Simpson Manufacturing Annual Report 2018

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FY2018 Annual Report · Simpson Manufacturing

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SIMPSON MANUFACTURING CO., INC.

Strength Built In

2018 ANNUAL REPORT

Advancing the industry – and our
business – through passion and precision.

Simpson Manufacturing Co., Inc.

Advancing the industry – and our

business – through passion and precision.

With more than 60 years of providing the highest-quality
structural building solutions, Simpson Strong-Tie has built a
strong foundation of product innovation, customer service
and industry leadership. And we continue to draw on that
rich heritage as we grow our business today — seeking
out profitable new markets worldwide, while researching
ever-better technology and products to help our customers
design and build safer, stronger structures.

2018 Annual ReportTo Our Stockholders

To our stockholders, customers and employees:

Simpson Manufacturing Co., Inc. was founded on the
principle of strengthening the performance and integrity of
building structures. Sixty-two years later, our commitment
to this mission is strong, and has been built into the core of
the company culture. At Simpson Manufacturing Co., Inc.,
through our subsidiary Simpson Strong-Tie Company Inc., we
pride ourselves on providing our customers with innovative
products and superior service. We are dedicated to maintaining
our trusted brand reputation through our proprietary testing
capabilities and deep industry relationships. We are devoted to
our employees and to ensuring that their workplace is a safe
and sustainable environment. Finally, we are committed to the
growth of Simpson Strong-Tie, and to providing value to all
stakeholders involved.

Operational Execution
2018 was a year of solid operational execution for our company.
We achieved consolidated full-year net sales of approximately
$1.1 billion, up 10% from $977 million in 2017, and we produced
strong earnings of $2.72 per diluted share, an increase of 40%
year-over-year.

In October of 2017 we announced a 2020 Plan focused on
maximizing operating efficiencies and enhancing long-term
stockholder value. The 2020 Plan is centered on three key
operational objectives which include driving organic growth;
rationalizing our cost structure to improve company-wide
profitability; and improving working capital management and
overall balance sheet discipline. In relation to these goals,
during 2018 we achieved:

• Strong growth in sales volume throughout almost all

areas of our company;

• A 230 basis point year-over-year improvement in
operating expenses as a percent of sales; and

• Approximately $160 million in cash flow generated

from operations, an increase of nearly $41 million, or
34% year-over-year.

These results represent tangible progress toward our key financial
targets under the 2020 Plan, and we are extremely proud of the
dedication and commitment from all of our employees who are
working hard to reach these goals.

Creating Stockholder Value
Our strong cash flow supported our capital allocation priorities
of returning a minimum of 50% of our cash flow from operations
to our stockholders in the form of dividends and repurchases
of shares of our common stock. In 2018 we paid $40 million in
quarterly cash dividends and repurchased $111 million of our
common stock. Our share repurchase activity in 2018 was a
record for Simpson Manufacturing Co., Inc., and reflects our
continued confidence in the strength and outlook of our business.

Over the past three years, we have increased our annual
dividend by approximately 40% and have repurchased more
than $230 million in shares, resulting in returns of our cash
flow from operations to stockholders of over 90%.

In addition, as part of our disciplined capital allocation strategy, we
also remain focused on augmenting organic growth with strategic
business acquisitions that fit our criteria for growth. This includes
enhancing our exposure to additional product lines or geographies
that align with our diversification strategy to become less reliant on
US housing starts.

Finally, we would like to acknowledge Peter Louras, our former
Chairman, who is currently serving as a Board Director but
will not be standing for re-election at our annual meeting in
April of 2019, as he will have reached the end of his 20-year
term limit. On behalf of the Board and management team at
Simpson Strong-Tie, we would like to thank Peter for his many
contributions over the past 20 years. His guidance has been
instrumental in the company’s achievements to date.

On behalf of everyone at Simpson Manufacturing Co., Inc.,
we thank you for your ongoing support.
As we look ahead to 2019, we remain committed to achieving our
2020 financial targets and focusing on the areas of our business
we can control to ensure long-term sustainable growth, enhanced
operating leverage and profitability, and continued return of capital
to our valued stockholders.

Thank you for your continuous support,

Karen Colonias
President and
Chief Executive Officer

James Andrasick
Non-Executive Chairman of the
Board of Directors

As part of an orderly transition, James Andrasick was named
Chairman of the Board of Directors effective January 1, 2019.
Mr. Andrasick has been a member of the Board since 2012 and
currently serves as chair of its Audit and Finance Committee
and serves on its Nominating and Governance Committee and
Corporate Strategy and Acquisitions Committee.

Simpson Manufacturing Co., Inc.

Financial Highlights

2018

2017

% Change

Capital Allocation 2018

Net Sales

$1,078,809

$977,025

10.4%

Income from
Operations

$172,332

$137,915

27.8%

Net Income

$126,633

$92,617

39.8%

Diluted Earnings
per Share

$2.72

$1.94

43.4%

1%
M&A

16%
CapEx

22%
Dividends

61%
Share
Repurchases

Total Assets

$1,021,663

$1,037,523

–1.5%

OPERATIONS IN

Stockholders’
Equity

Common Shares
Outstanding

Number of
Employees

$855,514

$884,778

– 3.0%

44,998

46,475

– 2.7%

3,135

2,902

8.0%

LOCATIONS

Dollars in thousands except per-share amounts.

Dividends per Share

Earnings per Share

Net Sales
Stockholders’ Equity

1.10

1.00

0.90

0.80

0.70

0.60

0.50

0.40

0.30

0.20

0.10

2.80

2.60

2.40

2.20

2.00

1.80

1.60

1.40

1.20

1.00

0.80

0.60

0.40

0.20

2014

2015

2016

2017

2018

2014

2015

2016

2017

2018

2014

2015

2016

2017

2018

1,100,000

1,000,000

900,000

800,000

700,000

600,000

500,000

400,000

300,000

200,000

100,000

2018 Annual Report

Relentlessly innovating
structural solutions to enhance
safety and strength.

Since Barclay Simpson founded our company in
1956, we’ve been driven by an abiding passion and
purpose — helping people design and build safer,
stronger structures.

Every day, we’re intensifying our research through
our state-of-the-art laboratories, professional
engineering and exhaustive full-scale testing. We’re
continually refining our solutions, developing the
most innovative and comprehensive product lines
in the construction industry.

And we’re always seeking organic pathways
to diversify our core business. Recently we’ve
expanded on our heritage of wood, concrete and
steel connection innovation with new products and
tools for the cross-laminated timber, wastewater
treatment, and mid-rise and cold-formed steel
markets — helping designers and builders work
smarter and more efficiently.

Simpson Manufacturing Co., Inc.5

2018 Annual Report6

Simpson Manufacturing Co., Inc.B

TRUSS

DIRECTOR

Selector®

SConnector
C

Screw
Substitution
Calculator

C
S
S

Planner
Software™

SDeck
P
D

Smarter
technology
built around
our customers’
business.

Every year we continue to build on our legacy
of product and technological innovations.
By cultivating and leveraging a deep
understanding of our customers’ needs,
we’ve created a range of customizable
product software and integrated technology
tools that help builders, lumber dealers and
component manufacturers specify products
and streamline their workflows.

In addition to our specialized technology
solutions, our evolving training workshops,
webinars, video library, web apps and
educational content provide the product
knowledge and design tools that empower
customers to solve real-world challenges.
And by continuing to offer the dedicated
service and technical support on which
we’ve built our name, we ensure that the
loyalty and trust of our customers and
strategic partners grew stronger every year.

2018 Annual ReportAnchors

Concrete

Decorative
Structural
Hardware

Decking
Outdoor

Connectors

Wood Construction
CLT Construction

Cold-Formed
Steel

Structural Steel Construction
Curved Drywall Framing

Simpson Manufacturing Co., Inc.Lateral-Force
Resisting Systems

Multistory Construction
Mid-Rise Steel

Repair,
Protect and
Strengthen

Wastewater Treatment
Bridge and Marine

Fasteners and
Fastening
Systems

Wood Construction
Concrete Construction

2018 Annual ReportA core belief
in doing
what’s right for
our people,
customers and
communities.

Doing what’s right is ingrained in our company culture and values.
And we honor that in many ways — from our national support of
Habitat for Humanity International to our newly created Do What
You Can Day, a company-wide effort to support local communities.

We remain committed to our employees and their families by offering
a variety of programs designed to enhance their physical, mental and
financial well-being, and by dedicating time and resources toward
strengthening the places where they work and live.

By prioritizing social responsibility and giving back, we celebrate and
embody the core values established by our founder, Barc Simpson —
and reinforce our Strength Built In legacy.

Simpson Manufacturing Co., Inc.11

2018 Annual ReportOffice
Street Address | 5956 W. Las Positas Boulevard, Pleasanton, CA 94588, USA | (800) 925-5099
Mailing Address | P.O. Box 10789, Pleasanton, CA 94588

2018 Officers

Karen Colonias
President and Chief Executive Officer

Roger Dankel
President, North American Sales
Simpson Strong-Tie Company Inc.

Ricardo M. Arevalo
Chief Operating Officer
Simpson Strong-Tie Company Inc.

Brian J. Magstadt
Chief Financial Officer, Treasurer and Secretary

Kevin Swartzendruber
Senior Vice President, Finance

Board of Directors

James S. Andrasick(2)(3)(4)
Chairman
Matson Navigation

Karen Colonias(4)
President and Chief Executive Officer

Peter N. Louras, Jr.(1) (2) (4)
Former Chairman
Group Vice President (retired)
The Clorox Company

Jennifer A. Chatman(1)(2)
Paul J. Cortese Distinguished
Professor of Management
Haas School of Business,
University of California, Berkeley

Gary M. Cusumano(1)(3) (4)
Chairman (retired)
The Newhall Land and Farming Company

Celeste Volz Ford(1)(3) (4)
Board Chair
Stellar Solutions, Inc.

Robin Greenway MacGillivray (1)(3)
Senior Vice President (retired)
One AT&T Integration – AT&T

Michael A. Bless(2)(4)
Chief Executive Officer
Century Aluminum Company

Philip E. Donaldson(2) (4)
Executive Vice President and Chief Financial Officer
Anderson Corporation

Annual Meeting
The annual meeting of stockholders will take place at 2:00 p.m.,
Pacific Daylight Time, on Friday, April 26, 2019, at the Company’s home
office located at 5956 W. Las Positas Boulevard, Pleasanton, California.

Stock Listing
Simpson Manufacturing Co., Inc.’s (the “Company’s”) common stock is
traded on the New York Stock Exchange under the ticker “SSD.”

Quarterly Stock Data
The table below shows the per-share closing price range of the
Company’s common stock for the last two years as quoted on the New
York Stock Exchange.

2018

2017

High

Low

High

Low

$71.93 $49.80

$54.13

$60.92 $48.63

$57.41

$77.76

$59.89 $72.46

$49.32

$42.01 $49.04

$67.20

$54.68 $62.19

$44.13

$40.18 $43.71

$60.43

$55.32 $57.59

$44.94

$41.55 $43.09

Form 10-K
The Company’s annual report on Form 10-K (which is included in this
report) and its quarterly and current reports on Forms 10-Q and 8-K are
filed with the Securities and Exchange Commission and are available upon
request. These reports are also available on the Company’s website at
simpsonmfg.com.

Investor Relations
ADDO Investor Relations
Investor.relations@strongtie.com
(310) 829-5400

For an investor information package, please call (925) 560-9097.

Transfer Agent & Registrar
P.O. Box 30170, College Station, Texas 77842

For stockholder inquiries, please call (877) 282-1168.
computershare.com

Independent Registered Public Accountants
Grant Thornton LLP
101 California Street, Suite 2700, San Francisco, CA 94111

(1) Member of Compensation and Leadership Development Committee
(2) Member of Audit and Finance Committee
(3) Member of Nominating and Governance Committee
(4) Member of Corporate Strategy and Acquisitions Committee

Simpson Manufacturing Co., Inc.

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K

(Mark One)

Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended December 31, 2018
OR
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

for the transition period from to
Commission file number: 1-13429
Simpson Manufacturing Co., Inc.
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)

5956 W. Las Positas Blvd., Pleasanton, CA
(Address of principal executive offices)

94-3196943
(I.R.S. Employer
Identification No.)

94588
(Zip Code)

Registrant’s telephone number, including area code: (925) 560-9000
Securities registered pursuant to Section 12(b) of the Act:

Common Stock, par value $0.01
(Title of each class)

New York Stock Exchange, Inc.
(Name of each exchange on which registered)

Securities registered pursuant to Section 12(g) of the Act:
None
(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.

Yes

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the

Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted

pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit such files). Yes

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter)

is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller

reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller
reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Non-accelerated filer

Accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected has elected not to use the extended
transition period for complying with the new or revised financial accounting standards provided pursuant to Section 13 (a) of the
Exchange Act

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes

As of June 30, 2018, there were outstanding 46,324,848 shares of the registrant’s common stock, par value $0.01, which is the
only outstanding class of common or voting stock of the registrant. The aggregate market value of the shares of common stock held

by non-affiliates of the registrant (based on the closing price for the common stock on the New York Stock Exchange on June 30, 2018)
was approximately $2,869,585,657

As of February 26, 2019, 44,842,697 shares of the registrant’s common stock were outstanding.

Documents Incorporated by Reference

Portions of the registrant's definitive Proxy Statement for its 2019 annual meeting of the stockholders (the "2019 Annual Meeting")
are incorporated herein by reference in Part III of this Annual Report on Form 10-K to the extent stated herein. Such Proxy Statement
will be filed with the Securities and Exchange Commission (the "SEC") within 120 days of the registrant's fiscal year ended December 31,
2018.

NOTE ABOUT FORWARD-LOOKING STATEMENTS

This document contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995,
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”). All statements relating to events or results that may occur in the future are forward-looking statements, including
but not limited to, statements or estimates regarding our plans, sales, sales trends, sales growth rates, revenues, profits, costs,
working capital, balance sheet, inventories, products (including truss and concrete products as well as software offerings),
relationships with contractors and partners (including our collaboration with The Home Depot, Inc.), market strategies, market
share, expenses (including operating expenses and research, development, engineering and capital investments), inventory turn
rates, cost savings or reduction measures, repatriation of funds, results of operations, tax liabilities, losses, capital spending, housing
starts, price changes (including product and raw material prices, such as steel prices), profitability, profit margins, operating income,
operating income margin (referring to consolidated income from operations as a percentage of net sales), operating expenses as
a percentage of net sales, effective tax rates, depreciation or amortization expenses, amortization periods, capital return (also called
return on invested capital), technology and system improvements, competitive environment, indemnification obligations, stock
repurchases, dividends, compensation arrangements, prospective adoption of new accounting standards, effects of changes in
accounting standards, effects and expenses of (including eventual gains or losses related to) mergers and acquisitions and related
integrations, effects and expenses of equity investments, effects of changes in foreign exchange rates or interest rates, effects and
costs of SAP and other software program implementations (including related expenses, such as capital expenditures, and savings),
effects and costs of credit facilities and capital lease obligations, headcount, engagement of consultants, the Company’s 2020 Plan
and other operating initiatives, the Company’s efforts and costs to implement the 2020 Plan and initiatives, the targets and
assumptions under the 2020 Plan and such other initiatives (including targets associated with organic compound annual growth
rate in consolidated net sales, operating income, operating income margin, operating expenses as a percentage of net sales, cost
structure rationalization, improved working capital management, return on invested capital, stock repurchases, and overall balance
sheet discipline) and the projected effects and impact of any of the foregoing on our business, financial condition and results of
operations. Forward-looking statements generally can be identified by words such as “anticipate,” “believe,” “estimate,” “expect,”
“intend,” “plan,” “target,” “continue,” “predict,” “project,” “change,” “result,” “future,” “will,” “could,” “can,” “may,” “likely,”
“potentially,” or similar expressions. Forward-looking statements are necessarily speculative in nature, are based on numerous
assumptions, and involve known and unknown risks, uncertainties and other factors (some of which are beyond our control) that
could significantly affect our operations and may cause our actual actions, results, financial condition, performance or achievements
to be substantially different from any future actions, results, financial condition, performance or achievements expressed or implied
by any such forward-looking statements. Those factors include, but are not limited to: (i) the impact, execution and effectiveness
of the Company’s current strategic plan, the 2020 Plan, and initiatives the realization of the assumptions made under the plan and
the efforts and costs to implement the plan and initiatives; (ii) general economic cycles and construction business conditions
including changes in U.S. housing starts; (iii) customer acceptance of our products; (iv) product liability claims, contractual liability,
engineering and design liability and similar liabilities or claims, (v) relationships with partners, suppliers and customers and their
financial condition; (vi) materials and manufacturing costs; (vii) technological developments, including system updates and
conversions; (viii) increased competition; (ix) changes in laws or industry practices; (x) litigation risks and actions by activist
shareholders; (xi) changes in market conditions; (xii) governmental and business conditions in countries where our products are
manufactured and sold; (xiii) natural disasters and other factors that are beyond the Company’s reasonable control; (xiv) changes
in trade regulations, treaties or agreements or in U.S. and international taxes, tariffs and duties including those imposed on the
Company’s income, imports, exports and repatriation of funds; (xv) effects of merger or acquisition activities; (xvi) actual or
potential takeover or other change-of-control threats; (xvii) changes in our plans, strategies, objectives, expectations or intentions;
and (xviii) other risks and uncertainties indicated from time to time in our filings with the U.S. Securities and Exchange Commission,
including this Annual Report on Form 10-K under the heading “Item 1A - Risk Factors.” In light of the foregoing, investors are
advised to carefully read the Company’s securities filings in connection with the important disclaimers set forth above and are
urged not to rely on any forward-looking statements in reaching any conclusions or making any investment decisions about us or
our securities. Except as required by law, we do not intend and undertake no obligation to update, revise or publicly release any
updates or revisions to any forward-looking statements hereunder, whether as a result of the receipt of new information, the
occurrence of future events, the change of circumstances or otherwise. We further do not accept any responsibility for any projections
or reports published by analysts, investors or other third parties. Each of the terms the “Company,” “we,” “our,” “us” and similar
terms used herein refer collectively to Simpson Manufacturing Co., Inc., a Delaware corporation and its wholly-owned subsidiaries,
including Simpson Strong-Tie Company Inc., unless otherwise stated. The Company regularly uses its website to post information
regarding its business and governance. The Company encourages investors to use http://www.simpsonmfg.com/ as a source of
information about Simpson.

“Strong-Tie” and our other trademarks appearing in this report are our property. This report contains additional trade names and
trademarks of other companies. We do not intend our use or display of other companies’ trade names or trademarks to imply an
endorsement or sponsorship of us by such companies, or any relationship with any of these companies.

Item 1. Business.

Company Background

PART I

The Company is focused on making structures safe and secure. The Company, through its wholly owned subsidiary, Simpson
Strong-Tie Company Inc. ("SST"), designs, engineers and is a leading manufacturer of wood construction products, including
connectors, truss plates, fastening systems, fasteners and pre-fabricated lateral systems used in light-frame construction, and
concrete construction products used for concrete, masonry, steel construction and for concrete repair, protection and strengthening,
including adhesives, chemicals, mechanical anchors, carbide drill bits, powder actuated tools and fiber reinforced materials. The
Company markets its products to the residential construction, light industrial and commercial construction, remodeling and do-
it-yourself (“DIY”) markets. The Company also provides engineering services in support of some of its products and increasingly
offers design and other software that facilitates the specification, selection and use of its products. The Company has continuously
manufactured structural connectors since 1956 and believes that the Simpson Strong-Tie brand benefits from strong brand name
recognition among architects and engineers who frequently request the use of the Company’s products.

Business Strategy

The Company attracts and retains customers by designing, manufacturing and selling products that are of high quality and
performance, easy to use and cost-effective for customers. The Company manufactures and warehouses its products in geographic
proximity to its markets to provide availability and rapid delivery of products to customers and prompt response to customer
requests for specially designed products and services. The Company maintains levels of inventory intended to operate with little
backlog and fill most customer orders within a few days. High levels of manufacturing automation and flexibility allow the
Company to maintain its quality standards while continuing to provide prompt delivery.

The Company intends to continue efforts to increase market share in both the wood construction and concrete construction product
groups by:

• maintaining frequent customer contacts and service levels;
•

continuing to sponsor seminars to inform architects, engineers, contractors and building officials on appropriate use,
proper installation and identification of the Company’s products;
continuing to invest in mobile, web and software applications for customers to help them do their jobs more efficiently
and connect with customers utilizing social media, blog posts and videos; and
continuing to innovate and diversify the product offerings.

•

The Company’s long-term strategy is to develop, acquire or invest in product lines or businesses that have the potential to increase
the Company’s earnings per share over time and that:

complement the Company’s existing product lines;
can be marketed through the Company’s existing distribution channels;

•
•
• might benefit from use of the Company’s brand names and expertise;
•
•
•

are responsive to needs of the Company’s customers;
expand the Company’s markets geographically; and
reduce the Company’s dependence on the United States residential construction market.

New Products. The Company commits substantial resources to new product development. The majority of SST’s products have
been developed through its internal research and development program. The Company believes it is the only United States
manufacturer with the capability to test multi-story wall systems, thus enabling full scale testing rather than analysis alone to prove
system performance. The Company’s engineering, sales, product management, and marketing teams work together with architects,
engineers, building inspectors, code officials and customers in the new product development process.

The Company’s product research and development is based largely on products or solutions that are identified within the Company
or as customers communicate to the Company as well as the Company’s strategic initiatives to develop new markets or product
lines. The Company’s strategy is to develop new products on a proprietary basis, to seek patents when appropriate and to rely on
trade secret protection for others. The Company typically develops 15 to 25 new products each year.

The Company expanded its product offering in 2018 by adding:

•
•
•
•
•
•

new connectors for wood framing applications;
new connectors for cross laminated timber;
new steel connection for mid-rise steel construction;
new connectors for cold formed steel applications;
new products for composite decking; and
new mechanical anchors for concrete construction.

The Company intends to continue to expand its product offering.

Distribution channels. The Company seeks to expand its product and distribution coverage through several channels:

• Distributors. The Company regularly evaluates its distribution coverage and the service levels provided by its distributors,
and from time to time implements changes. The Company evaluates distributor product mix and conducts promotions to
encourage distributors to add the Company’s products that complement the mix of product offerings in their markets.
• Home Centers. The Company intends to increase penetration of the DIY markets by continuing to solicit home centers
and increase product offerings. The Company’s sales force maintains on-going contact with home centers to work with
them in a broad range of areas, including inventory levels, retail display maintenance and product knowledge training.
The Company’s strategy is to ensure that the home center retail stores are fully stocked with adequate supplies of the
Company’s products carried by those stores. The Company has further developed extensive bar coding and merchandising
aids and has devoted a portion of its research efforts to the development of DIY products. The Company’s sales to home
centers increased year-over-year in 2018, 2017 and 2016.

• Dealers. In some markets, the Company sells its products directly to lumber dealers and cooperatives.
• OEM Relationships. The Company works closely with manufacturers of engineered wood products and OEMs to develop
and expand the application and sales of its engineered wood connector and fastener products. The Company has
relationships with several of the largest manufacturers of engineered wood products.
International Sales. The Company has established a presence in the European Community through acquisition of
companies with existing customer bases and through servicing United States-based customers operating in Europe. The
Company also distributes connector, anchor and epoxy products in Mexico, Chile, Australia, New Zealand, and the Middle
East.

•

See “Item 1A — Risk Factors,” “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of
Operations,” and “Note 18 — Segment Information” to the accompanying audited consolidated financial statements included in
Part II, Item 8 — "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K (the "Company’s
Consolidated Financial Statements").

Operating Segments and Geographic Areas

The Company is organized into three operating segments consisting of the North America, Europe and Asia/Pacific segments. The
North America segment includes operations primarily in the United States and Canada. The Europe segment includes operations
primarily in France, the United Kingdom, Germany, Denmark, Switzerland, Portugal, Poland, The Netherlands, Belgium, Spain,
Sweden and Norway. The Asia/Pacific segment includes operations primarily in Australia, New Zealand, China, Taiwan, and
Vietnam. These segments are similar in several ways, including similarities in the products manufactured and distributed, the types
of materials used, the production processes, the distribution channels and the product applications.

Products and Services

The Company manufactures and markets building and construction products and is a recognized brand name in residential and
commercial applications. The product lines historically have encompassed connectors, anchors, fasteners, lateral resistive systems,
truss plates, as well as repair and strengthening product lines for the marine, industrial and transportation markets. See “Item 7
— Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Note 18 — Segment
Information” to the Company’s Consolidated Financial Statements for financial information regarding revenues by product
category.

Most of the Company’s products are approved by building code evaluation agencies. To achieve such approvals, the Company
conducts extensive product testing, which is witnessed and certified by independent testing laboratories. The tests also provide
the basis of load ratings for the Company’s structural products. This test and load information is used by architects, engineers,

contractors, building officials and homeowners and is useful across all applications of the Company’s products, ranging from the
deck constructed by a homeowner to a multi-story structure designed by an architect or engineer.

Wood Construction Products. As described below, the Company’s wood construction products include (1) connectors, (2) truss
plates, (3) fastening systems and (4) lateral systems, and are typically made of steel. The Company produces and markets over
15,000 standard and custom wood construction products. These products are used primarily to strengthen, support and connect
wood applications in residential and commercial construction and DIY projects. The Company’s wood construction products
contribute to structural integrity and resistance to seismic, wind and other forces.

1. The Company’s connectors are prefabricated metal products that attach wood, concrete, masonry or steel together.

Connectors are essential for tying wood construction elements together and create safer and stronger buildings.

2. The Company’s truss connector plates and software are marketed under the name Integrated Component Systems. Truss
plates are toothed metal plates that join wood members together to form a truss. The Company continues to develop
sophisticated software to assist truss and component manufacturers’ in modeling, designing trusses and selecting the
appropriate truss plates for the applicable jobs.

3. The Company’s fastener line includes various nails, screws and staples. Complementing these products is the Quik Drive

auto-feed screw driving system used in numerous applications such as decking, subfloors, drywall and roofing.

4. The Company’s lateral resistive systems are assemblies used to resist earthquake or wind forces and include Steel and

Wood Shearwalls, Anchor Tiedown Systems (“ATS”) and steel moment frames.

Concrete Construction Products. As described below, the Company’s concrete construction products include (1) anchor products,
and (2) repair, protection and strengthening products. The Company produces and markets over 1,000 standard and custom concrete
construction products. The Company’s concrete construction products are composed of various materials including steel, chemicals
and carbon fiber. They are used primarily to anchor, protect and strengthen concrete, brick and masonry applications in industrial,
infrastructure, residential, commercial and DYI projects. The Company’s concrete construction products contribute to structural
integrity and resistance to seismic, wind and other forces. These products are sold in all segments of the Company worldwide.

1. The Company’s concrete construction anchor products include adhesives, mechanical anchors, carbide drill bits and
powder-actuated pins and tools used for numerous applications of anchoring or attaching elements onto concrete, brick,
masonry and steel.

2. The Company's concrete construction repair, protection and strengthening products include grouts, coatings, sealers,

mortars, fiberglass and fiber-reinforced polymer systems and asphalt products.

Engineering and Design Services. The Company’s engineers not only design and test products, but also provide engineering
support for customers in connection with a number of products that the Company manufactures and sells. This support might
range from the discussion of a load value in a catalog to testing the suitability of an existing product in a unique application. For
certain product lines, industry norms require that the Company’s engineers are more involved in the sales process. For example,
in connection with the sale of our truss plates, the Company’s engineers review the output of the Company’s software to assist
customers in ensuring that trusses are properly designed and specified, and in some instances seal design diagrams. Generally, in
connection with any engineering services the Company provides, the Company’s engineers serve as a point of reference and
support for the customer’s engineers and other service professionals, who ultimately determine and are responsible for the
engineering approach to any project.

Sales and Marketing

The Company’s sales and marketing programs are implemented through its branch system. The Company currently maintains
branches in California, Texas, Ohio, Canada, England, France, Germany, Denmark, Switzerland, Poland, Portugal, Austria, The
Netherlands, Ireland, Belgium, Sweden, Norway, Spain, Australia, New Zealand, and Chile. Each branch is served by its own
sales force, warehouse and office facilities, while some branches have their own manufacturing facilities. Each branch is responsible
for setting and executing sales and marketing strategies that are consistent both with the markets in the geographic area that the
branch serves and with the goals of the Company. Branch sales forces in North America are supported by marketing managers in
the home office in Pleasanton, California. The home office also coordinates issues affecting customers that operate in multiple
regions. The sales force maintains close working relationships with customers, develops new business, calls on architects, engineers
and building officials and participates in a range of educational seminars.

The Company dedicates substantial resources to customer service. The Company produces numerous publications and point-of-
sale marketing aids to serve specifiers, distributors, retailers and users for the various markets that it serves. These publications
include general catalogs, as well as various specific catalogs, such as those for its fastener products. The catalogs and publications
describe the products and provide load and installation information. The Company also maintains several linked websites centered
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on www.strongtie.com, which include catalogs, product and technical information, code reports and other general information
related to the Company, its product lines and promotional programs. The contents of these websites are not incorporated into this
filing. Further, the Company’s references to the URLs for these websites are intended to be inactive textual references only.

Manufacturing Process

The Company designs and manufactures most of its products. The Company has developed and uses automated manufacturing
processes for many of its products. The Company’s innovative manufacturing systems and techniques have allowed it to control
manufacturing costs, even while developing both new products and products that meet customized requirements and specifications.
The Company’s development of specialized manufacturing processes has also permitted increased operating flexibility and
enhanced product design innovation. As part of ongoing continuous improvement processes in its factories, the Company’s major
North American and European manufacturing facilities initiated lean manufacturing practices to improve efficiency and customer
service. The Company sources some products from third-party vendors, both domestically and internationally. The Company has
26 manufacturing locations in the United States, Canada, France, Denmark, Germany, Switzerland, Poland, Portugal, Belgium,
Sweden, China and England.

Quality Control. The Company has developed a quality system that manages defined procedures to ensure consistent product
quality and also meets the requirements of product evaluation reports such as the International Code Council Evaluation Services
(ICC-ES) and the International Association of Plumbers and Mechanical Officials Uniform Evaluation Services (IAPMO-UES).
Since 1996, the Company’s quality system has been registered under ISO 9001, an internationally recognized set of quality-
assurance standards. The Company believes that ISO registration is a valuable tool for maintaining and promoting its high quality
standards. As the Company establishes new business locations through expansion or acquisitions, projects are established to
integrate the Company’s quality systems and achieve ISO 9001 registration. In addition, the Company has six testing laboratories
accredited to ISO standard 17025, an internationally accepted standard that provides requirements for the competence of testing
and the further specialized accreditation for various Acceptance Criteria. The Company implements testing requirements through
systematic control of its processes, enhancing the Company’s standard for quality products, whether produced by the Company
or purchased from others.

Wood Construction Products Manufacturing. Most of the Company’s wood construction products are produced with a high level
of automation. The Company has significant press capacity and has multiple dies for some of its high volume products to enable
production of these products close to the customer and to provide back-up capacity. The balance of production is accomplished
through a combination of manual, blanking and numerically controlled (NC) processes that include robotic welders, lasers and
turret punches. This capability allows the Company to produce products with little redesign or set-up time, facilitating rapid
turnaround for customers. The Company also has smaller specialty production facilities, which primarily use batch production
with some automated lines.

Concrete Construction Products Manufacturing. The Company manufactures its concrete construction products at its facilities
in Zhangjiagang, China; West Chicago, Illinois; Cardet, France; Seewen, Switzerland; Malbork, Poland; Elvas, Portugal and
Madrid, Spain. The mechanical anchor products are produced with a high level of automation. Some products, such as epoxy and
adhesive anchors, are mixed in batches and are then loaded into one-part or two-part dispensers, which mix the product on the job
site because set-up times are usually very short. In addition, the Company purchases a number of products, powder actuated pins,
tools and accessories and certain of its mechanical anchoring products, from various sources around the world. These purchased
products undergo inspections on a sample basis for conformance with ordered specifications and tolerances before being distributed.

Regulation

Environmental Regulation. The Company itself is subject to environmental laws and regulations governing emissions into the
air, discharges into water, and generation, handling, storage, transportation, treatment and disposal of waste materials. The Company
is also subject to other federal and state laws and regulations regarding health and safety matters. The Company believes that it
has obtained all material licenses and permits required by environmental, health and safety laws and regulations in connection
with the Company’s operations and that its policies and procedures comply in all material respects with existing environmental,
health and safety laws and regulations. See “Item 1A — Risk Factors.”

Other. The Company’s product lines are subject to federal, state, county, municipal and other governmental and quasi-governmental
regulations that affect product development, design, testing, analysis, load rating, application, marketing, sales, exportation,
installation and use.

The Company considers product evaluation, recognition and listing to the building code as a significant tool that facilitates and
expedites the use of the Company’s products by design professionals, building officials, inspectors, builders, home centers and
19

contractors. Industry members are more likely to use building products that have the appropriate recognition and listing than
products that lack this acceptance. The Company devotes considerable time and testing resources to obtaining and maintaining
appropriate listings for its products. The Company actively participates in industry related professional associations and building
code committees both to keep abreast of regulatory changes and to provide comments and expertise to these regulatory agencies.

A substantial portion of the Company’s products have been evaluated and are recognized by governmental and product evaluation
agencies. Some of the entities that recognize the Company’s products include the International Code Council Evaluation Service
(ICC-ES), the International Association of Plumbing and Mechanical Officials Uniform Evaluation Services (IAPMO-UES), the
City of Los Angeles Research Reports (LARR’s), California Division of the State Architect Interpretation of Regulations (DSA
IR’s), the State of Florida, Underwriters Laboratory (UL), Factory Mutual (FM) and state departments of transportation. In Europe,
the Company’s structural products meet European Technical Agreement (ETA) regulations.

Competition

The Company faces a variety of competition in all of the markets in which it participates. This competition ranges from subsidiaries
of large national or international corporations to small regional manufacturers. While price is an important factor, the Company
also competes on the basis of quality, breadth of product line, proprietary technology, technical support, availability of inventory,
service (including custom design and manufacturing), field support and product innovation. As a result of differences in structural
design and building practices and codes, the Company’s markets tend to differ by region. Within these regions, the Company
competes with companies of varying size, several of which also distribute their products nationally or internationally. See “Item
1A — Risk Factors.”

Raw Materials

The principal raw material used by the Company is steel, including stainless steel. The Company also uses materials such as carbon
fiber, fiberglass, mortars, grouts, epoxies and acrylics in the manufacture of its chemical anchoring and reinforcing products. The
Company purchases raw materials from a variety of commercial sources. The Company’s practice is to seek cost savings and
enhanced quality by purchasing from a limited number of suppliers.

The steel industry is highly cyclical and prices for the Company’s raw materials are influenced by numerous factors beyond the
Company’s control. The steel market continues to be dynamic, with a high degree of uncertainty about future pricing trends. Given
current conditions, including significant import tariffs and duties, and unsettled international trade disputes, the Company currently
expects that the high degree of uncertainty regarding steel prices will continue. Numerous factors may cause steel prices to increase
in the future. In addition to increases in steel prices, steel mills may add surcharges for zinc, energy and freight in response to
increases in their costs. See “Item 1A — Risk Factors” and “Item 7 — Management’s Discussion and Analysis of Financial
Condition and Results of Operations.” The Company historically has not attempted to hedge against changes in prices of steel or
other raw materials. However, the Company may purchase and carry more steel or other raw materials in inventory to meet projected
sales demand in a tight raw materials market.

Patents and Proprietary Rights

The Company has United States and foreign patents, the majority of which cover products that the Company currently manufactures
and markets. These patents, and applications for new patents, cover various design aspects of the Company’s products, as well as
processes used in their manufacture. The Company continues to develop new potentially patentable products, product enhancements
and product designs. Although the Company does not intend to apply for additional foreign patents covering existing products,
the Company has developed an international patent program to protect new products that it may develop. In addition to seeking
patent protection, the Company relies on unpatented proprietary technology to maintain its competitive position. See “Item 1A
— Risk Factors.”

Acquisitions and Expansion into New Markets

We have invested in our strategic initiative to sell engineered product solutions, to help us perform throughout all industry
cycles, which we estimate supports approximately 40% of our connector and truss plate sales. In support of this effort, we
acquired CG Visions, Inc. (“CG Visions”) in 2017, and completed our purchase of the LotSpec software asset and entered into a
strategic software partnership with Hyphen Solutions ("Hyphen") in 2018.

The LotSpec software asset is a suite of software applications that facilitate builders’ abilities to complete complex designs and
do full take-offs in collaboration with our CG Visions software. Hyphen offers integrated information exchange between its software
and our existing CG Visions' take-off platform to more efficiently create detailed plan estimates, designs and production
specifications to automatically flow through to purchasing systems. We believe that the LotSpec software purchase and the Hyphen
strategic partnership align well with our strategy to continue strengthening our value proposition by being the industry's trusted
partner in construction solutions and building systems software.

In January 2017, the Company acquired CG Visions, Inc. ("CG Visions"), an Indiana corporation, for $20.8 million. CG Visions
provides scalable technologies and services in building information modeling ("BIM") technologies, estimation tools and software
solutions to a number of the top 100 mid-sized to large builders in the United States, which are expected to complement and
support the Company's sales in North America.

In August 2016, the Company purchased all of the outstanding shares of Multi Services Dêcoupe S.A. ("MS Decoupe"), a Belgium
public limited company, for $6.9 million. MS Decoupe primarily manufactures and distributes wood construction, plastic, and
metal labeling products in Belgium and the Netherlands, including distributing the Company's products manufactured at the
Company's production facility in France. With this acquisition, the Company will offer the Belgium market a wider-range of its
products, shorten delivery lead times, and expand the Company's sales presence into the Netherlands market.

Seasonality and Cyclicality

The Company’s sales are seasonal and cyclical. Operating results vary from quarter to quarter and with economic cycles. The
Company’s sales are also dependent, to a large degree, on the North American residential home construction industry. See “Item
1A — Risk Factors” and “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Employees and Labor Relations

As of December 31, 2018, the Company had 3,135 full-time employees, of whom 1,806 were hourly employees and 1,329 were
salaried employees. The Company believes that its overall compensation and benefits for the most part meet or exceed industry
averages and that its relations with its employees are good.

As of December 31, 2018, approximately 14% of the Company's employees are represented by labor unions and are covered by
collective bargaining agreements. We have two-facility locations with collective bargaining agreements covering tool and die
craftsmen, maintenance workers, and sheet-metal workers. In Stockton, California, two union contracts will expire in September
2019 and June 2023, respectively. Also, we have two contracts in San Bernardino County, California that will expire in June 2022
and February 2021, respectively. We expect to agree on the extension with the existing labor union contract that will expire in
September 2019, while parties are negotiating a new agreement. Based on current information and subject to future events and
circumstances, we believe that, even if new agreements are not reached before the existing labor union contracts expire, it is not
expected to have a material adverse effect on the Company's ability to provide products to customers or on the Company's
profitability. See “Item 1A — Risk Factors.”

Available Information

The Company makes available, free of charge, on its website www.simpsonmfg.com, copies of its annual reports on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements, and amendments to reports filed pursuant to
Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) after the Company files them
with the U.S. Securities and Exchange Commission (“SEC”). Printed copies of any of these materials will also be provided free
of charge on request.

The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers
that file electronically with the SEC at www.sec.gov.

The contents of the websites referred to above are not incorporated into this filing. Further, our references to the URLs for these
websites are intended to be inactive textual references only.

Item 1A. Risk Factors.

Investing in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described
below, in addition to other information contained in this Annual Report on Form 10-K, including our consolidated financial
statements and related notes thereto, before you decide to buy or hold shares of our common stock. The risks and uncertainties
described below are not the only ones we face. Additional risks and uncertainties that we are unaware of, or that we currently
believe are not material, may also become important factors that adversely affect our business. We may not be able to control any
of those risks and uncertainties. If any of those risks and uncertainties, whether described below or not, actually occurs, our
business, results of operations, financial condition and future prospects could be materially and adversely affected, and you may
lose all or part of your investment.

To facilitate a review of our risk factors, we have organized our risk factors into general groups of risks, including “General
Business Risks,” “Products, Services and Sales Risks,” “Technological and Intellectual Property Risks,” “Regulatory Risks,”
“Capital Expenditures, Expansions, Acquisitions and Divestitures Risk,” “International Operations Risks,” “Capital Structure
Risks,” “Employee Risks” and “Other Risks.” The grouping of risks is to facilitate your review only, and no ranking of importance
of risks or other inference should be made on account of such groups.

General Business Risks

Business cycles and uncertainty regarding the housing market, economic conditions, political climate and other
factors beyond our control could adversely affect demand for our products and services, our costs of doing business,
and our business, financial condition and results of operations.

With an estimated 60% of our total product sales being dependent on housing starts, our business, financial condition
and results of operations depends significantly on the stability of the housing, residential construction and home
improvement markets, as well as general economic conditions, including any future increase of interest rates by central
banks, including the U.S. Federal Reserve System, or other factors that could impact housing starts. Adverse conditions
in or uncertainty about these markets, the economic conditions or the political climate could adversely impact our
customers’ confidence or financial condition, causing them to determine not to purchase our products and services, causing
them to delay purchasing decisions, or impacting their ability to pay for our products and services. Other factors beyond
our control - including unemployment and foreclosure rates; inventory loss; interest rate fluctuations; raw material and
energy costs; labor and healthcare costs; the availability of financing; the state of the credit markets, including mortgages,
the availability, or lack thereof, of credit to builders and developers, home equity loans and consumer credit; weather;
natural disasters; acts of terrorism; and other conditions beyond our control - could further adversely affect demand for
our products and services, our costs of doing business, and our business, financial condition and results of operations.
Due to such factors and other trends, the construction industry is subject to significant volatility.

Further, many of our customers in the construction industry are small and medium-sized businesses. These businesses
are more likely to be significantly affected by economic downturns than larger, more established businesses. Uncertainty
about current global economic conditions may cause these consumers to postpone or refrain from spending or may cause
them to switch to lower-cost alternative products, which could reduce demand for our products and materially and
adversely affect our financial condition and operating results.

Additionally, declines in commercial and residential construction, such as housing starts and remodeling projects, which
generally occur during economic downturns, have in the past significantly reduced, and in the future can be expected to
reduce, the demand for our products and our stock price.

We may not be effective in achieving our stated strategic and operating objectives under our 2020 Plan.

We have been implementing a strategic plan, the 2020 Plan, centered on focusing on our organic growth, rationalizing
our cost structure to improve profitability, improving our working capital management primarily through the reduction
of inventory levels and other working capital items such as accounts payable and accounts receivable. While the strategy
calls for increased emphasis on certain operational targets, such as growing our net sales, reducing our operating expenses
as a percentage of net sales and decreasing our inventory levels, it moderates focus on other aspects of our operations
that used to be part of our prior strategy, such as certain categories of acquisitions (especially in the concrete space).

There can be no guarantee that the 2020 Plan will yield the results that we currently anticipate or results that will exceed
those that might be obtained under our prior strategy if we fail to successfully execute on one or more prongs of the 2020
Plan, even if we successfully implement one or more other prongs.

The successful execution of the 2020 Plan depends on, among other things, our ability to:

•

Maintain our top-line growth and achieve a net sales compound annual growth rate of approximately 8%
from fiscal 2016 through fiscal 2020 by gaining market share in certain products lines;

Carry out effective cost reduction measures in Europe and our concrete product line, justify certain expense
categories for each new period, and by fiscal 2020, reduce our operating expenses as a percent of net sales to
be below or at 27%;

Eliminate at least 25% to 30% of our product SKUs, implement Lean principles in our factories, and achieve
an additional 30% reduction of our raw materials and finished goods inventory by fiscal 2020; and

Realize return from our investment in software initiatives.

Although we have made progress on meeting 2020 Plan targets, we may not fully execute on one or more elements of
the 2020 Plan due to any number of reasons. Going forward, we may choose to refine our strategic and operating objectives,
update our current strategic plan, and pursue strategies outside the 2020 Plan that we believe represent great opportunities
due to changes in our business, operations, financial conditions and other factors beyond our control or not foreseeable.

Our sales are seasonal and we have little control over the timing of customer purchases. If we miss seasonal forecasts
or customers purchase our products in different quarters than we or analysts expect, our stock could materially
decline.

Our sales are seasonal, with operating results varying from quarter to quarter. With some exceptions, our sales and income
have historically been lower in the first and fourth quarters than in the second and third quarters, as customers tend to
purchase construction materials in the late spring and summer months for the construction season. In addition, weather
conditions, such as unseasonably warm, cold or wet weather, which affect, and sometimes delay or accelerate installation
of some of our products, may significantly affect our results of operations. Sales that we anticipate in one quarter may
occur in another quarter, affecting both quarters’ results and potentially our stock price.

In addition, we typically ship orders as we receive them and maintain inventory levels to allow us to operate with little
backlog. The efficiency of our inventory system, and our ability to avoid backlogs and potential loss of customers, is
closely tied to our ability to accurately predict seasonal and quarterly variances. Further, our planned expenditures are
also based primarily on sales forecasts. When sales do not meet our expectations, our operating results will be reduced
for the relevant quarters, as we will have already incurred expenses based on those expectations. This could result in a
material decline in our stock price.

We operate in a competitive industry, and if we fail to anticipate and react appropriately to competitors,
technological changes, changing industry trends and other competitive forces our sales and profit margins will
decline.

Our ability to compete effectively depends upon our ability to meet changing market conditions and develop enhancements
to our products on a timely basis in order to maintain our competitive advantage. Many of our competitors have greater
financial and other resources than we do. Our continued growth depends upon our ability to develop additional products,
services and technologies that meet our customers’ expectation of our brand and quality. There can be no assurance that
we will be successful in developing and marketing new products, product enhancements and additional technologies,
that we will not experience difficulties that could delay or prevent the successful development, introduction and marketing
of these products, or that our new products and product enhancements will adequately meet the requirements of the
marketplace, or will achieve market acceptance.

Further, one of the core elements of our strategy is to provide high quality products and customer services. Many of our
competitors are dedicating increasing resources to competing with us, especially as our products and services become
more affected by technological advances and software innovations. Some of our competitors have more experience
producing software and other technology-driven solutions. As a result, we are dedicating increasing resources to research

and development in new and changing technologies in order to stay competitive and provide high quality and innovative
products and services. These increased expenditures could reduce our operating results.

Additionally, our ability to compete effectively depends, to a significant extent, on the specification or approval of our
products by architects, engineers, building inspectors, building code officials and customers and their acceptance of our
premium brand. If a significant segment of those communities were to decide that the design, materials, manufacturing,
testing or quality control of our products is inferior to that of any of our competitors or the cost differences between our
products and any competitors are not justifiable, our sales and profits would be materially reduced.

Our future growth may depend on our ability to develop new products and penetrate new markets, which could
reduce our profitability.

Our future success depends upon our continued investment in research and new product development and our ability to
continue to develop new products that allow us to expand into new markets. Expansion into new markets and the
development of new products may involve considerable costs and may not generate sufficient revenue to be profitable
or cover the costs of development. We might not be able to penetrate these product markets and any market penetration
that occurs might not be timely or profitable. We may be unable to recoup part or all of the significant investments we
will have made in attempting to penetrate new markets.

Our failure to continue to successfully avoid, manage, defend, litigate and accrue for claims and litigation could
negatively impact our results of operations or cash flows.

We are exposed to and become involved in various litigation matters arising out of the ordinary routine conduct of our
business, including, from time to time, actual or threatened litigation relating to such items as our products and services,
product liability, employment-related claims, our distributors, intellectual property claims and regulatory actions.

The defense of litigation, including fees of legal counsel, expert witnesses and related costs, is expensive and difficult to
forecast accurately. In general, such costs are unrecoverable even if we ultimately prevail in litigation and could represent
a significant use of our capital resources. To defend lawsuits, it is also necessary for us to divert officers and other
employees from their normal business functions to gather evidence, give testimony and otherwise support litigation
efforts. We expect to experience higher than normal litigation costs arising from the lawsuits disclosed in this Annual
Report on Form 10-K.

If we lose any material litigation, we could face material judgments or awards against us. An unfavorable resolution of
one or more of the proceedings in which we are involved now or in the future could have a material adverse effect on
our business, assets, cash flow and financial condition.

There can be no assurance that we will be able to continue to successfully avoid, manage and defend such matters. In
addition, given the inherent uncertainties in evaluating certain exposures, actual costs to be incurred in future periods
may vary from our estimates for such contingent liabilities.

Product, Services and Sales Risks

Design defects, labeling defects, product formula defects, inaccurate chemical mixes, product recalls and/or product
liability claims could harm our reputation, sales and financial results.

We have on occasion found flaws and deficiencies in the design, manufacturing, assembling, labeling, product
formulations, chemical mixes or testing of our products. We also have on occasion found flaws and deficiencies in raw
materials and finished goods produced by others and used with or incorporated into our products. Some flaws and
deficiencies have not been apparent until after the products were installed by customers.

Many of our products are integral to the structural soundness or safety of the structures in which they are used. If any
flaws or deficiencies exist in our products and if such flaws or deficiencies are not discovered and corrected before our
products are incorporated into structures, the structures could be unsafe or could suffer severe damage, such as collapse
or fire, and personal injury or death could result. Errors in the installation of our products, even if the products are free
of flaws and deficiencies, could also cause personal injury or death and unsafe structural conditions. To the extent that
such damage or injury is not covered by our product liability insurance and we are held to be liable, we could be required
to correct such damage and to compensate persons who might have suffered injury or death, and our reputation, business
and financial condition could be materially and adversely affected.

Even if a flaw or deficiency is discovered before any damage or injury occurs, we may need to refund customers and/or
repair or recall products (to the extent possible), and we may be liable for any costs necessary to replace recalled products
or retrofit or remedy the affected structures. Any such recall, retrofit or other remedy could entail substantial costs and
adversely affect our reputation, sales and financial condition. We do not carry insurance against recall costs or the adverse
business effect of a recall, and our product liability insurance may not cover retrofit or other remedy costs.

As a result of the nature of many of our products and their use in construction projects, claims (including product warranty
claims and claims resulting from a natural disaster) may be made against us with regard to damage or destruction of
structures incorporating our products whether or not our products failed. Any such claims, if asserted, could require us
to expend material time and efforts defending the claim and may materially and adversely affect our business and financial
condition. Costs associated with resolving such claims (such as repair or replacement of the affected parts) could be
material and may exceed any amounts reserved in our consolidated financial statements.

While we generally attempt to limit our contractual liability and our exposure to price or expense increases, we
may have uncapped liabilities or significant exposure under some contracts, and could suffer material losses under
such contracts.

We enter into many types of contracts with our customers, suppliers and other third parties, including in connection with
our expansion into new markets and new product lines. Under some of these contracts, our overall liability may not be
limited to a specified maximum amount or we may have significant potential exposure to price or expense increases. If
we receive claims under these contracts or experience significant price increases or comparable expense increases, we
may incur liabilities significantly in excess of the revenues associated with such contracts, which could have a material
adverse effect on our results of operations.

Our software provides some design functions to customers, and we are involved both in product sales and
engineering services. Any software errors or deficiencies or failures in our engineering services could have material
adverse effects on our operations and financial condition.

Our design software facilitates the creation by customers of complex construction and building designs and we are
involved both in product sales and engineering services. Our software is extremely complex and is continually being
modified and improved. As a result, it may contain defects or errors and new versions may introduce new defects and
errors. While we have attempted to limit our potential liability for the failure of any designs created by our software, as
a result of defects in our software, the structures could be unsafe or could suffer severe damage, such as collapse or fire,
and personal injury or death could result. Errors in construction unconnected with our design could also cause personal
injury or death and unsafe structural conditions, even if our software design is sufficient. To the extent that a structure
designed by our software suffers any failure or deficiency, we could be required to correct deficiencies and may become
involved in litigation, even if our software design was not the cause of such deficiency. Further, if any damage or injury
is not covered by our insurance and we are held to be liable, we could be required to correct such damage and to compensate
persons who might have suffered injury, and our reputation, business and financial condition could be materially and
adversely affected.

While we engage in testing and upgrades, there can be no assurance that, despite our testing and upgrades, errors will
not be found in new and existing products resulting in loss of revenues or delay in market acceptance, diversion of
development resources, damage to our reputation, adverse litigation, or increased service and warranty costs, any of
which would have a material adverse effect upon our business, operating results and financial condition.

We are also involved in providing engineering solutions to our clients. The risks associated with providing these services
are materially different than the risks we historically faced when we only produced products. If our engineers prepare,
approve or seal drawings that contain defects or otherwise are involved in any design or construction that contains flaws,
regardless of whether our engineers caused such flaws, we may be held liable for professional negligence or other damages,
which could involve material claims.

We have a few large customers, the loss of any one of which could negatively affect our sales and profits.

Our largest customers accounted for a significant portion of net sales for the years ended December 31, 2018, 2017, and
2016. Any reduction in, or termination of, our sales to these customers would at least temporarily, and possibly on a
longer term basis, cause a material reduction in our net sales, income from operations and net income. Such a reduction

in or elimination of our sales to any of our largest customers would increase our relative dependence on our remaining
large customers.

In addition, our distributor customers have increasingly consolidated over time, which has increased the material adverse
effect of losing any one of them and may increase their bargaining power in negotiations with us. These trends could
negatively affect our sales and profitability.

Increases in prices of raw materials could negatively affect our sales and profits.

Our principal raw material is steel, including stainless steel. The steel industry can have large fluctuations. Numerous
factors beyond our control, such as general economic conditions, competition, worldwide demand, material and labor
costs, energy costs, foreign exchange rates, import duties and other trade restrictions influence prices for our raw materials.
Further, the domestic steel market is heavily influenced by three major United States manufacturers. We have not always
been able, and in the future we might not be able, to increase our product prices in amounts that correspond to increases
in costs of raw materials, without materially and adversely affecting our sales and profits.

We have historically not hedged against changes in prices of steel or other raw materials. In past years, however, we have
increased our anticipatory purchases of steel in an effort to mitigate the effects of rising steel prices. This strategy, coupled
with changing economic conditions, has resulted in substantial fluctuations in our inventory in recent years, which can
materially and adversely affect our margins, cash flow and profits.

We depend on third parties for transportation services and the lack of availability of transportation and/or increases
in cost could materially and adversely affect our business and operations.

Our business depends on the transportation of both finished goods to our customers and distributors and the transportation
of raw materials to us. We rely on third parties for transportation services of these items, which services are occasionally
in high demand (especially at the end of calendar quarters) and/or subject to price fluctuations.

If the required supply of transportation services is unavailable when needed, our manufacturing processes may be
interrupted or we may be unable to sell our products at full value, or at all. This could harm our reputation, negatively
impact our customer relationships and have a material adverse effect on our financial condition and results of operation.
In addition, a material increase in transportation rates or fuel surcharges could have a material adverse effect on our
profitability.

Technological and Intellectual Property Risks

Our recent efforts to increase our technology offerings and integrate new software and application offerings may
prove unsuccessful and may affect our future prospects.

Our industry has experienced increased complexity in some home design and builders are more aggressively trying to
reduce their costs. One of our responses has been to design and market sophisticated software to facilitate the design and
marketing of our product systems. We have continued to commit substantial resources to our software development
endeavors in recent years and expect that trend to continue in 2019.

We have a limited operating history in the technology space and may not be able to create commercially successful
software and applications. Even if we are able to create initially successful ideas, the technology industry is subject to
rapid changes. We may not be able to adapt quickly enough to keep up with changing demands, and our software may
become obsolete.

While we see having a software interface with the construction industry as a potential growth area, we also face competition
from other companies that are focused solely or primarily on the development of software and applications. These
companies may have significantly greater expertise and resources to devote to software development, and we may be
unable to compete with them in that space.

If we cannot protect our technology, we will not be able to compete effectively.

Our ability to compete effectively with other companies depends in part on our ability to maintain the proprietary nature
of our technology, in part through patents, copyrights, trade secrets and other intellectual property protections. We might
not be able to protect or rely on our patents and copyrights. Patents might not issue pursuant to pending patent applications.

Our software copyright and other protections might not be adequate to protect our software and application code. Others
might independently develop the same or similar technology, develop around the patented aspects of any of our products
or proposed products, or otherwise obtain access to or circumvent our proprietary technology. We also rely on unpatented
proprietary technology to maintain our competitive position. We might not be able to protect our trade secrets, our know-
how or other proprietary information. If we are unable to maintain the proprietary nature of our significant products, our
sales and profits are likely to be materially reduced.

In attempting to protect our proprietary information, we sometimes initiate lawsuits against competitors and others that
we believe have infringed or are infringing our rights. In such an event, the defendant may assert counterclaims to
complicate or delay the litigation or for other reasons. Litigation may be very costly and may result in adverse judgments
that affect our sales and profits materially and adversely.

Claims that we infringe intellectual property rights of others may materially increase our expenses and reduce
our profits.

Other parties have in the past and may in the future claim that our products or processes infringe their intellectual property
rights. We may incur substantial costs and liabilities in investigating, defending and resolving such claims, whether or
not they are meritorious, which may materially reduce our profitability and materially and adversely affect our business
and financial condition. Litigation can be disruptive to normal business operations and may result in adverse rulings or
decisions. If any such infringement claim is asserted against us, we may be required to obtain a license or cross-license,
modify our existing technology or design a new non-infringing technology, any of which could be costly and time-
consuming. A ruling against us in an infringement lawsuit could include an injunction barring our production or sale of
any infringing product. A damages award against us could include an award of royalties or lost profits and, if the court
finds willful infringement, treble damages and attorneys’ fees.

We have experienced and may in the future experience delays, outages, cyber-based attacks or security breaches
in relation to our information systems and computer networks, which have disrupted and may in the future disrupt
our operations and may result in data corruption. As a result, our profitability, financial condition and reputation
could be negatively affected. In addition, data privacy statements and laws could subject us to liability.

We depend on information technology networks and systems, including the internet, to process, transmit and store
electronic information. We depend on our information technology infrastructure for electronic communications among
our locations around the world and between our personnel and our subsidiaries, customers and suppliers. We collect and
retain large volumes of internal and customer, vendor and supplier data, including some personally identifiable
information, for business purposes. We also maintain personally identifiable information about our employees. The
integrity and protection of our customer, vendor, supplier, employee and other Company data is critical to our business.
The regulatory environment governing information, security and privacy laws is increasingly demanding and continues
to evolve. Maintaining compliance with applicable security and privacy regulations may increase our operating costs or
adversely affect our business operations.

Despite the security and maintenance measures we have in place, our facilities and systems, and those of the retailers,
dealers, licensees and other third-party distributors with which we do business, remain vulnerable to security breaches,
cyber-attacks, acts of vandalism, computer viruses, malware, data corruption, delays, disruptions, programming and/or
human errors or other similar events, such as those accomplished through fraud, trickery or other forms of deceiving our
employees, contractors or other agents or representatives and those due to system updates, natural disasters, malicious
attacks, accidents, power disruptions, telecommunications failures, acts of terrorism or war, computer viruses, physical
or electronic break-ins or similar events. Such incidents have occurred, continue to occur, and may occur in the future.

Security breaches of our infrastructure could create system disruptions, shutdowns or unauthorized disclosures of
confidential information. Despite the security measures we have in place, our facilities and systems, and those of the
retailers, dealers, licensees and other third party distributors with which we do business, may be vulnerable to security
breaches, cyber-attacks, acts of vandalism, computer viruses, misplaced or lost data, programming and/or human errors
or other similar events. Such incidents may involve misappropriation, loss or other unauthorized disclosure of confidential
data, materials or information, including those concerning our customers, employees or suppliers, whether by us or by
the retailers, dealers, licensees and other third-party distributors with which we do business, disrupt our operations, result
in losses, damage our reputation, and expose us to the risks of litigation and liability (including regulatory liability); and
may have a material adverse effect on our business, results of operations and financial condition.

We publicly post our privacy policies and practices concerning our processing, use, and disclosure of personally
identifiable information on our website. If we fail to adhere to our privacy policy and other published statements or
applicable laws concerning our processing, use, transmission and disclosure of protected information, or if our statements
or practices are found to be deceptive or misrepresentative, we could face regulatory actions, fines and other liability.

We may experience delays or outages in our information technology system and computer networks.

We may be subject to information technology system failures and network disruptions. These may be caused by delays
or disruptions due to system updates, natural disasters, malicious attacks, accidents, power disruptions,
telecommunications failures, acts of terrorism or war, computer viruses, physical or electronic break-ins or similar events
or disruptions.

Despite our security measures, our systems could be vulnerable to disruption, and any such disruption could negatively
affect our financial condition and results of operations.

Some of our agreements for software and software-as-services products have limited terms, and we may be unable
to renew such agreements and may lose access to such products.

We have various agreements with a number of third parties that provide software and software-as-service products to us.
These agreements often require reoccurring payments for online access to the products and have limited terms. In the
future, we will be required to renegotiate the terms of these agreements, and may be unable to renew such agreements
on favorable terms. If any such agreement cannot be renewed or can only be renewed on terms that are materially worse
for us, we may be unable to access the applicable software, and our business and operating results may be adversely
affected.

Regulatory Risks

Failure to comply with industry regulations could result in reduced sales and increased costs.

We are subject to environmental laws and regulations governing emissions into the air, discharges into water, and
generation, handling, storage, transportation, treatment and disposal of waste materials. We are also subject to other
federal and state laws and regulations regarding health and safety matters.

Our manufacturing operations involve the use of solvents, chemicals, oils and other materials that are regarded as hazardous
or toxic. We also use complex and heavy machinery and equipment that can pose severe safety hazards, especially if not
properly and carefully used. Some of our products also incorporate materials that are hazardous or toxic in some forms,
such as zinc and lead used in some steel galvanizing processes, chemicals used in our acrylic and epoxy anchoring
products, and chemicals used in our concrete repair, strengthening and protecting products. The gun powder used in our
powder-actuated tools is explosive. We have in the past, and may in the future, need to take steps to remedy our failure
to properly label, store, transport, use and manufacture such toxic and hazardous materials.

If we do not obtain all material licenses and permits required by environmental, health and safety laws and regulations,
we may be subject to regulatory action by governmental authorities. If our policies and procedures are flawed, or our
employees fail or neglect to follow our policies and procedures in all respects, we might incur liability. Relevant laws
and regulations could change or new ones could be adopted that require us to incur substantial expense to comply.

Complying or failing to comply with conflict minerals regulations could materially and adversely affect our supply
chain, our relationships with customers and suppliers and our financial results.

We are currently subject to conflict mineral disclosure regulations in the U.S. and may be affected by new regulations
concerning conflict and similar minerals adopted by other jurisdictions where we operate. While we have been successful
to date in adapting to such regulations, we have and will continue to incur added costs to comply with the disclosure
requirements, including costs related to determining the source of such minerals used in our products. We may not be
able to ascertain the origins of such minerals that we use and may not be able to satisfy requests from customers to certify
that our products are free of conflict minerals. These requirements also could constrain the pool of suppliers from which
we source such minerals. We may be unable to obtain conflict-free minerals at competitive prices. Such consequences
will increase costs and may materially and adversely affect our manufacturing operations and profitability.

When we provide engineering services we are subject to various local, state and federal rules and regulations
which can increase our potential liability.

As part of our product offerings, we may provide engineering and design-related services to our clients. Some of these
services require us to stamp drawings or otherwise be involved in the engineering process. While we generally attempt
to limit our liability through our internal processes and through our legal agreements with third parties to which we
provide such services, under various local, state and federal rules and regulations these limitations may not be effective
and we may be held liable for engineering failures. Any such liability could materially and adversely affect our profitability.

Capital Expenditures, Expansions, Acquisitions and Divestitures Risks

Our acquisition activities, if any, present unique risks for our business, and any acquisition could materially and
adversely affect our business and operating results.

We compete for acquisitions with other potential acquirers, some of which have greater financial or operational resources
than we do. As a result, we may not be able to identify suitable acquisition candidates or strategic opportunities. Any
acquisitions we undertake involve numerous risks, including, for example:

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inadequate access to information and/or due diligence of acquired businesses;
diversion of management’s attention from other business concerns;
overvaluation of acquired businesses;
difficulties assimilating the operations and products of acquired businesses, including expensive and time
consuming integration costs such as employee redeployment, relocation or severance, combining teams and
processes in various functional areas, reorganization or closures of facilities, and relocation or disposition of
excess equipment;
inaccurate accounting or public reporting arising from integration of the financial statements and disclosures of
acquired businesses;
undisclosed existing or potential liabilities of acquired businesses;
slow acceptance or rejection of acquired businesses’ products by our customers;
risks of entering markets in which we have little or no prior experience;
litigation involving activities, properties or products of acquired businesses;
increased cost of regulatory compliance and enforcement;
consumer and other claims related to products of acquired businesses; and
the potential loss of key employees of acquired businesses.

In addition, future acquisitions may involve issuance of additional equity securities that dilute the value of our existing
equity securities, increase our debt, cause impairment related to goodwill and cause impairment of, and amortization
expenses related to, other intangible assets, which could materially and adversely affect our profitability. Any acquisition
could materially and adversely affect our business and operating results, and as a result, our business and operating results
may differ from any guidance that we may provide.

We may decide to dispose of assets and incur material expenses in doing so.

We have terminated in the past and may terminate in the future product lines or businesses if we determine that the cost
of operating them is not warranted by their expected profitability. For example, we closed our sales offices in China,
Thailand and Dubai in 2015. There are significant costs with such divestitures, which could materially and adversely
affect our sales, assets, profitability and financial condition.

Our capital expenditures may not be adequate to maintain our competitive position and may not be implemented
in a timely or cost-effective manner.

Our capital expenditures are limited by our liquidity and capital resources and the amount we have available for capital
spending is limited by the need to pay our other expenses and to maintain adequate cash reserves and borrowing capacity
to meet unexpected demands that may arise. Productivity improvements through process re-engineering, design efficiency
and manufacturing cost improvements may be required to offset potential increases in labor and raw material costs and
competitive price pressures. If we are unable to make sufficient capital expenditures, or to maximize the efficiency of
the capital expenditures we do make, our competitive position may be harmed and we may be unable to manufacture the
products necessary to compete successfully in our targeted market segments.

Additional financing, if needed, to fund our working capital, growth or other business requirements may not be
available on reasonable terms, or at all.

If the cash needed for working capital or to fund our growth or other business requirements increases to a level that
exceeds the amount of cash that we generate from operations and have available through our current credit arrangements,
we will need to seek additional financing. Additional or new borrowings may not be available on reasonable terms, or at
all. Our ability to raise money by issuing and selling shares of our common or preferred stock depends on general market
conditions and the demand for our stock. If we sell stock, our existing stockholders could experience substantial dilution.
Our inability to secure additional financing could prevent the expansion of our business, internally and through
acquisitions.

If we change significantly the location, nature or extent of some of our manufacturing operations, we may reduce
our net income.

If we decide to change significantly the location, nature or extent of a portion of our manufacturing operations, we may
need to record an impairment of our goodwill. Our goodwill totaled $130.3 million at December 31, 2018. Recording an
impairment of our goodwill correspondingly reduces our net income. Other changes or events in the future could further
impair our recorded goodwill, which could also materially and adversely affect our profitability.

International Operations Risks

Our international operations may be materially and adversely affected by factors beyond our control.

Economic, social and political conditions, laws, practices and customs vary widely among the countries where we produce
or sell our products. Our operations outside of the United States are subject to a number of risks and potential costs,
including, for example, lower profit margins, less protection of intellectual property and economic, political and social
uncertainty in some countries. Our sales and profits depend, in part, on our ability to develop and implement policies and
strategies that effectively anticipate and manage these and other risks in the countries where we do business. These and
other risks may materially and adversely affect our operations in any particular country and our business as a whole.

International construction standards, techniques and methods differ from those in the United States. Laws and regulations
applicable in new markets may be unfamiliar to us. Compliance may be substantially more costly than we anticipate. As
a result, we may need to redesign our products, or invent or design new products, to compete effectively and profitably
in international markets. Inflation in emerging markets may also make our products more expensive there and increases
the market and credit risks that we are exposed to.

Other significant challenges to conducting business in foreign countries include, among other factors, local acceptance
of our products, political instability, changes in import and export regulations, changes in tariff and freight rates,
fluctuations in foreign exchange rates, currency controls, cash repatriation restrictions and differing economic outcomes.

International operations expose us to foreign exchange rate risk.

We have foreign exchange rate risk in our international operations and through purchases from foreign vendors. We do
not currently hedge this risk. Changes in currency exchange rates could materially and adversely affect our sales and
profitability.

Because of our international operations, we could be adversely affected by violations of applicable U.S. federal
and state or foreign laws and regulations, such as the United States Foreign Corrupt Practices Act and similar
worldwide anti-bribery, anti-corruption and anti-kickback laws.

As a result of our expanded international operations, we face increasing compliance and regulatory oversight related to
operating in foreign countries. The foreign and U.S. laws and regulations that are applicable to our operations are complex
and may increase the costs of regulatory compliance, or limit or restrict the products or services we sell or subject our
business to the possibility of regulatory actions or proceedings. The United States Foreign Corrupt Practices Act, and
other similar laws and regulations, generally prohibit companies and their intermediaries from making improper payments
to foreign governmental officials for the purpose of obtaining or retaining business. While our policies mandate compliance
with applicable laws and regulations, including anti-bribery laws and other anti-corruption laws, we cannot guarantee
that we will be successful in preventing our employees or other agents from taking actions in violation of these laws or

regulations. Such violations, or allegations of such violations, could disrupt our business and result in a material adverse
effect on our financial condition, results of operations and cash flows.

Our international operations depend on our successful management of our subsidiaries outside of the United
States.

We conduct our international business through wholly owned subsidiaries. Managing distant subsidiaries and fully
integrating them into our business is challenging. We cannot directly supervise every aspect of the operations of our
subsidiaries operating outside the United States. As a result, we rely on local managers and staff. Cultural factors and
language differences can result in misunderstandings among internationally dispersed personnel. The risk that
unauthorized conduct may go undetected may be greater in subsidiaries outside of the United States. These problems
could adversely affect our sales and profits.

Failure to comply with export, import, and sanctions laws and regulations could affect us materially and adversely.

We are subject to a number of export, import and economic sanction regulations, including the International Traffic in
Arms Regulations (“ITAR”), the Export Administration Regulations (“EAR”) and U.S. sanction regulations administered
by the U.S. Department of Treasury, Office of Foreign Assets (“OFAC”). Foreign governments where we have operations
also implement export, import and sanction laws and regulations, some of which may be inconsistent or conflict with
ITAR and EAR. Where we face such inconsistencies, it may be impossible for us to comply with all applicable regulations.

If we do not obtain all necessary import and export licenses required by applicable export and import regulations, including
ITAR and EAR, or do business with sanctioned countries or individuals, we may be subject to fines, penalties and other
regulatory action by governmental authorities, including, among other things, having our export or import privileges
suspended. Even if our policies and procedures for exports, imports and sanction regulations comply, but our employees
fail or neglect to follow them in all respects, we might incur similar liability.

Any changes in applicable export, import or sanction laws or regulations or any legal or regulatory violations could
materially and adversely affect our business and financial condition.

Our manufacturing facilities in China complicate our supply and inventory management.

We maintain manufacturing capability in various parts of the world, in part to allow us to serve our customers with prompt
delivery of needed products. Such customer service is a significant factor in our efforts to compete with larger companies
that have greater resources than we have. In recent years, we have substantially expanded our manufacturing in China.
Nearly all of our manufacturing output in China was and is currently intended for export to other parts of the world.
Because of the great distances between our manufacturing facilities in China and the markets to which the products made
there will be shipped, we may have difficulty providing adequate service to our customers, which may put us at a
competitive disadvantage. Our attempts to provide prompt delivery may necessitate that in China we produce and keep
on hand substantially more inventory of finished products than would otherwise be needed. Inventory fluctuations can
materially and adversely affect our margins, cash flow and profits. Any tariffs, duties, taxes, penalties imposed by the
United States on imports from China would negatively affect our inventory management and profits.

If significant tariffs or other restrictions are placed on our imports or any related counter-measures are taken by
other countries, our costs of doing business, revenue and results of operations may be negatively impacted.

If significant tariffs or other restrictions are placed on Chinese or other imports or any related counter-measures are taken
by China or other countries, our costs of doing business, revenue and results of operations may be materially harmed.
The Trump Administration announced a list of thousands of categories of goods that could face tariffs of up to 25%
assessed on the cost of goods as imported. If these duties are imposed on our imports, we may be required to raise our
prices, which may result in the loss of customers and harm our operating performance. Alternatively, we may seek to
shift production outside of China, resulting in significant costs and disruption to our operations as we would need to
pursue the time-consuming processes of recreating a new supply chain, identifying substitute components and establishing
new manufacturing locations. Additionally, the Trump Administration continues to signal that it may alter trade agreements
and terms between China and the United States, including limiting trade with China, and may impose additional tariffs
on imports from China. Even if the currently proposed duties are not imposed on our imports, it is possible further tariffs
will be imposed on our imports, or that our business will be impacted by retaliatory trade measures taken by China or
other countries in response to existing or future tariffs, causing us to raise prices or make changes to our operations, any
of which could materially harm our revenue or operating results.

We are subject to U.S. and international tax laws that could affect our financial results.
We generally conduct international operations through our wholly-owned subsidiaries. Our income tax liabilities in the
different countries where we operate depend in part on internal settlement prices and administrative charges among us
and our subsidiaries. These arrangements require us to make judgments with which tax authorities may disagree. Tax
authorities may impose additional tariffs, duties, taxes, penalties and interest on us. Transactions that we have arranged
in light of current tax rules could have material and adverse consequences if tax rules change, and changes in tax rules or
imposition of any new or increased tariffs, duties and taxes could materially and adversely affect our sales, profits and
financial condition.

Tax laws are dynamic and subject to change as new laws are passed and new interpretations are issued or applied. For
example, the U.S. enacted significant tax reform at the end of 2017, and certain provisions of the tax reform may adversely
affect us. If the U.S. or other foreign tax authorities change applicable tax laws, our overall taxes could increase, and our
business, financial condition or results of operations may be adversely impacted.

Recent changes in applicable law regarding the transfer of personally identifiable information by U.S. companies
doing business in the European Union could lead us to spend significant resources trying to comply with the newly
developed rules. We may not succeed in meeting such requirements, and we may face governmental actions and
suffer business losses.

We have in the past relied on adherence to the U.S. Department of Commerce’s Safe Harbor Policy Principles and
compliance with the Safe Harbor Frameworks as agreed to and set forth by the European Commission and the United
States, which established a means for legitimating the transfer of personally identifiable information by U.S. companies
doing business in the European Union (“EU”) to the U.S. under the EU Data Protection Directive (95/46/EC). New EU
legislation, the General Data Protection Regulation (Regulation (EU) 2016/679) (“GDPR”) became effective as of May
25, 2018, in replacement of the EU Data Protection Directive, and is expected to have a significant impact on how
businesses can collect and process the personal data of EU individuals.

In light of the GDPR, we have made and continue to engage in additional compliance efforts when transferring certain
data from the EU. We may be unsuccessful in complying with the new EU data transfer requirements, and as a result,
we may be at risk of enforcement actions taken by an EU data protection authority until such point in time that we ensure
all data transfers to us from the EU are in compliance with applicable law. We may find it necessary to establish systems
to maintain EU-origin data in the European Economic Area, which may involve substantial expense and distraction from
other aspects of our business.

Capital Structure Risks

Any issuance of preferred stock may dilute your investment and reduce funds available for dividends.
Our Board of Directors is authorized by our Certificate of Incorporation to determine the terms of one or more series of
preferred stock and to authorize the issuance of shares of any such series on such terms as our Board of Directors may
approve. Any such issuance could be used to impede an acquisition of our business that our Board of Directors does not
approve, further dilute the equity investments of holders of our common stock and reduce funds available for the payment
of dividends to holders of our common stock.

Future sales of our common stock could adversely affect our stock price.

Our Board of Directors has the authority to issue, from time to time, authorized and unissued shares of our common
stock. Our issuance of substantial amounts of new shares of our common stock could adversely affect the prevailing
market price for our common stock.

All of the outstanding shares of our common stock are freely tradable without restriction under the Securities Act of 1933,
as amended (the “Securities Act”), other than shares of our common stock held by our “affiliates,” as that term is defined
in Rule 144 under the Securities Act, which, however, may be sold by our affiliates pursuant to Rule 144. If a substantial
number of shares of our common stock are sold in the public market pursuant to Rule 144 by our affiliates or issued upon
the exercise of our outstanding options, the trading price of our common stock in the public market could be adversely
affected. As of February 26, 2019, there were 254,715 thousand shares held by our affiliates.

Delaware law and our corporate governance documents could deter takeover attempts that might otherwise be
beneficial to our stockholders.

Provisions of Delaware law could make it more difficult for a third party to acquire us. Section 203 of the Delaware
General Corporation Law may make the acquisition of the Company more difficult for potential acquirers by prohibiting
stockholders holding 15% or more of our outstanding voting stock from acquiring us without the consent of our Board
of Directors for at least three years from the date they first hold 15% or more of the voting stock.

Pursuant to the Company's current corporate governance documents, our stockholders cannot call special meetings and
cannot take action by written consent. In addition, a change in the composition of our Board of Directors that is not
approved by the existing Board of Directors could trigger a default under our existing credit facilities.

These provisions may discourage, delay or make difficult a merger or acquisition of the Company, including a transaction
that may offer a premium price for our common stock.

We will continue to incur increased costs as a result of being a publicly-traded company, including costs arising
from the scrutiny of our business, practice and governance as a publicly-traded company.

As a U.S. public company, we are generally subject to the reporting and other requirements of applicable federal and
state securities laws, rules and regulations and scrutiny by stockholders and proxy advisors. Compliance with these laws,
rules and regulations and attending to stockholder requests, requires us to continue to incur significant legal, accounting
and other expenses and costs, makes some activities more difficult, time-consuming or costly and increases demands on
our systems and resources, and may continue to do so. For example, we recently expended significant time and resources
in terminating our stockholder rights plan, creating a compensation recovery policy and an anti-hedging and anti-pledging
policy, redesigning our executive compensation program and responding to other requests from our stockholders. We
continue to implement strategic and board initiatives to comply with recent and updated best-practices related to our
public company status and respond to stockholder feedback, and expect that will have to continue to allocate significant
time and resources to such endeavors.

In addition, as a result of disclosure of information in filings required of a public company, our business and financial
condition will become more visible, which may result in threatened or actual litigation, including by competitors and
other third parties. If such claims are successful, our business and operating results could be harmed, and even if the
claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve
them, could divert the resources of our management and adversely affect our business, brand and reputation and results
of operations.

Employee Risks

We depend on key management and technical personnel, the loss of whom could harm our business.

We depend on our key management and technical personnel. The loss of one or more key employees could materially
and adversely affect us.

Our success also depends on our ability to attract and retain highly qualified technical, sales and marketing and management
personnel necessary for the maintenance and expansion of our activities. We face strong competition for such personnel
and may not be able to attract or retain such personnel. In addition, when we experience periods with little or no profits,
a decrease in compensation based on our profits may make it difficult to attract and retain highly qualified personnel.

In order to attract and retain executives and other key employees, we must provide a competitive compensation package,
including cash and stock-based compensation. Our primary form of stock-based compensation is restricted stock units
(“RSUs”). We have issued a substantial number of RSUs in various forms to our management and staff. We cannot
guarantee that such stock-based incentive awards are tax deductible. As a result, we may be required to pay additional
tax on stock-based compensation to our employees.

If the anticipated value of our stock-based incentive awards does not materialize so that they cease to be viewed as
valuable, if our profits decrease, or if our total compensation package is not viewed as competitive, our ability to attract,
retain and motivate executives and key employees could be weakened. The failure to successfully hire and retain executives
and key employees or the loss of any executives and key employees could have a significant impact on our operations.

Any work stoppage or interruption by employees could materially and adversely affect our business and financial
condition.

A significant number of our employees are represented by labor unions and covered by collective bargaining agreements
that will expire between 2019 and 2023. Although we believe that our relations with our employees are generally good,
no assurance can be given that we will be able to successfully extend or renegotiate our collective bargaining agreements
as they expire from time to time. If we fail to extend or renegotiate our collective bargaining agreements, if disputes with
our unions arise, or if our unionized workers engage in a strike or other work stoppage or interruption, we could experience
a significant disruption of, or inefficiencies in, our operations or incur higher labor costs, which could have a material
adverse effect on our business, results of operations, financial position and liquidity.

Other Risks

Natural disasters could decrease our manufacturing capacity.

Some of our current manufacturing facilities are located in geographic regions that have experienced major natural
disasters, such as earthquakes, floods and hurricanes. Our disaster recovery plan may not be adequate or effective. We
do not carry earthquake insurance. Other insurance that we carry is limited in the risks covered and the amount of coverage.
Our insurance would not be adequate to cover all of our resulting costs, business interruption and lost profits when a
major natural disaster occurs. A natural disaster rendering one or more of our manufacturing facilities totally or partially
unusable, whether or not covered by insurance, would materially and adversely affect our business and financial condition.

Climate change could materially and adversely affect our business.

We cannot predict the effects that climate change may have on our business. They might, for example:

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depress or reverse economic development,
reduce the demand for construction,
increasing the cost and reducing the availability of wood products used in construction,
increase the cost and reduce the availability of raw materials and energy,
increase the cost and reduce the availability of insurance covering damage from natural disasters, and
lead to new laws and regulations that increase our expenses and reduce our sales.

Any of these consequences, and other consequences of climate change that we do not foresee, could materially and
adversely affect our sales, profits and financial condition.

We may have exposure to greater than anticipated tax liabilities.

We provide guidance on our anticipated tax rates. Failure to meet these anticipated rates could cause us to miss analyst
forecasts and could result in material declines in our stock price. Our future income taxes could be adversely affected by
earnings being lower than anticipated in jurisdictions that have lower statutory tax rates and higher than anticipated in
jurisdictions that have higher statutory tax rates, by changes in the valuation of our deferred tax assets and liabilities, as
a result of changes in foreign tax exchanges, or changes in tax laws, regulations, or accounting principles, as well as
certain discrete items. The determination of our worldwide provision for income taxes and other tax liabilities requires
significant judgment, and there are many transactions and calculations where the ultimate tax determination is uncertain.
Although we believe our estimates are reasonable, the ultimate tax outcome may differ from the amounts recorded in our
financial statements and may materially affect our financial results in the period or periods for which such determination
is made.

On December 22, 2017, the U.S. Tax Cuts and Jobs Act of 2017 (the "Tax Reform Act") was signed into law. The impact
of the Tax Reform Act and any future Treasury rules, regulations or guidance thereunder on our business and our
stockholders is uncertain and could be adverse and cause our future results of operations and financial condition to differ
materially from our expectations, estimates and assumptions disclosed in this Annual Report on Form 10-K or previously.

Contracts that we file as exhibits to our public reports contain recitals, representations and warranties that may
not be factually correct.

The parties to any agreement or other instrument that we file as an exhibit to this or any other report did not necessarily
intend that any recital, representation, warranty or other statement of purported fact in the instrument establish or confirm

any fact, even if it is worded as such. Often such statements are used to allocate contractual risk between the parties, and
the statements often are subject to standards of materiality that differ from the standards applicable to our reports. In
addition, such statements may have been qualified by other materials that we have not filed with (or incorporated by
reference into) this or any other report or document. Such exhibits should be read in the context of our other disclosures
in our reports and it should not be assumed that any statement, representation or warranty of any party is necessarily
factually accurate.

Impairment charges on goodwill or other intangible assets adversely affect our financial position and results of
operations.

We are required to perform impairment tests on our goodwill, indefinite-lived intangible assets and definite-lived intangible
assets annually or at any time when events occur that could affect the value of such assets. To determine whether a
goodwill impairment has occurred, we compare fair value of each of our reporting units with its carrying value. In the
past, these tests have led us to incur significant impairment charges. Significant and unanticipated changes in
circumstances, such as significant adverse changes in business climate, adverse actions by regulatory authorities,
unanticipated competition, loss of key customers or changes in technology or markets, can require a charge for impairment
that can materially and adversely affect our reported net income and our stockholders’ equity.

We rely on complex software systems and hosted applications to operate our business, and our business may be
disrupted if we are unable to successfully/efficiently update these systems or convert to new systems.

We are increasingly dependent on technology systems to operate our business, reduce costs, and enhance customer service.
These systems include complex software systems and hosted applications that are provided by third parties such as
financial management and human capital management platforms from SAP America, Inc. and Workday, Inc. Software
systems need to be updated on a regular basis with patches, bug fixes and other modifications. Hosted applications are
subject to service availability and reliability of hosting environments. We also migrate from legacy systems to new systems
from time to time. Maintaining existing software systems, implementing upgrades and converting to new systems are
costly and require a significant allocation of personnel and other resources. The implementation of these systems upgrades
and conversions is a complex and time-consuming project involving substantial expenditures for implementation
activities, consultants, system hardware and software, often requires transforming our current business and financial
processes to conform to new systems, and therefore, may take longer, be more disruptive, and cost more than forecast
and may not be successful. If the implementation is delayed or otherwise is not successful, it may hinder our business
operations and negatively affect our financial condition and results of operations. There are many factors that may
materially and adversely affect the schedule, cost, and execution of the implementation process, including, without
limitation, problems during the design and testing phases of new systems; system delays and malfunctions; the deviation
by suppliers and contractors from the required performance under their contracts with us; the diversion of management
attention from our daily operations to the implementation project; reworks due to unanticipated changes in business
processes; difficulty in training employees in the operation of new systems and maintaining internal control while
converting from legacy systems to new systems; and integration with our existing systems. Some of such factors may
not be reasonably anticipated or may be beyond our control.

Failure of our internal control over financial reporting or our accounting systems could harm our business and
financial results.

Because of the inherent limitations of internal control, our internal control over financial reporting might not detect or
prevent misstatements of our consolidated financial statements on a timely basis. We have used accounting and other
financial management software systems in connection with our operations. Defects in such systems or their implementation
could result in errors in our consolidated financial statements. Our growth and entry into globally dispersed markets as
well as periodic conversions from legacy software systems to new software systems puts significant additional pressure
on our internal control. Failure to maintain an effective internal control could limit our ability to report our financial
results accurately or to detect and prevent deficiencies timely, cause investors to lose confidence in the accuracy and
completeness of our financial reports, and subject us to regulatory investigations and litigation. As a result, our business
and the market price of our common stock could be materially and adversely affected.

Changes in accounting standards could materially and adversely affect our financial results.

The accounting rules applicable to public companies are subject to frequent revision. Future changes in accounting
standards, guidance and interpretations could require us to change the way we measure revenue, expense or balance

sheet amounts, which could result in material and adverse change to our reported results of operations or financial
condition.

Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.

We own our home office in Pleasanton, California, and our principal United States manufacturing facilities in Stockton and San
Bernardino County, California, McKinney, Texas, West Chicago, Illinois, Columbus, Ohio, and Gallatin, Tennessee. The principal
manufacturing facilities located outside the United States, the majority of which we own, are in Canada, France, Denmark, Germany,
Poland, Switzerland, Sweden, Portugal and China. We also own and lease smaller manufacturing facilities, warehouses, research
and development facilities and sales offices in the United States, the United Kingdom, Europe, Asia, Australia, New Zealand, and
Chile. As of February 27, 2019, the Company’s owned and leased facilities were as follows:

North America
Europe
Asia/Pacific
Administrative and all other
Total

Number

Of
Properties

Owned

Approximate Square Footage
Leased
(in thousands of square feet)

Total

27
20
10
1
58

2,323
561
175
89
3,148

631
329
75
—
1,035

2,954
890
250
89
4,183

Our headquarters and principal executive offices are located in Pleasanton, California. We believe that our properties are maintained
in good operating condition. Our manufacturing facilities are equipped with specialized equipment and use extensive automation.
We consider our existing and planned facilities to be adequate for operations as currently conducted and as planned through 2018.
Our leased facilities typically have renewal options and have expiration dates through 2028. We believe we will be able to extend
leases on our various facilities as necessary, or as they expire. Currently, our manufacturing facilities are being operated with at
least one full-time shift. Based on current information and subject to future events and circumstances, we anticipate that we may
require additional facilities to accommodate possible future growth.

In November 2018, we sold our real estate in Vacaville, California and received net proceeds of $17.5 million, after closing costs
and sales price adjustments. These properties are classified under the “Administrative & All other” segment.

Item 3. Legal Proceedings.

From time to time, the Company is involved in various legal proceedings and other matters arising in the normal course of business.

Corrosion, hydrogen enbrittlement, cracking, material hardness, wood pressure-treating chemicals, mis-installations, misuse,
design and assembly flaws, manufacturing defects, labeling defects, product formula defects, inaccurate chemical mixes,
adulteration, environmental conditions, or other factors can contribute to failure of fasteners, connectors, anchors, adhesives,
specialty chemicals, such as fiber reinforced polymers, and tool products. In addition, inaccuracies may occur in product
information, descriptions and instructions found in catalogs, packaging, data sheets, and the Company’s website.

Certain of the legal proceedings in which we are involved are discussed under “Litigation and Potential Claims” in Note 14,
“Commitments and Contingencies,” to the Company’s Consolidated Financial Statements, and are hereby incorporated by
reference. The resolution of any claim or litigation is subject to inherent uncertainty and could have a material adverse effect on
the Company’s financial condition, cash flows or results of operations.

Item 4. Mine Safety Disclosures.

Not applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market Information for Common Stock

The information presented below is our historical data and not necessarily indicative of our future financial condition or results
of operations.

The Company’s common stock is listed on the New York Stock Exchange (the “NYSE”) under the symbol “SSD.”

Record Holders

As of February 19, 2019, there were 13,233 holders of record of the Company’s common stock. Because many of our shares of
common stock are held by brokers and other nominees on behalf of stockholders, including in trust, we are unable to estimate the
total number of stockholders represented by these record holders.

Dividends

Future dividends, if any, will be determined by the Company’s Board of Directors, based on the Company’s future earnings, cash
flows, financial condition and other factors deemed relevant by the Board of Directors. See “Item 7 — Management’s Discussion
and Analysis of Financial Condition and Results of Operations.”

Stock Performance Graph

This performance graph shall not be deemed “soliciting material” or to be “filed” with the SEC for purposes of Section 18 of the
Exchange Act, or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference
into any filing of the Company under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific
reference in such filing. The information presented below is our historical data and not necessarily indicative of our future financial
condition or results of operations.

The graph below compares the cumulative total stockholder return on the Company’s common stock from December 31, 2013,
through December 31, 2018, with the cumulative total return on the S&P 500 Index (a broad equity market index), the Dow Jones
U.S. Building Materials & Fixtures Index (a published industry or line-of-business index) and a Peer Group Index over the same
period (assuming the investment of $100 in the Company’s common stock and in each of the indices on December 31, 2013, and
reinvestment of all dividends into additional shares of the same class of equity securities at the frequency with which dividends
are paid on such securities during the applicable fiscal year). To provide an additional comparison to our performance, we included
an index consisting of companies in the building products or construction materials industries that are most comparable to us in
terms of size and nature of operations, which group has also been referenced by us in connection with setting our executive
compensation.

The Peer Group Index below consisted of AAON, Inc., PGT Innovations, Inc., Continental Building Products, Inc., Trex Company,
Inc., Insteel Industries, Inc., Quanex Building Products Corp., American Woodmark Corp, Patrick Industries, Inc., Apogee
Enterprises, Inc., U.S. Concrete, Inc., Gibraltar Industries, Inc., Eagle Materials Corp., Summit Material, LLC., Advanced Drainage
System, Armstrong World Industries, Inc., and Masonite International Corp. In 2018, we added Advanced Drainage System,
Armstrong World Industries, Inc., to the stock performance graph below to ensure that it continues to reflect an appropriate
comparison to our business operations. During 2018, NCI Building Systems, Inc. acquired Ply Gem Holdings, Inc., both of which
were included as our peer companies in 2017. These two companies are not included as peer companies this year. We review our
peer companies annually against revenue, industry and other company characteristics and as a result, we no longer consider these
companies to be peers as of the acquisition date. As a result of this review, we also added two new peer companies to the peer
group this year Advanced Drainage Systems and Armstrong World Industries.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

The table below presents the monthly repurchases of shares of our common stock in the fourth quarter of the fiscal year ended
December 31, 2018.

Period
October 1 - October 31, 2018
November 1 - November 30, 2018
December 1 - December 31, 2018
Total

(a)

(b)

Total
Number of
Shares
Purchased
528,100
220,359
221,634
970,093

Average
Price Paid
per Share
68.26
$
56.65
$
56.48
$

528,100
220,359
221,634

(d)
Approximate
Value of Shares
that May Yet Be
Purchased Under
the Plans or
Programs (1)
$66.0 million
$53.5 million
$41.0 million

(1)

Pursuant to the $275.0 million repurchase authorization that was publicly announced on August 1, 2017, and expired on December
31, 2018. See “Note 3 — Net Income per Share” to the Company’s Consolidated Financial Statements.

On January 28, 2019, the Company's Board of Directors authorized the Company to repurchase up to $100.0 million of the
Company’s common stock. The authorization is in effect from January 1, 2019 through December 31, in 2019.

Item 6. Selected Financial Data.

The following selected consolidated financial data should be read in conjunction with Part II, Item 7 “Management’s Discussion
and Analysis of Financial Condition and Results of Operations” and the Company's Consolidated Financial Statements and the
related Notes thereto appearing in Part II, Item 8 “Financial Statements and Supplementary Data” of this Annual Report on Form
10-K, including any discussion of presentation changes, accounting changes, business combinations or dispositions of business
operations therein to fully understand factors that may affect the comparability of the information. Historical performance is not
necessarily indicative of future results.

The consolidated statements of operations data for each of the years ended December 31, 2018, 2017 and 2016 and the consolidated
balance sheets data as of December 31, 2018 and 2017 are derived from our audited consolidated financial statements of this Form
10-K. The consolidated statements of operations data for the years ended December 31, 2015 and 2014 and the consolidated
balance sheets data as of December 31, 2016, 2015 and 2014 are derived from our audited consolidated financial statements,
except as otherwise noted, that are not included in this Annual Report on Form 10-K. The information presented below is our
historical data and not necessarily indicative of our future financial condition or results of operations. The financial data below
includes the results of operations of acquired companies following their acquisition. The consolidated statements of operations
data for the years ended December 31, 2015 and 2014 include reclassification adjustments to gross profit, operating expenses and
operating income, that had no affect on net income for the years therein. For a summary of acquisitions that took place during the
fiscal years ended December 31, 2018, 2017 and 2016, see “Note 10 — Acquisitions and Dispositions” to the Company’s
Consolidated Financial Statements.

(in thousands, except per-share data)
Statement of Operations Data:
Net sales

Gross profit

Gross profit margin

Total operating expenses

Percentage of sales
Income from operations

Percentage of sales

Net income

Percentage of sales

2018

2017

2016

2015

2014

Years Ended December 31,

$1,078,809
480,519

$ 977,025
443,381

$ 860,661
409,880

$ 794,059
356,406

$ 752,148
339,211

44.5%

45.4%

47.6%

44.9%

45.1%

312,080

305,626

269,450

246,976

238,793

28.9%

31.3%

31.1%

31.7%

172,332

137,915

141,210

109,819

100,213

16.0%

14.1%

16.4%

13.8%

13.3%

$ 126,633

92,617

89,734

67,888

63,531

11.7%

9.5%

10.4%

8.5%

8.4%

Earnings per share of common stock:

Basic

Diluted

Cash dividends declared per share of common stock

(in thousands)
Balance Sheet Data:
Working capital
Property, plant and equipment, net
Goodwill
Total assets
Line of credit and long-term liabilities, including
current portion
Total liabilities
Total stockholders’ equity

2.74

2.72

0.870

1.95

1.94

0.810

1.87

1.86

0.700

1.39

1.38

0.620

1.30

1.29

0.545

2018

2017

2016

2015

2014

447,949 $
254,597
130,250
1,021,663

447,450 $
273,020
137,140
1,037,523

476,451 $
232,810
124,479
979,974

494,308 $
213,716
123,950
961,309

16,443
166,149
855,514

17,310
152,745
884,778

5,336
114,132
865,842

16,521
111,485
849,824

509,838
207,027
123,881
973,065

15,138
109,600
863,465

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following is a discussion and analysis of the financial condition and results of operations, unless stated otherwise, for the
Company for the fiscal years ended December 31, 2018, 2017 and 2016, and of certain factors that may affect the Company’s
prospective financial condition and results of operations. The following discussion and analysis contain forward-looking statements
as discussed in the “Note About Forward-Looking Statements” at the beginning of this Annual Report on Form 10-K and should
be read in conjunction with the Company's Consolidated Financial Statements and related Notes included therein. In addition to
our historical consolidated financial information, the following discussion contains forward-looking statements that reflect our
plans, estimates, and beliefs. Our actual results could differ materially from those plans, estimates, and beliefs. Factors that could
cause or contribute to these differences include those discussed below and elsewhere in this Annual Report on Form 10-K,
particularly "Item 1A — Risk Factors."

All comparisons below (which are generally indicated by words such as “increased,” “decreased,” “remained,” or “compared to”),
unless otherwise noted, are comparing the year ended December 31, 2018 with the year ended December 31, 2017. In 2018, the
Company recorded an out-of-period adjustment for the years ended December 31, 2017 and December 31, 2016, which increased
cost of sales and decreased general and administrative expenses by $2.9 million and $2.6 million for the years ended December
31, 2017 and December 31, 2016, respectively. Such adjustment only applied to the North America segment, which resulted from
recording certain depreciation expense on company-owned real estate as general and administrative expense rather than cost of
goods sold. Income from operations and net income for the year ended December 31, 2017 as presented below were not affected
by the adjustment. In 2018, the Company changed its presentation of its consolidated statement of operations to display foreign
exchange gain (loss), net, as a separate item below income from operations. Foreign exchange gain (loss), net, was previously
included in general and administrative expenses and in income from operations. Income before tax and net income for the years
ended December 31, 2017 and December 31, 2016 presented below were not affected by the change in presentation.

Overview

We design, manufacture and sell building construction products that are of high quality and performance, easy to use and cost-
effective for customers. We operate in three business segments determined by geographic region: North America, Europe and
Asia/Pacific.

Our primary business strategy is to grow through increasing our market share and profitability in Europe; growing our share in
the concrete space; and continuing to develop our software to support our core wood products offering while leveraging our
strengths in engineering, sales and distribution, and our strong brand name. We believe these initiatives and objectives are crucial
to not only offer a more complete solution to our customers and bolster our sales of core wood connector products, but also to
mitigate the cyclicality of the U.S. housing market.

On October 30, 2017, we announced the 2020 Plan to provide additional transparency into our strategic plan and financial objectives.
We remain focused on achieving our aggressive financial targets under the 2020 Plan, assuming (i) there are mid-single digit
growth in U.S. housing starts and in the repair and remodel market, (ii) we can increase our market share and profitability in
Europe, and (iii) we can gain market share for both our truss and concrete product offerings. Subject to future events and
circumstances, our 2020 Plan is centered on three key aggressive operational objectives as further described below.

•

First, a continued focus on organic growth with a goal to achieve a net sales compound annual growth rate of approximately
8% (from $860.7 million reported in fiscal 2016) through fiscal 2020. Since 2016, net sales has grown at a compound
annual growth rate of 12%.
Second, rationalizing our cost structure to improve company-wide profitability by reducing total operating expenses as
a percentage of net sales from 31.8% in fiscal 2016 to a range of 26.0% to 27.0% by fiscal 2020. We expect to achieve
this initiative, aside from top-line growth, through cost reduction measures in Europe and our concrete product line, zero-
based budgeting for certain expense categories and a commitment to remaining headcount neutral (except in the production
and sales departments to meet demands from sales growth). Offsetting these reductions will be the Company’s ongoing
investment in its software initiatives as well as the expenses associated with our ongoing SAP implementation.

• Third, improving our working capital management and overall balance sheet discipline primarily through the reduction
of inventory levels as well as implementing Lean principles in many factories. With these efforts, we believe we could
achieve an additional 25% to 30% reduction of our raw materials and finished goods inventory through 2020 without
impacting day-to-day production and shipping procedures.

Many of our key operating initiatives stem from the 2020 Plan, including those focused on rationalizing our cost structure to drive
improved profitability without sacrificing our competitive edge, on growing our market share and on improving our technologies
and systems to provide best-in-class services to our customers.

Operating expenses as a percentage of net sales were 28.9% for the year ended 2018 and 31.3% for both years ended 2017 and
2016. In dollars, operating expenses for the year ended December 31, 2018 was $6.5 million above our operating expenses for
the year ending December 31, 2017, which was mostly due to increased consulting and legal expenses, sales and sales agent
commissions on increased sales volumes and SAP implementation expenses. In late 2017 and throughout 2018, we engaged a
leading management consultant to perform an independent in-depth analysis of our operations, which contributed towards a
reduction of expenses in 2018 and could potentially result in initiatives that reduce expenses beyond the 2020 Plan as well as
improvements to net working capital. We will incur additional consulting expenses in 2019 due to these initiatives, and we expect
all of the consulting fees we incurred in 2018 and will incur in 2019 for the leading management consultant will have a one-year
or less pay back.

We believe our efforts to achieve the 2020 Plan will contribute to improved business performance and operating results, improve
returns on invested capital and allow us to be more aggressive in repurchasing shares of our stock in the near-term. Through
execution on the 2020 Plan, we expect by the end of fiscal year 2020 to achieve a return on invested capital (1) target within the
range of 17% to 18% from 10.5% in 2016. The Company's return on invested capital was 14.3% for the fiscal year ended 2018.

We believe our ability to achieve industry-leading margins from a gross profit and operating income standpoint is due to the high
level of value-added services that we provide to our customers. Aside from our strong brand recognition and trusted reputation,
Simpson is unique due to our extensive product testing capabilities and our state-of-the-art test lab; strong customer support and
education for engineers, builders and contractors; deep 40-plus year relationships with engineers that get our products specified
on the blueprint and pulled through to the job site; product availability with delivery in typically 24 hours to 48 hours; and an
active involvement with code officials to improve building codes and construction practices. Based on current information, we
expect the competitive environment to be relatively stable with U.S. single-family housing to grow in the low to mid single digits
for fiscal year 2019. For the purposes of defining our 2020 objectives, during years 2017 to 2020 we assume U.S. single-family
housing starts growing as a percentage in the mid single digits on average, which should support a sustainable organic revenue
growth outlook in North America for many of our products.

We have invested in our strategic initiative to sell engineered product solutions, to help us perform throughout all industry cycles,
which we estimate supports approximately 40% of our connector and truss plate sales. In support of this effort, we acquired CG
Visions, Inc. (“CG Visions”) in 2017, and completed our purchase of the LotSpec software asset and entered into a strategic
software partnership with Hyphen Solutions ("Hyphen"), in 2018.

While acquisitions were part of a dual-fold approach to growth in the past, our go-forward strategy will primarily focus on organic
growth, supported by strategic capital investments in the business. As such, we will de-emphasize acquisitions activities going
forward, especially in the concrete repair space. An exception may occur if the right opportunity were to arise in other areas of
our business, such as in our core fastener space, which is the particular area where we believe it would be beneficial to gain
additional production capacity to support our wood business or to enhance our wood and concrete product portfolio with additional
value–added products.

Factors Affecting Our Results of Operations

Unlike lumber or other products that have a more direct correlation to housing starts, our products are used to a greater extent in
areas that are subject to natural forces, such as seismic or wind events. Our products are generally used in a sequential process
that follows the construction process. Residential and commercial construction begins with the foundation, followed by the wall
and the roof systems, and then the installation of our products, which flow into a project or a house according to these schedules.
Foundation product sales could be considered a leading indicator for our product sales.

Our sales also tend to be seasonal, with operating results varying from quarter to quarter. With some exceptions, our sales and
income have historically been lower in the first and fourth quarters than in the second and third quarters of a fiscal year, as our
41

customers tend to purchase construction materials in the late spring and summer months for the construction season. In addition,
weather conditions, such as extended cold or wet weather, which affect and sometimes delay installation of some of our products,
could negatively affect our results of operations. Political and economic events can also affect our sales and profitability.

ERP Integration

In July 2016, our Board of Directors (the "Board") approved a plan to replace our current in-house enterprise resource planning
("ERP") and externally sourced accounting platforms with a fully integrated ERP platform from SAP America, Inc. ("SAP") in
multiple phases by location over a period of four years at all facilities plus our headquarters, with a focus on configuring, instead
of customizing, the standard SAP modules.

We went live with our first wave of the SAP implementation project in February of 2018. The first wave of the SAP implementation
has taken longer than expected. As a result, we now believe the SAP implementation will be completed by the end of 2021, and
associated costs will increase by approximately 15% from prior estimates. While we believe the SAP implementation will be
beneficial to the Company over time, annual operating expenses are expected to increase from 2018 to 2024 as a result of the ERP
project, partly due to the amortization of related capitalized costs. As of December 31, 2018, we have capitalized $16.6 million
and expensed $13.1 million of the costs associated with the ERP project.

Business Segment Information

Our North America segment has generated revenues primarily from wood construction products compared to concrete construction
products. Due to improved economic conditions, net sales in regions of the segment have trended up, including increases in housing
starts, particularly in the north-western, south-western and south-eastern regions of the United States. Our wood product net sales
increased 12.6% for the year ended December 31, 2018 compared to the year ended December 31, 2017, primarily due to increased
sales volumes and an 11% price increase on a majority of our wood connector products sold in the United Stated effective in the
third quarter of 2018. Our truss sales increased for the year ended 2018 due to increased sales volumes from customer conversions
and unit sales prices. Our truss specialists are focusing on converting medium size truss customers to our design and management
software in 2019, while continuing to support our smaller truss customers. To improve truss plate gross profit margins, we have
relocated our truss manufacturing into our wood connector plants, which will increase efficiency and plant utilization in the wood
connector plants. Our concrete construction product sales increased 18.3% for the year ended December 31, 2018 compared to
the year ended December 31, 2017, mostly due to increased sales volumes and unit sales prices.

In late 2016, we collaborated with The Home Depot, Inc. (“The Home Depot”) to make available our mechanical anchor line of
products in The Home Depot. This collaboration increased a portion of our finished goods inventory and we expect to continue
to introduce our mechanical anchor line of products through approximately 1,900 of The Home Depot store locations by 2020.
As of December 31, 2018, the product line had rolled out to 373 The Home Depot locations with another 400 expected by the end
of the second quarter of 2019. The roll-out is occurring a much slower rate than expected due to space restrictions at The Home
Depot stores. This slower roll-out; however, is not expected to affect our 2020 Plan target for compound annual sales growth. See
“North America” below.

Our Europe segment generates more revenues from wood construction products than concrete construction products. Wood
construction product sales decreased 6.5% for the year ended December 31, 2018 compared to the year ended December 31, 2017.
Net sales on wood construction products for the year ended December 31, 2017 included $12.8 million of net sales provided by
Gbo Fastening Systems' Poland and Romania, both of which were sold during the latter part of 2017. Concrete construction product
sales are mostly project based, and net sales increased 7.4% for the year ended 2018 compared to the year ended 2017, primarily
due to increased sales volumes. The roll-out of the complete line of of Gbo fastener products into the Nordic region and France
is progressing as planned. We are increasing our wood connector sales presence in the Nordic region as expected, which will
partially replace third-party suppliers and improve related profit margins. Operating expenses decreased $3.1 million for the year
ended 2018 compared to the year ended 2017, partly due to the sale of Gbo Fastening Systems' Poland and Romania subsidiaries
as well as other cost reductions measures. See “Europe” below.

Our Asia/Pacific segment has generated revenues from both wood and concrete construction products. We believe that the Asia/
Pacific segment is not significant to our overall performance.

(1) When referred to above, the Company’s return on invested capital (“ROIC”) for a fiscal year is calculated based on (i)
the net income of that year as presented in the Company’s consolidated statements of operations prepared pursuant to
generally accepted accounting principles in the U.S. (“GAAP”), as divided by (ii) the average of the sum of the total
stockholders’ equity and the total long-term liabilities at the beginning of and at the end of such year, as presented in the
Company’s consolidated balance sheets prepared pursuant to GAAP for that applicable year. As such, the Company’s
ROIC, a ratio or statistical measure, is calculated using exclusively financial measures presented in accordance with
GAAP.

Business Outlook

Based on current information and subject to future events and circumstances:

• The Company currently anticipates that the market price of steel will be flat during the first quarter of 2019.

• The Company estimates that its full-year 2019 gross profit margin will be between approximately 44.5% and 45.5%.

• The Company estimates that its full-year 2019 operating expenses, as a percentage of net sales, will be between

approximately 27.5% and 28.5%.

• The Company estimates that its 2019 full-year effective tax rate will be between approximately 25% to 27% including
both federal and state income tax rates. The ultimate impact of the Tax Reform Act may differ materially from the
Company’s estimates due to changes in the interpretations and assumptions made by the Company as well as additional
regulatory guidance that may be issued and actions the Company may have taken or may take as a result of the Tax Cuts
and Jobs Act, such as cash repatriation to the United States. The Company will continue to assess the expected impacts
of the new tax law and provide additional disclosures at appropriate times.

Results of Operations

The following table sets forth, for the years indicated, the Company's operating results as a percentage of net sales for the years
ended December 31, 2018, 2017 and 2016, respectively:

2018

Years Ended December 31,
2017

2016

Net sales
Cost of sales
Gross profit
Research and development and other engineering
Selling expense
General and administrative expense
Total operating expense
Net gain on disposal of assets
Impairment of goodwill
Income from operations
Loss in equity investment, before tax
Foreign exchange gain (loss)
Interest expense, net
Gain on bargain purchase of a business
Loss on disposal of a business
Income before taxes
Provision for income taxes
Net income

100.0 %
55.5 %
44.5 %
4.0 %
10.2 %
14.7 %
28.9 %
(1.0)%
0.6 %
16.0 %
— %
— %
(0.1)%
— %
— %
15.9 %
4.2 %
11.7 %

100.0 %
54.6 %
45.4 %
4.9 %
11.8 %
14.6 %
31.3 %
— %
— %
14.1 %
— %
0.1 %
(0.1)%
0.6 %
— %
14.8 %
5.3 %
9.5 %

100.0 %
52.4 %
47.6 %
5.4 %
11.4 %
14.5 %
31.3 %
(0.1)%
— %
16.4 %
— %
(0.2)%
(0.1)%
— %
— %
16.1 %
5.7 %
10.4 %

Comparison of the Years Ended December 31, 2018 and 2017

Unless otherwise stated, the results announced below, when providing comparisons (which are generally indicated by words such
as “increased,” “decreased,” “unchanged” or “compared to”), compare the results of operations for the year ended December 31,
2018, against the results of operations for the year ended December 31, 2017. Unless otherwise stated, the results announced
below, when referencing “both years,” refer to the year ended December 31, 2017 and the year ended December 31, 2018. To
avoid fractional percentages, all percentages presented below were rounded to the nearest whole number.

The following table shows the change in the Company’s operations from 2017 to 2018, and the increases or decreases for each
category by segment:

(in thousands)

Net sales

Cost of sales

Gross profit

Operating expenses:
Research and development and other
engineering expense
Selling expense

General and administrative expense

Operating expenses

Net gain (loss) on disposal of assets

Impairment of goodwill

Income from operations

Loss in equity investment, before tax
Foreign exchange gain
Interest expense, net
Gain on bargain purchase of a business

Loss on disposal of a business

Income before income taxes

Provision for income taxes

Increase (Decrease) in Operating Segment

2017

North
America

Europe

Asia/
Pacific

Admin &
All Other

2018

977,025

106,890

533,644

443,381

68,120

38,770

(6,128) $
(3,307)
(2,821)

1,022
(93)
1,115

— $ 1,078,809
(74)
74

598,290

480,519

47,616

114,903

143,107

305,626

(160)

—

137,915

(86)
1,252
(788)
6,336

(211)

144,418

51,801

(3,728)
(1,418)
13,467

8,321
(1,009)
—

31,458

23
2,359
(341)
—

—

33,499
(7,796)
41,295

(1,166)
(3,917)
1,950
(3,133)
(624)
6,686
(5,750)
—
(3,026)
126
(6,336)
211
(14,775)
822
(15,597) $

244

169
(74)
339

—

744

—
161
(185)
—

—

720
(305)
1,025

194

643

927
(8,818)
—

7,965

—
(316)
617
—

—

8,266

973

43,056

109,931

159,093

312,080
(10,579)
6,686

172,332
(63)
430
(571)
—

—

172,128

45,495

7,293

126,633

Net income

92,617

Net Sales increased 10.4% to $1,078.8 million from $977.0 million. Net sales to contractor distributors, dealer distributors, home
centers and lumber dealers increased primarily due to increased home construction activity and average net sales unit prices. Wood
construction product net sales, including sales of connectors, truss plates, fastening systems, fasteners and shearwalls, represented
85% of the Company's total net sales in both years. Concrete construction product net sales, including sales of adhesives, chemicals,
mechanical anchors, powder actuated tools and reinforcing fiber materials, represented 15% of the Company's total net sales in
both years.

Gross profit increased to $480.5 million from $443.4 million. Gross profit margins decreased to 44.5% from 45.4%, which was
lower than our expected gross profit margins of 45.5% to 46.5%. This was due to an unexpected sharp decline in net sales and
increased labor and factory and tooling costs during December 2018 resulting in increases in factory, material and labor costs as
a percentage of net sales. The gross profit margins, including some intersegment expenses, which were eliminated in consolidation,
and excluding other expenses that are allocated according to product group, decreased to 45.2% from 46.5% for wood construction
products and increased to 37.1% from 34.7%, respectively.

Research and development and engineering expense decreased 9.6% to $43.1 million from $47.6 million, primarily due to decreases
of $2.1 million in personnel costs, $1.0 million in severance expenses, $0.6 million in cash profit sharing on lower operating
income and $0.2 million in professional fees.

Selling expense decreased 4.3% to $109.9 million from $114.9 million primarily due to decreases of $2.4 million in personnel
costs, $2.1 million in advertising and promotional costs, $1.9 million in severance expense and $1.0 million in stock-based
compensation expense, which was partly offset by an increase of $2.6 million in sales and agent commissions.

General and administrative expense increased 11.2% to $159.1 million from $143.1 million, primarily due to increases of $13.2
million in consulting and legal expenses, $3.3 million in depreciation expense, $0.5 million in bad debt expense and $0.4 million
in subscription, licensing, maintenance and hosting fees, which was partly offset by decreases of $1.0 million in personnel costs
and $0.6 million in stock-based compensation. Included in general and administrative expense are costs associated with the SAP
implementation of $6.5 million, an increase of $3.3 million over the prior year. These expenses were primarily for professional
fees and 2018 included $1.6 million in incremental related amortization expense.

Gain on sale of assets - In November 2018, the Company sold a facility that was previously leased exclusively to a third party.
The Company received net proceeds of $17.5 million, which resulted in a gain of $8.8 million. In 2016, an eminent domain claim
was exercised on land owned by the Company and included an offer for loss of property. The Company challenged the offer, which
resulted in the Company receiving an additional $1.0 million in the first quarter of 2018 for the taking of the land, which occurred
in 2016.

Impairment of goodwill - The Company completed its 2018 annual goodwill impairment analysis in the fourth quarter of 2018
and it resulted in the impairment charge of $6.7 million associated with assets acquired in Denmark in 2001. The impairment was
due to a reduction in expected future operating profits for the reporting unit alone, and not for the Company as a whole, and as a
result, the goodwill of the Denmark reporting unit was fully impaired. The Company’s 2018 annual goodwill impairment analysis
did not result in additional impairment of goodwill. See “Critical Accounting Policies and Estimates — Goodwill Impairment
Testing."

Our effective income tax rate decreased to 26.4% from 35.9%, primarily due to the Tax Reform Act, which reduced the United
States statutory federal corporate tax rate from 35% to 21%. The effective income tax rate for the year ended December 31, 2017
was also reduced by a nonrecurring gain on a bargain purchase related to the Gbo Fastening Systems acquisition, which was not
taxable. The effective income tax rate for the year ended December 31, 2018 was increased by a nonrecurring impairment of
goodwill related to the Europe segment, which was also not taxable.

Net income was $126.6 million compared to $92.6 million. Diluted net income per share of common stock was $2.72 compared
to $1.94. The $92.6 million consolidated net income for the year ended December 31, 2017 included a $6.3 million nonrecurring
gain on a bargain purchase of a business, which increased diluted earnings per share for the same period by $0.13.

Net Sales

The following table shows net sales by segment for the years ended December 31, 2017 and 2018, respectively:

(in thousands)
December 31, 2017
December 31, 2018
Increase (decrease)
Percentage increase (decrease)

North
America
$ 803,697
910,587
$ 106,890

Europe
$ 165,155
159,027
$ (6,128)

13.3%

(3.7)%

Asia/
Pacific

8,173
9,195
1,022
12.5%

Total
$ 977,025
1,078,809
$ 101,784

10.4%

The following table shows segment net sales as percentages of total net sales for the years ended December 31, 2017 and 2018,
respectively:

Percentage of total 2017 net sales
Percentage of total 2018 net sales

Gross Profit

North
America

Europe

Asia/
Pacific

82%
84%

17%
15%

Total

100%
100%

1%
1%

The following table shows gross profit by segment for the years ended December 31, 2017 and 2018, respectively:

(in thousands)
December 31, 2017
December 31, 2018
Increase (decrease)
Percentage increase (decrease)

* The statistic is not meaningful or material.

North
America
$ 383,282
422,053
38,771

Europe
$ 58,973
56,152
$ (2,821)

10.1%

(4.8)%

Asia/
Pacific

Admin &
All Other

971
2,085
1,114
*

Total
$ 443,381
480,519
37,138

155
229
74

8.4%

The following table shows gross profit percentages by segment for the years ended December 31, 2017 and 2018, respectively:

2017 gross profit percentage
2018 gross profit percentage

* The statistic is not meaningful or material.

North America

North
America

Europe

Asia/
Pacific

48%
46%

36%
35%

12%
23%

Admin &
All Other
*
*

Total

46%
45%

• Net sales increased 13.3% mostly due to increased sales volume and average unit price in the United States. Canada's net
sales increased primarily due to increased sales volumes and were not significantly affected by foreign currency translation.

• Gross profit margin decreased to 46.3% from 47.7%, primarily due to increased material, labor and shipping costs, as a

percentage of net sales, partly offset by decreased factory and overhead costs as a percentage of net sales.

• Research and development and engineering expense decreased $3.7 million primarily due to decreases of $2.1 million in
personnel costs, $0.5 million in severance expense, $0.5 million in cash profit sharing expense and $0.4 million in
professional fees.

•

Selling expense decreased $1.4 million, primarily due to decreases of $1.7 million in advertising expense, $0.8 million in
stock-based compensation expense, $0.8 million in severance expense and $0.3 million in personnel costs, partly offset by
an increase of $1.6 million in sales and agent commissions.

• General and administrative expense increased $13.5 million, primarily due to increases of $13.9 million in consulting and
legal expenses, $3.3 million in depreciation expense, $1.1 million mostly in software subscription, licensing, maintenance
and hosting fees and $0.2 million in bad debt expense, partly offset by decreases of $1.8 million in severance expense, $1.7
million in stock-based compensation and $1.1 million in personnel costs. Included in general and administrative expense
are costs associated with the SAP implementation of $6.4 million, an increase of $4.1 million over the prior year quarter.
These expenses were primarily for professional fees.

•

Income from operations increased $31.5 million, mostly due to increased gross profit, which were partially offset by higher
operating expenses. Severance expenses of $3.6 million were recorded in 2017.

Europe

• Net sales decreased 3.7% primarily due to reduced sales volume as a result of the late 2017 sale of Gbo Fastening Systems'
Poland and Romania subsidiaries (acquired in January 2017), which contributed $12.8 million in net sales for the year
ended December 31, 2017. Net sales were positively affected by approximately $4.9 million in foreign currency translations,
primarily related to the strengthening of the Euro, British pound, Danish Kroner and Polish zloty against the United States
dollar.

• Gross profit margin decreased to 35.3% from 35.7% primarily due to increased factory and overhead and warehousing

costs, partly offset by decreased material and labor costs.

• Research and development and engineering expense decreased $1.2 million primarily due to decreases of $0.5 million in
personnel costs and $0.5 million in severance expenses, partly offset by an increase of $0.2 million in professional fees.

•

Selling expense decreased $3.9 million primarily due to decreases of $2.2 million in personnel costs, $1.2 million in severance
expenses, $0.4 million mostly for advertising costs and $0.2 million in stock-based compensation expense.

• General and administrative expense increased $1.9 million primarily due to increases of $2.5 million in personnel costs,
including $1.7 million in severance expense, $0.5 million in amortization expenses and $0.2 million in bad debt expense,
partly offset by decreases of $1.1 million of consulting fees and $0.5 million mostly for software subscription, licensing,
maintenance and hosting fees. Included in general and administrative expense are costs associated with the SAP
implementation of $1.9 million, an increase of $0.8 million over the prior year quarter. These expenses were primarily for
professional fees.

•

Impairment of goodwill - The impairment charge of $6.7 million taken in the fourth quarter of 2018 was associated with
assets acquired in Denmark in 2001, and as a result, the goodwill of the Denmark reporting unit was fully impaired. The
impairment resulted from a reduction in expected future operating profits of the reporting unit, but not for Europe as a
whole. The Company’s 2018 annual goodwill impairment analysis did not result in additional impairment of goodwill for
other reporting units. See “Critical Accounting Policies and Estimates — Goodwill Impairment Testing."

•

Income from operations decreased $5.8 million, mostly due to a $6.7 million impairment of goodwill.

Asia/Pacific

•

For information about the Company's Asia/Pacific segment, please refer to the table above setting forth changes in our
operating results for the years ended December 31, 2018 and 2017.

Administrative and All Other

• Gain on sale of assets - In November 2018, the Company sold a facility that was previously leased exclusively to a third

party. The Company received net proceeds of $17.5 million, which resulted in a gain of $8.8 million.

Comparison of the Years Ended December 31, 2017 and 2016

Unless otherwise stated, the results announced below, when providing comparisons (which are generally indicated by words such
as “increased,” “decreased,” “unchanged” or “compared to”), compare the results of operations for the year ended December 31,
2017, against the results of operations for the year ended December 31, 2016. Unless otherwise stated, the results announced
below, when referencing “both years,” refer to the year ended December 31, 2016 and the year ended December 31, 2017. To
avoid fractional percentages, all percentages presented below were rounded to the nearest whole number.

The following table shows the change in the Company’s operations from 2016 to 2017, and the increases or decreases for each
category by segment:

(in thousands)
Net sales
Cost of sales
Gross profit
Research and development and other
engineering expense
Selling expense
General and administrative expense
Operating expenses
Gain on sale of assets
Income from operations
Loss in equity method, before tax
Foreign exchange gain (loss)
Interest expense, net
Gain on bargain purchase of a business
Loss on disposal of a business
Income before income taxes
Provision for income taxes
Net income

2016
860,661
450,781
409,880

46,248
98,343
124,859
269,450
(780)
141,210
—
(1,733)
(577)
—
—
138,900
49,166
89,734

Increase (Decrease) in Operating Segment

North
America

Europe

Asia/
Pacific

Admin &
All Other

61,676
41,581
20,095

53,881
38,946
14,935

201
8,042
15,553
23,796
769
(4,470)
(86)
(200)
89
—
—
(4,667)
4,278
(8,945) $

1,224
8,268
4,853
14,345
(18)
608
—
2,918
(204)
6,336
(211)
9,447
697
8,750

807
2,255
(1,448)

6
227
(1,103)
(870)
(67)
(511)
—
(450)
63
—
—
(898)
(302)
(596) $

— $
81
(81)

(63)
23
(1,055)
(1,095)
(64)
1,078
—
717
(159)
—
—
1,636
(2,038)
3,674

2017
977,025
533,644
443,381

47,616
114,903
143,107
305,626
(160)
137,915
(86)
1,252
(788)
6,336
(211)
144,418
51,801
92,617

Net Sales increased 13.5% to $977.0 million from $860.7 million. Recently acquired businesses accounted for $47.9 million (41%)
of the increase in net sales. Net sales to contractor distributors, lumber dealers, dealer distributors and home centers increased
primarily due to increased home construction activity and average net sales unit prices. Wood construction product net sales,
including sales of connectors, truss plates, fastening systems, fasteners and shearwalls, represented 85% of the Company's total
net sales in both years. Concrete construction product net sales, including sales of adhesives, chemicals, mechanical anchors,
powder actuated tools and reinforcing fiber materials, represented 15% of the Company's total net sales in both years.

Gross profit increased to $443.4 million from $409.9 million. Gross profit margins decreased to 45.4% from 47.6%. Recently
acquired businesses had an average gross profit margin of 30% for the year ended 2017. The gross profit margins, including some
intersegment expenses, which were eliminated in consolidation, and excluding other expenses that are allocated according to
product group, decreased to 47% from 49% for wood construction products and remained at 35% for both years for concrete
construction products.

Research and development and engineering expense increased 3.0% to $47.6 million from $46.2 million, primarily due to increases
of $2.2 million in personnel costs mainly attributable to the addition of staff and pay rate increases instituted on January 1, 2017,
and $1.2 million in severance expenses, partly offset by a decreases of $1.4 million in professional fees and $0.8 million in cash
profit sharing on lower operating income.

Selling expense increased 16.8% to $114.9 million from $98.3 million primarily due to increases of $10.3 million in personnel
costs mostly related to recent acquisitions and the addition of staff and pay rate increases instituted on January 1, 2017, $3.1 million
in advertising costs, $2.0 million in severance expenses, $0.7 million in depreciation expense, $0.3 million in donation expense,
$0.3 million in facility expenses and $0.2 million in computer and phone expenses, which was partly offset by a decrease of $0.9
million in cash profit sharing expense. Recent acquisitions increased selling expense by $7.2 million.

General and administrative expense increased 14.6% to $143.1 million from $124.9 million, primarily due to increases of $10.3
million in personnel costs mostly related to recent acquisitions and the addition of staff and pay rate increases instituted on January
1, 2017, $6.5 million in legal and professional fees mostly related to strategic initiatives such as software and systems integration
and compensation and governance changes, $3.7 million in software licensing, maintenance and hosting fees, $1.8 million in
depreciation expense and $2.0 million in severance expenses, which was partly offset by a decrease of $6.0 million in cash profit

sharing expense on lower operating income and reduced payouts under our executive officer cash profit sharing plan and $0.4
million in stock-based compensation. Recently acquired businesses were responsible for $11.2 million of the total increase in
general and administrative expenses.

Gain on bargain purchase of a business - On January 3, 2017, we acquired Gbo Fastening Systems for approximately $10.2
million. This transaction was recorded as a business combination in accordance with the business acquisition method. We recorded
a bargain purchase gain of $6.3 million, which represents the fair value of the net assets acquired and liabilities assumed over the
consideration exchanged as of the acquisition date. This nonrecurring, non-operating income gain is included in the line item
“Gain (adjustment) on bargain purchase of a business” in our results of operations for 2017.

Loss on disposal of a business - In 2017, we sold all of the outstanding shares of Gbo Poland and Gbo Romania for approximately
$10.2 million, resulting in a loss of $0.2 million. In February 2018, post-closing adjustments were finalized, which resulted in the
Company receiving an additional $69 thousand in sales proceeds.

Our effective income tax rate increased to 36% from 35%, primarily due to the Tax Reform Act toll tax (repatriation), partly offset
by a decrease in the deferred tax liability due to the December 31, 2017 re-measurement the liability using the new 21% U.S.
corporate tax rate.

Net income was $92.6 million compared to $89.7 million. Diluted net income per share of common stock was $1.94 compared to
$1.86. The increase in net income was primarily due to the $6.3 million nonrecurring bargain purchase gain (see "Gain on bargain
purchase of a business" above), which increased diluted net income by $0.13 per share of common stock.

Net Sales

The following table shows net sales by segment for the years ended December 31, 2016 and 2017, respectively:

(in thousands)
December 31, 2016
December 31, 2017

Increase
Percentage increase

North
America
$ 742,021
803,697
61,676

Europe
$ 111,274
165,155
53,881

8.3%

48.4%

Asia/
Pacific

7,366
8,173
807
11.0%

Total
$ 860,661
977,025
$ 116,364

13.5%

The following table shows segment net sales as percentages of total net sales for the years ended December 31, 2016 and 2017,
respectively:

Percentage of total 2016 net sales
Percentage of total 2017 net sales

Gross Profit

North
America

Europe

Asia/
Pacific

86%
82%

13%
17%

Total

100%
100%

1%
1%

The following table shows gross profit by segment for the years ended December 31, 2016 and 2017, respectively:

(in thousands)
December 31, 2016
December 31, 2017
Increase (decrease)
Percentage increase (decrease)

* The statistic is not meaningful or material.

North
America
$ 363,187
383,282
20,095

Europe
44,038
58,973
14,935

5.5%

33.9%

Asia/
Pacific

Admin &
All Other

2,419
971
(1,448) $
*

Total
$ 409,880
443,381
33,501

236
155
(81) $

8.2%

The following table shows gross profit percentages by segment for the years ended December 31, 2016 and 2017, respectively:

2016 gross profit percentage
2017 gross profit percentage

* The statistic is not meaningful or material.

North America

North
America

48.9%
47.7%

Europe

39.6%
35.7%

Asia/
Pacific

32.8%
11.9%

Admin &
All Other
*
*

Total

47.6%
45.4%

• Net sales increased 8.3% mostly due to increased average unit price in the United States and increased overall sales volumes.
Canada's net sales increased primarily due to increased sales volumes on flat average net sales unit prices. Canada's net
sales were not significantly affected by foreign currency translation. The recent North America acquisition increased net
sales by $5.8 million.

• Gross profit margin decreased to 47.7% from 48.9% due to increased material, factory and overhead expenses and labor

expenses, which was partly offset by the effect of increased average net sales unit prices.

• Research and development and engineering expense increased $0.2 million primarily due to increases of $1.5 million in
personnel costs mainly related to the addition of staff and pay rate increases instituted on January 1, 2017, and $0.6 million
in severance expenses, partly offset by a decreases of $1.4 million in consulting fees and $0.9 million in cash profit sharing
expense.

•

Selling expense increased $8.0 million, primarily due to increases of $4.5 million in personnel costs mostly related to the
addition of staff and pay rate increases instituted on January 1, 2017, $2.4 million in advertising expense mostly in point
of purchase advertising, trade show and sale promotion costs, $0.8 million in severance expenses, $0.7 million in depreciation
expense and $0.3 million in donation expense, partly offset by a decrease of $1.0 million in cash profit sharing costs on
lower operating income.

• General and administrative expense increased $15.6 million, primarily due to increases of $6.9 million in personnel costs,
mostly related to the North America acquisition and the addition of staff and pay rate increases instituted on January 1,
2017, $6.4 million in legal and professional fees, mostly related to strategic initiatives such as software and systems
integration and compensation and governance changes, $2.6 million mostly in software licensing, maintenance and hosting
fees, $2.3 million in depreciation expense, $1.8 million in severance expenses, $0.6 million in intangible amortization
expense and $0.5 million in stock-based compensation, partly offset by a decrease of $3.8 million in cash profit sharing
expense. The recent North America acquisition increased general and administrative expense by $6.5 million.

•

Income from operations decreased $4.5 million, mostly due to increased operating expenses, which were partially offset
by higher gross profit. Severance expenses of $3.6 million were recorded in 2017.

Europe

• Net sales increased 48% primarily due acquired net sales of $42.1 million, which accounted for 78% of the total increase.
Net sales were positively affected by approximately $1.4 million in foreign currency translations primarily related to the
strengthening of the Euro, Polish zloty and Danish Kroner against the United States dollar.

• Gross profit margin decreased to 36% from 40% primarily due to our recent Europe acquisitions. The acquired businesses

in Europe had an average gross profit margin of 20% in 2017.

• Research and development and engineering expense increased $1.2 million primarily due to increases of $0.6 million in
severance expenses and $0.5 million in personnel costs mainly related to the addition of staff and pay rate increases instituted
on January 1, 2017.

•

Selling expense increased $8.3 million primarily due to an increase of $5.4 million in personnel costs mostly related to
acquisitions and the addition of staff, $1.2 million in severance expenses, $0.6 million mostly in advertising costs, $0.3
million in facility expenses and $0.2 million in agent commissions. The recent Europe acquisitions increased selling expense
by $6.6 million.

• General and administrative expense increased $1.9 million primarily due to increases of $2.4 million in personnel costs,
mostly related to the addition of staff and pay rate increases instituted on January 1, 2017, $1.0 million in computer expenses
mostly in software licensing and data processing fees, $0.6 million in cash profit sharing expense, $0.2 million in severance
expenses, $0.2 million in stock based compensation and $0.2 million in professional fees, partly offset by a decrease in
amortization expense of $0.5 million as well as the benefit from $2.9 million in net foreign currency translation in the
current period. Recent Europe acquisitions increased general and administrative expense by $4.7 million.

•

Income from operations increased $3.5 million, mostly due to increased gross profits, which were partially offset by higher
operating expenses, which included $2.0 million in severance expenses.

Asia/Pacific

•

For information about the Company's Asia/Pacific segment, please refer to the table above setting forth changes in our
operating results for the years ended December 31, 2017 and 2016.

Administrative and All Other

• General and administrative expenses decreased, primarily due to a decreases of $2.8 million in cash profit sharing expense,

partly offset by an increase of $1.3 million in personnel costs.

Critical Accounting Policies and Estimates

The critical accounting policies described below affect the Company’s more significant judgments and estimates used in the
preparation of the Company's Consolidated Financial Statements. If the Company’s business conditions change or if it uses different
assumptions or estimates in the application of these and other accounting policies, the Company’s future results of operations
could be adversely affected.

Inventory Valuation

Inventories are stated at the lower of cost or net realizable value (market). Cost includes all costs incurred in bringing each product
to its present location and condition, as follows:

• Raw materials and purchased finished goods — principally valued at cost determined on a weighted average basis;

•

and
In-process products and finished goods — cost of direct materials and labor plus attributable overhead based on a
normal level of activity.

The Company applies net realizable value and obsolescence to the gross value of inventory. The Company estimates net realizable
value based on estimated selling price less further costs to completion and disposal. The Company impairs slow-moving products
by comparing inventories on hand to projected demand. If on-hand supply of a product exceeds projected demand or if the Company
believes the product is no longer marketable, the product is considered obsolete inventory. The Company revalues obsolete inventory
to its net realizable value. The Company has consistently applied this methodology. The Company believes that this approach is
prudent and makes suitable impairments for slow-moving and obsolete inventory. When impairments are established, a new cost
basis of the inventory is created. Unexpected change in market demand, building codes or buyer preferences could reduce the rate
of inventory turnover and require the Company to recognize more obsolete inventory.

Business Combinations

The Company recognizes separately from goodwill or any gain from a bargain purchase the assets acquired and the liabilities
assumed at their acquisition date fair values. Goodwill as of the acquisition date is measured as the excess of consideration
transferred and the net of the acquisition date fair values of the assets acquired and the liabilities assumed. A gain on a bargain
purchase as of the acquisition date is measured as the excess of the net of the fair value of the assets acquired less liabilities assumed
and consideration transferred. While the Company uses its best estimates and assumptions as a part of the purchase price allocation
process to value assets acquired and liabilities assumed at the acquisition date, the Company’s estimates are inherently uncertain
and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, the
Company records adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. On the
conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever
51

comes first, the Company records subsequent adjustments, if any, to its consolidated statements of operations. None of the
subsequent adjustments for the fiscal years ended 2016, 2017 and 2018 were material.

Accounting for business combinations requires the Company’s management to make significant estimates and assumptions,
especially at the acquisition date with respect to intangible assets. Although the Company believes that the assumptions and
estimates it has made in the past have been reasonable and appropriate, they are based in part on historical experience and information
obtained from the management of the acquired companies and are inherently uncertain.

Examples of critical estimates in valuing certain of the intangible assets that the Company has acquired include:

Future expected cash flows from customer relationships and acquired unpatented technologies and patents;

•
• The acquired company’s brand and competitive position and assumptions about the period of time the acquired brand

will continue to be used in the combined company’s product portfolio; and

• Discount rates.

Unanticipated events and circumstances may affect the accuracy or validity of such assumptions, estimates or actual results.

For a given acquisition, the Company may identify pre-acquisition contingencies as of the acquisition date and may extend its
review and evaluation of these pre-acquisition contingencies throughout the measurement period (up to one year from the acquisition
date) to obtain sufficient information to assess whether the Company includes these contingencies as a part of the purchase price
allocation and, if so, to determine their estimated amounts.

If the Company determines that a pre-acquisition contingency (that is not income-tax related) is probable and estimable as of the
acquisition date, the Company records its best estimate for such a contingency as a part of the preliminary purchase price allocation.
The Company often continues to gather information and evaluate its pre-acquisition contingencies throughout the measurement
period. If the Company changes the amounts recorded or identifies additional pre-acquisition contingencies during the measurement
period, such amounts are included in the purchase price allocation during the measurement period and, subsequently, in the
Company’s results of operations.

In addition, the Company estimates uncertain tax positions and income tax related valuation allowances assumed in connection
with a business combination initially as of the acquisition date. The Company reevaluates these items quarterly with any adjustments
to its preliminary estimates being recorded to goodwill if the Company is within the measurement period. The Company continues
to collect information to determine estimated values. Subsequent to the measurement period or the Company’s final determination
of the uncertain tax positions estimated value or tax-related valuation allowances, whichever comes first, changes to these uncertain
tax positions and tax-related valuation allowances will affect the Company’s provision for income taxes in its consolidated statement
of operations and could have a material effect on the Company’s results of operations and financial position.

Goodwill Impairment Testing

The Company tests goodwill for impairment at the reporting unit level on an annual basis (in the fourth quarter for the Company).
The Company also reviews goodwill for impairment whenever events or changes in circumstances indicate the carrying value of
an asset may not be recoverable. These events or circumstances could include a significant change in the business climate, legal
factors, operating performance indicators, competition, or disposition or relocation of a significant portion of a reporting unit.

The reporting unit level is generally one level below the operating segment, which is at the country level, except for the United
States, Australia and S&P Clever reporting units.

The Company determined that the United States reporting unit includes four components: Northwest United States, Southwest
United States, Northeast United States and Southeast United States (collectively, the “U.S. Components”). The Company aggregates
the U.S. Components into a single reporting unit because management concluded that they are economically similar and that the
goodwill is recoverable from the U.S. Components working in concert. The U.S. Components are economically similar because
of a number of factors, including selling similar products to shared customers and sharing assets and services such as intellectual
property, manufacturing assets for certain products, research and development projects, manufacturing processes, management of
inventory excesses and shortages and administrative services. These activities are managed centrally at the U.S. Components level
and costs are allocated among the four U.S. Components.

in concert. The AU Components are economically similar because of a number of factors, including that New Zealand, and United
Arab Emirates operate as extensions of their Australian parent company selling similar products and sharing assets and services
such as intellectual property, manufacturing assets for certain products, management of inventory excesses and shortages and
administrative services. These activities are managed centrally at the AU Components level and costs are allocated among the AU
Components.

The Company determined that the S&P Clever reporting unit includes ten components: S&P Switzerland, S&P Poland, S&P
Austria, S&P The Netherlands, S&P Portugal, S&P Germany, S&P France, Socom, S&P Nordic and S&P Spain (collectively, the
"S&P Components”). The Company aggregates the S&P Components into a single reporting unit because management concluded
that they are economically similar and that the goodwill is recoverable from the S&P Components working in concert. The S&P
Components are economically similar because of a number of factors, including sharing assets and services such as intellectual
property, manufacturing assets for certain products, research and development projects, manufacturing processes, management of
inventory excesses and shortages and administrative services. These activities are managed centrally at the S&P Components level
and costs are allocated among the S&P Components.

The Company may first assess qualitative factors related to the goodwill of the reporting unit to determine whether it is necessary
to perform an impairment test. If the Company judges that it is more likely than not that the fair value of the reporting unit is
greater than the carrying amount of the reporting unit, including goodwill, no further testing is required. This assessment method
was not utilized in our 2018 annual goodwill impairment test.

For all reporting units, the Company compares the fair value of the reporting unit to its carrying value. The fair value calculation
uses both the income approach (discounted cash flow method) and the market approach, equally weighted. If the Company judges
that the carrying value of the net assets assigned to the reporting unit, including goodwill, exceeds the fair value of the reporting
unit, the Company would record an impairment charge equal to the difference between the implied fair value of the goodwill and
the carrying value, not to exceed the goodwill asset's carrying amount.

Determining the fair value of a reporting unit or an indefinite-lived purchased intangible asset is a judgment involving significant
estimates and assumptions. These estimates and assumptions include revenue growth rates, operating margins and working capital
requirements used to calculate projected future cash flows, risk-adjusted discount rates, selected multiples, control premiums and
future economic and market conditions (Level 3 fair value inputs). The Company bases its fair value estimates on assumptions
that it believes to be reasonable, but that are unpredictable and inherently uncertain. Actual future results may differ from those
estimates.

Assumptions about a reporting unit’s operating performance in the first year of the discounted cash flow model used to determine
whether or not the goodwill related to that reporting unit is impaired are derived from the Company’s budget. The fair value model
considers such factors as macro-economic conditions, revenue and expense forecasts, product line changes, material, labor and
overhead costs, tax rates, working capital levels and competitive environment. Future estimates, however derived, are inherently
uncertain but the Company believes that this is the most appropriate source on which to base its fair value calculations.

The Company uses these parameters only to provide a basis for the determination of whether or not the goodwill related to a
reporting unit is impaired. No inference whatsoever should be drawn from these parameters about the Company’s future financial
performance and they should not be taken as projections or guidance of any kind.

The 2018 annual testing of goodwill for impairment resulted in an impairment charge.

The carrying value of the Denmark reporting unit exceeded its fair value in an amount that approximated the carrying value of its
goodwill, primarily due to the reporting unit not meeting management's pre-tax operating profit objectives. As a result, the Company
impaired all of the Denmark reporting unit’s goodwill, which was $6.7 million at December 31, 2018.
Revenue Recognition

Generally, the Company's revenue contract with a customer exists when the goods are shipped, and services are rendered; and its
related invoice is generated. The duration of the contract does not extend beyond the promised goods or services already transferred.
The transaction price of each distinct promised product or service specified in the invoice is based on its relative stated standalone
selling price. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product
to a customer at a point in time. The Company’s shipping terms provide the primary indicator of the transfer of control. The
Company's general shipping terms are F.O.B. shipping point, where title and risk and rewards of ownership transfer at the point
when the products leave the Company's warehouse. The Company recognizes revenue based on the consideration specified in the
invoice with a customer, excluding any sales incentives, discounts, and amounts collected on behalf of third parties (i.e.,
governmental tax authorities). Based on historical experience with the customer, the customer's purchasing pattern and its significant
53

experience selling products, the Company concluded that a significant reversal in the cumulative amount of revenue recognized
will not occur when the uncertainty (if any) is resolved (that is, when the total amount of purchases is known). Refer to Note 2
for revenue disaggregation disclosure.

Revenue from Contracts with Customers

On January 1, 2018, the Company adopted the New Revenue Standard ("Topic 606") using the modified retrospective method
and recorded an $0.8 million, net of tax, increase to opening retained earnings on January 1, 2018 as the cumulative effect of
adopting Topic 606 for estimated rights of return assets on product sales.

Disaggregated revenue

Under Topic 606, the Company disaggregates net sales consistent with the distribution of the Company's net sales by the following
product groups as noted in Note 18 segment information of these financial statements.

• Wood Construction Products Revenue. Wood construction products represented almost 85% of total net sales in the year

ended December 31, 2018.

• Concrete Construction Products Revenue. Concrete construction products represented 15% of total net sales in the year

ended December 31, 2018.

Customer acceptance criteria. Generally, there are no customer acceptance criteria included in the Company's standard sales
agreement with customers. When an arrangement with the customer does not meet the criteria to be accounted for as a revenue
contract under the standard, the Company recognizes revenue in the amount of nonrefundable consideration received when the
Company has transferred control of the goods or services and has stopped transferring (and has no obligation to transfer) additional
goods or services. The Company offers certain customers discounts for paying invoices ahead of the due date, which are generally
30 to 60 days.

Other revenue. Service sales, representing after-market repair and maintenance, engineering activities and software license sales
and services are less than 1.0% of net sales and recognized as the services are completed or the software products and services
are delivered. Services may be sold separately or in bundled packages. The typical contract length for service is generally less
than one year. For bundled packages, the Company accounts for individual services separately if they are distinct. A distinct service
is separately identifiable from other items in the bundled package if a customer can benefit from it on its own or with other resources
that are readily available to the customer. The consideration (including any discounts) is allocated between separate services in a
bundle based on their stand-alone selling prices. The stand-alone selling prices are determined based on the prices at which the
Company separately sells the services.

Reconciliation of contract balances

Contract assets are the rights to consideration in exchange for goods or services that the Company has transferred to a customer
when that right is conditional on something other than the passage of time. Contract liabilities are recorded for any services billed
to customers and not yet recognizable if the contract period has commenced or for the amount collected from customers in advance
of the contract period commencing. As of December 31, 2018, the Company had no contract assets or contract liabilities from
contracts with customers.

Other accounting issues

Volume discounts. Volume discounts are accounted for as variable consideration because the transaction price is uncertain until
the customer completes or fails to purchase the specified volume of purchases (consideration is contingent on a future outcome -
occurrence or nonoccurrence). In addition, the Company applies the volume rebate or discount retrospectively, because the final
price of each products or services sold depends on the customer's total purchases subject to the rebate program. The estimated
rebates are deducted from the transaction price revenues based on the historical experience with the customer.

Rights of return and other allowances. Rights of return creates variability in the transaction price. The Company accounts for
returned product during the return period as a refund to customer and not a performance obligation. The estimated allowance for
returns is based on historical percentage of returns and allowance from prior periods and the customer's historical purchasing
pattern. This estimate is deducted from revenues based on the gross transaction price.

Principal versus Agent. The Company considered the principal versus agent guidance of the new revenue recognition standard
and concluded that the Company is the principal in a third-party transaction. The Company manufactures its products and has
control over transfer of its products to Dealer Distributors, Contract Distributors, and end customers.

Costs to obtain or fulfill a contract. Costs incurred to obtain a contract are immaterial. Commission cost is not an incremental cost
directly related to obtaining a contract.

Shipping costs. The Company recognizes shipping and handling activities that occur after the customer has obtained control of
goods as a fulfillment cost rather than as an additional promised service. Therefore, the Company recognizes revenue and accrues
shipping and handling costs when the control of goods transfers to the customer upon shipment.

Advertising costs. Cooperative advertising and partnership discounts are consideration payable to a customer and not a payment
in exchange for a distinct product or service at fair value. Estimated cooperative advertising and partnership discounts are reductions
to the transaction price.

Practical Expedients. The Company did not use either the practical expedient for the existence of a significant financing component
or, the practical expedient for expensing certain costs of obtaining a contract.

Effect of New Accounting Standards

See "Note 1 — Recently Adopted Accounting Standards" and "Note 1 — Recently Issued Accounting Standards Not Yet Adopted"
to the Company's Consolidated Financial Statements.

Liquidity and Sources of Capital

Our primary sources of liquidity are cash and cash equivalents, our cash flow from operation and our $300.0 million credit facility
that expires on July 23, 2021. As of December 31, 2018, there were no amounts outstanding under this facility.

Our principal uses of liquidity include the costs and expenses associated with our operations, continuing our capital allocation
strategy, which includes growing our business by internal improvements, repurchasing our common stock, paying cash dividends,
and meeting other liquidity requirements for the next twelve months.

As of December 31, 2018, our cash and cash equivalents consisted of deposits and money market funds held with established
national financial institutions. Cash and cash equivalents of $45.4 million are held in the local currencies of our foreign operations
and could be subject to additional taxation if repatriated to the United States. Due to changes resulting from the Tax Reform Act,
the Company repatriated $63.5 million in cash held outside of the United States in 2018. The Company is maintaining a permanent
reinvestment assertion on its foreign earnings relative to remaining cash held outside the United States after completion of the
repatriation plan.

The following table presents selected financial information as of December 31, 2018, 2017 and 2016, respectively:

(in thousands)

At December 31,

2018

2017

2016

Cash and cash equivalents

Property, plant and equipment, net

Equity investment, goodwill and intangible assets

Working capital

160,180

168,514

226,537

254,597

157,139

447,949

273,020

169,015

447,450

232,810

149,843

476,451

The following table provides cash flow indicators for the twelve months ended December 31, 2018, 2017 and 2016, respectively:

(in thousands)

Net cash provided by (used in):

Operating activities

Investing activities

Financing activities

Years Ended December 31,

2018

2017

2016

160,080
(10,249)
(155,393)

119,065
(75,815)
(106,671)

98,965
(48,543)
(83,134)

Cash flows from operating activities result primarily from the Company's earnings or losses, and are also affected by changes in
operating assets and liabilities which consist primarily of working capital balances. As a building materials manufacturer, the
Company's operating cash flows are subject to seasonality and are cyclically associated with the volume and timing of construction
project starts. For example, trade accounts receivable, net, is generally at its lowest at the end of the fourth quarter and increases
during the first, second and third quarters.

In 2018, operating activities provided $160.1 million in cash and cash equivalents, as a result of $126.6 million from net income
and $50.4 million from non-cash adjustments to net income which includes depreciation and amortization expense and stock-
based compensation expense, partly offset by a decrease of $17.0 million in the net change in operating assets and liabilities due
to increases of $26.4 million in inventory and $12.6 million in trade accounts receivable, net, partly offset by a decrease of $5.3
million in other current assets and increases of $9.1 million in accrued liabilities and $4.7 million in trade accounts payable. Cash
used in investing activities of $10.2 million during the year ended December 31, 2018, consisted primarily of $29.3 million for
ERP software, property, plant and equipment expenditures, primarily related to machinery and equipment purchases, and software
in development, partly offset by $21.1 million in proceeds, mostly the sale of real estate including the November 2018 sale of our
commercial rental property in California a net amount of $17.5 million. Cash used in financing activities of $155.4 million during
the year ended December 31, 2018, consisted primarily of $110.5 million for the repurchase of the Company's common stock and
$39.9 million used to pay cash dividends.

In 2017, operating activities provided $119.1 million in cash and cash equivalents, as a result of $92.6 million from net income
and $48.5 million from non-cash adjustments to net income which includes depreciation and amortization expenses and stock-
based compensation expenses, partly offset by a decrease of $22.0 million in the net change in operating assets and liabilities due
to increases of $17.8 million in trade accounts receivable, net, $6.6 million in inventory and $5.6 million in income tax receivable,
partly offset by an increase of $10.1 million in accrued liabilities. Cash used in investing activities of $75.8 million during the
year ended December 31, 2017, consisted primarily of $58.0 million for property, plant and equipment expenditures, primarily
related to real estate improvements, ERP software, machinery and equipment purchases, and software in development, and $27.9
million, net of acquired cash of $4.0 million, for the acquisitions of CG Visions and Gbo Fastening Systems, which was partly
offset by $9.5 million, net of delivered cash of $0.8 million, for the sale of Gbo Poland and Gbo Romania (see "Note 10 —
Acquisitions and Dispositions" to the Company's Consolidated Financial Statements). Cash used in financing activities of $106.7
million during the year ended December 31, 2017, consisted primarily of $70.0 million for the repurchase of the Company's
common stock (see "Note 3 — Net Income per Share" to the Company's Consolidated Financial Statements) and $37.0 million
used to pay cash dividends.

In 2016, operating activities provided $94.9 million in cash and cash equivalents, as a result of $89.7 million from net income and
$42.1 million from non-cash adjustments to net income which includes depreciation and amortization expenses, stock-based
compensation expenses and software development project write-off, partly offset by a decrease of $36.9 million in the net change
in operating assets and liabilities due to increases of $36.6 million in inventory and $7.5 million in trade accounts receivable, net,
partly offset by a decrease of $5.8 million in trade accounts payable. Cash used in investing activities of $48.5 million during the
year ended December 31, 2016, consisted primarily of $42.0 million for property, plant and equipment expenditures, related to
real estate improvements, primarily related to improvements of the West Chicago facility, machinery and equipment purchases,
and software in development, $5.4 million, net of acquired cash of $1.5 million, for the acquisition of MS Decoupe, and $2.5
million for the equity investment in Ruby Sketch. See "Note 10 — Acquisitions and Dispositions" and "Note 11 — Equity
Investments" to the Company's Consolidated Financial Statements. Cash used in financing activities of $79.1 million during the
year ended December 31, 2016, consisted primarily of $53.5 million for the repurchase of the Company's common stock, including
a $50.0 million accelerated share repurchase program (see "Note 3 — Net Income per Share" to the Company's Consolidated
Financial Statements) and $32.7 million used to pay cash dividends, partly offset by $8.0 million received from the exercise of
stock options.

Capital Allocation Strategy

We have a strong cash position and remain committed to seeking growth opportunities in our lines of building products where we
can leverage our expertise in engineering, testing, manufacturing and distribution to invest in and grow our business. Those
opportunities include internal improvements or acquisitions that fit within our strategic growth plan. Additionally, we have financial
flexibility and are committed to providing returns to our stockholders. Below are highlights of our execution on our capital allocation
strategy,
first announced in August 2015 and updated in August 2016.

• Our asset acquisitions, net of cash acquired and proceeds from sales of businesses, in 2016, 2017 and 2018 were $5.4
million, $18.5 million and $2.0 million, respectively. In January 2017, we acquired Gbo Fastening Systems for approximately
$10.2 million, and sold two of its subsidiaries in late 2017 for approximately $9.5 million, retaining the Gbo Fastening
Systems operations in Sweden and Norway for less than $1.0 million in cash. Also in January 2017, we acquired CG Visions
for approximately $20.8 million.

• Our capital spending in 2016, 2017 and 2018 was $42.0 million, $58.0 million and $29.3 million, respectively, which was
primarily used for real estate improvements, machinery and equipment purchases and software in development. Based on
current information and subject to future events and circumstances, we estimate that our full-year 2019 capital spending
will be approximately $30 million to $35 million, including $7 to $10 million on maintenance type capital expenditures,
assuming all such projects will be completed by the end of 2019. Based on current information and subject to future events
and circumstances, we estimate that our full-year 2019 depreciation and amortization expense to be approximately $39
million to $41 million, of which approximately $33 million to $35 million is related to depreciation.

•

In April 2018, the Company’s Board of Directors raised the quarterly cash dividend by 4.8% to $0.22 per share. On January 28,
2019, the Board declared a cash dividend of $0.22 per share, estimated to be $9.8 million in total. Such dividend is scheduled
to be paid on April 25, 2019, to stockholders of record on April 4, 2019.

For 2018, the Company purchased and received 1,954,829 shares of the Company's common stock, including 1,772,658
share purchased on the open market at an average price of $62.69 per share, for a total of $110.5 million. In total, as illustrated
in the table below, the Company has repurchased over five million shares of the Company's common stock, which represents
approximately 11.6% of our shares of common stock outstanding at the beginning of 2015. Including dividends, we have
returned cash of $420.1 million, which represents 84.7% of our total cash flow from operations during the same period.

• On January 28, 2019, the Company's Board of Directors authorized the Company to repurchase up to $100.0 million of the

Company’s common stock. The authorization is in effect from January 1, 2019 through December 31, in 2019.

The following table presents the Company’s dividends paid and share repurchases for the period from January 1, 2015 through
December 31, 2018, in aggregated amounts:

(in thousands)

January 1 - December 31, 2018

January 1 - December 31, 2017

January 1 - December 31, 2016

January 1 - December 31, 2015

Total

Number of Shares
Repurchased

Cash Paid for
Repurchases

Cash Paid for
Dividends

Total

1,955

1,138

1,244

1,339

5,676

110,540

39,891

70,000

53,502

47,144

36,981

32,711

29,352

281,186

138,935

150,431

106,981

86,213

76,496

420,121

As of December 31, 2018, the Company repurchased $234.6 million of the Company's previously announced $275.0 million share
repurchase authorization (which expired at the end of 2018).

Contractual Obligations

The following table summarizes our known material contractual obligations and commitments as of December 31, 2018:

Contractual Obligation (in thousands)
Long-term debt interest obligations (1)
Operating lease obligations (2)
Capital lease obligations(3)
Purchase obligations (4)

Payments Due by Period

Total
all
periods

Less
than 1
year

1 — 3
years

3 — 5
years

1,934 $

1,234 $

700 $

— $

31,692

2,804

32,895

6,962

1,160

28,438

10,311

1,644

3,874

5,856

—

583

More
than 5
years

—

8,563

—

Total

69,325 $

37,794 $

16,529 $

6,439 $

8,563

(1)

Includes interest payments on fixed-term debt, line-of-credit borrowings and annual facility fees on the Company’s primary line-of-credit facility. Interest on
line-of-credit facilities was estimated based on historical borrowings and repayment patterns. The Company’s primary line-of-credit facility requires the Company
pay an annual facility fee from 0.15% to 0.30%, depending on the Company’s leverage ratio, on the unused portion of the facilities.
(2)

Includes real estate and auto leases and other equipment.
Includes obligations under two lease agreements for certain office equipment. The interest rates for these two capital leases are 2.89% and 3.50%, respectively,

(3)

and the two leases will mature in May 2021 and July 2021.
(4)Consists of other purchase commitments related to facility equipment, consulting services, minimum quantities of certain raw materials. The Company currently
is not a party to any long-term supply contracts with respect to the purchase of raw materials or finished goods.

Off-Balance Sheet Arrangements

The Company did not have any off-balance sheet arrangements as of December 31, 2018.

Contingencies

From time to time, we are subject to various claims, lawsuits, legal proceedings (including litigation, arbitration or regulatory
actions) and other matters arising in the ordinary course of business. Periodically, we evaluate the status of each matter and assess
our potential financial exposure.

The Company records a provision for a liability when we believe that (a) it is probable that a loss has been incurred, and (b) the
amount is reasonably estimable. Significant judgment is required to determine both probability and the estimated amount. The
outcomes of claims, lawsuits, legal proceedings and other matters brought against the Company are subject to significant uncertainty,
some of which are inherently unpredictable and/or beyond our control. Therefore, although management considers the likelihood
of such an outcome to be remote, if one or more of these matters were resolved against the Company for amounts in excess of
management’s expectations, they could have a material adverse impact on our business, results of operations, financial position
and liquidity and the Company’s Consolidated Financial Statements could be materially adversely affected.

See “Item 3 — Legal Proceedings” above and “Note 14 — Commitments and Contingencies” to the Company’s Consolidated
Financial Statements.

Inflation

The Company believes that the effect of inflation on the Company has not been material in the three most recent fiscal years ended
December 31, 2018, 2017 and 2016, respectively, as general inflation rates have remained relatively low. The Company’s main
raw material is steel. Increases in steel prices may adversely affect the Company’s gross profit margin if it cannot recover the
higher costs through price increases of its products. See “Item 1 — Raw Materials” and “Item 1A — Risk Factors.”

Indemnification

In the normal course of business, to facilitate transactions of services and products, we have agreed to indemnify certain parties
with respect to certain matters. These agreements may limit the time within which an indemnification claim can be made and the
amount of the claim. In addition, we have entered into indemnification agreements with our officers and directors, and the

Company’s bylaws as permitted by the Company’s certificate of incorporation require the Company to indemnify corporate servants,
including our officers and directors, to the fullest extent permitted by law. The Company maintains directors and officers liability
insurance coverage to reduce its exposure to such obligations. The Company has not incurred significant obligations under
indemnification provisions historically, and does not expect to incur significant obligations in the future. It is not possible to
determine the maximum potential amount under these indemnities due to the limited history of prior indemnification claims and
the unique facts and circumstances involved in each particular agreement. Accordingly, the Company has not recorded any liability
for costs related these indemnities through December 31, 2018.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

We have operations both within the United States and internationally, and we are exposed to market risks in the ordinary course
of our business, including changes to foreign currency exchange rates and interest rates.

Foreign Currency Exchange Risk

The Company has foreign currency exchange rate risk in its international operations, and through purchases from foreign vendors.
Changes in the values of currencies of foreign countries affect our financial position, income statement and cash flows when
translated into United States dollars. The Company does not currently hedge this risk. The Company estimates that if the exchange
rate were to change by 10% in any one country where the Company has operations, the change in net income would not be material
to the Company’s operations taken as a whole.

The translation adjustment on the Company's underlying assets and liabilities resulted in a decrease in accumulated other
comprehensive income of $12.9 million for the year ended December 31, 2018, primarily due to the effect of the strengthening
of the United States dollar in relation to most foreign currencies during 2018.

Interest Rate Risk

The Company has no variable interest-rate debt outstanding. The Company estimates that a hypothetical 100 basis point change
in U.S. interest rates would not be material to the Company’s operations taken as a whole.

Item 8. Consolidated Financial Statements and Supplementary Data.

SIMPSON MANUFACTURING CO., INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Consolidated financial statements

Reports of Independent Registered Public Accounting Firms
Consolidated Balance Sheets at December 31, 2018 and 2017
Consolidated Statements of Operations for the years ended December 31, 2018, 2017 and 2016
Consolidated Statements of Comprehensive Income for the years ended December 31, 2018, 2017, 2016
Consolidated Statements of Stockholders' Equity for the years ended December 2018, 2017 and 2016
Consolidated Statements of Cash Flows for the years ended December 31, 2018, 2017 and 2016
Notes to the Consolidated Financial Statements

Financial Statement Schedule

Schedule II — Valuation and Qualifying Accounts

61
63
64
65
66
67
68

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders
Simpson Manufacturing Co., Inc.

Opinion on the financial statements
We have audited the accompanying consolidated balance sheets of Simpson Manufacturing Company, Inc. (a Delaware corporation)
and subsidiaries (the “Company”) as of December 31, 2018 and 2017, the related consolidated statements of operations,
comprehensive income, changes in stockholders’ equity, and cash flows for each of the three years in the period ended December
31, 2018, and the related notes and schedules (collectively referred to as the “financial statements”). In our opinion, the financial
statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and
the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018, in conformity
with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2018, based on criteria established in
the 2013 Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (“COSO”), and our report dated February 27, 2019 expressed an unqualified opinion thereon.

Basis for opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on
the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error
or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether
due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Grant Thornton LLP

We have served as the Company’s auditor since 2015.

San Francisco, California
February 27, 2019

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders
Simpson Manufacturing Co., Inc.

Opinion on internal control over financial reporting
We have audited the internal control over financial reporting of Simpson Manufacturing Company, Inc. (a Delaware corporation)
and subsidiaries (the “Company”) as of December 31, 2018, based on criteria established in the 2013 Internal Control-Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, the
Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018, based
on criteria established in the 2013 Internal Control-Integrated Framework issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(“PCAOB”), the consolidated financial statements of the Company as of and for the year ended December 31, 2018, and our report
dated February 27, 2019 expressed an unqualified opinion on those financial statements.

Basis for opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment
of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal
Control over Financial Reporting (“Management’s Report”). Our responsibility is to express an opinion on the Company’s internal
control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required
to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and
performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable
basis for our opinion.

Definition and limitations of internal control over financial reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain
to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets
of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that
could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Grant Thornton LLP
San Francisco, California
February 27, 2019

Simpson Manufacturing Co., Inc. and Subsidiaries
Consolidated Balance Sheets
(In thousands, except per share data)

ASSETS

Current assets

Cash and cash equivalents
Trade accounts receivable, net
Inventories
Other current assets
Total current assets

Property, plant and equipment, net
Goodwill
Equity investment (see Note 11)
Intangible assets, net
Other noncurrent assets

Total assets

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities

Trade accounts payable
Accrued liabilities
Accrued profit sharing trust contributions
Accrued cash profit sharing and commissions

Total current liabilities

Deferred income tax and other long-term liabilities

Total liabilities

Commitments and contingencies (see Note 14)
Stockholders’ equity

Preferred stock, par value $0.01; authorized shares, 5,000; issued and outstanding shares,
none
Common stock, par value $0.01; authorized shares, 160,000; issued and outstanding shares,
44,998, and 46,745 at December 31, 2018 and 2017, respectively

Additional paid-in capital
Retained earnings
Treasury stock
Accumulated other comprehensive loss

Total stockholders’ equity

Total liabilities and stockholders’ equity

December 31,

2018

2017

$ 160,180
146,052
276,088
17,209
599,529
254,597
130,250
2,487
24,402
10,398
$1,021,663

$ 168,514
135,958
252,996
26,473
583,941
273,020
137,140
2,549
29,326
11,547
$1,037,523

34,361
98,572
7,804
10,843
151,580
14,569
166,149

31,536
88,485
7,054
9,416
136,491
16,254
152,745

—

453
276,504
628,207
(25,000)
(24,650)
855,514
$1,021,663

473
260,157
676,644
(40,000)
(12,496)
884,778
$1,037,523

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

Years Ended December 31,
2017
977,025

2018
1,078,809

598,290

480,519

43,056

109,931

159,093

312,080
(10,579)
6,686

172,332
(63)
430
(571)
—

—

172,128

45,495

126,633

2.74

2.72

46,213

46,540

533,644

443,381

47,616

114,903

143,107

305,626
(160)
—

137,915
(86)
1,252
(788)
6,336
(211)
144,418

51,801

92,617

1.95

1.94

47,486

47,774

2016
860,661

450,781

409,880

46,248

98,343

124,859

269,450
(780)
—

141,210
—
(1,733)
(577)
—

—

138,900

49,166

89,734

1.87

1.86

48,084

48,295

Net sales

Cost of sales

Gross profit

Operating expenses:

Research and development and other engineering

Selling

General and administrative

Total operating expenses

Net gain on disposal of assets

Impairment of goodwill

Income from operations

Loss in equity investment, before tax

Foreign exchange gain (loss), net

Interest expense, net

Gain on bargain purchase of a business

Loss on disposal of a business

Income before taxes

Provision for income taxes

Net income

Earnings per share of common stock:

Basic

Diluted

Weighted average number of shares of common stock outstanding

Basic

Diluted

Simpson Manufacturing Co., Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income
(In thousands)

Net income
Other comprehensive income:

Translation adjustment, net of tax expense of $0, $0 and ($222) for
2018, 2017 and 2016, respectively
Unamortized pension adjustments, net of tax benefit (expense) of ($59),
$37 and $88, for 2018, 2017 and 2016, respectively

Comprehensive income

Year End December 31,
2017

2016

92,617

89,734

2018
126,633

(12,911)

21,418

(3,920)

376
114,098

(944)
113,091

(474)
85,340

Simpson Manufacturing Co., Inc. and Subsidiaries
Consolidated Statements of Stockholders’ Equity
For the years ended December 31, 2016, 2017 and 2018
(In thousands, except per share data)

Common Stock

Par Value

Additional
Paid-in
Capital

Retained
Earnings

Accumulate
d
Other
Comprehens
ive

481 $ 238,212 $ 639,707 $ (28,576) $
—
—
—
3
—
—
—
(13)

89,734
—
—
—
—
—
—
(53,489)

—
(3,920)
(474)
—
—
—
—
—

—
—
—
7,973
13,186
251
—
—

Treasury
Stock

Total

— $ 849,824
89,734
—
(3,920)
—
(474)
—
7,976
—
13,186
—
251
—
(53,502)
(53,502)
—
53,502

—

(33,530)

(4,018)

—
315
— 865,842
92,617
—
21,418
—
(944)
—
6,610
—
12,565
—
—
—
(70,000)
(60,000)
—
20,000

—

—
(32,970)
—
21,418
(944)
—
—
—
—
—

—

—
(40,000)

—
(12,496)
—
(12,911)
—
—
376
—
381
—
—
—
—
— (120,540)
— 135,540

—

(38,400)

(5,341)

411
884,778
126,633
(12,911)
376
791
695
10,334
(110,540)
—

(39,962)

(5,145)

—

—
473
—
—
—
3
—
—
—
(5)

—

—
473
—
—
—
—
—
—
—
(22)

—

(33,530)

(4,020)

—

315
255,917
—
—
—
6,607
12,565
—
(10,000)
—

—
642,422
92,617
—
—
—
—
—
—
(19,995)

—

(38,400)

(5,343)

—

411
260,157

—
676,644
— 126,633
—
—
—
—
410
—
—
695
—
10,334
—
10,000
— (135,518)

—

(39,962)

(5,147)

—

465
—
453 $ 276,504 $ 628,207 $ (24,650) $ (25,000) $ 855,514

465

—

Balance at January 1, 2016

Net income

Translation adjustment, net of tax

Pension adjustment, net of tax

Options exercised

Stock-based compensation expense

Tax benefit of options exercised

Repurchase of common stock

Retirement of common stock

Cash dividends declared on common
stock, $0.70 per share

Shares issued from release of restricted
stock units

Common stock issued at $33.45 per
share

Balance at December 31, 2016

Net income

Translation adjustment, net of tax

Pension adjustment, net of tax

Options exercised

Stock-based compensation expense

Tax benefit of options exercised

Repurchase of common stock

Retirement of common stock

Cash dividends declared on common
stock, $0.81 per share

Shares issued from release of restricted
stock units

Common stock issued at $44.26 per
share

Balance at December 31, 2017

Net income

Translation adjustment, net of tax

Pension adjustment, net of tax

Adoption of new accounting standards

Options exercised

Stock-based compensation expense

Repurchase of common stock

Retirement of common stock

Cash dividends declared on common
stock, $0.87 per share

Shares issued from release of restricted
stock units

Common stock issued at $57.41 per
share

48,184 $
—
—
—
270
—
—
(1,244)
—

—

217

10
47,437
—
—
—
223
—
—
(1,138)
—

—

214

9
46,745
—
—
—
—
23
—
(1,955)
—

—

177

Balance at December 31, 2018

44,998 $

Simpson Manufacturing Co., Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)

Cash flows from operating activities

Net income
Adjustments to reconcile net income to net cash provided by operating activities:

Gain on sale of assets
Depreciation and amortization
Write-off of software development project
Loss in equity method investment, before tax
Gain (adjustment) on bargain purchase of a business
Loss on disposal of a business
Impairment of goodwill
Deferred income taxes
Noncash compensation related to stock plans
Excess tax benefit of options exercised and restricted stock units vested
Recovery (provision) of doubtful accounts
Foreign exchange gain
Changes in operating assets and liabilities, net of effects of acquisitions and dispositions:

Trade accounts receivable
Inventories
Other current assets
Other noncurrent assets
Trade accounts payable
Accrued liabilities
Accrued profit sharing trust contributions
Accrued cash profit sharing and commissions
Long-term liabilities
Accrued workers’ compensation
Income taxes payable

Net cash provided by operating activities

Cash flows from investing activities

Capital expenditures
Assets acquisitions, net of cash acquired
Equity investments
Proceeds from sale of property and equipment
Proceeds from sale of a business

Net cash used in investing activities

Cash flows from financing activities

Repayment of long-term borrowings and capital leases
Repayment of debt and line of credit borrowings
Deferred and contingent consideration paid for asset acquisitions
Debt issuance costs
Repurchase of common stock
Issuance of Company’s common stock
Excess tax benefit of options exercised and restricted stock units vested
Dividends paid
Cash paid on behalf of employees for shares withheld
Net cash used in financing activities

Effect of exchange rate changes on cash

Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year

Supplemental Disclosure of Cash Flow Information

Cash paid during the year for

Interest
Income taxes

Noncash activity during the year for
Noncash capital expenditures
Capital lease obligations
Contingent consideration for acquisition
Issuance of Company's common stock for compensation
Dividends declared but not paid

Years Ended December 31,
2017

2016

2018

126,633

92,617

89,734

(10,579)
39,393
—
63
—
—
6,686
4,950
11,176
—
569
(1,841)

(12,573)
(26,425)
5,297
533
4,670
9,136
755
1,491
(2,276)
(173)
2,595
160,080

(29,310)
(2,007)
—
21,068
—
(10,249)

(968)
821
(364)
—
(110,540)
695
—
(39,891)
(5,146)
(155,393)
(2,772)
(8,334)
168,514
160,180

160
40,123

908
—
—
465
9,988

(160)
33,724
676
86
(6,336)
211
—
6,299
13,908
—
66
—

(17,822)
(6,580)
(2,016)
513
1,157
10,130
498
(1,246)
(718)
(343)
(5,599)
119,065

(58,041)
(27,921)
—
681
9,466
(75,815)

(354)
(400)
(205)
—
(70,000)
6,610
—
(36,981)
(5,341)
(106,671)
5,398
(58,023)
226,537
168,514

121
50,832

1,533
3,750
1,314
411
9,954

(780)
27,927
2,212
—
—
—
—
(869)
13,946
(273)
(83)
—

(7,548)
(36,617)
(2,180)
336
5,785
4,290
757
2,064
242
(1,024)
1,046
98,965

(42,002)
(5,361)
(2,500)
1,320
—
(48,543)

—
—
(27)
(1,125)
(53,502)
7,976
273
(32,711)
(4,018)
(83,134)
424
(32,288)
258,825
226,537

284
49,425

2,318
—
—
315
8,535

Simpson Manufacturing Co., Inc. and Subsidiaries
Notes to Consolidated Financial Statements

Operations and Summary of Significant Accounting Policies

Nature of Operations

Simpson Manufacturing Co., Inc., through Simpson Strong-Tie Company Inc. and its other subsidiaries (collectively, the
“Company”), focuses on designing, manufacturing, and marketing systems and products to make buildings and structures safe
and secure. The Company designs, engineers and is a leading manufacturer of wood construction products, including connectors,
truss plates, fastening systems, fasteners and shearwalls, and concrete construction products, including adhesives, specialty
chemicals, mechanical anchors, powder actuated tools and fiber reinforcing materials. The Company markets its products to the
residential construction, industrial, commercial and infrastructure construction, remodeling and do-it-yourself markets.

The Company operates exclusively in the building products industry. The Company’s products are sold primarily in the United
States, Canada, Europe and Pacific Rim. A portion of the Company’s business is therefore dependent on economic activity within
the North America segment. The Company is dependent on the availability of steel, its primary raw material.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of Simpson Manufacturing Co., Inc. and its subsidiaries.
Investments in 50% or less owned entities are accounted for using either cost or the equity method. The Company consolidates
all variable interest entities ("VIEs") where it is the primary beneficiary. There were no VIEs as of December 31, 2018 or 2017.
All significant intercompany transactions have been eliminated.

Use of Estimates

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United
States of America, as amended from time to time ("GAAP") requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated
financial statements and the reported amounts of revenues and expenses during the reporting period. The Company's actual results
could differ from those estimates.

Cash Equivalents

Cash and cash equivalents include cash on hand, cash in banks and cash equivalents, which are highly liquid investments
with an original or remaining maturity of three months or less at the time of purchase to be cash equivalents.

Allowance for Doubtful Accounts

The Company evaluates the collectability of specific customer accounts that would be considered doubtful based on the customer’s
financial condition, payment history, credit rating and other factors that the Company considers relevant, or accounts that the
Company assigns for collection. The Company reserves for the portion of those outstanding balances that the Company believes
it is not likely to collect based on historical collection experience. The Company also reserves 100% of the amounts that it deems
uncollectable due to a customer’s deteriorating financial condition or bankruptcy. If the financial condition of the Company’s
customers were to deteriorate, resulting in probable inability to make payments, additional allowances may be required.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash in banks, short-term
investments in money market funds and trade accounts receivable. The Company maintains its cash in demand deposit and money
market accounts held primarily at 17 banks.

Inventory Valuation

Inventories are stated at the lower of cost or net realizable value. Cost includes all costs incurred in bringing each product to its
present location and condition, as follows:

• Raw materials and purchased finished goods for resale — principally valued at cost determined on a weighted average

•

basis; and
In-process products and finished goods — cost of direct materials and labor plus attributable overhead based on a
normal level of activity.

The Company applies net realizable value and obsolescence to the gross value of the inventory. The Company estimates net
realizable value based on estimated selling price less further costs to completion and disposal. The Company impairs slow-moving
products by comparing inventories on hand to projected demand. If on-hand supply of a product exceeds projected demand or if
the Company believes the product is no longer marketable, the product is considered obsolete inventory. The Company revalues
obsolete inventory to its net realizable value and has consistently applied this methodology. When impairments are established, a
new cost basis of the inventory is created. Unexpected change in market demand, building codes or buyer preferences could reduce
the rate of inventory turnover and require the Company to recognize more obsolete inventory.

Warranties and recalls

The Company provides product warranties for specific product lines and records estimated recall expenses in the period in which
the recall occurs, none of which has been material to the Consolidated Financial Statements. In a limited number of circumstances,
the Company may also agree to indemnify customers against legal claims made against those customers by the end users of the
Company’s products. Historically, payments made by the Company, if any, under such agreements have not had a material effect
on the Company’s consolidated results of operations, cash flows or financial position.

Fair Value of Financial Instruments

Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants. As such, fair value is a market-based measurement that is determined based on assumptions
that market participants would use in pricing an asset or a liability. Assets and liabilities recorded at fair value are measured and
classified under a three-tier fair valuation hierarchy based on the observability of the inputs available in the market: Level 1 inputs
are quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2 inputs are quoted prices for similar assets
and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market
corroboration, for substantially the full term of the financial instrument; and Level 3 inputs are unobservable inputs based on the
Company’s assumptions used to measure assets and liabilities at fair value. The fair value hierarchy requires an entity to maximize
the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

As of December 31, 2018 and 2017, the Company’s investments included in cash equivalents consisted of only money market
funds, which are the Company’s primary financial instruments and carried at cost, approximating fair value, based on Level 1
inputs. The balance of the Company’s primary financial instruments as of December 31, 2018 and 2017 was $0.2 million and $5.3
million, respectively. The carrying amounts of trade accounts receivable, accounts payable and accrued liabilities approximate
fair value due to the short-term nature of these instruments. The fair value of the Company’s contingent consideration related to
acquisitions is classified as Level 3 within the fair value hierarchy as it is based on unobserved inputs such as management estimates
and entity-specific assumptions and is evaluated on an ongoing basis.

Property, Plant and Equipment

Property, plant and equipment are carried at cost. Major renewals and betterments are capitalized. Maintenance and repairs are
expensed as incurred. When assets are sold or retired, their costs and accumulated depreciation are removed from the accounts,
and the resulting gains or losses are reflected in the accompanying Consolidated Statements of Operations.

The “Intangibles—Goodwill and Other” topic of the FASB ASC provides guidance on capitalization of the costs incurred for
computer software developed or obtained for internal use. The Company capitalizes qualified external costs and internal costs
related to the purchase and implementation of software projects used for business operations and engineering design activities.
Capitalized software costs primarily include purchased software, internal costs and external consulting fees. Capitalized software
projects are amortized over the estimated useful lives of the software.

Depreciation and Amortization

Software, including amounts capitalized for internally developed software is amortized on a straight-line basis over an estimated
useful life of three to five years. Machinery and equipment is depreciated using accelerated methods over an estimated useful life
of three to ten years. Buildings and site improvements are depreciated using the straight-line method over their estimated useful
lives, which range from 15 to 45 years. Leasehold improvements are amortized using the straight-line method over the shorter of
69

the expected life or the remaining term of the lease. Purchased intangible assets with finite useful lives are amortized using the
straight-line method over the estimated useful lives of the assets.

Preferred Stock

The Board has the authority to issue the authorized and unissued preferred stock in one or more series with such designations,
rights and preferences as may be determined from time to time by the Board. Accordingly, the Board is empowered, without
stockholder approval, to issue preferred stock with dividend, redemption, liquidation, conversion, voting or other rights that could
adversely affect the voting power or other rights of the holders of the Company’s common stock.

Common Stock

Subject to the rights of holders of any preferred stock that may be issued in the future, holders of common stock are entitled to
receive such dividends, if any, as may be declared from time to time by the Company’s Board of Directors (the "Board") out of
legally available funds, and in the event of liquidation, dissolution or winding-up of the Company, to share ratably in all assets
available for distribution. The holders of common stock have no preemptive or conversion rights. Subject to the rights of any
preferred stock that may be issued in the future, the holders of common stock are entitled to one vote per share on any matter
submitted to a vote of the stockholders. A director in an uncontested election is elected if the votes cast “for” such director’s
election exceed the votes cast “against” such director’s election, except that, if a stockholder properly nominates a candidate for
election to the Board, the candidates with the highest number of affirmative votes (up to the number of directors to be elected) are
elected. There are no redemption or sinking fund provisions applicable to the common stock.

Comprehensive Income or Loss

Comprehensive income is defined as net income plus other comprehensive income or loss. Other comprehensive income or loss
consists of changes in cumulative translation adjustments and changes in unamortized pension adjustments recorded directly in
accumulated other comprehensive income within stockholders’ equity.

Foreign Currency Translation

The local currency is the functional currency of most of the Company’s operations in Europe, Canada, Asia, Australia and New
Zealand. Assets and liabilities denominated in foreign currencies are translated using the exchange rate on the balance sheet date.
Revenues and expenses are translated using average exchange rates prevailing during the year. The translation adjustment resulting
from this process is shown separately as a component of stockholders’ equity. Foreign currency transaction gains or losses are
included in general and administrative expenses.

Revenue Recognition

Sales Taxes

The Company presents taxes collected and remitted to governmental authorities on a net basis in the accompanying Consolidated
Statements of Operations.

Cost of Sales

The types of costs included in cost of sales include material, labor, factory and tooling overhead, shipping, and freight costs. Major
components of these expenses are material costs, such as steel, packaging and cartons, personnel costs, and facility costs, such as
rent, depreciation and utilities, related to the production and distribution of the Company’s products. Inbound freight charges,
purchasing and receiving costs, inspection costs, warehousing costs, internal transfer costs, and other costs of the Company’s
distribution network are also included in cost of sales.

Tool and Die Costs

Tool and die costs are included in product costs in the year incurred.

Shipping and Handling Fees and Costs

The Company’s general shipping terms are F.O.B. shipping point. Shipping and handling fees and costs are included in revenues
and product costs, as appropriate, in the year incurred.

Product and Software Research and Development Costs

Product research and development costs, which are included in operating expenses and are charged against income as incurred,
were $10.8 million, $10.6 million and $10.8 million in 2018, 2017 and 2016, respectively. The types of costs included as product
research and development expenses was revised in 2017 and prior years to include all related personnel costs including salary,
benefits, retirement, stock-based compensation costs, as well as computer and software costs, professional fees, supplies, tools
and maintenance costs. In 2018, 2017 and 2016, the Company incurred software development expenses related to its expansion
into the plated truss market and some of the software development costs were capitalized. See "Note 8 — Property, Plant and
Equipment." The Company amortizes acquired patents over their remaining lives and performs periodic reviews for impairment.
The cost of internally developed patents is expensed as incurred.

Selling Costs

Selling costs include expenses associated with selling, merchandising and marketing the Company’s products. Major components
of these expenses are personnel, sales commissions, facility costs such as rent, depreciation and utilities, professional services,
information technology costs, sales promotion, advertising, literature and trade shows.

Advertising Costs

Advertising costs are included in selling expenses are expensed when the advertising occurs and were $7.6 million, $9.6 million
and $7.1 million in 2018, 2017, and 2016, respectively.

General and Administrative Costs

General and administrative costs include personnel, information technology related costs, facility costs such as rent, depreciation
and utilities, professional services, amortization of intangibles and bad debt charges.

Accounting for Stock-Based Compensation

The Company recognizes stock-based expense related to stock options and restricted stock awards on a straight-line basis, net of
forfeitures, over the requisite service period of the awards, which is generally the vesting term of four years. Stock-based expense
related to performance share grants are measured based on grant date fair value and expensed on a graded basis over the service
period of the awards, which is generally a performance period of three years. The assumptions used to calculate the fair value of
options or restricted stock units are evaluated and revised, as necessary, to reflect market conditions and the Company’s experience.

Income Taxes

Income taxes are calculated using an asset and liability approach. The provision for income taxes includes federal, state and foreign
taxes currently payable and deferred taxes, due to temporary differences between the financial statement and tax bases of assets
and liabilities. In addition, future tax benefits are recognized to the extent that realization of such benefits is more likely than not.
This method gives consideration to the future tax consequences of the deferred income tax items and immediately recognizes
changes in income tax laws in the year of enactment. On December 22, 2017, the President of the United States signed into law
71

the Tax Cuts and Jobs Act of 2017 (the “Tax Reform Act”). Further information on the tax impacts of the Tax Reform Act is
included in Note 10 — Income Taxes of the Company’s consolidated financial statements.

Net Income per Share

Basic net income per common share is computed based on the weighted average number of common shares outstanding. Potentially
dilutive shares, using the treasury stock method, are included in the diluted per-share calculations for all periods when the effect
of their inclusion is dilutive.

Recently Adopted Accounting Standards

In May 2014, the FASB issued Accounting Standards Update No. 2014-09 (later codified as ASC 606), Revenue from Contracts
with Customers (“ASC 606”), which supersedes nearly all existing revenue recognition guidance under GAAP. ASC 606 provides
a five-step model for revenue recognition to be applied to all revenue contracts with customers. The five-step model includes: (1)
determination of whether a contract, an agreement between two or more parties that creates legally enforceable rights and
obligations, exists; (2) identification of the performance obligations in the contract; (3) determination of the transaction price; (4)
allocation of the transaction price to the performance obligations in the contract; and (5) recognition of revenue when (or as) the
performance obligations are satisfied. The core principle of ASC 606 is that an entity should recognize revenue for the transfer of
goods or services equal to the amount that it expects to be entitled to receive for those goods or services. ASC 606 also requires
additional disclosures about the nature, timing and uncertainty of revenue and cash flows arising from customer contracts, including
significant judgments and changes in judgments. The standard is effective for annual and interim periods beginning after December
15, 2017 and permits two methods of adoption: retrospectively to each prior reporting period presented (full retrospective method),
or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (modified
retrospective method). The Company adopted the new revenue standard on January 1, 2018 using the modified retrospective
approach. Refer to Note 2 for additional information.

In October 2016, the FASB issued Accounting Standards Update ("ASU") No. 2016-16, Income Taxes (Topic 740), Intra-Entity
Transfers of Assets Other Than Inventory ("ASU 2016-16"), which requires companies to account for the income tax effects of
intercompany sales and transfers of assets other than inventory when the transfer occurs. Current guidance requires companies to
defer the income tax effects of intercompany transfers of assets until the asset has been sold to an outside party or otherwise
recognized. On January 1, 2018, the Company adopted ASU 2016-16 using a modified retrospective approach. Adoption of ASU
2016-16 had no material effect on the Company's consolidated financial statements and footnote disclosures.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for
Goodwill Impairment ("ASU 2017-04"), which eliminates the requirement to calculate the implied fair value of goodwill to measure
a goodwill impairment charge or Step 2 of the goodwill impairment analysis. Instead, an impairment charge will be recorded based
on the excess of a reporting unit's carrying amount over its fair value using Step 1 of the goodwill impairment analysis. On January
1, 2018, the Company prospectively adopted ASU 2017-04. In 2018, the Company applied ASU 2017-04 to the Company's
measurement of impairment for its Denmark reporting unit. Refer to Note 9 for additional information.

In February 2018, the FASB issued ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive
Income ("ASU 2018-02"). ASU 2018-02 allows but not require a reclassification from Accumulated other Comprehensive Income
to Retained Earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act of 2017. The amendments in this ASU are
effective for fiscal years beginning after December 15, 2018 and for interim periods therein. During the fourth quarter of 2018,
the Company early adopted the new accounting guidance and elected to reclass the stranded tax effects under ASU 2018-02. The
election resulted in a reclass of $0.4 million to retained earnings.

All other issued and effective accounting standards during 2018 were determined to be not relevant or material to the Company.

Recently Issued Accounting Standards Not Yet Adopted

In February 2016, the FASB issued ASU No. 2016-02, (Topic 842), Leases (“ASU 2016-02”). ASU 2016-02 core requirement is
to recognize the assets and liabilities that arise from leases including those leases classified as operating leases. The amendments
require a lessee to recognize a liability to make lease payments (the lease liability) and a right-of-use asset representing its right
to use the underlying asset for the lease term in the statement of financial position. For leases with a term of 12 months or less, a
lessee is permitted to make an accounting policy election by class of underlying asset to not recognize lease assets and lease
liabilities. If a lessee makes this election, it should recognize lease expense for such leases generally on a straight-line basis over
the lease term. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within
those fiscal years, with early adoption permitted.
72

Optional transition method - ASC 2018-11, Topic 842, Targeted Improvements (issued in July 2018) provide entities with an
additional (and optional) transition method to adopt the new lease standard. This additional transition method allows a cumulative
effect adjustment to the opening balance of retained earnings in the period of adoption without adjusting the comparative periods
presented. On January 1, 2019, the Company will adopt the new lease standard using the optional transition method.

During the fourth quarter of 2018, in preparation for the adoption of the new lease accounting standard, the Company has
implemented internal controls and a new lease accounting information system to enable the preparation of financial information.
The Company will elect and apply practical transition expedients of not reassessing whether any expired or existing contracts are
or contain leases; not reassessing the lease classification for any expired or existing leases and not reassessing initial direct costs
for any existing leases. The adoption of Topic 842 will result in recognition of right-of-use ("ROU") assets and lease liabilities of
approximately $36.0 million to $37.0 million and approximately $35.0 million to $36.0 million, respectively on January 1, 2019,
on the Company’s balance sheets. The most significant impact from recognition of ROU assets and lease liabilities is related
primarily to facilities and auto operating leases.

Revenue from Contracts with Customers

Disaggregated revenue

• Wood Construction Products Revenue. Wood construction products represented almost 85% of total net sales in the year

ended December 31, 2018.

• Concrete Construction Products Revenue. Concrete construction products represented 15% of total net sales in the year

ended December 31, 2018.

Reconciliation of contract balances

Other accounting issues

Costs to obtain or fulfill a contract. Costs incurred to obtain a contract are immaterial. Commission cost is not an incremental cost
directly related to obtaining a contract.

3. Net Income per Share

The following shows a reconciliation of basic earnings per share (“EPS”) to diluted EPS:

(in thousands, except per-share amounts)
Net income available to common stockholders

Basic weighted average shares outstanding
Dilutive effect of potential common stock equivalents
Diluted weighted average shares outstanding
Net earnings per share:

Basic
Diluted

4. Stockholders' Equity

Stock Repurchase Program

For the Year Ended December 31,

2018
$ 126,633

2017

92,617

2016
$ 89,734

46,213
327
46,540

47,486
288
47,774

48,084
211
48,295

$
$

2.74
2.72

$
$

1.95
1.94

$
$

1.87
1.86

At its meeting in August 2016, the Board authorized the Company to repurchase up to $125 million of its common stock. This
authorization increased and extended the $50.0 million repurchase authorization from February 2016. At its meeting in August
2017, the Board authorized the Company to repurchase up to $275.0 million of its common stock. This authorization increased
and extended the $125.0 million repurchase authorization from August 2016 and remained in effect through December 31, 2018.

For the fiscal year ended December 31, 2017, the Company purchased a total of 1,138,387 shares of its common stock for a total
of $60.0 million through accelerated share repurchase programs that the Company entered into with Wells Fargo, which included
460,887 shares purchased at an average share price of $43.39 per share pursuant to a $20.0 million accelerated share repurchase
program initiated in June 2017 (the "2017 June ASR Program"), and 677,500 shares received at an average share price of $59.04
per share, or $40.0 million, pursuant to a $50.0 million accelerated share repurchase program initiated in December 2017 (the
"2017 December ASR Program").

In February 2018, the Company received 182,171 shares of its common stock as the final delivery for the 2017 December ASR
Program. For the year ended December 31, 2018, the Company repurchased 1,772,658 shares of the Company's common stock
on the open market at an average price of $62.69 per share. As of December 31, 2018, the Company repurchased approximately
$234.6 million of the Company's previously announced $275.0 million share repurchase authorization (which expired at the end
of 2018).

At the Company's meeting in December 2018, the Board authorized the Company to repurchase up to $100.0 million of its common
stock which will remain in effect through the end of 2019.

See the "Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2018, 2017 and 2016."

Comprehensive Income or Loss

The following shows the components of accumulated other comprehensive income or loss as of December 31, 2018 and 2017,
respectively:

(in thousands)

Balance at January 1, 2016

Foreign
Currency
Translation

Pension
Benefit

(27,552) $ (1,024) $

Other comprehensive income before reclassification net of tax benefit (expense) of
($222) and $87, respectively
Balance at December 31, 2016
Other comprehensive loss net of tax benefit (expense) of ($0) and $37, respectively

Amounts reclassified from accumulative other comprehensive income, net of $0 tax

Balance at December 31, 2017
Other comprehensive loss net of tax benefit (expense) of $0 and $59, respectively
Balance at December 31, 2018

(3,920)
(31,472)
21,273

(474)
(1,498)
(944)
—
(2,442)
757

145
(10,054)
(12,911)
(22,965) $ (1,685) $

Total
(28,576)

(4,394)
(32,970)
20,329

145
(12,496)
(12,154)
(24,650)

Stock-Based Compensation

The Company currently maintains an equity incentive plan, the Simpson Manufacturing Co., Inc. Amended and Restated 2011
Incentive Plan (the “2011 Plan”). The 2011 Plan amended and restated in their entirety, and incorporated and superseded, both the
Simpson Manufacturing Co., Inc. 1994 Stock Option Plan (the “1994 Plan”), which was principally for the Company’s employees,
and the Simpson Manufacturing Co., Inc. 1995 Independent Director Stock Option Plan (the “1995 Plan”), which was for the
Company's independent directors. Awards previously granted under the 1994 Plan or the 1995 Plan will not be affected by the
adoption of the 2011 Plan and will continue to be governed by the 1994 Plan or the 1995 Plan, respectively. The Company does
not currently intend to award incentive stock options or restricted stock units under the 1994 Plan or the 1995 Plan.

Under the 2011 Plan, no more than 16.3 million shares of the Company’s common stock in aggregate may be issued including
shares already issued pursuant to prior awards granted under the 2011 Plan. Shares of common stock underlying awards to be
issued pursuant to the 2011 Plan are registered under the Securities Act. Under the 2011 Plan, the Company may grant restricted
stock and restricted stock units, although the Company currently intends to award primarily performance-based and/or time-based
restricted stock units ("RSUs").

The following table shows the Company’s stock-based compensation activity:

(in thousands)
Stock-based compensation expense recognized in operating expenses

Fiscal Years Ended December 31,

2018
$ 10,356

2017
$ 12,744

2016
$ 13,113

Tax benefit of stock-based compensation expense in provision for income taxes

2,476

4,575

4,757

Stock-based compensation expense, net of tax

Fair value of shares vested

Proceeds to the Company from the exercise of stock-based compensation

Tax benefit from exercise of stock-based compensation, including shortfall tax benefits

7,880

8,169

8,356

$ 15,372

$ 11,043

$ 13,186

695

6,610

7,976

— $

(251)

The Company allocates stock-based compensation expense among cost of sales, research and development and other engineering
expense, selling expense, or general and administrative expense based on the job functions performed by the employees to whom
the stock-based compensation is awarded. Stock-based compensation cost capitalized in inventory was immaterial for all periods
presented.

The following table summarizes the Company’s unvested restricted stock unit activity for the year ended December 31, 2018:

Unvested Restricted Stock Units (RSUs)
Outstanding at January 1, 2018

Awarded
Vested
Forfeited

Outstanding at December 31, 2018
Outstanding and expected to vest at December 31, 2018

Shares
(in thousands)

Weighted-
Average
Price

696
189
(263)
(18)
604
598

$
$

35.34
54.99
35.23
39.23
41.37
41.32

$
$

Aggregate
Intrinsic
Value *
(in thousands)

39,609

32,669
32,388

* The intrinsic value for outstanding and expected to vest is calculated using the closing price per share of $54.13, as reported

by the New York Stock Exchange on December 31, 2018.

During the year ended December 31, 2018, the Company granted 189,167 RSUs to the Company's employees, including officers,
and eight non-employee directors at an estimated weighted average fair value of $54.99 per share, based on the closing price
(adjusted for certain market factors, and to a lesser extent, the present value of dividends) of the Company's common stock on the
grant grants. The RSUs granted to the Company's employees may be time-based, performance-based or time- and performance-
based. Certain of the performance-based RSUs are granted to officers and key employees, where the number of performance-
based awards to be issued is based on the achievement of certain Company performance criteria established in the RSU agreement
over a cumulative three year period. These awards cliff vest after three years. In addition, these same officers and key employees
also receive time-based RSUs, which vest pursuant to a three-year graded vesting schedule. Time- and performance based RSUs
are granted to the Company's employees excluding officers and certain key employees, vest ratably over the four year life of the
award, and require the underlying shares of the Company's common stock to be subject to a performance-based adjustment during
the first year.

The total intrinsic value of RSUs vested during the years ended December 31, 2018, 2017 and 2016 was $9.8 million, $10.8 million
and $10.3 million, respectively, based on the market value on the vest date.

The following table summarizes the Company’s stock option activity for the year ended December 31, 2018:

Non-Qualified Stock Options
Outstanding at January 1, 2018

Exercised
Forfeited

Outstanding and exercisable at December 31, 2018

Shares
(in thousands)
28
$
(23) $
(5) $
— $

29.66
29.66
29.66
—

Weighted-
Average
Exercise
Price

Weighted-
Average
Remaining
Contractual
Life

Aggregate
Intrinsic
Value*
(in thousands)
780

0.1

— $

—

The total intrinsic value of stock options exercised during each of the three years ended December 31, 2018, 2017 and 2016, was
$0.7 million, $4.6 million and $3.1 million, respectively. Currently, the Company is not awarding stock options under its 2011
Plan.

As of December 31, 2018, the Company's aggregate unamortized stock compensation expense was approximately $10.3 million,
which is entirely attributable to unvested RSUs and is expected to be recognized in expense over a weighted-average period of
approximately 2.1 years.

Stock Bonus Plan

The Company also maintains a stock bonus plan, the Simpson Manufacturing Co., Inc. 1994 Employee Stock Bonus Plan (the
“Stock Bonus Plan”), whereby it awards shares of the Company’s common stock to employees, who do not otherwise participate
in any of the Company’s equity-based incentive plans and meet minimum service requirements as determined by the Committee.
The number of shares awarded, as well as the required period of service, is determined by the Committee. Shares have generally
been awarded under the Stock Bonus Plan following the year in which the respective employee reached his or her tenth, twentieth,
thirtieth, fortieth or fiftieth anniversary of employment with the Company or any direct or indirect subsidiary thereof. The Company
awarded 9,000 shares for service through 2018, (5,500 shares to be issued and 3,500 shares of which are expected to be settled in
cash for the Company's foreign employees). In 2017 and 2016, the Company awarded 12,000 and 10,000 shares, respectively. As
a result, we recorded pre-tax compensation charges of $0.8 million, $1.2 million and $0.8 million for each of the years ended
December 31, 2018, 2017 and 2016, respectively. The charges also include cash bonuses to compensate employees for income
taxes payable as a result of the stock bonuses.

6. Trade Accounts Receivable, net

Trade accounts receivable consisted of the following:

(in thousands)
Trade accounts receivable
Allowance for doubtful accounts
Allowance for sales discounts

December 31,

2018

2017

149,886
(1,364)
(2,470)
146,052

139,910
(996)
(2,956)
135,958

The Company adopted ASC 606 effective January 1, 2018, resulting in the reclassification of an estimated refund liability of $0.8
million from allowance for sales discounts and returns to other current liabilities as of December 31, 2018.

Inventories

The components of inventories consisted of the following:

(in thousands)
Raw materials
In-process products
Finished products

8. Property, Plant and Equipment, net

Property, plant and equipment consisted of the following:

(in thousands)
Land
Buildings and site improvements
Leasehold improvements
Machinery and equipment

Less accumulated depreciation and amortization

Capital projects in progress

December 31,

2018

2017

98,058
24,645
153,385
276,088

91,022
26,849
135,125
252,996

December 31,

2018

2017

30,034
198,809
4,826
330,076
563,745
(318,388)
245,357
9,240
254,597

33,087
212,817
4,684
300,334
550,922
(299,907)
251,015
22,005
273,020

Included in property, plant and equipment at December 31, 2018 and 2017, are fully depreciated assets with an original cost of
$196.8 million and $189.9 million, respectively. These fully depreciated assets are still in use in the Company’s operations. The
Company capitalizes certain development costs associated with internal use software, including the direct costs of services provided
by third-party consultants and payroll for internal employees, both of which are performing development and implementation
activities on a software project. As of December 31, 2018 and 2017, the Company had capitalized software development costs
subject to amortization of $39.1 million and $20.5 million, respectively, and as of December 31, 2018 and 2017, $3.6 million and
$12.2 million, respectively, included in capital projects in progress.

In November 2018, the Company sold a facility that was not occupied by the Company and was leased to a third party. The
Company received net proceeds of $17.5 million, after closing costs and sales price adjustments

Depreciation expense, including depreciation of equipment, internally developed software and software acquired through capital
lease arrangements, was $33.3 million, $27.3 million and $21.6 million for the years ended December 31, 2018, 2017 and 2016,
respectively.

9. Goodwill and Intangible Assets

Goodwill

The annual changes in the carrying amount of goodwill, by segment, as of December 31, 2017 and 2018, were as follows,
respectively:

(in thousands)
Balance as of January 1, 2017
Goodwill
Accumulated impairment losses

Goodwill acquired
Foreign exchange
Reclassifications (1)
Balance as of December 31, 2017
Goodwill
Accumulated impairment losses

Goodwill acquired
Foreign exchange
Balance as of December 31, 2018
Goodwill
Accumulated impairment losses

North
America

Europe

Asia
Pacific

Total

96,154
(10,666)
85,488
10,066
198
3

106,421
(10,666)
95,755
913
(233)

51,031
(13,415)
37,616
—
2,472
(192)

53,311
(13,415)
39,896
—
(738)

1,375
—
1,375
—
114
—

1,489
—
1,489
—
(145)

148,560
(24,081)
124,479
10,066
2,784
(189)

161,221
(24,081)
137,140
913
(1,116)

107,101
(10,666)
96,435

52,573
(20,102)
32,471

1,344
—
1,344

161,018
(30,768)
130,250

$
(1) During 2017, $3 thousand and $192 thousand was reclassified to other assets, with a corresponding $189 thousand decrease in goodwill related to the CG
Visions and MS Decoupe acquisitions.

Goodwill Impairment Testing

The reporting unit level is generally one level below the operating segment, which is at the country level, except for the United
States, Australia and S&P Clever reporting units.

The Company determined that the United States reporting unit includes four components: Northwest United States, Southwest
United States, Northeast United States and Southeast United States (collectively, the “U.S. Components”). The Company aggregates
the U.S. Components into a single reporting unit because management concluded that they are economically similar and that the
goodwill is recoverable from the U.S. Components working in concert. The U.S. Components are economically similar because
of a number of factors, including selling similar products to shared customers and sharing assets and services such as intellectual
property, manufacturing assets for certain products, research and development projects, manufacturing processes, management
of inventory excesses and shortages and administrative services. These activities are managed centrally at the U.S. Components
level and costs are allocated among the four U.S. Components.

The Company determined that the Australia reporting unit includes three components: Australia, New Zealand, and United Arab
Emirates (collectively, the “AU Components”). The Company aggregates the AU Components into a single reporting unit because
management concluded that they are economically similar and that the goodwill is recoverable from the AU Components working
in concert. The AU Components are economically similar because of a number of factors, including that New Zealand, and United
Arab Emirates operate as extensions of their Australian parent company selling similar products and sharing assets and services
such as intellectual property, manufacturing assets for certain products, management of inventory excesses and shortages and
administrative services. These activities are managed centrally at the AU Components level and costs are allocated among the AU
Components.

of inventory excesses and shortages and administrative services. These activities are managed centrally at the S&P Components
level and costs are allocated among the S&P Components.

Determining the fair value of a reporting unit, or an indefinite-lived purchased intangible asset, requires significant estimates and
assumptions. These estimates and assumptions include revenue growth rates, operating margins and working capital requirements
used to calculate projected future cash flows, risk-adjusted discount rates, selected multiples, control premiums and future economic
and market conditions (Level 3 fair value inputs). The Company bases its fair value estimates on assumptions that it believes to
be reasonable, but that are unpredictable and inherently uncertain. Actual future results may differ from those estimates.

The 2018 annual testing of goodwill for impairment resulted in an impairment charge. The carrying value of the Denmark reporting
unit exceeded its fair value in an amount that approximated the carrying value of its goodwill, primarily due to the reporting unit
not meeting management's pre-tax operating profit objectives. As a result, the Company impaired all of the Denmark reporting
unit’s goodwill, which was $6.7 million at December 31, 2018.

The 2017 and 2016 annual testing of goodwill for impairment did not result in impairment charges.

Amortizable Intangible Assets

Intangible assets from acquired businesses are recognized at their estimated fair values at the date of acquisition and consist of
patents, unpatented technology, non-compete agreements, trademarks, customer relationships and other intangible assets. Finite-
lived intangibles are amortized to expense over the applicable useful lives, ranging from three to 21 years, based on the nature of
the asset and the underlying pattern of economic benefit as reflected by future net cash inflows. The Company performs an
impairment test of finite-lived intangibles whenever events or changes in circumstances indicate their carrying value may be
impaired.

The total gross carrying amount and accumulated amortization of definite-lived intangible assets at December 31, 2018 were $53.2
million and $28.8 million, respectively. The aggregate amount of amortization expense of intangible assets for the years ended
December 31, 2018, 2017 and 2016 was $6.2 million, $6.0 million and $6.1 million, respectively.

The annual changes in the carrying amounts of patents, unpatented technologies, customer relationships and non-compete
agreements and other intangible assets subject to amortization for the years ended December 31, 2018 and 2017 were as follows:

(in thousands)
Patents
Balance at January 1, 2017
Acquisition
Amortization
Foreign exchange
Removal of fully amortized assets
Balance at December 31, 2017
Amortization
Removal of fully amortized assets
Balance at December 31, 2018

Gross
Carrying
Amount

Accumulated
Amortization

Net
Carrying
Amount

1,718
800
—
2
(170)
2,350
—
(241)
2,109

(528) $
— $

(187)
—
170
(545)
(107)
241
(411) $

1,190
800
(187)
2
—
1,805
(107)
—
1,698

Gross
Carrying
Amount

Accumulated
Amortization

(in thousands)
Unpatented Technology
Balance at January 1, 2017
Amortization
Foreign exchange
Balance at December 31, 2017
Amortization
Reclassifications (1)
Foreign exchange
Removal of fully amortized assets
Balance at December 31, 2018
(1) Reclassifications in 2018 of $0.3 million in unpatented technology, with a corresponding reduction in other assets related to Technogrout asset acquisition.

(9,003) $
(1,976)
—
(10,979)
(2,557)
—
—
1,192
(12,344) $

21,162
—
505
21,667
—
277
(90) $

12,159
(1,976)
505
10,688
(2,557)
277
(90)
—
8,318

(1,192)
20,662

Net
Carrying
Amount

(in thousands)

Non-Compete Agreements,
Trademarks and Other
Balance at January 1, 2017
Acquisition
Amortization
Foreign exchange
Removal of fully amortized assets
Balance at December 31, 2017
Acquisition
Amortization
Reclassifications
Removal of fully amortized asset
Balance at December 31, 2018

Gross
Carrying
Amount

Accumulated
Amortization

Net
Carrying
Amount

6,727
9,260
—
16
(3,778)
12,225
879
—
(24)
(855)
12,225

(4,100)
—
(2,495)
—
3,778
(2,817)
—
(1,757)
—
855
(3,719) $

2,627
9,260
(2,495)
16
—
9,408
879
(1,757)
(24)
—
8,506

(in thousands)
Customer Relationships
Balance at January 1, 2017
Acquisition
Amortization
Reclassifications(1)
Foreign exchange
Removal of fully amortized assets
Balance at December 31, 2017
Amortization
Foreign exchange
Balance at December 31, 2018

Gross
Carrying
Amount

Accumulated
Amortization

Net
Carrying
Amount

21,217
1,091
—
626
394
(5,650)
17,678
—
(115)
17,563

(14,945)
—
(1,574)
—
—
5,650
(10,869)
(1,430)
—
(12,299) $

6,272
1,091
(1,574)
626
394
—
6,809
(1,430)
(115)
5,264

(1) During 2017, $0.6 million was reclassified to customer relationships with a corresponding $0.6 million decrease in other assets related to the MS Decoupe
acquisition.

At December 31, 2018, estimated future amortization of intangible assets was as follows:

(in thousands)

2019
2020
2021
2022
2023
Thereafter

5,319
5,287
4,807
2,928
2,124
3,321
23,786

Indefinite-Lived Intangible Assets

As of December 31, 2018, the only indefinite-lived intangible asset, consisting of a trade name, totaled $0.6 million.

Definite-lived and indefinite-lived assets, net, by segment as of December 31, 2018 and 2017 were as follows:

(in thousands)
Total Intangible Assets
North America
Europe
Total

December 31, 2017

Gross
Carrying
Amount

Accumulated
Amortization

Net
Carrying
Amount

30,775
23,762
54,537

(13,732) $
(11,479)
(25,211) $

17,043
12,283
29,326

At December 31, 2018

Gross
Carrying
Amount

Accumulated
Amortization

Net
Carrying
Amount

30,825
22,353
53,178

(16,002) $
(12,774)
(28,776) $

14,823
9,579
24,402

10. Acquisitions and Dispositions

Under the business combinations topic of the FASB ASC 805, the Company accounts for acquisitions where the acquiree meets
the definition of an acquired business as business combinations and ascribes acquisition-date fair values to the acquired assets and

assumed liabilities. Provisional fair value measurements are made at the time of the acquisitions. Adjustments to those measurements
may be made in subsequent periods, up to one year from the acquisition date, as information necessary to complete the analysis
is obtained. Fair value of intangible assets are generally based on Level 3 inputs.

CG Visions, Inc.

In January 2017, to support our strategic initiative to sell engineered products solutions, the Company acquired CG Visions, Inc.
("CG Visions"), an Indiana corporation for $20.8 million. CG Visions provides scalable technologies and services in building
information modeling ("BIM") technologies, estimation tools and software solutions to a number of the top 100 mid-sized to large
builders in the United States, which are expected to complement and support the Company's sales in North America. During the
third quarter of 2017, the Company finalized its fair value measurement of assets acquired and liabilities assumed in this acquisition.
CG Visions assets and liabilities included other current assets of $0.5 million, noncurrent assets of $20.4 million, current liabilities
and contingent consideration of $1.1 million. Included in noncurrent assets was goodwill of $10.1 million, which was assigned
to the North America segment, and intangible assets of $10.3 million, both of which are not subject to tax-deductible amortization.
The estimated weighted-average amortization period for the intangible assets is 7 years.

Gbo Fastening Systems AB

In January 2017, the Company acquired Gbo Fastening Systems AB ("Gbo Fastening Systems"), a Sweden limited company, for
$10.2 million. Gbo Fastening Systems manufactures and sells a complete line of CE-marked structural fasteners as well as fastener
dimensioning software for wood construction applications, currently sold mostly in northern and eastern Europe, which are expected
to complement the Company's line of wood construction products in Europe. The Gbo Fastening Systems acquisition result in a
$6.3 million gain on bargain purchase of a business, which was included in the consolidated statements of operation. Without
speculating regarding the sellers' motivation, the Company does not know why Gbo Fastening Systems was sold below fair value,
resulting in a nonrecurring bargain purchase gain for the Company.

The following table represents the final allocation of the purchase price to the estimated fair value of the assets acquired and
liabilities assumed in the Gbo Fastening Systems acquisition:

(In thousands)
Assets*

Cash and cash equivalents

Accounts receivable

Inventory

Other current assets

Noncurrent assets

Liabilities

Accounts payable
Other current liabilities and long-term liabilities

Total net assets

Gain on bargain purchase of a business, net of tax

Total purchase price

* Intangible assets acquired were determined to have little to no value, thus were not recognized

Multi Services Dêcoupe S.A.

3,956

4,914

13,591

760

3,929

27,150

4,500
6,146

10,646

16,504
(6,336)
10,168

In August 2016, the Company purchased all of the outstanding shares of Multi Services Dêcoupe S.A. ("MS Decoupe"), a Belgium
public limited company, for $6.9 million. MS Decoupe primarily manufactures and distributes wood construction, plastic, and
metal labeling products in Belgium and the Netherlands, including distributing the Company's products manufactured at the
Company's production facility in France. With this acquisition, the Company could potentially offer the Belgium market a wider-
range of its products, shorten delivery lead times, and expand the Company's sales presence into the Netherlands market. During

the third quarter of 2017, the Company finalized its fair value measurement of assets acquired and liabilities assumed in this
acquisition. MS Decoupe assets and liabilities included cash and cash equivalents of $1.4 million, other current assets of $1.6
million, noncurrent assets of $5.0 million, current liabilities of $0.6 million and noncurrent deferred income tax liabilities of $1.0
million. Included in noncurrent assets was goodwill of $1.4 million, which was assigned to the Europe segment, and intangible
assets of $1.7 million, both of which are not subject to tax-deductible amortization. The estimated weighted-average amortization
period for the intangible assets is 10 years.

The results of operations of the businesses acquired in 2016 through 2018 have been in the Company’s consolidated results of
operations since the date of the acquisition. They were not material to the Company on an individual or aggregate basis, and
accordingly, pro forma results of such operations have not been presented.

Sales of Gbo Poland and Gbo Romania

As a result of incompatibility with Simpson's market strategy, the Company completed the sale of all of its equity in Gbo Fastening
Systems' Poland and Gbo Romania subsidiaries on September 29, 2017 and October 31, 2017, respectively, for approximately
$10.2 million, resulting in a loss of $0.2 million which was presented in the accompanying statements of operations.

11. Equity Investments

In December 2016, the Company acquired a 25.0% equity interest in Ruby Sketch Pty Ltd. (“Ruby Sketch”), an Australian
proprietary limited company, for $2.5 million. The Company has accounted for its ownership interest using the equity method of
accounting and recognized Ruby Sketch investment at cost. The investment will fluctuate in future periods based on the Company’s
allocable share of earnings or losses from the investment which is recognized through earnings.

Ruby Sketch develops software that assists in designing residential structures, primarily used in Australia and potentially for the
North America market. The Company’s future relationship with Ruby Sketch also could potentially include the specification of
the Company’s products in Ruby Sketch's software. The Company has no obligation to make any additional capital contributions
to Ruby Sketch.

12. Accrued Liabilities

Accrued liabilities consisted of the following:

(in thousands)
Sales incentive and advertising accruals
Vacation liability
Dividend payable
Labor related liabilities
Sales taxes payable and other

13. Debt

December 31,

2018

2017

36,312
2,901
10,024
22,365
26,970
98,572

31,143
8,993
9,954
20,196
18,199
88,485

The Company has revolving lines of credit with various banks in the United States and Europe. Total available credit at December 31,
2018 was $304.0 million including revolving credit lines and an irrevocable standby letter of credit in support of various insurance
deductibles.

The Company’s primary credit facility is a $300.0 million revolving line of credit, which expires on July 23, 2021. Amounts
borrowed under this credit facility will bear interest at an annual rate equal to either, at the Company’s option, (a) the rate for
Eurocurrency deposits for the corresponding deposits of United States dollars appearing on Reuters LIBOR1screen page (the
“LIBOR Rate”), adjusted for any reserve requirement in effect, plus a spread of 0.60% to 1.45%, determined quarterly based on
the Company’s leverage ratio (at December 31, 2018, the LIBOR Rate was 2.46%, or (b) a base rate, plus a spread of 0.00% to
0.45%, determined quarterly based on the Company’s leverage ratio. The base rate is defined in a manner such that it will not be
less than the LIBOR Rate. The Company will pay fees for standby letters of credit at an annual rate equal to the applicable spread

described above, and will pay market-based fees for commercial letters of credit. The Company is required to pay an annual facility
fee of 0.15% to 0.30% of the available commitments under the credit agreement, regardless of usage, with the applicable fee
determined on a quarterly basis based on the Company’s leverage ratio. There was no amount outstanding under this revolving
line of credit as of December 31, 2018 and 2017, respectively.

In addition to the $300.0 million credit facility, the Company’s borrowing capacity under other revolving credit lines totaled $3.4
million at December 31, 2018. The other revolving credit lines charge interest ranging from 0.49% to 9.50% and have maturity
dates of December 2019. The Company had $0.8 million outstanding under these other revolving lines of credit as of December 31,
2018, and had no outstanding balance as of December 31, 2017.

The Company and its subsidiaries are required to comply with various affirmative and negative covenants. The covenants include
provisions that would limit the availability of funds as a result of a material adverse change to the Company’s financial position
or results of operations. The Company was in compliance with its financial covenants under the loan agreement as of December 31,
2018.

The Company incurs interest costs, which include interest, maintenance fees and bank charges. The amount of costs incurred,
capitalized, and expensed for the years ended December 31, 2018, 2017 and 2016, consisted of the following:

Interest costs incurred
Less: Interest capitalized
Interest expense

Capital Lease Obligations

Years Ended December 31,

2018

2017

2016

1,224
(160)
1,064

1,249
(72)
1,177

1,167
(20)
1,147

During 2017, the Company entered into two four-year lease agreements for certain office equipment with Cisco Systems Capital
Corporation for a total of approximately $4.4 million, which was recorded in fixed assets as capital lease obligations. These capital
lease obligations are included in current liabilities and other long-term liabilities in the accompanying consolidated balance sheets.
The interest rates for these two capital leases are 2.89% and 3.50%, respectively, and the two leases will mature in May 2021 and
July 2021, respectively.

As of December 31, 2018, the current portion of the outstanding liability for the leased equipment was approximately $1.1 million
and the long-term portion was approximately $1.6 million.

14. Commitments and Contingencies

Leases

Certain properties occupied by the Company are leased. The leases expire at various dates through 2026 and generally require the
Company to assume the obligations for insurance, property taxes and maintenance of the facilities.

Rental expense for 2018, 2017 and 2016 with respect to all leased property was approximately $6.9 million, $6.4 million and $5.9
million, respectively.

At December 31, 2018, minimum rental commitments under all non-cancelable leases were as follows:

(in thousands)

2019
2020
2021
2022
2023
Thereafter
Total

6,962
5,830
4,481
3,457
2,399
8,563
31,692

Some of these minimum rental commitments contain renewal options and provide for periodic rental adjustments based on changes
in the consumer price index or current market rental rates. Other rental commitments provide options to cancel early without
penalty. Future minimum rental payments under the earliest cancellation options are included in the minimum rental commitments
in the table above.

Other Contractual Obligations

Purchase obligations consist of commitments primarily related to the acquisition, construction or expansion of facilities and
equipment, consulting agreements, and minimum purchase quantities of certain raw materials. The Company is not a party to any
long-term supply contracts with respect to the purchase of raw materials or finished goods. Debt interest obligations include annual
facility fees on the Company’s primary line-of-credit facility. Interest on line-of-credit facilities was estimated based on historical
borrowings and repayment patterns.

At December 31, 2018, other contractual obligations were as follows:

(in thousands)

As of December 31, 2018
2019
2020
2021
2022
2023
Thereafter
Total

Employee Relations

Debt and
Interest
Obligations

1,234
450
250
—
—
—
1,934

Capital
Lease
Obligations
$

Purchase
Obligations
28,438
2,367
1,507
583
—
—
32,895

1,160 $
1,160
484
—
—
—
2,804 $

Total

30,832
3,977
2,241
583
—
—
37,633

As of December 31, 2018, in the U.S. approximately 14% of our employees are represented by labor unions and are covered by
collective bargaining agreements. The Company has two-facility locations with collective bargaining agreements covering tool
and die craftsmen, maintenance workers, and sheet-metal workers. In Stockton, California, two union contracts will expire in
September 2019 and June 2023, respectively. Also, the Company has two contracts in San Bernardino County, California that will
expire in June 2022 and February 2021, respectively. The Company expects to agree on the extension with the existing labor union
contract that will expire in September 2019, while parties are negotiating a new agreement. Based on current information and
subject to future events and circumstances, the Company believes that, even if new agreements are not reached before the existing
labor union contracts expire, it is not expected to have a material adverse effect on the Company's ability to provide products to
customers or on the Company's profitability.

Environmental

The Company’s policy with regard to environmental liabilities is to accrue for future environmental assessments and remediation
costs when information becomes available that indicates that it is probable that the Company is liable for any related claims and
assessments and the amount of the liability is reasonably estimable. The Company does not believe that any such matters will
have a material adverse effect on the Company’s financial condition, cash flows or results of operations.

Litigation and Potential Claims
86

From time to time, the Company is involved in various legal proceedings and other matters arising in the normal course of
business. Corrosion, hydrogen enbrittlement, cracking, material hardness, wood pressure-treating chemicals, misinstallations,
misuse, design and assembly flaws, manufacturing defects, labeling defects, product formula defects, inaccurate chemical mixes,
adulteration, environmental conditions, or other factors can contribute to failure of fasteners, connectors, anchors, adhesives,
specialty chemicals, such as fiber reinforced polymers, and tool products. In addition, inaccuracies may occur in product
information, descriptions and instructions found in catalogs, packaging, data sheets, and the Company’s website.

The resolution of any claim or litigation is subject to inherent uncertainty and could have a material adverse effect on the Company’s
financial condition, cash flows or results of operations.

Gentry Homes, Ltd. v. Simpson Strong-Tie Company Inc., et al., Case No. 17-cv-00566, was filed in a federal district court in
Hawaii against Simpson Strong-Tie Company Inc. and the Company on November 20, 2017. The Gentry case is a product of a
previous state court class action, Nishimura v. Gentry Homes, Ltd., et al., Civil No. 11-1-1522-07, which is now closed. The
Nishimura case concerned alleged corrosion of the Company’s galvanized “hurricane straps” and mudsill anchor products used
in a residential project in Ewa by Gentry, Honolulu, Hawaii. In the Nishimura case, the plaintiff homeowners and the developer,
Gentry Homes, Ltd. (“Gentry”), arbitrated their dispute and agreed on a settlement in the amount of approximately $90 million.
In the subsequent Gentry case, Gentry alleges breach of warranty and negligent misrepresentation by the Company related to its
“hurricane strap” and mudsill anchor products, and demands general, special, and consequential damages from the Company in
an amount to be proven at trial. Gentry also seeks pre-judgment and post-judgment interest, attorneys’ fees and costs, and other
relief. The Company admits no liability and will vigorously defend the claims brought against it. At this time, the Company cannot
reasonably ascertain the likelihood that it will be found responsible for substantial damages to Gentry. Based on the facts currently
known, and subject to future events and circumstances, the Company believes that all or part of the claims brought against it in
the Gentry case may be covered by its insurance policies.

Charles Vitale, et al. v. D.R. Horton, Inc. and D.R. Horton-Schuler Homes, LLC, Civil No. 15-1-1347-07, a putative class action
lawsuit, was filed in the Hawaii First Circuit on July 13, 2015, in which the plaintiff homeowners allege that all homes built by
D.R Horton/D.R. Horton-Schuler Homes (collectively, “Horton Homes”) in the State of Hawaii have strap-tie holdowns that are
suffering premature corrosion. The complaint alleges that various manufacturers make strap-tie holdowns that suffer from such
corrosion. Although the plaintiffs’ original complaint did not specifically reference the Company’s products, their subsequent
amended complaints make such reference. The amended complaints also allege that sill plates made by a third party are prematurely
corroding. The Company is not currently a party to the Vitale lawsuit, but the lawsuit in the future could potentially involve the
Company’s strap-tie holdowns and mudsill anchors. If claims are asserted against the Company in the Vitale case, it will vigorously
defend any such claims, whether brought by the plaintiff homeowners or by Horton Homes. Based on the facts currently known,
and subject to future events and circumstances, the Company believes that all or part of any claims that any party might bring
against it related to the Vitale case may be covered by its insurance policies.

Ronald Yee, et al. v. D.R. Horton, Inc. and D.R. Horton-Schuler Homes, LLC, Civil No. 18-1-1748-10, a putative class action
lawsuit, was filed in the Hawaii First Circuit on October 30, 2018 in which the plaintiff homeowners allege that all homes built
by D.R Horton/D.R. Horton-Schuler Homes (collectively, “Horton Homes”) in the State of Hawaii have strap-tie holdowns and
mudsill anchors made by the Company that are suffering premature corrosion. The case is related to the Vitale matter discussed
above. The complaint also alleges that sill plates made by a third party are prematurely corroding. The plaintiff homeowners have
not sued the Company, and the Company is not currently a party to the Yee lawsuit. The lawsuit in the future could potentially
involve the Company. If claims are asserted against the Company in the Yee case, it will vigorously defend any such claims,
whether brought by the plaintiff homeowners or by Horton Homes. Based on the facts currently known, and subject to future
events and circumstances, the Company believes that all or part of any claims that any party might bring against it related to the
Yee case may be covered by its insurance policies

Given the nature and the complexities involved in the Gentry, Vitale and Yee proceedings, the Company is unable to estimate
reasonably the likelihood of possible loss or a range of possible loss until the Company knows, among other factors, (i) the specific
claims brought against the Company and the legal theories on which they are based; (ii) what claims, if any, might be dismissed
without trial; (iii) how the discovery process will affect the litigation; (iv) the settlement posture of the other parties to the litigation;
(v) the damages to be proven at trial, particularly if the damages are not specified or are indeterminate; (vi) the extent to which
the Company’s insurance policies will cover the claims or any part thereof, if at all; and (vii) any other factors that may have a
material effect on the proceeding.

15. Income Taxes

On December 22, 2017, the Tax Reform Act was signed, which includes a broad range of tax reform proposals affecting businesses,
including corporate tax rates, business deductions, and international tax provisions. Many of these provisions significantly differ
from current U.S. tax law, resulting in financial reporting implications. Some of the changes include, but are not limited to, a U.S.
corporate tax rate decrease from 35% to 21% effective for tax years beginning after December 31, 2017, the option to claim
accelerated depreciation deductions, the transition of U.S. international taxation from a worldwide tax system to a territorial system,
and a one-time transition tax on the mandatory deemed repatriation of foreign earnings as of December 31, 2017.

While the Tax Reform Act provides for a territorial tax system, beginning in 2018, it includes two new U.S. tax base erosion
provisions: the global intangible low-taxed income (“GILTI”) provisions and the base-erosion and anti-abuse tax (“BEAT”)
provisions. The GILTI provisions impose a tax on foreign income in excess of a deemed return on tangible assets of foreign
corporations. The guidance indicates that either accounting for deferred taxes related to GILTI inclusions or to treat any taxes on
GILTI inclusions as period cost are both acceptable methods subject to an accounting policy election. Effective the first quarter
of 2018, the Company has elected to treat any GILTI inclusions as a period cost.

The BEAT provisions in the Tax Reform Act eliminate the deduction of certain base-erosion payments made to related foreign
corporations, and impose a minimum tax if greater than regular tax. The Company is not subject to this tax and therefore has not
included any tax impacts of BEAT in its consolidated financial statements for the year ended December 31, 2018.

On December 22, 2017, Staff Accounting Bulletin No. 118 ("SAB 118") was issued by the SEC to address the application of U.S.
GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including
computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Reform Act. During the
year ended December 31, 2017, the Company recorded provisional amounts for $2.8 million of deferred tax benefit recorded in
connection with the re-measurement of deferred tax assets and liabilities and $3.8 million of current tax expense recorded in
connection with the transition tax on the mandatory deemed repatriation of foreign earnings. As of December 31, 2018, we have
completed our accounting for the tax effects of the Tax Reform Act. Subsequent adjustments to these amounts resulted in additional
tax benefits recorded during 2018 of approximately $0.7 million and $0.6 million, respectively. Management will continue to
monitor any changes in tax law.

The provision for income taxes from operations consisted of the following:

(in thousands)
Current

Federal
State
Foreign
Deferred
Federal
State
Foreign

Years Ended December 31,

2018

2017

2016

27,410
9,515
4,605

3,179
263
523
45,495

36,077
6,357
3,068

6,093
544
(338)
51,801

39,649
7,053
3,333

260
13
(1,142)
49,166

Income and loss from operations before income taxes for the years ended December 31, 2018, 2017, and 2016, respectively,
consisted of the following:

(in thousands)
Domestic
Foreign

2018

Years Ended December 31,
2017

2016

169,109
3,019
172,128

132,105
12,313
144,418

131,827
7,073
138,900

At December 31, 2018, the Company had $37.0 million of pre-tax loss carryforwards in various foreign taxing jurisdictions, of
which $0.9 million will begin to expire between 2019 and 2025. The remaining tax losses can be carried forward indefinitely.

At December 31, 2018, and 2017, the Company had deferred tax valuation allowances of $13.3 million and $11.1 million,
respectively. The valuation allowance increased $2.1 million and $4.2 million for the years ended December 31, 2018 and 2017,
respectively. The increase in 2018 valuation allowances was primarily a result of increases in foreign losses in jurisdictions where
the Company has recorded a full valuation allowance. The increase in 2017 valuation allowances was primarily due to the Company's
remaining foreign tax credits carryforward in the U.S. As of December 31, 2018, the Company believes it is more likely than not
that these foreign tax credits will expire unrealized under the Tax Reform Act.

The Company has not historically recorded federal income taxes on the undistributed earnings of its foreign subsidiaries because
such earnings are reinvested and, in the Company’s opinion, will continue to be reinvested indefinitely. The Tax Reform Act
provided for a one-time transition tax on the mandatory deemed repatriation of foreign earnings through the year ended December
31, 2017, and as a result, the Company recorded a net $3.2 million tax liability based on undistributed foreign earnings of
approximately $23.9 million. As a result of the implications of the 2017 Tax Reform Act and in satisfying Management’s 2020
Plan, the Company announced one-time distributions from select foreign jurisdictions to the U.S. during 2018. The Company
repatriated approximately $63.0 million between the third and fourth quarter and recorded taxes of approximately $1.0 million
which is primarily comprised of withholding taxes and state income taxes. The Company intends to limit any possible future
distributions to earnings previously taxed in the U.S. As a result, the Company has not recognized a deferred tax liability on its
investment in foreign subsidiaries. Determination of the related amount of unrecognized deferred U.S. income taxes is not
practicable because of the complexities associated with this hypothetical calculation.

Reconciliations between the statutory federal income tax rates and the Company’s effective income tax rates as a percentage of
income before income taxes for its operations were as follows:

(in thousands)
Federal tax rate

State taxes, net of federal benefit

Tax benefit of domestic manufacturing deduction

Mandatory deemed repatriation of foreign earnings

Change in U.S. tax rate applied to deferred taxes

Change in valuation allowance

True-up of prior year tax returns to tax provision

Difference between United States statutory and foreign local tax rates
Change in uncertain tax position

Other

Effective income tax rate

Years Ended December 31,
2017

2016

2018

21.0 %

4.5 %

— %

1.3 %

(1.2)%

0.5 %

(0.1)%

0.4 %

26.4 %

35.0 %

3.2 %

(2.0)%

2.7 %

(1.9)%

1.3 %

(0.5)%

(0.8)%

— %

(1.1)%

35.9 %

35.0 %

3.4 %

(2.5)%

— %

(0.1)%

(0.2)%

(0.3)%

(0.2)%

0.3 %

35.4 %

The decrease in the Company’s effective tax rate is primarily driven by the reduced U.S. federal income tax rate in 2018.

The tax effects of the significant temporary differences that constitute the deferred tax assets and liabilities at December 31, 2018
and 2017, respectively, were as follows:

(in thousands)
Deferred asset taxes

State tax
Workers’ compensation
Health claims
Vacation liability
Allowance for doubtful accounts
Inventories
Sales incentive and advertising allowances
Stock-based compensation
Unrealized foreign exchange gain or loss
Foreign tax credit carryforwards
Uncertain tax positions’ unrecognized tax benefits
Foreign tax loss carry forward
Other

Less valuation allowances
Total deferred asset taxes

Deferred tax liabilities

Depreciation
Goodwill and other intangibles amortization
Tax effect on cumulative translation adjustment
Total deferred tax liabilities

Total Deferred tax asset/(liability)

December 31,

2018

2017

919
785
445
370
171
5,659
799
3,074
440
5,043
39
8,091
1,813
27,648
(13,254)
14,394

(9,189) $
(13,027)
(497)
(22,713)

1,390
822
487
1,008
104
5,385
709
2,967
291
4,453
31
6,892
1,291
25,830
(11,114)
14,716

(7,050)
(11,331)
(487)
(18,868)

(8,319) $

(4,152)

A reconciliation of the beginning and ending amounts of unrecognized tax benefits in 2018, 2017 and 2016, respectively, was as
follows, including foreign translation amounts:

Reconciliation of Unrecognized Tax Benefits
Balance at January 1
Additions based on tax positions related to prior years
Reductions based on tax positions related to prior years
Additions for tax positions of the current year
Lapse of statute of limitations
Balance at December 31

2018

2017

2016

1,895
—
(171)
100
(67)
1,757

1,119
660
(1)
319
(202)
1,895

1,107
204
—
155
(347)
1,119

Tax positions of $0.1, $0.0, and $0.0 million are included in the balance of unrecognized tax benefits at December 31, 2018, 2017,
and 2016, respectively, which if recognized, would reduce the effective tax rate.

The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense, which is a
continuation of the Company’s historical accounting policy. During the year ended December 31, 2018 and 2017, accrued interest
increased by $5 thousand and $0.2 million, respectively, and during the years ended 2016, accrued interest decreased by $61
thousand. The Company had accrued $0.4 million for each of the fiscal years ended 2018 and 2017 and $0.2 million for the year
ended 2016, for the potential payment of interest, before income tax benefits.

At December 31, 2018, the Company remained subject to United States federal income tax examinations for the tax years 2015
through 2018. In addition, the Company remained subject to state, local and foreign income tax examinations primarily for the
tax years 2013 through 2018.

16. Retirement Plans

The Company has six defined contribution retirement plans covering substantially all salaried employees and nonunion hourly
employees. On January 1, 2015, the Simpson Manufacturing Co., Inc. 401(k) Profit Sharing Plan for Salaried Employees was
amended, restated and superseded by the Simpson Manufacturing Co., Inc. 401(k) Profit Sharing Plan (the “Restated Plan”), and
the Simpson Manufacturing Co., Inc. 401(k) Profit Sharing Plan for Hourly Employees was merged with and incorporated into
the Restated Plan. The Restated Plan, covering United States employees, provides for quarterly safe harbor contributions, limited
to 3% of the employees quarterly eligible compensation and for annual discretionary contributions, subject to certain limitations,
but in no event are total contributions more than the amounts permitted under the Internal Revenue Code as deductible expense.
The discretionary amounts for 2016, 2017 and 2018 were equal to 7% of qualifying salaries or wages of the covered employees.
The other four plans, covering the Company’s European and Canadian employees, require the Company to make contributions
ranging from 3% to 15% of the employees’ compensation. The total cost for these retirement plans for the years ended December 31,
2018, 2017 and 2016, was $15.8 million, $14.2 million and $10.1 million, respectively.

We participate in various multiemployer benefit plans that cover some of our employees who are represented by labor unions. We
make periodic contributions to these plans in accordance with the terms of applicable collective bargaining agreements and laws
but do not sponsor or administer these plans. We do not participate in any multiemployer benefit plans for which we consider our
contributions to be individually significant. If we were to otherwise withdraw from participation in any of these plans, applicable
law would require us to fund our allocable share of the unfunded vested benefits, which is known as a withdrawal liability. As of
December 31, 2018, we believe that there was no probable withdrawal liability under the multiemployer benefit pension plans
under the terms of collective-bargaining agreements that cover its union-represented employees.

Our total contribution to various industry-wide, union-sponsored pension funds and a statutorily required pension fund for
employees in the U.S. and Europe were $4.5 million, $4.0 million and $3.1 million for the years ended December 31, 2018, 2017
and 2016, respectively.

17. Related Party Transactions

During 2018, the Company identified certain purchases of goods and services from companies where the Chief Executive Officer
of the Company serves as a director on the respective company providing the goods or services. The amount of goods and services
purchased by the Company pursuant to these arrangements was not material to the Company’s consolidated statement of income
and cash flows for the year ended December 31, 2018.

18. Segment Information

The Company is organized into three reporting segments. The segments are defined by the regions where the Company’s products
are manufactured, marketed and distributed to the Company’s customers. The three regional segments are the North America
segment (comprised primarily of the Company's operations in the United States and Canada), the Europe segment and the Asia/
Pacific segment (comprised of the Company’s operations in Asia, the South Pacific, and the Middle East). These segments are
similar in several ways, including the types of materials used, the production processes, the distribution channels and the product
applications.

The Administrative & All Other column primarily includes expenses such as self-insured workers compensation claims for
employees of the Company’s venting business, which was sold in 2010, stock-based compensation for certain members of
management, interest expense, foreign exchange gains or losses and income tax expense, as well as revenues and expenses related
to real estate activities, such as gain on sale of property, rental income and depreciation expense on the Company’s property in
Vacaville, California. In November 2018, the Vacaville property was sold for $17.5 million, net of closing costs and sales price
adjustments and resulted in a pre-tax gain of $8.8 million.

The following table shows certain measurements used by management to assess the performance of the segments described above
as of December 31, 2018, 2017 and 2016, respectively:

(in thousands)

2018
Net sales

Sales to other segments *

Income from operations

Depreciation and amortization

Impairment of goodwill

Significant non-cash charges

Provision for income taxes

Capital expenditures and business acquisitions, net of
cash acquired
Total assets

North
America

Europe

Asia/
Pacific

Administrative
& All Other

Total

910,587

159,027

9,195

— $1,078,809

2,279

164,453

30,505

—

6,340

39,638

27,059

1,773
(3,026)
6,297

6,686

1,169

2,947

2,556

1,119,012

157,437

28,292

2,040

1,794

—

113

1,702

25,644

—

8,865

797

—

3,619

2,797

32,344

172,332

39,393

6,686

11,176

45,495

—
(280,430)

31,317

1,021,663

(in thousands)
2017
Net sales
Sales to other segments *
Income (loss) from operations
Depreciation and amortization
Gain on bargain purchase of a business
Significant non-cash charges
Provision for income taxes
Capital expenditures and business acquisitions, net of
cash acquired
Total assets

(in thousands)
2016
Net sales
Sales to other segments *
Income (loss) from operations
Depreciation and amortization
Significant non-cash charges
Provision for (benefit from) income taxes
Capital expenditures and business acquisitions, net of
cash acquired

Total assets

North
America

803,697
3,237
132,995
25,745
—
9,861
47,434

70,040
953,033

North
America

742,021
2,512
137,466
19,433
9,124
45,547

37,652

853,826

Europe
165,155
959
2,723
5,832
6,336
1,509
2,124

11,411
208,640

Europe
111,274
570
2,115
5,809
1,052
1,428

8,461

165,121

* Sales to other segments are eliminated on consolidation.

Asia/
Pacific

Administrative
& All Other

8,173
20,715
1,296
1,246
—
65
419

4,511
26,820

7,366
28,690
1,807
1,208
113
721

1,250

25,118

— $
—
901
901
—
2,473
1,824

Total
977,025
24,911
137,915
33,724
6,336
13,908
51,801

—
(150,970)

85,962
1,037,523

— $
—
(178)
1,477
3,657
1,470

Total
860,661
31,772
141,210
27,927
13,946
49,166

—

47,363

(64,091)

979,974

Asia/
Pacific

Administrative
& All Other

Cash collected by the Company’s United States subsidiaries is routinely transferred into the Company’s cash management accounts,
and therefore has been included in the total assets of “Administrative & All Other.” Cash and short-term investment balances in
“Administrative & All Other” were $113.6 million, $80.2 million and $137.4 million as of December 31, 2018, 2017 and 2016,
respectively. As of December 31, 2018, the Company had $45.5 million, or 28.4%, of its cash and cash equivalents held outside
the United States in accounts belonging to the Company’s various foreign operating entities. The majority of this balance is held
in foreign currencies and could be subject to additional taxation if repatriated to the United States.

The significant non-cash charges comprise compensation related to equity awards under the Company's stock-based incentive
plans and the Company's employee stock bonus plan. The Company’s measure of profit or loss for its reportable segments is
income (loss) from operations. The reconciling amounts between consolidated income before tax and consolidated income from

operations are net interest income (expense), loss in equity method investment, gain on bargain purchase of a business, and loss
on disposal of a business. Interest income (expense) is primarily attributed to “Administrative & All Other.”

The following table shows the geographic distribution of the Company’s net sales and long-lived assets as of December 31, 2018,
2017 and 2016, respectively:

(in thousands)
United States

Canada

United Kingdom

Germany

France

Poland

Sweden

Denmark

Norway
Switzerland

Australia

Belgium

The Netherlands

New Zealand

Chile

Other countries

2018

2017

2016

Net
Sales

Long-Lived
Assets

Net
Sales

Long-Lived
Assets

Net
Sales

Long-Lived
Assets

860,482

210,063

758,181

223,184

702,071

192,787

46,874

27,194

22,950

40,182

10,200

15,461

11,682

12,324
6,939

6,119

5,547

5,068

3,061

3,233

1,493

4,257

1,417

13,221

7,891

2,794

1,154

1,454

—
8,067

199

1,961

111

11,635

43,176

23,157

21,821

36,677

20,409

16,421

14,723

12,902
5,593

5,501

5,050

4,834

2,604

2,314

3,662

4,650

1,459

14,153

9,152

2,471

1,068

1,601

229
8,748

268

2,065

110

130

12,710

38,269

20,751

33,062

20,905

6,633

—

15,728

—
6,549

4,741

1,286

4,909

2,474

1,572

1,711

4,473

1,183

12,582

8,349

1,830

—

1,249

—
8,469

239

1,798

163

7,471

$ 1,078,809

264,346

977,025

282,059

860,661

240,670

Net sales and long-lived assets, excluding intangible assets, are attributable to the country where the sales or manufacturing
operations are located.

The Company's wood construction products include connectors, truss plates, fastening systems, fasteners and pre-fabricated
shearwalls and are used for connecting and strengthening wood-based construction primarily in the residential construction market.
Its concrete construction products include adhesives, specialty chemicals, mechanical anchors, carbide drill bits, powder actuated
tools and reinforcing fiber materials and are used for restoration, protection or strengthening concrete, masonry and steel
construction in residential, industrial, commercial and infrastructure construction. The following table show the distribution of
the Company’s net sales by product for the years ended December 31, 2018, 2017 and 2016, respectively:

(in thousands)
Wood Construction
Concrete Construction
Other
Total

2018

913,202
165,317
290
1,078,809

2017

2016

833,200
143,102
723
977,025

732,414
128,247
—
860,661

No customer accounted for as much as 10% of net sales for the years ended December 31, 2018, 2017 and 2016.

19. Subsequent Events

On January 28, 2019, the Board declared a cash dividend of $0.22 per share of our common stock, estimated to be $9.8 million
in total. The record date for the dividend will be April 4, 2019, and will be paid on April 25, 2019. At the same meeting, the Board
authorized the Company to repurchase up to $100.0 million of the Company's common stock. The authorization is in effect from
January 1, 2019 through December 31, 2019.

During February 2019, a tentative settlement in principle was reached to resolve a certain pending legal proceeding outstanding
as of the year end. As a result, the Company recorded a charge to Administrative expense, which decreased net income by
approximately $2.9 million after taxes from the amount previously disclosed in the Company’s earnings release dated February
4, 2019. Diluted earnings per share decreased from $2.78 reported previously to $2.72 per diluted share. The adjustment had no
material impact to the Company’s consolidated balance sheet or cash flows for the period.

20. Selected Quarterly Financial Data (Unaudited)

In 2018, the Company recorded out-of-period adjustments, which increased cost of sales and decreased general and administrative
expenses in equal amounts. Such adjustment only applied to the North America segment, which resulted from recording certain
depreciation expense on company-owned real estate as general and administrative expense rather than cost of goods sold. Income
from operations and net income for each of the quarters as presented below were not affected by the adjustment. In 2018, the
Company changed its presentation of its consolidated statement of operations to display foreign exchange gain (loss), net, as a
separate item below income from operations. Foreign exchange gain (loss), net, was previously included in general and
administrative expenses and in income from operations. Income before tax and net income for each of the quarters as presented
below were not affected by the change in presentation.

The following table sets forth selected quarterly financial data for each of the quarters in 2018 and 2017, respectively:

(in thousands, except per share amounts)

Net sales

Cost of sales

Gross profit

2018

2017

Fourth
Quarter

Third
Quarter

Second
Quarter

First
Quarter

Fourth
Quarter

Third
Quarter

Second
Quarter

First
Quarter

$241,845

$284,178

$308,007

$244,779

$231,681

$262,476

$263,002

$219,867

143,409

150,282

167,442

137,157

129,777

143,338

140,139

120,390

98,436

133,896

140,565

107,622

101,904

119,138

122,863

99,477

Research and development and
other engineering
Selling

General and administrative

10,216

26,278

45,195

10,441

26,879

37,356

Total operating expenses

81,689

74,676

Net gain on disposal of assets

Impairment of goodwill

(8,810)

6,686

(460)

—

11,249

29,201

39,354

79,804
(125)
—

11,150

27,573

37,188

75,911
(1,184)
—

12,565

28,753

36,236

77,554
(13)
—

11,265

27,867

33,441

72,573
(147)
—

11,967

28,646

37,586

78,199

—

11,819

29,637

35,845

77,301
(50)
—

Income from operations
Loss in equity investment,
before tax
Foreign exchange gain (loss)

Interest (expense) income, net
Gain (adjustment) on bargain
purchase of a business
Gain (loss) on disposal of a
business

Income before income taxes
Provision for
income taxes

Net income
Earnings per share of common
stock:
Basic

Diluted

Cash dividends declared per
share of common stock

18,871

59,680

60,886

32,895

24,363

46,712

44,614

22,226

(11)

(571)

(239)

—

(30)

1,242

(58)

—

2
(142)
(184)

—

(24)
(99)
(90)

—

(33)
342
(104)

(13)
(16)
(296)

—

(2,052)

(654)

443

(12)
523
(199)

—

(28)
403
(189)

8,388

—

18,050

60,834

60,562

32,682

23,914

44,778

44,926

30,800

5,293

16,473

16,476

7,253

10,829

16,581

16,712

7,679

$ 12,757

$ 44,361

$ 44,086

$ 25,429

$ 13,085

$ 28,197

$ 28,214

$ 23,121

0.28

0.96

0.95

0.94

0.55

0.54

0.28

0.27

0.60

0.59

0.49

0.48

0.22

0.21

— $

0.42

0.21

0.18

Basic earnings per share of common stock (“EPS”) for each of the quarters presented above is computed based on the weighted
average number of shares of common stock outstanding during the quarter. Diluted EPS is computed based on the weighted average
number of shares of common stock plus the effect of dilutive potential shares of common stock outstanding during the quarter
using the treasury stock method. Dilutive potential shares of common stock include outstanding stock options and stock awards.

The sum of the quarterly basic and diluted EPS amounts may not necessarily be equal to the full-year basic and diluted EPS
amounts.

SCHEDULE II

Simpson Manufacturing Co., Inc. and Subsidiaries

VALUATION AND QUALIFYING ACCOUNTS
for the years ended December 31, 2018, 2017 and 2016

Column A

(in thousands)
Classification
Year to date December 31, 2018
Allowance for doubtful accounts
Allowance for sales discounts
Allowance for deferred tax assets

Year to date December 31, 2017
Allowance for doubtful accounts
Allowance for sales discounts
Allowance for deferred tax assets

Year to date December 31, 2016
Allowance for doubtful accounts
Allowance for sales discounts
Allowance for deferred tax assets

Column D

Column E

Column B

Balance at

Beginning

of Year

Column C
Additions

Charged

to Costs

Charged

to Other

and

Accounts —

Expenses

Write-offs

Deductions

996
2,956
11,114

569
361
2,477

201
—

— $
—
337

895
3,050
6,868

1,142
2,706
7,575

66
(94)
5,765

(83)
344
358

—
—
—

(35)
—
1,519

164
—
1,065

Balance

at End

of Year

1,364
3,317
13,254

996
2,956
11,114

895
3,050
6,868

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures.

None.

Item 9A. Controls and Procedures.

Disclosure Controls and Procedures. As of December 31, 2018, the Company carried out an evaluation, under the supervision
and with the participation of the Company’s management, including the chief executive officer (“CEO”) and the chief financial
officer (“CFO”), of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under
the Exchange Act. Disclosure controls and procedures are controls and other procedures designed reasonably to assure that
information required to be disclosed in the Company’s reports filed or submitted under the Exchange Act, such as this Annual
Report on Form 10-K, is recorded, processed, summarized and reported within the time periods specified in the Securities and
Exchange Commission’s rules and forms. Disclosure controls and procedures are also designed reasonably to assure that this
information is accumulated and communicated to the Company’s management, including the CEO and the CFO, as appropriate
to allow timely decisions regarding required disclosure. Based on this evaluation, as of December 31, 2018, the Company's CEO
and CFO have concluded that the Company's disclosure controls and procedures were effective at the reasonable assurance level.

Management’s Report on Internal Control over Financial Reporting. The Company’s management is responsible for establishing
and maintaining adequate internal control over financial reporting. The Company’s management assessed the effectiveness of the
Company’s internal control over financial reporting as of December 31, 2018, using the criteria established in Internal Control -
Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and
concluded that the Company's internal control over financial reporting was effective as of December 31, 2018.

Grant Thornton LLP, an independent registered public accounting firm that audited the Company’s Consolidated Financial
Statements, has also audited the effectiveness of the Company’s internal control over financial reporting as of December 31, 2018,
as stated in their report included in the Company's Consolidated Financial Statements.

Changes in Internal Control over Financial Reporting. In 2016, we began the process of implementing a fully integrated ERP
platform from SAP America, Inc. (“SAP”), as part of a multi-year plan to integrate and upgrade our systems and processes. The
first phase of this implementation became operational on February 5, 2018, at a limited number of our North America sales,
production, warehousing and administrative locations. We believe the necessary steps have been taken to monitor and maintain
appropriate internal control over financial reporting during this period of change and will continue to evaluate the operating
effectiveness of related key controls during subsequent periods.

As the phased implementation of this system continues, we are experiencing certain changes to our processes and procedures
which, in turn, result in changes to our internal control over financial reporting. While we expect SAP to strengthen our internal
financial controls by automating certain manual processes and standardizing business processes and reporting across our
organization, management will continue to evaluate and monitor our internal controls as each of the affected areas evolves. For a
discussion of risks related to the implementation of new systems, see Item 1A - "Risk Factors - Other Risks - We rely on complex
software systems and hosted applications to operate our business, and our business may be disrupted if we are unable to successfully/
efficiently update these systems or convert to new systems in this Annual Report on Form 10-K.

There were no changes in our internal control over financial reporting identified in management's evaluation pursuant to Rules
13a-15(d) or 15d-15(d) of the Exchange Act during the three months ended December 31, 2018, that materially affected, or are
reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations of Disclosure Controls and Procedures and Internal Control over Financial Reporting. The Company’s
management, including the CEO and the CFO, does not, however, expect that the Company’s disclosure controls and procedures
or the Company’s internal control over financial reporting will necessarily prevent all fraud and material errors. Internal control
over financial reporting, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that
the objectives of the control system are met. In addition, the design of a control system must reflect the facts that there are resource
constraints and that the benefits of controls must be considered relative to their costs. The inherent limitations in internal control
over financial reporting include the realities that judgments can be faulty and that breakdowns can occur because of simple error
or mistake. Controls also can be circumvented by the individual acts of some persons, by collusion of two or more people, or by
management override of controls. The design of any system of internal control is also based in part on assumptions about the
likelihood of future events, and there can be only reasonable, not absolute, assurance that any design will succeed in achieving its
stated goals under all potential events and conditions. Over time, controls may become inadequate because of changes in
circumstances, or the degree of compliance with the policies and procedures may deteriorate.

Item 9B. Other Information.

None.

Item 10. Directors, Executive Officers and Corporate Governance.

PART III

The information required by this Item will be contained in the Company’s proxy statement for the 2019 Annual Meeting to be
held on Monday, April 26, 2019, to be filed with the SEC not later than 120 days following the end of the Company’s fiscal year
ended December 31, 2018, which information is incorporated herein by reference.

Item 11. Executive Compensation.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

Item 14. Principal Accounting Fees and Services.

Item 15. Exhibits and Financial Statement Schedules.

PART IV

(a) The following documents are filed as part of this Annual Report on Form 10-K:

1. Consolidated financial statements

The following consolidated financial statements are filed as a part of this report:

Reports of Independent Registered Public Accounting Firms

Consolidated Balance Sheets as of December 31, 2018, and 2017

Consolidated Statements of Operations for the years ended December 31, 2018, 2017 and 2016

Consolidated Statements of Comprehensive Income for the years ended December 31, 2018, 2017 and
2016

Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2018, 2017 and 2016
99

Consolidated Statements of Cash Flows for the years ended December 31, 2018, 2017 and 2016

Notes to Consolidated Financial Statements

2. Financial Statement Schedules

The following consolidated financial statement schedule for each of the years in the three-year period ended
December 31, 2018, is filed as part of this Annual Report on Form 10-K:

Schedule II - Valuation and Qualifying Accounts-Years ended December 31, 2018, 2017 and 2016.

All other schedules have been omitted as the required information is not present or is not present in
amounts sufficient to require submission of the schedule, or because the information required is included
in the consolidated financial statements and related notes thereto.

(b) Exhibits

The following exhibits are either incorporated by reference into, or filed or furnished with, this Annual Report on Form 10-K, as
indicated below.

3.1 Certificate of Incorporation of Simpson Manufacturing Co., Inc. is incorporated by reference to Exhibit 3.1 of its

Quarterly Report on Form 10-Q for the quarter ended September 30, 2007.

3.2 Certificate of Amendment of Certificate of Incorporation of Simpson Manufacturing Co., Inc. is incorporated by

reference to Exhibit 3.1 of its Current Report on Form 8-K dated March 28, 2017.

3.3 Amended and Restated Bylaws of Simpson Manufacturing Co., Inc., as amended, are incorporated by reference

to Exhibit 3.2 of its Current Report on Form 8-K dated March 28, 2017.

4.1 Certificate of Designation, Preferences and Rights of Series A Participating Preferred Stock of Simpson
Manufacturing Co., Inc., dated July 30, 1999, is incorporated by reference to Exhibit 4.2 of its Registration
Statement on Form 8-A dated August 4, 1999.

10.1 Form of Indemnification Agreement between Simpson Manufacturing Co., Inc. and its directors and executive
officers, as well as the officers of Simpson Strong-Tie Company Inc., is incorporated by reference to Exhibit 10.2
of Simpson Manufacturing Co., Inc.’s Annual Report on Form 10-K for the year ended December 31, 2004.

10.2 Credit Agreement, dated as of July 27, 2012 (the “2012 Credit Agreement”), among Simpson Manufacturing Co.,
Inc., as Borrower, Wells Fargo Bank, National Association (“Wells Fargo”), MUFG Union Bank, N.A. (f/k/a Union
Bank, N.A.), HSBC Bank USA, N.A., and Bank of Montreal, as Lenders, Wells Fargo in its separate capacities
as Swing Line Lender and L/C issuer and as Administrative Agent, and Simpson Strong-Tie Company Inc., and
Simpson Strong-Tie International, Inc. as Guarantors, is incorporated by reference to Exhibit 10.1 of Simpson
Manufacturing Co., Inc.’s Current Report on Form 8-K dated August 1, 2012.

10.3 Second Amendment to the 2012 Credit Agreement, dated as of July 25, 2016, among the Company, as Borrower,
Wells Fargo Bank, National Association (“Wells Fargo”), MUFG Union Bank, N.A. (f/k/a Union Bank, N.A.),
HSBC Bank USA, N.A., and Bank of Montreal, as Lenders, Wells Fargo in its separate capacities as Swing Line
Lender and L/C issuer and as Administrative Agent, and Simpson Strong-Tie Company Inc., and Simpson Strong-
Tie International, Inc. as Guarantors, which Second Amendment incorporates and supersedes the First Amendment
to the Credit Agreement dated December 8, 2015, is incorporated by reference to Exhibit 10.1 of Simpson
Manufacturing Co., Inc.’s Current Report on Form 8-K dated July 25, 2016.

10.4 Simpson Manufacturing Co., Inc. Executive Officer Cash Profit Sharing Plan, as amended through March 17,
2017, is incorporated by reference to Exhibit 10.4 of its Annual Report on Form 10-K dated February 28, 2018.

10.5 Simpson Manufacturing Co., Inc. Amended and Restated 2011 Incentive Plan is incorporated by reference to

Exhibit A of Simpson Manufacturing Co., Inc.’s Schedule 14A Proxy Statement dated March 9, 2015.

100

10.6 Simpson Manufacturing Co., Inc. 401(k) Profit Sharing Plan is incorporated by reference to Exhibit 4.5 of Simpson
Manufacturing Co., Inc.’s Registration Statement on Form S-8, File Number 333-173811, dated December 15,
2015.

10.7 Compensation of Named Executive Officers and Directors is incorporated by reference to Item 5.02 of Simpson
Manufacturing Co., Inc.’s Current Report on Form 8-K dated February 15, 2018, Item 5.02 of Simpson
Manufacturing Co., Inc.’s Current Report on Form 8-K dated February 4, 2017, Item 5.02 of Simpson
Manufacturing Co., Inc.’s Current Report on Form 8-K dated December 6, 2016 and Item 5.02 of Simpson
Manufacturing Co., Inc.’s Current Report on Form 8-K/A filed on October 26, 2016.

10.8 Form of Simpson Manufacturing Co., Inc. 2017 Performance Based Restricted Stock Unit Agreement is
incorporated by reference to Exhibit 10.10 of its Annual Report on Form 10-K dated February 28, 2018.

10.9 Form of Simpson Manufacturing Co., Inc. 2017 Time Based Restricted Stock Unit Agreement is incorporated by

reference to Exhibit 10.11 of its Annual Report on Form 10-K dated February 28, 2018.

10.10 Form of Simpson Manufacturing Co., Inc. 2017 Director Time Based Restricted Stock Unit Agreement is
incorporated by reference to Exhibit 10.12 of its Annual Report on Form 10-K dated February 28, 2018.

10.11 Form of Simpson Manufacturing Co., Inc. 2018 Performance Based Restricted Stock Unit Agreement is
incorporated by reference to Exhibit 10.13 of its Annual Report on Form 10-K dated February 28, 2018.

10.12 Form of Simpson Manufacturing Co., Inc. 2018 Time Based Restricted Stock Unit Agreement is incorporated by

reference to Exhibit 10.14 of its Annual Report on Form 10-K dated February 28, 2018.

10.13 Form of Simpson Manufacturing Co., Inc. 2018 Director Time Based Restricted Stock Unit Agreement is
incorporated by reference to Exhibit 10.15 of its Annual Report on Form 10-K dated February 28, 2018.

10.14 Form of Simpson Manufacturing Co., Inc. 2019 Performance Based Restricted Stock Unit Agreement is filed

herewith.

10.15 Form of Simpson Manufacturing Co., Inc. 2019 Time Based Restricted Stock Unit Agreement is filed herewith.

21. List of Subsidiaries of the Registrant is filed herewith.

Consent of Grant Thornton LLP is filed herewith.

31.1 Chief Executive Officer’s Rule 13a-14(a)/15d-14(a) Certification is filed herewith.

31.2 Chief Financial Officer’s Rule 13a-14(a)/15d-14(a) Certification is filed herewith.

32.

Section 1350 Certifications are furnished herewith.

99.1 Simpson Manufacturing Co., Inc. 1994 Employee Stock Bonus Plan, as amended through December 7, 2015, is
incorporated by reference to Exhibit A of Simpson Manufacturing Co., Inc.’s Schedule 14A Proxy Statement dated
March 10, 2016.Simpson Manufacturing Co., Inc. 1994 Employee Stock Bonus Plan, as amended through
December 7, 2015, is incorporated by reference to Exhibit A of Simpson Manufacturing Co., Inc.’s Schedule 14A
Proxy Statement dated March 10, 2016.

99.2 Form of Simpson Manufacturing Co., Inc. 2017 Performance & Time Based Restricted Stock Unit Agreement is

incorporated by reference to Exhibit 99.2 of its Annual Report on Form 10-K dated February 28, 2018.

99.3 Form of Simpson Manufacturing Co., Inc. 2018 Company OP Performance & Time Based Restricted Stock Unit
Agreement is incorporated by reference to Exhibit 99.3 of its Annual Report on Form 10-K dated February 28,
2018.

99.4 Form of Simpson Manufacturing Co., Inc. 2018 Branch OP Performance & Time Based Restricted Stock Unit
Agreement is incorporated by reference to Exhibit 99.4 of its Annual Report on Form 10-K dated February 28,
2018.

101

99.5 Form of Simpson Manufacturing Co., Inc. 2019 Company OP Performance and Time Based Restricted Stock Unit

Agreement is filed herewith.

99.6 Form of Simpson Manufacturing Co., Inc. 2019 Branch OP Performance and Time Based Restricted Stock Unit

Agreement is filed herewith.

101 Financial statements from the annual report on Form 10-K of Simpson Manufacturing Co., Inc. for the year ended
December 31, 2018, formatted in XBRL, are filed herewith and include: (i) the Consolidated Balance Sheets,
(ii) the Consolidated Statements of Operations, (iii) the Statement of Comprehensive Income, (iv) the Consolidated
Statements of Stockholders’ Equity, (v) the Consolidated Statements of Cash Flows and (vi) the Notes to
Consolidated Financial Statements.

Item 16. Form 10-K Summary.

None.

102

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused

this report to be signed on its behalf by the undersigned, thereunto duly authorized.

SIGNATURES

Dated:

February 27, 2019

Simpson Manufacturing Co., Inc.
(Registrant)

/s/Brian J. Magstadt

Brian J. Magstadt
Chief Financial Officer
and Duly Authorized Officer
of the Registrant
(principal accounting and financial officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities and on the dates indicated below.

Signature

Title

Date

Chief Executive Officer:

/s/Karen Colonias

(Karen Colonias)

Chief Financial Officer:

President, Chief Executive
Officer and Director

(principal executive officer)

February 27, 2019

/s/Brian J. Magstadt

(Brian J. Magstadt)

Chief Financial Officer,
Treasurer and Secretary

February 27, 2019

(principal accounting and financial officer)

Directors:

/s/James S. Andrasick

(James S. Andrasick)

/s/Peter N. Louras, Jr.

(Peter N. Louras, Jr.)

/s/Michael A. Bless

(Michael A. Bless)

Chairman of the Board and Director

February 27, 2019

Director

February 27, 2019

/s/Jennifer A. Chatman

Director

February 27, 2019

(Jennifer A. Chatman)

/s/Gary M. Cusumano

(Gary M. Cusumano)

/s/Celeste Volz Ford

(Celeste Volz Ford)

Director

February 27, 2019

/s/Robin G. MacGillivray

Director

February 27, 2019

(Robin G. MacGillivray)

/s/Philip E. Donaldson

(Philip E. Donaldson)

Director

February 27, 2019

103

Simpson Manufacturing Co., Inc. and Subsidiaries
List of Subsidiaries of Simpson Manufacturing Co., Inc.
At February 27, 2019

Exhibit 21

1. Simpson Strong-Tie Company Inc., a California corporation

2. Simpson Strong-Tie International, Inc., a California corporation

3. Simpson Strong-Tie Canada, Limited, a Canadian corporation

4. Simpson Strong-Tie Europe EURL, a French corporation

5. Simpson Strong-Tie, S.A.S., a French corporation

6. Simpson Strong-Tie Australia, Inc., a California corporation

7. Simpson Strong-Tie A/S, a Danish corporation

8. Simpson Strong-Tie GmbH, a German corporation

9. Simpson Strong-Tie Sp. z.o.o., a Polish corporation

10. Simpson France SCI, a French corporation

11. Simpson Strong-Tie Australia Pty Limited, an Australian corporation

12. Simpson Strong-Tie Asia Limited, a Hong Kong company

13. Simpson Strong-Tie Asia Holding Limited, a Hong Kong company

14. Simpson Strong-Tie (Zhangjiagang) Co., Ltd., a Chinese company

15. Socom S.A.S., a French corporation

16. Simpson Strong-Tie (New Zealand) Limited, a New Zealand company

17. Simpson Strong-Tie Switzerland GmbH, a Switzerland company

18. S&P Clever Reinforcement Company AG, a Switzerland company

19. S&P Handels GmbH, an Austrian company

20. S&P Clever Reinforcement GmbH, a Germany company

21. S&P Clever Reinforcement Company Benelux B.V., a Dutch company

22. S&P Polska Sp. z.o.o., a Polish corporation

23. Clever Reinforcement Iberica - Materiais de Construção, Lda., a Portugal company

24. S&P Reinforcement France, a French company

25. Simpson Strong-Tie Vietnam Company Limited, a Vietnam company

26. Simpson Strong-Tie South Africa (PTY) Ltd, a South Africa company

27. Simpson Strong-Tie Chile Limitada, a Chile company

28. S&P Reinforcement Nordic ApS, a Danish company

29. Simpson Strong-Tie Structural Connectors Ireland Ltd, an Ireland company

30. Multi Services Dêcoupe S.A., a Belgium company

31. CG Visions, LLC, an Indiana corporation

32. Gbo Fastening Systems AB, a Swedish corporation

33. Christiania Spigerverk AS, a Norwegian company

34. Simpson LotSpec, LLC, a Delware Company

35. D.P.P. B.V Limited, a Dutch Company

104

Consent of Independent Registered Public Accounting Firm

Exhibit 23

We have issued our reports dated February 27, 2019, with respect to the consolidated financial statements, financial
statement schedule, and internal control over financial reporting included in the Annual Report of Simpson
Manufacturing Co., Inc. on Form 10-K for the year ended December 31, 2018. We consent to the incorporation by
reference of said reports in the Registration Statements of Simpson Manufacturing Co., Inc. on Forms S-8 (File Nos.
033-90964, 333-37325, 333-40858, 333-97313, 333-97315, 333-173811, and 033-85662).

/s/ Grant Thornton LLP
San Francisco, California
February 27, 2019

105

Simpson Manufacturing Co., Inc. and Subsidiaries
Rule 13a-14(a)/15d-14(a) Certifications

I, Karen Colonias, certify that:

I have reviewed this annual report on Form 10-K of Simpson Manufacturing Co., Inc.;

Exhibit 31.1

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report
is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to
be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during
the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial
reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or
persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and
report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the

registrant’s internal control over financial reporting.

DATE:

February 27, 2019

By /s/Karen Colonias

Karen Colonias
Chief Executive Officer

106

Simpson Manufacturing Co., Inc. and Subsidiaries
Rule 13a-14(a)/15d-14(a) Certifications

I, Brian J. Magstadt, certify that:

I have reviewed this annual report on Form 10-K of Simpson Manufacturing Co., Inc.;

Exhibit 31.2

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the

registrant’s internal control over financial reporting.

DATE:

February 27, 2019

By /s/Brian J. Magstadt

Brian J. Magstadt
Chief Financial Officer

107

Simpson Manufacturing Co., Inc. and Subsidiaries
Section 1350 Certifications

Exhibit 32

The undersigned, Karen Colonias and Brian J. Magstadt, being the duly elected and acting Chief Executive Officer and
Chief Financial Officer, respectively, of Simpson Manufacturing Co., Inc., a Delaware corporation (the “Company”), hereby certify
that the annual report of the Company on Form 10-K for the year ended December 31, 2018, fully complies with the requirements
of section 13(a) of the Securities Exchange Act of 1934, as amended, and that information contained in such report fairly presents,
in all material respects, the financial condition and results of operations of the Company.

DATE: February 27, 2019

By /s/Karen Colonias

Karen Colonias
Chief Executive Officer

By /s/Brian J. Magstadt

Brian J. Magstadt

Chief Financial Officer

A signed original of this written statement required by Section 1350 of Chapter 63 of Title 18 of the United States Code has been
provided to Simpson Manufacturing Co., Inc. and will be retained by Simpson Manufacturing Co., Inc. and furnished to the Securities
and Exchange Commission or its staff on request.

The foregoing certification is being furnished to the Securities and Exchange Commission pursuant to § 18 U.S.C. Section 1350. It is
not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference
into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in
such filing.

108

Simpson Manufacturing Co., Inc.
5956 W. Las Positas Boulevard
Pleasanton, CA 94588
Tel: (800) 925-5099 Fax: (925) 847-1608
simpsonmfg.com