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :-------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net sales | $396,738 | $364,304 | $1,154,661 | $974,048 | | Cost of sales | 198,706 | 191,061 | 597,901 | 521,339 | | Gross profit | 198,032 | 173,243 | 556,760 | 452,709 | | Total operating expenses | 97,417 | 81,972 | 286,141 | 240,013 | | Income from operations | 100,619 | 91,343 | 270,731 | 212,905 | | Net income | $73,778 | $67,057 | $196,650 | $157,362 | | Basic EPS | $1.70 | $1.54 | $4.54 | $3.60 | | Diluted EPS | $1.70 | $1.54 | $4.52 | $3.59 | | Cash dividends declared per common share | $0.25 | $0.23 | $0.73 | $0.69 | Condensed Consolidated Statements of Stockholders' Equity (in thousands) | (in thousands) | Balance at Dec 31, 2020 | Net income | Stock-based compensation | Repurchase of common stock | Cash dividends declared | Balance at Sep 30, 2021 | | :----------------------- | :---------------------- | :--------- | :----------------------- | :------------------------- | :---------------------- | :---------------------- | | Total Stockholders' Equity | $980,943 | $196,650 | $12,432 | $(24,125) | $(31,619) | $1,123,003 | Condensed Consolidated Statements of Cash Flows (in thousands) | (in thousands) | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :-------------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $122,098 | $129,618 | | Net cash used in investing activities | $(41,200) | $(21,554) | | Net cash used in financing activities | $(61,258) | $(26,153) | | Net increase in cash and cash equivalents | $19,541 | $81,255 | | Cash and cash equivalents at end of period | $294,180 | $311,465 | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) [Note 1. Basis of Presentation](index=9&type=section&id=Note%201.%20Basis%20of%20Presentation) This note details accounting policies, including consolidation, revenue recognition, stock-based compensation, and the non-material impact of LIBOR transition - The company's unaudited interim financial statements adhere to GAAP, relying on management estimates and assumptions, and do not forecast future periods[23](index=23&type=chunk)[25](index=25&type=chunk) - Revenue is typically recognized upon shipment and transfer of control to the customer, usually at the F.O.B. shipping point[26](index=26&type=chunk) - The LIBOR transition to alternative reference rates is not anticipated to materially impact the company's consolidated operating results, financial position, or cash flow[36](index=36&type=chunk) [Note 2. Revenue from Contracts with Customers](index=12&type=section&id=Note%202.%20Revenue%20from%20Contracts%20with%20Customers) This note disaggregates revenue by Wood Construction Products and Concrete Construction Products, clarifying customer acceptance criteria and the absence of contract assets or liabilities Revenue from Contracts with Customers by Product Group | Product Group | 9 Months Ended Sep 30, 2021 Sales % | 9 Months Ended Sep 30, 2020 Sales % | | :-------------------------- | :------------------------------------ | :------------------------------------ | | Wood Construction Products | 86% | 86% | | Concrete Construction Products | 14% | 14% | - As of September 30, 2021, the company had no contract assets or contract liabilities from contracts with customers[42](index=42&type=chunk) [Note 3. Net Income Per Share](index=13&type=section&id=Note%203.%20Net%20Income%20Per%20Share) This note reconciles basic and diluted net income per common share for the three and nine months ended September 30, 2021 and 2020 Net Income Per Share (in thousands, except per share amounts) | (in thousands, except per share amounts) | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :--------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net income available to common stockholders | $73,778 | $67,057 | $196,650 | $157,362 | | Basic weighted-average shares outstanding | 43,276 | 43,474 | 43,287 | 43,683 | | Diluted weighted-average shares outstanding | 43,485 | 43,683 | 43,500 | 43,873 | | Basic Net income per common share | $1.70 | $1.54 | $4.54 | $3.60 | | Diluted Net income per common share | $1.70 | $1.54 | $4.52 | $3.59 | [Note 4. Stockholders' Equity](index=13&type=section&id=Note%204.%20Stockholders%27%20Equity) This note details treasury shares held and share repurchase activities during the nine months ended September 30, 2021, including remaining authorization - As of September 30, 2021, the company held **373,034 shares** of its common stock as treasury shares[45](index=45&type=chunk) - During the nine months ended September 30, 2021, the company repurchased **222,060 shares** for **$24.1 million** at an average of **$108.64 per share**[46](index=46&type=chunk) - Approximately **$75.9 million** remains available for repurchase under the **$100 million** share repurchase authorization, which expires at the end of 2021[46](index=46&type=chunk) [Note 5. Stock-Based Compensation](index=13&type=section&id=Note%205.%20Stock-Based%20Compensation) This note outlines recognized stock-based compensation expense, types of restricted stock units (RSUs) granted, and aggregate unamortized compensation expense Stock-Based Compensation Expense (in millions) | Stock-Based Compensation Expense (in millions) | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :--------------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Total Expense | $2.6 | $4.0 | $12.4 | $9.5 | - During the nine months ended September 30, 2021, the company granted **133,717 RSUs** to employees at an estimated weighted average fair value of **$100.93 per share**[48](index=48&type=chunk) - As of September 30, 2021, the aggregate unamortized stock compensation expense was approximately **$20.3 million**, expected to be recognized over a weighted-average period of **2.3 years**[50](index=50&type=chunk) [Note 6. Trade Accounts Receivable, Net](index=14&type=section&id=Note%206.%20Trade%20Accounts%20Receivable%2C%20Net) This note provides a detailed breakdown of trade accounts receivable, net of allowances for doubtful accounts and sales discounts and returns, as of the specified dates Trade Accounts Receivable, Net (in thousands) | (in thousands) | At Sep 30, 2021 | At Sep 30, 2020 | At Dec 31, 2020 | | :------------------------------ | :-------------- | :-------------- | :-------------- | | Trade accounts receivable | $241,955 | $231,559 | $170,001 | | Allowance for doubtful accounts | (1,670) | (2,032) | (2,110) | | Allowance for sales discounts and returns | (3,750) | (3,080) | (2,763) | | **Total** | **$236,535** | **$226,447** | **$165,128** | [Note 7. Inventories](index=14&type=section&id=Note%207.%20Inventories) This note details the composition of the company's inventories, categorized into raw materials, in-process products, and finished products, as of the specified dates Inventories (in thousands) | (in thousands) | At Sep 30, 2021 | At Sep 30, 2020 | At Dec 31, 2020 | | :---------------- | :-------------- | :-------------- | :-------------- | | Raw materials | $149,488 | $100,198 | $95,777 | | In-process products | 28,399 | 21,533 | 21,803 | | Finished products | 207,625 | 138,323 | 166,162 | | **Total** | **$385,512** | **$260,054** | **$283,742** | [Note 8. Derivative Instruments](index=14&type=section&id=Note%208.%20Derivative%20Instruments) This note describes the company's use of short-term foreign currency forward contracts to hedge foreign exchange rate risk, primarily for the Chinese Yuan, and their accounting treatment - The company uses short-term foreign currency forward contracts to hedge currency exposures associated with cash flows denominated in non-functional currencies, primarily the Chinese Yuan (CNY)[53](index=53&type=chunk)[54](index=54&type=chunk) - As of September 30, 2021, the aggregate notional amount of outstanding foreign currency derivative contracts was to buy **CNY 14.1 million** by selling **$2.0 million**[54](index=54&type=chunk) - For the nine months ended September 30, 2021, gains of **$0.4 million** on these contracts were recognized as a reduction of cost of sales[55](index=55&type=chunk) [Note 9. Property, Plant and Equipment, Net](index=15&type=section&id=Note%209.%20Property%2C%20Plant%20and%20Equipment%2C%20Net) This note provides a breakdown of the company's property, plant, and equipment, net of accumulated depreciation and amortization, including land, buildings, machinery, and capital projects in progress Property, Plant and Equipment, Net (in thousands) | (in thousands) | At Sep 30, 2021 | At Sep 30, 2020 | At Dec 31, 2020 | | :-------------------------------- | :-------------- | :-------------- | :-------------- | | Land | $28,232 | $28,287 | $28,553 | | Buildings and site improvements | 201,730 | 201,020 | 203,421 | | Machinery, equipment, and software | 396,201 | 363,187 | 372,923 | | Less accumulated depreciation and amortization | (400,981) | (369,655) | (377,460) | | Capital projects in progress | 24,409 | 17,934 | 20,656 | | **Total** | **$255,547** | **$246,472** | **$255,184** | [Note 10. Goodwill and Intangible Assets, Net](index=15&type=section&id=Note%2010.%20Goodwill%20and%20Intangible%20Assets%2C%20Net) This note details goodwill carrying amounts by geographic segment and intangible assets, net of amortization, including amortization expense and future schedule Goodwill by Segment (in thousands) | Goodwill (in thousands) | At Sep 30, 2021 | At Sep 30, 2020 | At Dec 31, 2020 | | :---------------------- | :-------------- | :-------------- | :-------------- | | North America | $96,306 | $96,161 | $96,311 | | Europe | 35,816 | 36,215 | 38,059 | | Asia/Pacific | 1,373 | 1,358 | 1,474 | | **Total** | **$133,495** | **$133,734** | **$135,844** | Intangible Assets, Net (in thousands) | Intangible Assets, Net (in thousands) | At Sep 30, 2021 | At Sep 30, 2020 | At Dec 31, 2020 | | :------------------------------------ | :-------------- | :-------------- | :-------------- | | Net Carrying Amount | $22,077 | $20,964 | $26,800 | - Amortization expense of definite-lived intangible assets was **$5.0 million** for the nine months ended September 30, 2021, with a weighted-average amortization period of **6.3 years**[59](index=59&type=chunk) [Note 11. Leases](index=17&type=section&id=Note%2011.%20Leases) This note summarizes the company's operating and finance leases, including right-of-use assets, lease liabilities, expense components, cash flow, and maturity schedule Operating Leases (in thousands) | Operating Leases (in thousands) | At Sep 30, 2021 | At Sep 30, 2020 | At Dec 31, 2020 | | :------------------------------ | :-------------- | :-------------- | :-------------- | | Operating lease right-of-use assets | $41,513 | $41,453 | $45,792 | | Total operating lease liabilities | $41,912 | $41,797 | $46,342 | Lease Expense (in thousands) | Lease Expense (in thousands) | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :--------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Operating lease cost | $2,958 | $2,736 | $8,570 | $7,708 | | Total finance lease cost | $2 | $225 | $217 | $682 | - As of September 30, 2021, the weighted-average remaining operating lease term was **6.77 years** with a weighted-average discount rate of **5.26%**[66](index=66&type=chunk) [Note 12. Debt](index=19&type=section&id=Note%2012.%20Debt) This note describes the company's $300.0 million unsecured revolving credit facility, its maturity, and confirms compliance with financial covenants and debt-free status as of September 30, 2021 - The company has a **$300.0 million** unsecured revolving credit facility with Wells Fargo Bank, maturing on July 12, 2026[67](index=67&type=chunk) - As of September 30, 2021, the full **$300 million** under the Credit Facility was available for borrowing, and the company remained debt-free[67](index=67&type=chunk)[132](index=132&type=chunk) - The company was in compliance with its financial covenants under the Credit Facility as of September 30, 2021[68](index=68&type=chunk) [Note 13. Commitments and Contingencies](index=19&type=section&id=Note%2013.%20Commitments%20and%20Contingencies) This note outlines the company's environmental liability policy and discusses legal proceedings, including the Gentry Homes case resolution, without expecting material adverse financial effects - The company accrues for environmental liabilities when probable and estimable, and does not believe such matters will have a material adverse effect on its financial condition, cash flows, or results of operations[69](index=69&type=chunk) - The Gentry Homes, Ltd. v. Simpson Strong-Tie Company Inc. case was resolved via a written settlement agreement without adjudication or admission of liability, incurring no uninsured liability[72](index=72&type=chunk) - The company does not expect any current legal proceedings to have a material adverse effect on its financial condition, cash flows, or results of operations[156](index=156&type=chunk) [Note 14. Segment Information](index=21&type=section&id=Note%2014.%20Segment%20Information) This note provides financial performance metrics for the company's three reporting segments (North America, Europe, and Asia/Pacific) and disaggregates sales by product group Net Sales by Segment (in thousands) | Net Sales by Segment (in thousands) | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | North America | $338,591 | $316,902 | $989,711 | $852,759 | | Europe | $54,832 | $44,766 | $155,567 | $114,877 | | Asia/Pacific | $3,315 | $2,636 | $9,383 | $6,412 | | **Total** | **$396,738** | **$364,304** | **$1,154,661** | **$974,048** | Income (Loss) from Operations by Segment (in thousands) | Income (Loss) from Operations by Segment (in thousands) | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :-------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | North America | $96,954 | $87,378 | $261,487 | $213,135 | | Europe | $7,517 | $6,074 | $15,681 | $7,100 | | Asia/Pacific | $313 | $519 | $941 | $(160) | | Administrative and all other | $(4,165) | $(2,628) | $(7,378) | $(7,170) | | **Total** | **$100,619** | **$91,343** | **$270,731** | **$212,905** | Sales by Product Group (in thousands) | Sales by Product Group (in thousands) | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Wood construction products | $338,896 | $311,167 | $996,261 | $834,411 | | Concrete construction products | $57,589 | $52,983 | $157,417 | $139,299 | | Other | $253 | $154 | $983 | $338 | | **Total** | **$396,738** | **$364,304** | **$1,154,661** | **$974,048** | [Note 15. Subsequent Events](index=22&type=section&id=Note%2015.%20Subsequent%20Events) This note reports a subsequent event where the Board of Directors declared a quarterly cash dividend after the reporting period - On October 19, 2021, the Board of Directors declared a quarterly cash dividend of **$0.25 per share**, estimated to be **$10.8 million** in total, payable on January 27, 2022[78](index=78&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=23&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations, including business overview, growth initiatives, COVID-19 impact, performance factors, segment results, business outlook, and liquidity [Overview](index=24&type=section&id=Overview) This overview introduces the company's business segments, key growth initiatives in wood and concrete products, and five-year ambitions, addressing ongoing COVID-19 impact management - The company designs, manufactures, and sells high-quality building construction products across North America, Europe, and Asia/Pacific segments[86](index=86&type=chunk) - Key growth initiatives focus on expanding into new markets within wood and concrete products, including OEM, repair & remodel/DIY, mass timber, concrete, and structural steel[87](index=87&type=chunk)[88](index=88&type=chunk) - The company's five-year ambitions include strengthening its values-based culture, being a business partner of choice, innovative leadership, above-market growth relative to U.S. housing starts, and remaining in the top quartile for operating income margins and return on invested capital[91](index=91&type=chunk) - Despite the ongoing COVID-19 pandemic, the company has not experienced significant disruptions within its supply chain and continues to meet customer needs[90](index=90&type=chunk)[92](index=92&type=chunk) [Factors Affecting Our Results of Operations](index=25&type=section&id=Factors%20Affecting%20Our%20Results%20of%20Operations) This section discusses key factors influencing financial performance, including construction market cyclicality, seasonality, weather, political/economic events, volatile raw material costs (especially steel), and product transportation challenges - The company's business is significantly dependent on United States housing starts and residential construction activity, with sales tending to be seasonal and lower in the first and fourth quarters[94](index=94&type=chunk)[97](index=97&type=chunk) - Rising material input and product logistics costs are being monitored, with increased selling prices expected to be offset by higher material costs, sourcing complications, and a tight labor market, potentially affecting operating margins[94](index=94&type=chunk)[95](index=95&type=chunk) - Operations are exposed to risks from a volatile steel market, stressed product transportation systems, and the impact of pandemics like COVID-19[97](index=97&type=chunk)[98](index=98&type=chunk) [Business Segment Information](index=25&type=section&id=Business%20Segment%20Information) This section overviews North America, Europe, and Asia/Pacific segment performance, detailing sales growth drivers, gross margin trends, and the impact of rising raw material costs, particularly steel, on future margins - North America's wood and concrete construction product sales increased **8.9%** and **8.7%** respectively for Q3 2021, primarily due to product price increases, partly offset by decreased sales volumes in the home center channel[99](index=99&type=chunk) - Europe sales increased due to higher sales volumes and positive foreign currency translation, with wood construction product sales up **24.7%** for Q3 2021[100](index=100&type=chunk) - The company anticipates significant gross margin and operating margin compression in fiscal year 2022 as higher priced raw materials and rising average cost of steel on hand offset 2021 price increases[102](index=102&type=chunk) [Business Outlook](index=26&type=section&id=Business%20Outlook) This section provides the company's updated fiscal year 2021 outlook, reflecting actual third-quarter results and current expectations regarding raw material input costs and demand trends Fiscal Year 2021 Outlook | Metric | Fiscal Year 2021 Outlook | | :-------------------- | :----------------------- | | Operating margin | 20.0% to 22.0% | | Effective tax rate | 25.0% to 26.0% | | Capital expenditures | $55 million to $60 million | - The company expects its operating margin for the full year of 2022 to decline by approximately **400 to 500 basis points** year-over-year due to anticipated higher raw material costs[102](index=102&type=chunk)[147](index=147&type=chunk) [Results of Operations for the Three Months Ended September 30, 2021, Compared with the Three Months Ended September 30, 2020](index=26&type=section&id=Results%20of%20Operations%20for%20the%20Three%20Months%20Ended%20September%2030%2C%202021%2C%20Compared%20with%20the%20Three%20Months%20Ended%20September%2030%2C%202020) This section details the company's consolidated financial performance for the third quarter of 2021 compared to the same period in 2020, highlighting increases in net sales, gross profit, and operating expenses, and their primary drivers Financial Performance (3 Months Ended Sep 30, 2021 vs 2020) | Metric (in thousands except EPS) | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | Change (%) | | :------------------------------- | :-------------------------- | :-------------------------- | :--------- | | Net sales | $396,738 | $364,304 | 8.9% | | Gross profit | $198,032 | $173,243 | 14.3% | | Gross margin | 49.9% | 47.6% | +2.3 pp | | Total operating expenses | $97,417 | $81,972 | 18.8% | | Income from operations | $100,619 | $91,343 | 10.2% | | Net income | $73,778 | $67,057 | 10.0% | | Diluted EPS | $1.70 | $1.54 | 10.4% | - Net sales increased **8.9%** primarily due to the implementation of product price increases and a marginal increase in sales volume[105](index=105&type=chunk) - Gross profit increased **14.3%**, with gross margins rising to **49.9%** from **47.6%**, mainly driven by product price increases partially offset by marginal increases in average material costs[106](index=106&type=chunk) - Operating expenses (R&D, Selling, G&A) increased across the board, primarily due to higher personnel costs, professional fees, and travel-related expenses[107](index=107&type=chunk)[108](index=108&type=chunk) [Results of Operations for the Nine Months Ended September 30, 2021, Compared with the Nine Months Ended September 30, 2020](index=28&type=section&id=Results%20of%20Operations%20for%20the%20Nine%20Months%20Ended%20September%2030%2C%202021%2C%20Compared%20with%20the%20Nine%20Months%20Ended%20September%2030%2C%202020) This section provides a comprehensive comparison of the company's financial performance for the first nine months of 2021 against the same period in 2020, detailing significant increases in net sales, gross profit, and net income, driven by sales volumes and price increases Financial Performance (9 Months Ended Sep 30, 2021 vs 2020) | Metric (in thousands except EPS) | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | Change (%) | | :------------------------------- | :-------------------------- | :-------------------------- | :--------- | | Net sales | $1,154,661 | $974,048 | 18.5% | | Gross profit | $556,760 | $452,709 | 23.0% | | Gross margin | 48.2% | 46.5% | +1.7 pp | | Total operating expenses | $286,141 | $240,013 | 19.2% | | Income from operations | $270,731 | $212,905 | 27.1% | | Net income | $196,650 | $157,362 | 25.0% | | Diluted EPS | $4.52 | $3.59 | 25.9% | - Net sales increased **18.5%** due to increases in sales volumes across most distribution channels and product price increases implemented during the period[119](index=119&type=chunk)[128](index=128&type=chunk) - Gross profit increased **23.0%**, with gross margins rising to **48.2%** from **46.5%**, primarily due to product price increases and lower labor/factory expenses, partly offset by higher material, warehouse, and shipping costs[120](index=120&type=chunk)[132](index=132&type=chunk) - Operating expenses increased across R&D, Selling, and G&A, mainly driven by higher personnel costs, professional fees, patent/code approval costs, and software development expenses[121](index=121&type=chunk)[122](index=122&type=chunk)[123](index=123&type=chunk) [Effect of New Accounting Standards](index=32&type=section&id=Effect%20of%20New%20Accounting%20Standards) This section refers to Note 1 for information regarding the effect of new accounting standards [Liquidity and Sources of Capital](index=32&type=section&id=Liquidity%20and%20Sources%20of%20Capital) This section discusses the company's liquidity position, including credit facilities, cash and cash equivalents, principal uses of capital, and the change in capital return threshold - The company's **$300.0 million** unsecured revolving credit facility was amended to extend its term to July 12, 2026, and was fully available with no outstanding debt as of September 30, 2021[132](index=132&type=chunk) Selected Financial Information (in thousands) | Selected Financial Information (in thousands) | At Sep 30, 2021 | At Dec 31, 2020 | At Sep 30, 2020 | | :------------------------------------------ | :-------------- | :-------------- | :-------------- | | Cash and cash equivalents | $294,180 | $274,639 | $311,465 | | Working capital less cash and cash equivalents | $409,997 | $284,439 | $317,779 | Cash Flow Indicators (in thousands) | Cash Flow Indicators (in thousands) | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :---------------------------------- | :-------------------------- | :-------------------------- | | Net cash provided by operating activities | $122,098 | $129,618 | | Net cash used in investing activities | $(41,200) | $(21,554) | | Net cash used in financing activities | $(61,258) | $(26,153) | - Capital expenditures for 2021 are estimated to be in the range of **$50 million to $60 million**, primarily for safety, equipment replacement, and productivity improvements[137](index=137&type=chunk) - The Board approved changing the capital return threshold from **50% of cash flow from operations** to **50% of free cash flow**[139](index=139&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=35&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section discusses the company's exposure to various market risks, including foreign exchange risk, interest rate risk, and commodity price risk, particularly concerning steel, and their potential impact on operating margins - The company is exposed to foreign exchange rate risk in its international operations and purchases from foreign vendors, which it manages through foreign currency forward contracts for forecasted transactions[143](index=143&type=chunk)[144](index=144&type=chunk) - Primary interest rate risk stems from variable rates on its Credit Facility, but the company was debt-free as of September 30, 2021[146](index=146&type=chunk) - The company is exposed to commodity price risk related to steel purchases, with steel costs increasing in 2021 due to a worldwide shortage, and anticipates a **400-500 basis point** decline in 2022 operating margins if higher steel prices are not mitigated[147](index=147&type=chunk) [Item 4. Controls and Procedures](index=35&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of the company's disclosure controls and procedures as of September 30, 2021, and discusses the ongoing ERP system (SAP) implementation and its expected impact on internal controls over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures were effective at the reasonable assurance level as of September 30, 2021[148](index=148&type=chunk)[149](index=149&type=chunk) - The company is implementing a fully integrated ERP platform (SAP), which is causing changes to processes and internal controls but is expected to strengthen financial controls by automating and standardizing business processes[151](index=151&type=chunk)[152](index=152&type=chunk) - There were no material changes in internal control over financial reporting during the three months ended September 30, 2021[153](index=153&type=chunk) PART II — OTHER INFORMATION [Item 1. Legal Proceedings](index=34&type=section&id=Item%201.%20Legal%20Proceedings) This section states that the company is involved in various legal proceedings arising in the normal course of business but does not expect any to have a material adverse effect on its financial condition, cash flows, or results of operations - The company is involved in various legal proceedings related to product failures and information inaccuracies but does not expect any to have a material adverse effect on its financial condition, cash flows, or results of operations[155](index=155&type=chunk)[156](index=156&type=chunk) [Item 1A. Risk Factors](index=36&type=section&id=Item%201A.%20Risk%20Factors) This section states that there have been no material changes to the risk factors previously reported in the company's Annual Report on Form 10-K for the fiscal year ended December 31, 2020, nor have any new risk factors been identified - No material changes to risk factors or new risk factors identified since the filing of the Annual Report on Form 10-K for the year ended December 31, 2020[154](index=154&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=37&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section provides a table detailing the monthly repurchases of the company's common stock during the third quarter of 2021 under its publicly announced share repurchase authorization Common Stock Repurchases | Period | Total Number of Shares Purchased | Average Price Paid per Share | Approximate Dollar Value of Shares that May Yet Be Purchased under the Plans or Programs | | :------------------------ | :----------------------------- | :--------------------------- | :--------------------------------------------------------------------------------- | | July 1 - July 31, 2021 | 183,965 | $109.44 | $80,000,041 | | August 1 - August 31, 2021 | — | — | $80,000,041 | | September 1 - September 30, 2021 | 39,308 | $104.95 | $75,874,723 | | **Total** | **223,273** | | | - Share repurchases were conducted under a **$100.0 million** authorization publicly announced on December 16, 2020, scheduled to expire on December 31, 2021[158](index=158&type=chunk) [Item 3. Defaults Upon Senior Securities](index=37&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section states that there were no defaults upon senior securities during the reporting period - There were no defaults upon senior securities[159](index=159&type=chunk) [Item 4. Mine Safety Disclosures](index=37&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section states that mine safety disclosures are not applicable to the company - Mine safety disclosures are not applicable[161](index=161&type=chunk) [Item 5. Other Information](index=37&type=section&id=Item%205.%20Other%20Information) This section indicates that there is no other information to report - No other information to report[163](index=163&type=chunk) [Item 6. Exhibits](index=38&type=section&id=Item%206.%20Exhibits) This section provides an index of exhibits filed with the report, including certifications from the CEO and CFO, and XBRL documents - The exhibit index includes certifications (CEO, CFO), XBRL Instance Document, and various XBRL Taxonomy Linkbase Documents[166](index=166&type=chunk)

Financial Data and Key Metrics Changes - The company's Q3 2021 net sales reached $396.7 million, an increase of 8.9% compared to the prior year period, primarily driven by product price increases to offset rising raw material costs [7][27] - Gross margins improved to 49.9% from 47.9% in the prior quarter and 47.6% in the year-ago period, reflecting strong pricing power despite higher material costs [10][29] - Income from operations increased to $100.6 million, leading to earnings per diluted share of $1.70, compared to $1.54 in the previous year [11][35] Business Line Data and Key Metrics Changes - In North America, net sales increased by 6.8% to $338.6 million, driven by price increases, although sales volumes declined, particularly in the home center channel [27] - European net sales rose by 22.5% to $54.8 million, benefiting from higher sales volumes compared to the previous year's COVID-19 related slowdown [28] - Gross margin for wood products was 50.2%, up from 48% in the prior year, while concrete products saw a margin of 44.6%, compared to 42.1% previously [30] Market Data and Key Metrics Changes - U.S. housing starts improved by 19.5% during the first nine months of 2021 compared to the same period last year, indicating a positive trend in the housing market [15] - In Europe, sales improved due to strengthening demand and effective inventory management amid supply chain shortages [16] Company Strategy and Development Direction - The company is focused on growth in OEM repair, remodel, DIY, and mass timber markets, aiming to be a leader in engineered load-ready construction fastening solutions [17][19] - There is an emphasis on expanding presence in concrete construction and structural steel markets, with existing product and distribution capabilities already in place [18][20] - The company is pursuing both organic growth and M&A opportunities to enhance its product offerings and market share [22][23] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing macroeconomic challenges, including supply chain constraints and rising raw material costs, but expressed confidence in the company's ability to manage these issues [24][49] - The company anticipates significant gross margin compression beginning in fiscal 2022 due to higher raw material costs, despite maintaining an industry-leading operating margin in the long term [11][46] - Management remains optimistic about the company's strategic initiatives driving improved operational performance and returns on investment capital [41][47] Other Important Information - The company declared a quarterly cash dividend of $0.25 per share, payable on January 27, 2022, reflecting strong cash generation and commitment to shareholder returns [40] - Inventory levels increased to $385.5 million, primarily due to rising steel prices, with careful management practices in place to ensure product availability [37] Q&A Session Summary Question: Contribution from pricing in North America - The contribution from pricing in the quarter was approximately $75 million [52] Question: Home center business performance - The home center business experienced a significant decline due to inventory leveling and tough comparables from the previous year [56] Question: Lead times for customer orders - The company maintains lead times of over 97%, typically within 24 to 48 hours, which is a key differentiator [59] Question: Impact of price increases on customer demand - Customers have not significantly reduced demand despite price increases, primarily due to the availability of products [64] Question: Changes in building codes and standards - There is emerging interest in building to resiliency standards, which could impact future revenue and competitive positioning [68] Question: Challenges with overseas sourcing - The company faces longer lead times for products sourced from overseas, prompting interest in increasing domestic manufacturing capabilities [73]

PART I — FINANCIAL INFORMATION [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) Presents Simpson Manufacturing Co., Inc.'s unaudited condensed consolidated financial statements and detailed notes for specified periods [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) | ASSETS (in thousands) | June 30, 2021 | December 31, 2020 | June 30, 2020 | | :---------------------- | :------------ | :---------------- | :------------ | | Cash and cash equivalents | $305,796 | $274,639 | $315,448 | | Trade accounts receivable, net | $249,931 | $165,128 | $233,867 | | Inventories | $310,254 | $283,742 | $265,365 | | Total current assets | $901,703 | $753,139 | $834,902 | | Total assets | $1,373,974 | $1,232,569 | $1,284,503 | | LIABILITIES AND STOCKHOLDERS' EQUITY (in thousands) | June 30, 2021 | December 31, 2020 | June 30, 2020 | | :---------------------- | :------------ | :---------------- | :------------ | | Total current liabilities | $232,454 | $194,061 | $193,414 | | Long term debt, net of current portion | — | — | $150,000 | | Total liabilities | $287,069 | $251,626 | $390,291 | | Total stockholders' equity | $1,086,905 | $980,943 | $894,212 | | Total liabilities and stockholders' equity | $1,373,974 | $1,232,569 | $1,284,503 | - Total assets increased by **$141.4 million** (11.5%) from December 31, 2020, to June 30, 2021, primarily driven by increases in current assets, particularly trade accounts receivable and inventories[10](index=10&type=chunk) - Long-term debt, net of current portion, was reduced to **zero** as of June 30, 2021, from **$150 million** at June 30, 2020[10](index=10&type=chunk) - Total stockholders' equity increased by **$105.9 million** (10.8%) from December 31, 2020, to June 30, 2021[10](index=10&type=chunk) [Condensed Consolidated Statements of Earnings and Comprehensive Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Earnings%20and%20Comprehensive%20Income) | (in thousands except per-share amounts) | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :-------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net sales | $410,281 | $326,076 | $757,922 | $609,744 | | Gross profit | $196,446 | $149,800 | $358,727 | $279,466 | | Income from operations | $101,728 | $72,212 | $170,112 | $121,562 | | Net income | $72,483 | $53,479 | $122,872 | $90,305 | | Diluted EPS | $1.66 | $1.22 | $2.82 | $2.05 | | Cash dividends declared per common share | $0.25 | $0.23 | $0.48 | $0.46 | - Net sales increased by **25.8%** for the three months ended June 30, 2021, and by **24.3%** for the six months ended June 30, 2021, compared to the respective prior-year periods[12](index=12&type=chunk) - Net income increased by **35.5%** to **$72.5 million** for the three months ended June 30, 2021, and by **36.1%** to **$122.9 million** for the six months ended June 30, 2021, year-over-year[12](index=12&type=chunk) - Diluted EPS grew by **36.1%** to **$1.66** for the three months and by **37.6%** to **$2.82** for the six months ended June 30, 2021, compared to the same periods in 2020[12](index=12&type=chunk) [Condensed Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20Equity) | (in thousands) | Balance at Dec 31, 2020 | Net Income | Dividends Declared | Stock-based Compensation | Other Changes | Balance at Jun 30, 2021 | | :------------- | :---------------------- | :--------- | :----------------- | :----------------------- | :------------ | :---------------------- | | Total Stockholders' Equity | $980,943 | $122,872 | $(20,816) | $9,826 | $(5,920) | $1,086,905 | - Total stockholders' equity increased from **$980.9 million** at December 31, 2020, to **$1,086.9 million** at June 30, 2021, primarily due to net income of **$122.9 million**, partly offset by cash dividends declared of **$20.8 million**[17](index=17&type=chunk) - For the six months ended June 30, 2021, stock-based compensation added **$9.8 million** to additional paid-in capital[17](index=17&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) | (in thousands) | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :------------- | :----------------------------- | :----------------------------- | | Operating activities | $81,632 | $42,766 | | Investing activities | $(26,214) | $(13,444) | | Financing activities | $(25,603) | $57,733 | | Net increase in cash and cash equivalents | $31,157 | $85,238 | | Cash and cash equivalents at end of period | $305,796 | $315,448 | - Net cash provided by operating activities significantly increased to **$81.6 million** for the six months ended June 30, 2021, from **$42.8 million** in the prior-year period[19](index=19&type=chunk) - Cash used in investing activities increased to **$26.2 million**, primarily due to capital expenditures and an investment in a venture capital fund[19](index=19&type=chunk) - Cash used in financing activities was **$25.6 million**, mainly for dividends paid and taxes on employee stock, a shift from **$57.7 million** provided in the prior year which included proceeds from lines of credit[19](index=19&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) [1. Basis of Presentation](index=9&type=section&id=1.%20Basis%20of%20Presentation) - The financial statements are prepared in conformity with GAAP, requiring management estimates and assumptions, particularly in the context of COVID-19 impacts[22](index=22&type=chunk) - Revenue is recognized when control of a product is transferred to a customer, typically at the F.O.B. shipping point[25](index=25&type=chunk) - The Company uses derivative instruments (foreign currency forward contracts) as cash flow hedges to mitigate foreign currency exchange rate risk, with fair value changes included in accumulated other comprehensive loss[29](index=29&type=chunk) - The Company does not expect a material impact from the transition from LIBOR to alternative reference interest rates, but will continue to monitor the impact[36](index=36&type=chunk) [2. Revenue from Contracts with Customers](index=12&type=section&id=2.%20Revenue%20from%20Contracts%20with%20Customers) - Wood construction products accounted for **87%** of total net sales in the six months ended June 30, 2021, and **86%** in the same period of 2020[38](index=38&type=chunk) - Concrete construction products represented **13%** and **14%** of total net sales for the six months ended June 30, 2021 and 2020, respectively[39](index=39&type=chunk) - Service sales (after-market repair, engineering, software licenses) were less than **1.0%** of net sales[41](index=41&type=chunk) [3. Net Income Per Share](index=13&type=section&id=3.%20Net%20Income%20Per%20Share) | (in thousands, except per share amounts) | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income available to common stockholders | $72,483 | $53,479 | $122,872 | $90,305 | | Basic weighted-average shares outstanding | 43,434 | 43,471 | 43,406 | 43,787 | | Diluted weighted-average shares outstanding | 43,641 | 43,663 | 43,620 | 43,980 | | Basic EPS | $1.67 | $1.23 | $2.83 | $2.06 | | Diluted EPS | $1.66 | $1.22 | $2.82 | $2.05 | [4. Stockholders' Equity](index=13&type=section&id=4.%20Stockholders%27%20Equity) - As of June 30, 2021, the Company held **150,974** shares of its common stock as treasury shares[45](index=45&type=chunk) [5. Stock-Based Compensation](index=13&type=section&id=5.%20Stock-Based%20Compensation) | Stock-Based Compensation Expense (in thousands) | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :---------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total Expense | $3,300 | $5,200 | $9,800 | $5,400 | - During the six months ended June 30, 2021, the Company granted **133,717** restricted stock units (RSUs) to employees, with an estimated weighted average fair value of **$100.93** per share[47](index=47&type=chunk) - As of June 30, 2021, the aggregate unamortized stock compensation expense was approximately **$21.3 million**, to be recognized over a weighted-average period of **2.5 years**[49](index=49&type=chunk) [6. Trade Accounts Receivable, Net](index=14&type=section&id=6.%20Trade%20Accounts%20Receivable%2C%20Net) | (in thousands) | At June 30, 2021 | At December 31, 2020 | At June 30, 2020 | | :------------- | :--------------- | :------------------- | :--------------- | | Trade accounts receivable | $255,077 | $170,001 | $239,220 | | Allowance for doubtful accounts | $(1,446) | $(2,110) | $(2,007) | | Allowance for sales discounts and returns | $(3,700) | $(2,763) | $(3,346) | | Total | $249,931 | $165,128 | $233,867 | - Net trade accounts receivable increased by **$84.8 million** from December 31, 2020, to June 30, 2021[50](index=50&type=chunk) [7. Inventories](index=14&type=section&id=7.%20Inventories) | (in thousands) | At June 30, 2021 | At December 31, 2020 | At June 30, 2020 | | :------------- | :--------------- | :------------------- | :--------------- | | Raw materials | $101,163 | $95,777 | $110,883 | | In-process products | $24,117 | $21,803 | $18,661 | | Finished products | $184,974 | $166,162 | $135,821 | | Total | $310,254 | $283,742 | $265,365 | - Total inventories increased by **$26.5 million** from December 31, 2020, to June 30, 2021, primarily in finished products[51](index=51&type=chunk) [8. Derivative Instruments](index=14&type=section&id=8.%20Derivative%20Instruments) - The Company uses short-term foreign currency forward contracts to hedge currency exposures, primarily for Chinese Yuan (CNY) transactions[52](index=52&type=chunk)[53](index=53&type=chunk) - As of June 30, 2021, outstanding foreign currency derivative contracts had an aggregate notional amount to buy **CNY36.9 million** by selling **$5.4 million**[53](index=53&type=chunk) - For the six months ended June 30, 2021, gains of **$0.2 million** on these contracts were recognized as a reduction of cost of sales[54](index=54&type=chunk) [9. Property, Plant and Equipment, Net](index=15&type=section&id=9.%20Property%2C%20Plant%20and%20Equipment%2C%20Net) | (in thousands) | At June 30, 2021 | At December 31, 2020 | At June 30, 2020 | | :------------- | :--------------- | :------------------- | :--------------- | | Land | $28,373 | $28,553 | $28,068 | | Buildings and site improvements | $202,573 | $203,421 | $200,205 | | Machinery, equipment, and software | $392,860 | $372,923 | $359,997 | | Less accumulated depreciation and amortization | $(393,653) | $(377,460) | $(360,719) | | Capital projects in progress | $19,239 | $20,656 | $13,751 | | Total | $255,353 | $255,184 | $247,119 | - Net property, plant and equipment remained relatively stable at **$255.4 million** as of June 30, 2021, compared to **$255.2 million** at December 31, 2020[55](index=55&type=chunk) [10. Goodwill and Intangible Assets, Net](index=15&type=section&id=10.%20Goodwill%20and%20Intangible%20Assets%2C%20Net) | Goodwill (in thousands) | At June 30, 2021 | At December 31, 2020 | At June 30, 2020 | | :---------------------- | :--------------- | :------------------- | :--------------- | | North America | $96,393 | $96,311 | $96,099 | | Europe | $36,296 | $38,059 | $34,929 | | Asia/Pacific | $1,432 | $1,474 | $1,307 | | Total | $134,121 | $135,844 | $132,335 | | Intangible Assets, Net (in thousands) | At June 30, 2021 | At December 31, 2020 | At June 30, 2020 | | :------------------------------------ | :--------------- | :------------------- | :--------------- | | North America | $16,288 | $18,089 | $12,857 | | Europe | $7,461 | $8,711 | $9,282 | | Total | $23,749 | $26,800 | $22,139 | - Amortization expense for definite-lived intangible assets was **$3.4 million** for the six months ended June 30, 2021, with a weighted-average amortization period of **6.4 years**[57](index=57&type=chunk) [11. Leases](index=17&type=section&id=11.%20Leases) | (in thousands) | At June 30, 2021 | At December 31, 2020 | At June 30, 2020 | | :------------- | :--------------- | :------------------- | :--------------- | | Operating lease right-of-use assets | $43,374 | $45,792 | $36,930 | | Total operating lease liabilities | $43,864 | $46,342 | $36,992 | | Total finance lease liabilities | $48 | $384 | $998 | | Lease Expense (in thousands) | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2021 | | :--------------------------- | :------------------------------- | :----------------------------- | | Operating lease cost | $3,055 | $6,017 | | Total finance lease cost | $108 | $216 | - The weighted-average remaining lease term for operating leases was **6.91 years** as of June 30, 2021, with a weighted-average discount rate of **5.28%**[65](index=65&type=chunk) [12. Debt](index=19&type=section&id=12.%20Debt) - The Company's primary credit facility is a **$300.0 million** unsecured revolving credit facility with Wells Fargo Bank, which was extended to July 12, 2026, in July 2021[66](index=66&type=chunk)[78](index=78&type=chunk) - As of June 30, 2021, there were no outstanding balances on the Credit Facility, and the Company was in compliance with its financial covenants[66](index=66&type=chunk)[67](index=67&type=chunk) [13. Commitments and Contingencies](index=19&type=section&id=13.%20Commitments%20and%20Contingencies) - The Company accrues for environmental liabilities when probable and estimable, not expecting a material adverse effect on financial condition[68](index=68&type=chunk) - The Company is involved in various legal proceedings, including the Gentry Homes, Ltd. v. Simpson Strong-Tie Company Inc. case, where a settlement in principle has been reached[69](index=69&type=chunk)[71](index=71&type=chunk) - The Company believes that all or part of the damages for claims in the Gentry case may be covered by its insurance policies[72](index=72&type=chunk) [14. Segment Information](index=20&type=section&id=14.%20Segment%20Information) - The Company operates in three geographic segments: North America, Europe, and Asia/Pacific[73](index=73&type=chunk) | Net Sales by Segment (in thousands) | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :---------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | North America | $350,557 | $286,807 | $651,120 | $535,857 | | Europe | $56,438 | $37,379 | $100,734 | $70,111 | | Asia/Pacific | $3,286 | $1,890 | $6,068 | $3,776 | | Total | $410,281 | $326,076 | $757,922 | $609,744 | | Income (Loss) from Operations by Segment (in thousands) | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :---------------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | North America | $95,123 | $72,196 | $164,533 | $125,757 | | Europe | $5,873 | $2,696 | $8,164 | $1,026 | | Asia/Pacific | $203 | $(75) | $628 | $(679) | | Total | $101,728 | $72,212 | $170,112 | $121,562 | | Net Sales by Product Group (in thousands) | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :---------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Wood construction products | $355,787 | $280,724 | $657,365 | $523,244 | | Concrete construction products | $54,305 | $45,304 | $99,828 | $86,316 | | Other | $189 | $48 | $729 | $184 | | Total | $410,281 | $326,076 | $757,922 | $609,744 | [15. Subsequent Events](index=21&type=section&id=15.%20Subsequent%20Events) - On July 14, 2021, the Board declared a quarterly cash dividend of **$0.25** per share, totaling an estimated **$10.8 million**, payable on October 28, 2021[77](index=77&type=chunk) - In July 2021, the Credit Facility term was extended from July 23, 2022, to July 12, 2026, and certain covenants were modified for additional flexibility[78](index=78&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the Company's financial condition, operational results, growth initiatives, COVID-19 impacts, and performance analysis [Overview](index=22&type=section&id=Overview) - The Company designs, manufactures, and sells high-quality building construction products across three geographic segments: North America, Europe, and Asia/Pacific[87](index=87&type=chunk) - Key growth initiatives focus on expanding into new markets (OEM, repair & remodel, mass timber, concrete, structural steel) within core wood and concrete product competencies[88](index=88&type=chunk) - The Company's Five-year Ambitions include strengthening its values-based culture, being the business partner of choice, striving for innovation, achieving above-market growth relative to U.S. housing starts, and maintaining top quartile operating income margins and return on invested capital[90](index=90&type=chunk)[93](index=93&type=chunk) - Despite COVID-19 challenges, the Company has not experienced significant supply chain disruptions and continues to meet customer needs[93](index=93&type=chunk) - Increased selling prices are expected to boost net sales, but rising material costs (especially steel, with a projected **300-400 basis point** impact on operating margins over **12-18 months**), sourcing complications, and a tight labor market could negatively affect operating margins for the remainder of 2021[95](index=95&type=chunk)[96](index=96&type=chunk) [Factors Affecting Our Results of Operations](index=24&type=section&id=Factors%20Affecting%20Our%20Results%20of%20Operations) - The Company's results are influenced by U.S. housing starts, residential construction activity, and demand in areas prone to natural forces (seismic/wind events)[95](index=95&type=chunk)[97](index=97&type=chunk) - Sales are seasonal, typically lower in Q1 and Q4, and can be affected by weather conditions, political/economic events (e.g., tariffs), and volatile raw material costs, particularly steel[98](index=98&type=chunk) [ERP Integration](index=24&type=section&id=ERP%20Integration) - The Company is implementing a fully integrated SAP ERP platform, with North America operations completed in 2021 and company-wide completion expected in 2022[101](index=101&type=chunk) - Annual operating expenses are expected to increase through 2024 due to SAP implementation, primarily from training costs and depreciation of capitalized costs[101](index=101&type=chunk) [Business Segment Information](index=24&type=section&id=Business%20Segment%20Information) - North America wood construction product net sales increased **23.2%** and concrete construction product net sales increased **15.2%** for Q2 2021, primarily due to higher product prices[102](index=102&type=chunk) - Europe net sales increased for Q2 2021, with wood construction product sales up **53.7%** and concrete construction product sales up **40.6%**, driven by higher sales volumes and positive foreign currency translation[104](index=104&type=chunk) - Increased steel costs and product sourcing complications are expected to negatively affect operating margins in North America and Europe in the second half of 2021 and into 2022[103](index=103&type=chunk)[104](index=104&type=chunk) [Business Outlook](index=25&type=section&id=Business%20Outlook) - For the full fiscal year ending December 31, 2021, the Company estimates an operating margin in the range of **19.5% to 21.0%**[107](index=107&type=chunk) - The estimated effective tax rate for 2021 is between **25.0% and 26.0%**[107](index=107&type=chunk) - Capital expenditures for fiscal year 2021 are estimated to be in the range of **$55 million to $60 million**[107](index=107&type=chunk) [Results of Operations for the Three Months Ended June 30, 2021, Compared with the Three Months Ended June 30, 2020](index=25&type=section&id=Results%20of%20Operations%20for%20the%20Three%20Months%20Ended%20June%2030%2C%202021%2C%20Compared%20with%20the%20Three%20Months%20Ended%20June%2030%2C%202020) | (in thousands) | Q2 2020 | Q2 2021 | Change ($) | Change (%) | | :------------- | :------ | :------ | :--------- | :--------- | | Net sales | $326,076 | $410,281 | $84,205 | 25.8% | | Gross profit | $149,800 | $196,446 | $46,646 | 31.1% | | Income from operations | $72,212 | $101,728 | $29,516 | 40.9% | | Net income | $53,479 | $72,483 | $19,004 | 35.5% | - Gross margins increased to **47.9%** from **45.9%**, primarily due to product price increases[109](index=109&type=chunk) - Total operating expenses increased by **22.0%** to **$94.7 million**, driven by increases in personnel costs, professional fees, and commissions across R&D, selling, and G&A[110](index=110&type=chunk)[111](index=111&type=chunk) - North America net sales increased **22.2%** due to product price increases and marginally higher sales volumes, with Canada benefiting from foreign currency translation[116](index=116&type=chunk) - Europe net sales increased **51.0%** due to higher sales volumes and a positive foreign currency translation effect of approximately **$5.3 million**[120](index=120&type=chunk) [Results of Operations for the Six Months Ended June 30, 2021, Compared with the Six Months Ended June 30, 2020](index=28&type=section&id=Results%20of%20Operations%20for%20the%20Six%20Months%20Ended%20June%2030%2C%202021%2C%20Compared%20with%20the%20Six%20Months%20Ended%20June%2030%2C%202020) | (in thousands) | H1 2020 | H1 2021 | Change ($) | Change (%) | | :------------- | :------ | :------ | :--------- | :--------- | | Net sales | $609,744 | $757,922 | $148,178 | 24.3% | | Gross profit | $279,466 | $358,727 | $79,261 | 28.4% | | Income from operations | $121,562 | $170,112 | $48,550 | 39.9% | | Net income | $90,305 | $122,872 | $32,567 | 36.1% | - Gross profit margins increased to **47.3%** from **45.8%**, driven by lower labor costs and factory expense, and product price increases, partly offset by higher material, warehouse, and shipping costs[122](index=122&type=chunk) - Total operating expenses increased by **19.4%** to **$188.7 million**, primarily due to higher personnel costs, professional fees, and stock-based compensation across all categories[123](index=123&type=chunk)[124](index=124&type=chunk)[125](index=125&type=chunk) - North America net sales increased **21.5%** due to higher sales volumes and product price increases, with Canada benefiting from **$3.3 million** in foreign currency translation[130](index=130&type=chunk) - Europe net sales increased **43.7%** due to higher sales volumes and positive **$8.8 million** foreign currency translations[131](index=131&type=chunk) [Effect of New Accounting Standards](index=31&type=section&id=Effect%20of%20New%20Accounting%20Standards) - Refer to Note 1 for details on accounting standards not yet adopted, specifically ASU 2020-04 (Reference Rate Reform) related to LIBOR transition[133](index=133&type=chunk)[35](index=35&type=chunk)[36](index=36&type=chunk) [Liquidity and Sources of Capital](index=31&type=section&id=Liquidity%20and%20Sources%20of%20Capital) - The Company's **$300.0 million** unsecured revolving credit facility was extended to July 12, 2026, with no outstanding balances as of June 30, 2021[134](index=134&type=chunk)[135](index=135&type=chunk) - Principal uses of liquidity include operating costs, working capital, capital expenditures, share repurchases, cash dividends, and other investments[136](index=136&type=chunk) | Cash Flow Indicators (in thousands) | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :---------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $81,632 | $42,766 | | Net cash used in investing activities | $(26,214) | $(13,444) | | Net cash used in financing activities | $(25,603) | $57,733 | - Capital expenditures for fiscal year 2021 are projected to be **$55 million to $60 million**, primarily for safety, equipment replacement, and productivity improvements[140](index=140&type=chunk) - The Board approved changing the capital return threshold from **50%** of cash flow from operations to **50%** of free cash flow (cash flow from operations minus capital expenditures)[142](index=142&type=chunk) - From 2015 to 2020, the Company returned **$637.7 million** to stockholders through stock repurchases and dividends, representing **70.2%** of total cash flow from operations[143](index=143&type=chunk) - In July 2021, the Company repurchased **182,752** shares for **$20.0 million**[144](index=144&type=chunk) [Off-Balance Sheet Arrangements](index=34&type=section&id=Off-Balance%20Sheet%20Arrangements) - The Company did not have any off-balance sheet arrangements as of June 30, 2021[145](index=145&type=chunk) [Inflation and Raw Materials](index=34&type=section&id=Inflation%20and%20Raw%20Materials) - While general inflation rates have been low, the cost of steel, lumber, and petroleum products have increased, potentially affecting future inflation rates[146](index=146&type=chunk) - Increased steel prices, the Company's main raw material, may adversely affect gross profit margins if higher costs cannot be recovered through timely price increases[146](index=146&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=34&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section outlines the Company's exposure to market risks, specifically foreign exchange risk and interest rate risk, and the strategies employed to manage them [Foreign Exchange Risk](index=34&type=section&id=Foreign%20Exchange%20Risk) - The Company is exposed to foreign exchange rate risk from international operations and foreign vendor purchases[148](index=148&type=chunk) - Foreign currency forward contracts are used to hedge transactional exposures, particularly for the Chinese Yuan[149](index=149&type=chunk) - Foreign currency translation adjustments resulted in an accumulated other comprehensive loss of **$1.8 million** for the six months ended June 30, 2021, due to the weakening U.S. dollar[150](index=150&type=chunk) [Interest Rate Risk](index=35&type=section&id=Interest%20Rate%20Risk) - The primary interest rate risk arises from variable-rate borrowings under the Credit Facility, exposing the Company to short-term market interest rate fluctuations[151](index=151&type=chunk) [Item 4. Controls and Procedures](index=35&type=section&id=Item%204.%20Controls%20and%20Procedures) This section details the effectiveness of the Company's disclosure controls and procedures and discusses changes in internal control over financial reporting, particularly in relation to the ongoing SAP ERP implementation [Disclosure Controls and Procedures](index=35&type=section&id=Disclosure%20Controls%20and%20Procedures) - As of June 30, 2021, the CEO and CFO concluded that the Company's disclosure controls and procedures were effective at a reasonable assurance level[152](index=152&type=chunk) - Internal controls, while designed to provide reasonable assurance, cannot prevent all fraud and material errors due to inherent limitations[153](index=153&type=chunk) [Changes in Internal Control over Financial Reporting](index=35&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) - The ongoing SAP ERP implementation, operational in North America and parts of Europe, is causing changes to processes and internal control over financial reporting[154](index=154&type=chunk) - No changes in internal control over financial reporting materially affected, or are reasonably likely to materially affect, internal control during the three months ended June 30, 2021[156](index=156&type=chunk) PART II — OTHER INFORMATION [Item 1. Legal Proceedings](index=36&type=section&id=Item%201.%20Legal%20Proceedings) This section addresses the Company's involvement in legal proceedings, noting that no current proceedings are expected to have a material adverse effect, but acknowledges the inherent uncertainty of litigation outcomes - The Company is not currently a party to any legal proceedings expected to have a material adverse effect on its financial condition, cash flows, or results of operations[158](index=158&type=chunk) - The resolution of any claim or litigation is subject to inherent uncertainty and could materially impact the Company's financial condition[158](index=158&type=chunk) [Item 1A. Risk Factors](index=36&type=section&id=Item%201A.%20Risk%20Factors) This section states that there have been no material changes to the risk factors previously reported in the Company's Annual Report on Form 10-K for the year ended December 31, 2020 - No material changes or new risk factors have been identified since the filing of the Annual Report on Form 10-K for the year ended December 31, 2020[159](index=159&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=36&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the Company's common stock repurchase program, including the authorized amount and the remaining value available for repurchases - The Board authorized the repurchase of up to **$100.0 million** of common stock, expiring December 31, 2021[160](index=160&type=chunk) - As of June 30, 2021, **$100.0 million** remained available under this authorization, with no repurchases made during the six months ended June 30, 2021[160](index=160&type=chunk) [Item 3. Defaults Upon Senior Securities](index=36&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section confirms that there have been no defaults upon senior securities - There were no defaults upon senior securities[161](index=161&type=chunk) [Item 4. Mine Safety Disclosures](index=36&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section states that mine safety disclosures are not applicable to the Company - Mine safety disclosures are not applicable to the Company[163](index=163&type=chunk) [Item 5. Other Information](index=36&type=section&id=Item%205.%20Other%20Information) This section indicates that there is no other information to report - There is no other information to report[165](index=165&type=chunk) [Item 6. Exhibits](index=36&type=section&id=Item%206.%20Exhibits) This section provides an index of exhibits filed with the Form 10-Q, including certificates of incorporation, bylaws, CEO/CFO certifications, and XBRL-related documents - The exhibit index includes the Certificate of Incorporation, Amended and Restated Bylaws, CEO/CFO Certifications, Section 1350 Certifications, and various XBRL documents[168](index=168&type=chunk)

Simpson Manufacturing Co., Inc. (NYSE:SSD) Q2 2021 Earnings Conference Call July 26, 2021 5:00 PM ET Company Participants Kim Orlando - ADDO Investor Relations Karen Colonias - President and Chief Executive Officer Brian Magstadt - Chief Financial Officer and Treasurer Conference Call Participants Daniel Moore - CJS Securities Tim Wojs - Baird Kurt Yinger - D.A. Davidson Julio Romero - Sidoti & Company Operator Greetings. Welcome to Simpson Manufacturing Company Incorporated Second Quarter 2021 Earnings Con ...

STRONG FOUNDATION. STRONGER FUTURE. Simpson Manufacturing Co., Inc. Investor Presentation June 2021 SIMPSON Manufacturing Safe Harbor This presentation 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," "inte ...

Financial Performance - Net sales for the three months ended March 31, 2021, were $347,642,000, representing a 22.6% increase from $283,668,000 in the same period of 2020[12] - Gross profit for the same period was $162,282,000, up from $129,666,000, indicating a gross margin improvement[12] - Net income increased to $50,387,000 for Q1 2021, compared to $36,826,000 in Q1 2020, reflecting a 36.8% year-over-year growth[12] - Total net sales for the company reached $347.6 million in Q1 2021, compared to $283.7 million in Q1 2020, marking an increase of 22.6%[70] - Income from operations increased to $68.4 million, up 38.6% from $49.4 million in the prior year[12] - Net income for the three months ended March 31, 2021, was $50.4 million, a 36.8% increase from $36.8 million in 2020[12] - Basic net income per common share for the three months ended March 31, 2021, was $1.16, up from $0.84 in the same period of 2020, reflecting a 38% increase[41] Assets and Liabilities - Total current assets rose to $819,001,000 as of March 31, 2021, compared to $751,983,000 at the end of 2020, marking an increase of 8.9%[10] - Total assets increased to $1.29 billion as of March 31, 2021, compared to $1.20 billion at the end of 2020[10] - Total liabilities decreased to $280,218,000 as of March 31, 2021, down from $356,654,000 at the end of 2020, a reduction of 21.4%[10] - The company had no outstanding long-term debt as of March 31, 2021, compared to $150.0 million as of December 31, 2020[10] Cash Flow and Dividends - The company declared cash dividends of $0.23 per common share for both Q1 2021 and Q1 2020[12] - The Company declared a quarterly cash dividend of $0.25 per share, estimated to total $10.9 million, payable on July 22, 2021[73] - Cash flows from operating activities provided $17.833 million in Q1 2021, compared to $12.725 million in Q1 2020, reflecting a 40% increase[17] - The company experienced a net decrease in cash and cash equivalents of $17.211 million in Q1 2021, compared to an increase of $71.531 million in Q1 2020[17] Stock and Compensation - Stock-based compensation expense for the three months ended March 31, 2021, was $6.5 million, an increase of $6.2 million compared to $0.3 million in the same period of 2020[43] - The Company granted 133,424 restricted stock units (RSUs) to employees during the three months ended March 31, 2021, with an estimated weighted average fair value of $100.26 per share[44] - Noncash compensation related to stock plans amounted to $6.542 million in Q1 2021, significantly higher than $0.277 million in Q1 2020[17] Sales by Product - Wood construction products accounted for 87% of total net sales in the three months ended March 31, 2021, compared to 86% in the same period of 2020[35] - Concrete construction products represented 13% of total net sales for the three months ended March 31, 2021, down from 14% in the same period of 2020[36] - Wood construction products sales increased to $301,578,000 in Q1 2021 from $242,520,000 in Q1 2020, marking a growth of 24.3%[72] - Concrete construction products sales rose to $45,523,000 in Q1 2021, up from $41,012,000 in Q1 2020, reflecting a 11.9% increase[72] Accounts Receivable and Inventory - Trade accounts receivable increased to $232,646 thousand as of March 31, 2021, up from $174,853 thousand in 2020, reflecting a growth of 33%[46] - Total inventories rose to $296,640 thousand at March 31, 2021, compared to $255,720 thousand in 2020, marking an increase of 16%[47] - The allowance for doubtful accounts decreased from $2.11 million on December 31, 2020, to $1.78 million on March 31, 2021, after write-offs of $215,000[31] Lease Obligations - Operating lease liabilities totaled $44,751 thousand as of March 31, 2021, compared to $33,687 thousand in 2020, indicating a 33% increase[58] - The weighted-average remaining lease term for operating leases was 7.13 years as of March 31, 2021, compared to 6.38 years in 2020[61] - The company reported an operating lease cost of $2.9 million for Q1 2021, up from $2.5 million in Q1 2020, which is an increase of 14.7%[59] Goodwill and Intangible Assets - Goodwill totaled $133,477 thousand at March 31, 2021, slightly down from $135,844 thousand at December 31, 2020, a decrease of 2%[52] - Amortization expense for definite-lived intangible assets was $1.7 million for the three months ended March 31, 2021, compared to $1.5 million in 2020, reflecting a 13% increase[53] - The estimated future amortization of definite-lived intangible assets totals $24.4 million, with $4.6 million expected in the remaining nine months of 2021[55]

Simpson Manufacturing Co., Inc (NYSE:SSD) Q1 2021 Earnings Conference Call April 26, 2021 5:00 PM ET Company Participants Kim Orlando - ADDO, IR Karen Colonias - Simpson’s President and CEO Brian Magstadt - CFO & Treasurer Conference Call Participants Daniel Moore - CJS Securities Tim Wojs - Robert Baird Kurt Yinger - D.A. Davidson Julio Romero - Sidoti & Company Operator Greetings and welcome to Simpson Manufacturing Company’s First Quarter 2021 Earnings Conference Call. At this time, all participants are ...

PART I [Business Overview](index=5&type=section&id=Item%201.%20Business) Simpson Manufacturing Co., Inc. designs, engineers, and manufactures wood and concrete construction products for residential, commercial, and DIY markets, with operations dependent on the construction industry and steel as a primary raw material - The company is a leading manufacturer of wood and concrete construction products, marketing them to residential, light industrial, commercial, remodeling, and DIY markets[18](index=18&type=chunk) - A key distribution strategy includes expanding product offerings through home centers. The company successfully brought back Lowe's as a customer in Q2 2020, completing a rollout to over **1,700 stores** by year-end[25](index=25&type=chunk)[33](index=33&type=chunk) - The company's primary raw material is steel. It faces uncertainty regarding steel prices due to factors like import tariffs and international trade disputes[38](index=38&type=chunk)[39](index=39&type=chunk) - The business is seasonal and cyclical, with sales historically lower in the first and fourth quarters, and is highly dependent on the North American residential construction market[43](index=43&type=chunk) Employee Count by Region as of Dec 31, 2020 | Region | Employee Count | | :--- | :--- | | North America | 2,591 | | Europe | 670 | | Asia Pacific | 301 | | **Total** | **3,562** | [Risk Factors](index=11&type=section&id=Item%201A.%20Risk%20Factors) The company faces various material risks including the impact of the COVID-19 pandemic, dependency on the cyclical housing market, reliance on large customers, raw material price volatility, product liability, cybersecurity threats, and international operational challenges [Risks Related to the COVID-19 Pandemic](index=11&type=section&id=Risks%20Related%20to%20the%20COVID-19%20Pandemic) The COVID-19 pandemic poses significant risks to the company's operations, supply chain, and customer demand, potentially leading to economic downturns, operational disruptions, and increased compliance costs with uncertain full impact - The COVID-19 pandemic could negatively impact operations, supply chains, and customer demand, potentially compressing margins and being adversely affected by a resulting economic downturn[58](index=58&type=chunk) - Compliance with new health and safety regulations, such as those from the COVID-19 pandemic, may require altering manufacturing processes and could increase capital expenditures and other expenses[61](index=61&type=chunk) [Risks Related To Our Business And Our Industry](index=12&type=section&id=Risks%20Related%20To%20Our%20Business%20And%20Our%20Industry) The company's business faces industry-specific risks including dependence on cyclical housing markets, potential loss of large customers, challenges in new product development, intense competition, raw material price volatility, and reliance on third-party transportation - A significant portion of product sales depends on housing starts, making the business vulnerable to economic cycles, interest rates, and consumer confidence[63](index=63&type=chunk) - The company has a few large customers, and the loss of any one could materially reduce net sales and income. Customer consolidation increases this risk[65](index=65&type=chunk)[67](index=67&type=chunk) - Steel is the principal raw material, and its price fluctuates due to factors beyond the company's control, including import tariffs. The inability to pass cost increases to customers could adversely affect profitability[76](index=76&type=chunk)[77](index=77&type=chunk) [Product, Services and Sales Risks](index=14&type=section&id=Product,%20Services%20and%20Sales%20Risks) The company faces product and service risks including potential product liability claims, design or manufacturing defects, and recalls, which could harm its reputation and financial results, alongside significant liabilities from errors in engineering services or design software - The company is exposed to product liability claims, and while insured above a certain amount, it bears the costs of defense and damages up to the retention amount. A major claim could exceed insurance coverage[80](index=80&type=chunk)[81](index=81&type=chunk) - Defects in products, if not discovered before installation, could lead to unsafe structures, property damage, or personal injury, potentially resulting in significant liability for the company[82](index=82&type=chunk)[83](index=83&type=chunk) - Errors in the company's planning/design software or engineering services could lead to litigation and liability for correcting deficiencies or compensating for damages[86](index=86&type=chunk) [Risks Related to Our Intellectual Property and Information Technology](index=16&type=section&id=Risks%20Related%20to%20Our%20Intellectual%20Property%20and%20Information%20Technology) The company faces significant technology and intellectual property risks, including the commercial success of new software, IP protection, cybersecurity threats, and operational disruptions from complex IT system upgrades and failures - The company is investing heavily in software and applications, but may not be able to create commercially successful products or keep up with rapid technological changes[87](index=87&type=chunk)[88](index=88&type=chunk) - The company is subject to cybersecurity risks, and a security breach could lead to misappropriation of confidential information, negative publicity, and significant costs. Compliance with data privacy regulations like GDPR and CCPA is also a challenge[92](index=92&type=chunk)[93](index=93&type=chunk) - The company is increasingly dependent on complex software systems like SAP and Workday. System updates or conversions are costly, complex, and time-consuming, and any failures or delays could disrupt business operations[95](index=95&type=chunk) [Risks Related to International Operations](index=23&type=section&id=Risks%20Related%20to%20International%20Operations) With **17.5%** of 2020 sales from outside the U.S., the company is exposed to international risks including currency fluctuations, political instability, complex legal and tax environments, compliance with regulations, and potential disruptions at its China manufacturing facility - In 2020, international sales were **$222.4 million**, or **17.5%** of consolidated sales. The business is subject to risks like currency exchange rate fluctuations, changing laws, and political conditions[117](index=117&type=chunk) - The company's manufacturing facility in Jiangsu, China, creates supply chain risks. An event like the COVID-19 pandemic could interfere with commercial activity and require seeking alternative, potentially more costly, supply sources[125](index=125&type=chunk) - Significant tariffs or other restrictions on imports, particularly from China, could increase costs, require price hikes that may lose customers, or force a costly shift in production[126](index=126&type=chunk) [Unresolved Staff Comments](index=26&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments - None[135](index=135&type=chunk) [Properties](index=26&type=section&id=Item%202.%20Properties) The company operates **53** properties globally, totaling approximately **4.2 million** square feet, with **3.0 million** owned and **1.2 million** leased, including its headquarters and principal manufacturing facilities in the U.S., Europe, and China Owned and Leased Facilities by Region (as of Feb 25, 2021) | Region | Number of Properties | Owned (sq. ft. in thousands) | Leased (sq. ft. in thousands) | Total (sq. ft. in thousands) | | :--- | :--- | :--- | :--- | :--- | | North America | 25 | 2,235 | 821 | 3,056 | | Europe | 17 | 533 | 342 | 875 | | Asia/Pacific | 10 | 175 | 41 | 216 | | Administrative and all other | 1 | 89 | — | 89 | | **Total** | **53** | **3,032** | **1,204** | **4,236** | - The company owns its headquarters in Pleasanton, CA, and principal U.S. manufacturing facilities in California, Texas, Illinois, Ohio, and Tennessee. It also owns major facilities in France, Denmark, Germany, Poland, Switzerland, Sweden, Portugal, and China[136](index=136&type=chunk) [Legal Proceedings](index=28&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in various legal proceedings arising in the normal course of business, with further details provided in Note 14 of the Consolidated Financial Statements - The company is involved in various legal proceedings arising in the normal course of business. Further details are provided in Note 14 of the Consolidated Financial Statements[139](index=139&type=chunk) [Mine Safety Disclosures](index=28&type=section&id=Item%204.%20Mine%20Safely%20Disclosure) This item is not applicable to the company - Not applicable[140](index=140&type=chunk) PART II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=28&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity,%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on the NYSE under "SSD"; in 2020, it paid **$40.3 million** in dividends and repurchased **$13.5 million** in shares, with a new **$100.0 million** repurchase program authorized for 2021 - The company's common stock is listed on the New York Stock Exchange (NYSE) under the symbol "SSD"[142](index=142&type=chunk) - In 2020, the company paid a total of **$40.3 million** in cash dividends. A quarterly dividend of **$0.23 per share** was declared in January 2021[143](index=143&type=chunk) Share Repurchases in Q4 2020 | Period | Total Shares Purchased | Average Price Paid per Share | Total Value (approx. in millions) | | :--- | :--- | :--- | :--- | | Oct 1 - Oct 31, 2020 | 55,624 | $88.97 | $4.9 | | Nov 1 - Nov 30, 2020 | 32,630 | $89.86 | $2.9 | | Dec 1 - Dec 31, 2020 | 63,344 | $89.74 | $5.7 | | **Total** | **151,598** | | **$13.5** | - On December 16, 2020, the Board authorized a new share repurchase program of up to **$100.0 million**, effective from January 1, 2021, through December 31, 2021[146](index=146&type=chunk) [Selected Financial Data](index=30&type=section&id=Item%206.%20Selected%20Financial%20Data) This section presents a five-year summary of key financial data, highlighting **$1.27 billion** in net sales, **$252.4 million** in income from operations, **$187.0 million** in net income, and **$4.27** diluted EPS for fiscal year 2020 Selected Financial Data (2016-2020) | (in thousands, except per-share data) | 2020 | 2019 | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | :--- | :--- | | **Statement of Operations Data:** | | | | | | | Net sales | $1,267,945 | $1,136,539 | $1,078,809 | $977,025 | $860,661 | | Income from operations | $252,363 | $181,254 | $172,625 | $138,273 | $141,670 | | Net income | $187,000 | $133,982 | $126,633 | $92,617 | $89,734 | | Diluted EPS | $4.27 | $2.98 | $2.72 | $1.94 | $1.86 | | Cash dividends declared per share | $0.92 | $0.91 | $0.87 | $0.81 | $0.70 | | **Balance Sheet Data (End of Year):** | | | | | | | Total assets | $1,232,569 | $1,095,366 | $1,021,663 | $1,037,523 | $979,974 | | Total stockholders' equity | $980,943 | $891,957 | $855,514 | $884,778 | $865,842 | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=31&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section discusses the company's strong 2020 financial performance, with net sales increasing **11.6%** to **$1.27 billion** and net income rising to **$187.0 million**, driven by market factors and improved gross margin, alongside its strong liquidity and 2021 outlook - The company withdrew its 2020 guidance and financial targets for its '2020 Plan' in April 2020 due to uncertainties from the COVID-19 pandemic[154](index=154&type=chunk) - Despite initial concerns, 2020 sales increased compared to 2019, driven by the return of Lowe's, increased housing starts, and a strong home repair and remodel market[160](index=160&type=chunk) - The company is continuing its multi-year implementation of an SAP ERP system, with North American operations completed and a company-wide rollout targeted for 2022, contingent on the lifting of travel restrictions[170](index=170&type=chunk) 2021 Business Outlook | Metric | 2021 Estimate | | :--- | :--- | | Operating margin | 16.5% to 18.5% | | Depreciation and amortization | $44 million to $48 million | | Effective tax rate | 25.0% to 26.0% | | Capital expenditures | $50 million to $55 million | [Results of Operations](index=34&type=section&id=Results%20of%20Operations) For 2020, net sales increased **11.6%** to **$1.27 billion**, gross profit grew **17.1%** to **$576.4 million** with margin expanding to **45.5%**, and income from operations surged **39.2%** to **$252.4 million**, leading to **$187.0 million** in net income Comparison of Operations (2020 vs. 2019) | (in thousands) | 2020 | 2019 | % Change | | :--- | :--- | :--- | :--- | | Net sales | $1,267,945 | $1,136,539 | 11.6% | | Gross profit | $576,384 | $492,130 | 17.1% | | Income from operations | $252,363 | $181,254 | 39.2% | | Net income | $187,000 | $133,982 | 39.6% | | Diluted EPS | $4.27 | $2.98 | 43.3% | - Gross profit margin increased to **45.5%** in 2020 from **43.3%** in 2019, mainly due to lower material costs[180](index=180&type=chunk) - Wood construction products constituted **85%** of total net sales in 2020, up from **84%** in 2019, while concrete products made up the remaining **15%**[179](index=179&type=chunk) Net Sales by Segment (2020 vs. 2019) | (in thousands) | 2020 | 2019 | % Change | | :--- | :--- | :--- | :--- | | North America | $1,101,891 | $972,849 | 13.3% | | Europe | $156,713 | $155,144 | 1.0% | | Asia/Pacific | $9,341 | $8,546 | 9.3% | | **Total** | **$1,267,945** | **$1,136,539** | **11.6%** | [Liquidity and Sources of Capital](index=39&type=section&id=Liquidity%20and%20Sources%20of%20Capital) The company maintains strong liquidity with **$274.6 million** in cash and an undrawn **$300 million** credit facility, supported by **$207.6 million** in cash from operations, while allocating capital to **$37.9 million** in capital expenditures, **$76.2 million** in share repurchases, and **$40.4 million** in dividends - Primary liquidity sources are cash on hand, cash flow from operations, and a **$300.0 million** credit facility expiring in July 2022. As of Dec 31, 2020, there were no amounts outstanding under this facility[207](index=207&type=chunk) Cash Flow Summary | (in thousands) | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $207,572 | $205,662 | $160,080 | | Net cash used in investing activities | $(39,853) | $(28,021) | $(10,249) | | Net cash used in financing activities | $(126,777) | $(108,154) | $(155,393) | - In 2020, the company used **$76.2 million** for common stock repurchases and **$40.4 million** for cash dividends[211](index=211&type=chunk) Contractual Obligations as of Dec 31, 2020 | Contractual Obligation (in thousands) | Total | Less than 1 year | 1 — 3 years | 3 — 5 years | More than 5 years | | :--- | :--- | :--- | :--- | :--- | :--- | | Primary line-of credit annual facility fees | $900 | $600 | $300 | $— | $— | | Operating lease obligations | $46,342 | $10,696 | $15,613 | $10,348 | $9,685 | | Purchase obligations | $38,119 | $37,536 | $583 | $— | $— | | **Total** | **$85,361** | **$48,832** | **$16,496** | **$10,348** | **$9,685** | [Quantitative and Qualitative Disclosures About Market Risk](index=44&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to market risks, primarily foreign currency exchange rate risk from international operations, which it hedges with forward contracts, and interest rate risk, which is not material due to no variable interest-rate debt outstanding as of year-end 2020 - The company is exposed to foreign currency exchange rate risk from its international operations. In 2020, it entered into forward contracts to hedge risks associated with the Chinese Yuan[223](index=223&type=chunk)[224](index=224&type=chunk) - The company has no variable interest-rate debt outstanding, and estimates that a **100 basis point** change in U.S. interest rates would not have a material impact[225](index=225&type=chunk) [Consolidated Financial Statements and Supplementary Data](index=47&type=section&id=Item%208.%20Consolidated%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the company's audited consolidated financial statements for fiscal year 2020, including balance sheets, statements of operations, equity, and cash flows, along with the independent auditor's unqualified opinions on both financial statements and internal controls, noting inventory valuation as a critical audit matter [Reports of Independent Registered Public Accounting Firm](index=48&type=section&id=Reports%20of%20Independent%20Registered%20Public%20Accounting%20Firm) Grant Thornton LLP issued an unqualified opinion on Simpson Manufacturing's consolidated financial statements for the three years ended December 31, 2020, and on the effectiveness of internal control over financial reporting, identifying inventory valuation as a critical audit matter - The auditor, Grant Thornton LLP, issued an unqualified opinion on the consolidated financial statements[230](index=230&type=chunk) - The auditor also issued an unqualified opinion on the effectiveness of the company's internal control over financial reporting as of December 31, 2020[231](index=231&type=chunk)[243](index=243&type=chunk) - Inventory valuation was identified as a critical audit matter due to the significant management judgment and estimation uncertainty involved in forecasting future demand and assessing market conditions for slow-moving and obsolete inventory[235](index=235&type=chunk)[236](index=236&type=chunk) [Consolidated Financial Statements](index=52&type=section&id=Consolidated%20Financial%20Statements) The consolidated financial statements present the company's financial position and results for 2020, showing total assets of **$1.23 billion**, total liabilities of **$251.6 million**, total stockholders' equity of **$980.9 million**, and net income of **$187.0 million** on net sales of **$1.27 billion** Consolidated Balance Sheet Highlights (as of Dec 31) | (in thousands) | 2020 | 2019 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $274,639 | $230,210 | | Total current assets | $753,139 | $640,907 | | Total assets | $1,232,569 | $1,095,366 | | **Liabilities & Equity** | | | | Total current liabilities | $194,061 | $158,907 | | Total liabilities | $251,626 | $203,409 | | Total stockholders' equity | $980,943 | $891,957 | Consolidated Statement of Operations Highlights (Year Ended Dec 31) | (in thousands) | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | Net sales | $1,267,945 | $1,136,539 | $1,078,809 | | Gross profit | $576,384 | $492,130 | $480,287 | | Income from operations | $252,363 | $181,254 | $172,625 | | Net income | $187,000 | $133,982 | $126,633 | [Notes to Consolidated Financial Statements](index=56&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail accounting policies including revenue recognition and inventory valuation, provide segment information showing North America as the largest with **$1.1 billion** in 2020 net sales, discuss contingencies like the Gentry Homes lawsuit, and detail **$76.2 million** in 2020 stock repurchases - The company recognizes revenue when control transfers to the customer, which is generally F.O.B. shipping point[283](index=283&type=chunk) - In 2020, the company repurchased **1,053,314 shares** for **$76.2 million**. A new **$100.0 million** repurchase authorization was approved for 2021[311](index=311&type=chunk) - The company is a defendant in a lawsuit, Gentry Homes, Ltd. v. Simpson Strong-Tie, related to alleged corrosion of its products. The company admits no liability and cannot reasonably ascertain the likelihood or amount of a potential loss[361](index=361&type=chunk)[362](index=362&type=chunk) Net Sales by Product Group | (in thousands) | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | Wood Construction | $1,082,877 | $948,768 | $913,202 | | Concrete Construction | $184,631 | $187,462 | $165,317 | | Other | $437 | $309 | $290 | | **Total** | **$1,267,945** | **$1,136,539** | **$1,078,809** | [Changes in and Disagreements with Accountants on Accounting and Financial Disclosures](index=81&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosures) The company reports no changes in or disagreements with its accountants regarding accounting principles, practices, or financial statement disclosures - None[389](index=389&type=chunk) [Controls and Procedures](index=81&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of December 31, 2020, while continuing to monitor changes from the ongoing SAP ERP system implementation - As of December 31, 2020, the CEO and CFO concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level[390](index=390&type=chunk) - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2020, based on the COSO framework[391](index=391&type=chunk) - The company is in the process of a multi-year implementation of an SAP ERP platform, which is resulting in changes to its internal control over financial reporting. Management believes necessary steps have been taken to maintain appropriate controls during this transition[393](index=393&type=chunk)[394](index=394&type=chunk) [Other Information](index=82&type=section&id=Item%209B.%20Other%20Information) The company reports no other information for this item - None[397](index=397&type=chunk) PART III [Directors, Executive Officers and Corporate Governance](index=83&type=section&id=Item%2010.%20Directors,%20Executive%20Officers%20and%20Corporate%20Governance) Information regarding directors, executive officers, and corporate governance is incorporated by reference from the company's definitive Proxy Statement for its 2021 Annual Meeting of Stockholders - Information is incorporated by reference from the company's proxy statement for the 2021 Annual Meeting of Stockholders[400](index=400&type=chunk) [Executive Compensation](index=83&type=section&id=Item%2011.%20Executive%20Compensation) Information concerning executive compensation is incorporated by reference from the company's definitive Proxy Statement for its 2021 Annual Meeting of Stockholders - Information is incorporated by reference from the company's proxy statement for the 2021 Annual Meeting of Stockholders[401](index=401&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=83&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information concerning security ownership of certain beneficial owners and management is incorporated by reference from the company's definitive Proxy Statement for its 2021 Annual Meeting of Stockholders - Information is incorporated by reference from the company's proxy statement for the 2021 Annual Meeting of Stockholders[402](index=402&type=chunk) [Certain Relationship and Related Transactions, and Director Independence](index=83&type=section&id=Item%2013.%20Certain%20Relationship%20and%20Related%20Transactions,%20and%20Director%20Independence) Information concerning certain relationships, related transactions, and director independence is incorporated by reference from the company's definitive Proxy Statement for its 2021 Annual Meeting of Stockholders - Information is incorporated by reference from the company's proxy statement for the 2021 Annual Meeting of Stockholders[403](index=403&type=chunk) [Principal Accounting Fees and Services](index=83&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Information concerning principal accounting fees and services is incorporated by reference from the company's definitive Proxy Statement for its 2021 Annual Meeting of Stockholders - Information is incorporated by reference from the company's proxy statement for the 2021 Annual Meeting of Stockholders[404](index=404&type=chunk) PART IV [Exhibits and Financial Statement Schedules](index=83&type=section&id=Item%2015.%20Exhibits,%20Financial%20Statement%20Schedules) This section lists documents filed as part of the Form 10-K, including consolidated financial statements, Schedule II, and various exhibits such as governance documents, credit agreements, and required certifications - The consolidated financial statements and Schedule II (Valuation and Qualifying Accounts) are filed as part of the report[406](index=406&type=chunk)[407](index=407&type=chunk) - Exhibits filed include governance documents, credit agreements, employee compensation plans, a list of subsidiaries, consent of the auditor, and CEO/CFO certifications[409](index=409&type=chunk)[411](index=411&type=chunk) [Form 10-K Summary](index=87&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company reports no summary for this item - None[412](index=412&type=chunk)