Strong People, Strong Company
Simpson Manufacturing Co., Inc.
2020 Annual Report
Sal Reyes Welder, 28 years
A People-Centered Culture
It all starts with people.
Ever since Simpson Strong-Tie was founded in 1956, people have been at the root of how we
do business. In fact, of the Company Values that we inherited from our founder, Barc Simpson,
perhaps the most central is No. 5, “Everybody Matters.”
In Barc’s words, “Everybody in a company is important.
In Barc’s words, “Everybody in a company is important.
Everybody. That’s absolutely crucial ... We rely
Everybody. That’s absolutely crucial ... We rely
on each other to be successful, we show each
on each other to be successful, we show each
other respect.”
other respect.”
Barc also said the secret to the company’s success
Barc also said the secret to the company’s success
was that he knew he couldn’t know everything,
was that he knew he couldn’t know everything,
so he focused on hiring smart, motivated people
so he focused on hiring smart, motivated people
and encouraged them to trust their curiosity and
and encouraged them to trust their curiosity and
creative instincts.
creative instincts.
“Great companies are built with great people ...
“Great companies are built with great people ... they
they make the company the kind of place where ...
make the company the kind of place where ... they
they want to stay ... and help build it.”
want to stay ... and help build it.”
Simpson Strong-Tie often talks of having a Secret
Simpson Strong-Tie often talks of having a Secret
Sauce behind our success, but that sauce doesn’t lie
Sauce behind our success, but that sauce doesn’t lie
in a formula or instruction manual. The strength of
in a formula or instruction manual. The strength of
our company comes from our values-driven culture,
our company comes from our values-driven culture,
a culture that places people first — our customers,
a culture that places people first — our customers, our
communities and, of course, our brilliant and
our communities and, of course, our brilliant and
passionate employees.
passionate employees.
3
To our stockholders, customers and employees
Strong People, Strong Company
Increasing Stockholder Value
Despite the unique challenges presented by the
COVID-19 pandemic in 2020, we’re extremely pleased
with the way our company was able to persevere and
even thrive this past year. As a major supplier to an
industry that was deemed essential, we’ve continued
to operate during the pandemic with minimal disruptions.
By remaining resolute, agile and resilient, we were able
to overcome obstacles to keep our customers up and
running and to support a healthy and growing industry.
Our solid business performance in 2020 wouldn’t have
been possible without the unwavering commitment
of all our employees. We value the health, safety and
well-being of our employees as a top priority, and
we strive for continuous improvement in our business
culture and practices to ensure that our company
remains a safe and rewarding place to work.
Delivering Financial and Operational Excellence
Financially, we had a very strong 2020, with net sales of
approximately $1.27 billion, up 11.6% from $1.14 billion
in 2019. We generated strong earnings of $4.27 per
diluted share, an increase of 43.3% year-over-year.
Due to the significant level of uncertainty regarding
future market conditions surrounding COVID-19, in
April 2020 we elected to withdraw the financial targets
established in our 2020 Plan. That said, we continued
to execute based on the same underlying principles,
with a focus on operating efficiencies and cost savings
to guide us through the pandemic. As a result, we
delivered on nearly every target we had set as part
of our 2020 Plan goals.
Operationally, we’ve made significant strategic changes
to our business since the onset of the 2020 Plan to
ensure our foundation would be even stronger. This
included positioning our business to be less vulnerable
to the cyclicality of the US housing market by diversifying
with key investments in adjacent products and markets.
In addition, we narrowed our focus in the concrete
space, driving market share gains and margin expansion,
as well as strengthened our position in Europe and in the
software space.
In 2020, we benefited from a shift in consumer behavior
toward home renovations in the COVID-19 environment.
We were thrilled to have Lowe’s return as a home center
customer in the second quarter of 2020 and have since
stocked all Lowe’s stores with our industry-leading
connectors, mechanical anchors and fasteners.
We generated cash flow from operations of $207.6
million in 2020, which has enabled us to continue
executing on our capital return priorities — including
the payment of $40.4 million in quarterly cash dividends
and the repurchase of $76.2 million of our common
stock, reflecting our Board and management’s ongoing
confidence in the company’s strategic direction. As a
result, over the past three years, we’ve paid $120.5
million in dividends and repurchased $247.5 million
of our common stock, resulting in cash returns to
stockholders of more than 64.2% of our operating cash
flows, exceeding our 50% capital return goal. Through
our execution on the 2020 plan and this return of cash
to stockholders, we achieved a return on invested
capital(1) of 20% for the 2020 fiscal year.
Building a More Sustainable Future
Our mission to provide superior solutions that help
people design and build safer, stronger structures not
only drives us to design innovative products, but also
guides how we manufacture them. At Simpson, we
take great care to operate in a safe and environmentally
responsible manner to protect our employees and
help our customers build a better world. We pride
ourselves on fostering a diverse and inclusive work
environment, shaped by employees of all genders, ages,
ethnicities and abilities, and we benefit from their unique
perspectives across our entire company. Our engineers
are focused on developing product innovations that
reduce material waste, labor and installation cost, and
we’re continually improving our production workflows
and technology to ensure that we’re delivering the
highest-quality solutions by the most efficient and
economical means.
On behalf of everyone at Simpson Manufacturing Co., Inc.,
we thank all our loyal customers, employees, suppliers
and stockholders for your ongoing support.
Sincerely,
Karen Colonias
President and Chief Executive Officer
James Andrasick
Non-Executive Chairman of the Board of Directors
(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 US (“GAAP”), as divided by (ii) the average of the sum of total stockholders’ equity and total
long-term interest-bearing liabilities (which for the company are long-term capital lease obligations) 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. That is to say, the company’s ROIC, a ratio or statistical measure, is calculated using exclusively financial measures
presented in accordance with GAAP.
Financial Highlights
2020
2019
% Change
Capital Allocation 2020
Net Sales
$1,267,945
$1,136,539
Income from Operations
$252,363
$181,254
Net Income
$187,000
$133,982
Diluted Earnings per Share
$4.27
$2.98
Total Assets
$1,232,569
$1,095,366
Stockholders’ Equity
$980,943
$891,957
Common Shares Outstanding
43,326
44,209
Number of Employees
3,562
3,337
Dollars in thousands except per-share amounts.
11.6%
39.2%
39.6%
43.3%
12.5%
10.0%
–2.0%
6.7%
Total $157,295
100%
Share
Repurchases $76,189
48%
Dividends $40,400
26%
CapEx $37,909
M&A $2,797
24%
2%
Net Sales
Stockholders' Equity
Net Sales
Stockholders' Equity
Stockholders' Equity
Dividends per Share
Dividends per Share
1.00
1.00
0.90
0.90
0.80
0.80
0.70
0.70
0.60
0.60
0.50
0.50
0.40
0.40
0.30
0.30
0.20
0.20
0.10
0.10
Earnings per Share
Earnings per Share
Earnings per Share
4.50
4.00
3.50
3.00
2.50
2.00
1.50
1.00
0.50
0.00
4.50
4.50
4.00
4.00
3.50
3.50
3.00
3.00
2.50
2.50
2.00
2.00
1.50
1.50
1.00
1.00
0.50
0.50
0.00
0.00
Net Sales
1,400,000
1,200,000
1,200,000
1,200,000
1,000,000
1,100,000
1,100,000
1,000,000
1,000,000
900,000
900,000
800,000
800,000
800,000
700,000
700,000
600,000
400,000
200,000
600,000
600,000
500,000
500,000
400,000
400,000
300,000
300,000
200,000
200,000
100,000
100,000
2016
2016
2017
2017
2018
2018
2019
2019
2016
2020
2020
2017
2018
2016
2016
2019
2017
2017
2020
2018
2018
2019
2019
2020
2020
2016
2017
2015
2015
2018
2016
2016
2019
2017
2017
2020
2018
2018
2019
2019
Net Sales
Stockholders' Equity
5
1,200,000
1,100,000
1,000,000
900,000
800,000
700,000
600,000
500,000
400,000
300,000
200,000
100,000
2015
2016
2017
2018
2019
Putting Our People First
At Simpson Strong-Tie, we’re always mindful that our company’s success is built on the
commitment and ingenuity of our employees. Our people are our greatest advantage and
our most valuable asset, so our first business priority at all times is to ensure their safety.
When the scientific community made it clear that we
were in a global health crisis, we acted immediately and
resolutely to protect our employees while keeping the
business running. Only those workers whose physical
presence was essential — our production and
warehouse employees, plus key members of our
facilities and operations teams — continued to work
onsite, with safety protocols strictly enforced;
everybody else was equipped to work remotely.
The leadership team has been constantly monitoring
official guidelines from the CDC, the WHO and
local health authorities to gauge what safe next
steps will look like.
Thanks to the focus and dedication of our employees,
our business has continued to thrive during this difficult
and unforeseen time, and we remain well-situated for
whatever lies ahead.
6
Van Voong Shipping Supervisor, 17 years
Jorge Cruz Fabricator, 1 year
A Steadfast Commitment to Service
For nearly 65 years, we’ve been committed to helping people build safer, stronger
structures by providing high-quality products and exceptional service.
As a critical link in the supply chain and a major resource
of technical expertise to the construction industry,
we’ve continued to honor this company mission despite
unprecedented challenges.
Through the combined strengths of our engineering
minds, modern manufacturing processes and
efficient business practices, we quickly adapted to
meet the needs of our industry, as well as taking
on a major new home center customer.
By upholding our longstanding commitment to an
industry that relies on us to deliver outstanding
products and service, we’re not only helping ensure
the well-being of our customers, we’re continuing
to live up to our reputation as an industry leader.
9
Claudia
Chuck
Mike
Brian
Homer
Casey
Steve
Dana
Frederik
Bryan
Russ
Corey
Keith
Griff
Brianna
Wendy
Thom
Scott
Leslie
Valerie
Cory
Michael
Patrick
Brittney
Derek
Shane
Adam
Galen
Jeff
Sam
Sheryl
Jim
Fred
Resilient Infrastructures
We’re a company that always thinks ahead. As Barc noted, “The view is long range ... good
business leaders focus on the long-term outcomes, not short-term gains.” To that end, we
at Simpson Strong-Tie put considerable thought into having the right technology and tools in
place for every conceivable contingency — so our employees, customers and investors
always know we’re looking after their needs and interests, regardless of fluctuations in the
industry or greater economy.
Our ecommerce portal gives customers a simple,
always-available means of placing orders, while our
robust inventory and accounting software provides
us with accurate reporting that helps us better
manage and plan our operations — and ultimately
better serve our customers.
We also continue to develop resources to help our
industry partners work more effectively — like our
Builder Learning Center, which offers specially
designed training for production builders, and
software such as Pipeline LBM that helps lumber
businesses streamline their workflows.
By ensuring that business operations run as smoothly
and efficiently as possible for everyone, our technological
infrastructures support our stability as a company,
along with the success of our customers.
Heather
Pari
Ben
Elaine
Carlos
Jackie
Clif
11
Ketra
Jason
Emmet
Ceaseless Innovation
Seeking out new solutions to construction challenges is at the heart of who we are and what
we do. Our intense curiosity and deep passion for problem solving drive us to continually push
the boundaries of product design to meet the ongoing demands of the industry. Across the
entire spectrum of applications and materials — structural and cold-formed steel, light-frame
wood, mass timber, concrete and beyond — we consider it our charge to design, test and
manufacture the strongest and most economical solutions available.
Since our beginnings as a company,
Simpson Strong -Tie has believed the only
true strength is tested strength. Our structural
products are thoroughly tested and load rated in
our university-grade laboratories as part of their
research and development. Whether it’s assessing
3D-printed prototypes or creating full-scale
application testing scenarios, we rigorously
evaluate each design until its performance
has been proven at the highest levels for every
conceivable condition.
We’re uncompromising in our quest to provide the
construction industry with solutions that help ensure
its success. It’s how we exceed other manufacturers’
practices, and it’s why we remain an industry leader
and a trusted source of expert engineering solutions.
12
Robert Nye Senior EH&S Coordinator, 25 years
Pioneering Products
A comprehensive set of load-rated fasteners
and connectors specially engineered for
mass timber construction
The Avant Collection™
a sleek new line of products for our Outdoor Accents®
offering of decorative structural hardware
SPergola
Planner
P
Software™
P
Yield-Link®
a replaceable, bolted connection for structural steel
moment frames which requires no field welding
New design tools such as
Pergola Planner Software™
for outdoor building projects
14
Despite economic disruptions to many industries in 2020,
staying true to our business plans and values helped
Simpson Strong-Tie to persevere and even break new
ground for the essential industry we serve. Whether it
was for wood framing, mass timber, concrete or
steel construction, we continued to provide innovative,
time-saving solutions to our customers. Even in times of
upheaval and adjustment, creative problem solving for our
customers and our industry remains business as usual —
here are a few examples.
Titen Turbo™ screw anchor
for use in concrete and masonry
WBAC wood backing connector
for attaching cabinetry and other heavy
fixtures to cold-formed steel studs
BAN09 windbracing strap
for European wood construction, featuring
adjustable lengths and reinforced fastener holes
SDPW DEFLECTOR Screw
for connecting non-load-bearing
walls to trusses or joists
Honoring Our Communities
Another of our company values founded on Barc Simpson’s Principles of Business is “Give Back.”
As Barc put it, “... we know that there are many others in this world who will never have the
opportunities we’ve had. It is our responsibility ... to support others.” We believe our company has
a mission to serve society not only with our strong structural products and solutions but also in
the way we conduct our business.
We’re very aware how much our good fortunes
depend on what others have done to make our society
free and prosperous. We also know that, even in
America, injustice is real and not everyone has
equal chances of success. So we’re trying to do our
part to create a stronger, more inclusive social
fabric by recognizing the value of every person
and by promoting diversity and equality.
That’s why, in addition to offering product donations
and volunteer hours to organizations such as Habitat
for Humanity, we’re proud to make contributions to
help communities recovering from natural disasters
and to organizations that protect human rights.
As Barc said, “Do what you can.”
16
Yolie Bernal Receptionist, 34 years
Office
Street Address | 5956 W. Las Positas Boulevard, Pleasanton, CA 94588, USA | (800) 925-5099
Mailing Address | P.O. Box 10789, Pleasanton, CA 94588
2020 Officers
Karen Colonias
President and Chief Executive Officer
Roger Dankel
President, North American Sales
Simpson Strong-Tie Company Inc.
Terry Hammons
Senior Vice President, General Counsel
and Corporate Secretary
Brian J. Magstadt
Chief Financial Officer and Treasurer
Michael L. Olosky
Chief Operating Officer
(Since November 2020)
Kevin Swartzendruber
Senior Vice President, Finance
Ricardo M. Arevalo
Former Chief Operating Officer
Simpson Strong-Tie Company Inc.
(Retired February 2020)
Board of Directors
James S. Andrasick(1)(2)(3)(4)
Chairman (retired)
Matson Navigation
Michael A. Bless(1)(3)
Chief Executive Officer
Century Aluminum Company
Jennifer A. Chatman(2)(4)
Paul J. Cortese
Distinguished Professor of Management
Haas School of Business,
University of California, Berkeley
Karen Colonias(3)
President and Chief Executive Officer
Gary M. Cusumano(2)(3)
Chairman (retired)
The Newhall Land and Farming Company
Philip E. Donaldson(1) (3)
Executive Vice President and Chief Financial Officer
Andersen Corporation
Celeste Volz Ford(1)(3) (4)
Board Chair
Stellar Solutions, Inc.
Robin Greenway MacGillivray (2)(4)
Senior Vice President (retired)
One AT&T Integration – AT&T
Annual Meeting
The annual meeting of stockholders will take place at 2:00 p.m., Pacific
Daylight Time, on Tuesday, May 4, 2021, virtually via live webcast at
www.virtualshareholdermeeting.com/SSD2021.
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.
2020
2019
High
Low
Close
High
Low
Close
Q4
$97.37
$87.38
$93.45
$83.98
$68.13
$80.23
Q3 $103.35
$79.11
$97.16
$69.37
$59.31
$69.37
Q2
$93.54
$56.58
$84.36
$67.29
$59.02
$66.46
Q1
$86.99
$49.13
$61.98
$61.38
$54.17
$59.27
Form 10-K
The Company’s annual report on Form 10-K (which is available in a
separate 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 can also be accessed 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
Computershare Trust Company N.A.
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 Audit and Finance Committee
(2) Member of Compensation and Leadership Development Committee
(3) Member of Corporate Strategy and Acquisitions Committee
(4) Member of Nominating and Governance Committee
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, 2020
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:
Title of Each Class
Common Stock, par value $0.01
Trading Symbol
SSD
Name of Each Exchange on Which Registered
New York Stock Exchange
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 ý No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.
Yes o No ý
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 ý No o
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 ý No o
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of
the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.
7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
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
x
☐
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 o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ý
1
The aggregate market value of the shares of common stock, par value $0.01 per share, which is the only outstanding class
of voting and non-voting equity, 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, 2020) was approximately $3,667,414,802.
As of February 16, 2021, 43,334,701 shares of the registrant’s common stock were outstanding.
Documents Incorporated by Reference
Portions of the registrant's definitive Proxy Statement for its 2020 annual meeting of stockholders (the "2020 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, 2020.
2
SIMPSON MANUFACTURING CO., INC.
TABLE OF CONTENTS
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PART I
PART II
Item 1.
Business
Item 1A.
Risk Factors
Item 1B.
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safely Disclosure
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
Item 7.
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
Selected Financial Data
Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
Item 8.
Item 9.
Consolidated Financial Statements and Supplementary Data
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Item 9A.
Controls and Procedures
Item 9B.
Other Information
Item 10.
Directors, Executive Officers, and Corporate Governance
Item 11.
Executive Compensation
PART III
Item 12.
Item 13.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
Certain Relationship and Related Transactions, and Director Independence
Item 14.
Principal Accounting Fees and Services
PART 1V
Item 15.
Exhibits, Financial Statement Schedules
Item 16.
Form 10-K Summary
3
NOTE ABOUT FORWARD-LOOKING STATEMENTS
In this filing we make statements concerning our expectations, beliefs, plans, objectives, goals, strategies, and future events or
performance. Such statements are 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”). 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. Although we believe that these forward-looking
statements and the underlying assumptions are reasonable, we cannot assure you that they will prove to be correct.
Forward-looking statements involve a number of risks and uncertainties, and there are factors that could cause actual results to
differ materially from those expressed or implied in our forward-looking statements. Some of those factors (in addition to
others described elsewhere in this Annual Report on Form 10-K and in subsequent filings with the U.S. Securities and
Exchange Commission (the “SEC”)) include:
the impact, execution and effectiveness of the Company’s strategic plan and initiatives;
general economic cycles and construction business conditions including changes in U.S. housing starts;
customer acceptance of our products;
product liability claims, contractual liability, engineering and design liability and similar liabilities or claims;
relationships with partners, suppliers and customers and their financial condition;
•
•
•
•
•
• materials and manufacturing costs;
•
•
•
•
•
•
•
•
technological developments, including system updates and conversions;
increased competition;
changes in laws or industry practices;
litigation risks and actions by activist shareholders;
changes in market conditions;
geopolitical and business conditions in countries where our products are manufactured and sold;
natural disasters and other factors that are beyond the Company’s reasonable control;
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;
effects of merger or acquisition activities;
actual or potential takeover or other change-of-control threats; and
changes in our plans, strategies, objectives, expectations or intentions.
•
•
•
These factors in addition to others described elsewhere in this Annual Report on Form 10-K, including those described under
Item 1A-Risk Factors, and in subsequent filings with the SEC, should not be construed as a comprehensive listing of factors
that could cause results to vary from our forward-looking statements.
We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new
information, future events, or otherwise. If one or more forward-looking statements are updated, no inference should be drawn
that additional updates will be made with respect to those or other forward-looking statements.
4
Item 1. Business.
Company Background
PART I
Simpson Manufacturing Co,. Inc. ("Simpson," the "Company," "we," "us," or "our,") through our wholly-owned subsidiary,
Simpson Strong-Tie Company Inc. ("SST"), design, engineer and are a leading manufacturer of high quality wood and concrete
building construction products designed to make structures safer and more secure, and that perform at high levels. Our products
are designed to be easy to use and cost-effective for customers. Our wood construction products are used in light-frame
construction and include connectors, truss plates, fastening systems, fasteners and pre-fabricated lateral resistive systems. Our
concrete construction products are used in concrete, masonry and steel construction and include adhesives, chemicals,
mechanical anchors, carbide drill bits, powder actuated tools, fiber reinforced materials and other repair products used for
protection and strengthening. We market our products to the residential construction, light industrial and commercial
construction, remodeling and do-it-yourself (“DIY”) markets. We also provide engineering services in support of some of our
products and increasingly offer design and other software that facilitates the specification, selection and use of our products.
The Company has continuously manufactured structural connectors since 1956 and believes that the Simpson Strong-Tie®
brand benefits from strong brand name recognition in residential, light industrial and commercial applications among architects
and engineers who frequently request the use of our products.
Sales
The Company attracts and retains customers by designing, manufacturing and selling high quality products that perform well,
are 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
minimum 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;
continuing to invest in Building Information Modeling ("BIM") software services and solutions for home builders and
lumber-building material suppliers; and
continuing to innovate and diversify our product offerings.
•
•
•
Products and Services
Historically, the Company’s 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.
Many of the Company’s products are approved by building code evaluation agencies. To achieve these 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. 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 gravity forces. As described below, the Company’s wood construction products include:
5
•
•
•
Connectors - Connectors are prefabricated metal products that attach wood, concrete, masonry or steel together and are
essential for tying wood construction elements together and create safer and stronger buildings. Included in this
category are connectors, holddowns, and truss connector plates, for example;
Fasteners - The fastening line includes various nails, screws and staples, which are complemented by the Company's
Quik Drive auto-feed screw driving system, which is used in numerous applications such as decking, subfloors,
drywall and roofing; and
Lateral Resistive Systems - 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. 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 DIY projects. The Company’s concrete construction products contribute to structural
integrity and resistance to seismic, wind and gravity forces. These products are sold in all segments of the Company. As
described below, the Company’s concrete construction products include:
•
•
Anchor Products - 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;
and
Construction, Repair, Protection and Strengthening Products - 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
the truss product line, 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 and design loads for any project.
Distribution Channels and Markets
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 expand its product
offerings through home centers. The Company’s sales force maintains ongoing 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 and development efforts to DIY products. The
Company’s sales to home centers increased year-over-year in 2020, 2019 and 2018. The Company brought back
Lowe's as a home center customer in the second quarter of 2020.
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, composite laminated timber
and OEMs for off-site construction to develop and expand the application and sales of its engineered wood connector,
fastener, anchor, and truss products. The Company has relationships with many of the leaders in these industries.
International Sales. The Company has established a presence in Europe through acquisition of companies with
existing customer bases and through servicing U.S.-based customers operating in Europe. The Company also
distributes connector, anchor and epoxy products in Mexico, Chile, Australia and New Zealand.
6
Markets
The Company seeks to expand existing and identify new distributions channels in the markets we serve, and expand into new
markets. Presently, we primarily serve three markets, which are also our operating segments, consisting of the North America,
Europe and Asia/Pacific segments. The North America segment includes operations primarily in the U.S. 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.
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 U.S. manufacturer with
the capability to internally 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, builders 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, feedback or requests from customers for new or specialty products and in connection with the Company’s strategic
initiatives to expand into new markets and/or develop new 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.
Since at least 2006, the Company has developed 15 to 25 new products each year. In 2020, through our research and
development efforts, the Company expanded its product offerings by adding:
•
•
•
•
•
•
•
new connectors and lateral products for wood framing applications;
new connectors for timber & offsite constructions;
new steel connections for mid-rise steel construction;
new connectors for cold formed steel applications;
new fastener products for wood construction;
new mechanical and adhesive anchors for concrete and masonry construction; and
new repair and strengthening systems for concrete, masonry and wood pile applications.
The Company intends to continue to expand its product offering.
The Company provides expertise and resources to offer software solutions and services to builders and lumber building material
dealers and supports efforts to further develop integrated software component solutions for the building industry. The Company
also has ongoing development of truss software for the design, modeling and truss plate selection for its integrated component
manufacturing customers.
Competition
Simpson is a category creator in the building products space. Our mission is to provide solutions that help people design and
build safer, stronger structures. Our products improve the performance and integrity of the structures they are installed in,
helping to make those structures more sustainable, and often helping to save lives in times of natural disasters.
Today, we offer over 14,000 wood construction products, and over 1,000 concrete construction products for the residential
construction, light industrial and commercial construction, remodeling, and repair & remodel markets.
We sell our products through multiple channels including contractor distributors, home centers and co-ops, lumber dealers and
OEMs. Currently, 23 of the top 25 U.S. builders are engaged on our builders program. In terms of home centers, we were
pleased to welcome back Lowe’s as a home center customer in the second quarter of 2020. By the end of the year, we had
successfully completed the rollout of our product sets in over 1,700 Lowe’s stores.
We encounter a variety of competitors that vary by product line, end market and geographic area. The Company's competitors
include many regional or specialized companies, as well as large U.S. and non-U.S. companies or divisions of large companies.
7
While we do not believe that any single company competes with us across all of our product lines and distribution channels,
certain companies compete in one or more product categories and/or distribution channels.
For over 60 years, through our wholly-owned subsidiary, Simpson Strong-Tie Company Inc., we have led the industry with a
majority market share in the wood connectors products space and a growing presence in both the concrete and fastener markets
in the US and Europe. We’ve successfully increased our market share over the years through:
•
•
•
•
•
•
designing and marketing end-to-end construction product systems;
product availability with delivery in typically 24 hours to 48 hours;
strong customer support and education for engineers, builders, contractors and building officials;
extensive product testing capabilities at our state-of-the-art test lab;
strong relationships with engineers that get our products specified on the blueprint and pulled through to the job site;
and
active involvement with code officials to improve building codes and construction practices.
We believe these value-added services are competitive differentiators and provide us with a competitive advantage, helping us
to achieve industry-leading margins, strong brand recognition and a trusted reputation. We also provide engineering services in
support of some of our products and increasingly offer design and other software that facilitates the specification, selection and
use of our products. We are also investing in software technology, such as 3D visualization software tools, truss design and
specification software and Building Information Modeling software (“BIM”), in order to drive increased specification and use
of our building material products with homeowners, truss component manufacturers, builders and distributors as well as to
support our customers with additional solutions and services.
U.S. housing starts are a leading indicator for a significant portion of our business. In an effort to help mitigate our exposure to
the cyclicality of the U.S. housing market, as well as to respond to the needs of our customers, we’ve made investments over
the years in adjacent products such as anchors, fasteners and software solutions as well as expanded operations into Europe
through acquisitions.
Resources
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, Trademarks and Intellectual Property
Generally, the Company seeks statutory protection for strategic or financially important intellectual property developed in
connection with its business. Certain intellectual property, where appropriate, is protected by contracts, licenses, confidentiality
or other agreements. From time to time, the Company takes action to protect its businesses by asserting its intellectual property
rights against third-party infringers.
The Company’s trademarks are registered or otherwise legally protected in the U.S. and many non-U.S. countries where
products and services of the Company are sold. The Company, from time to time, becomes involved in trademark licensing
transactions.
Most works of authorship produced for the Company, such as computer programs, catalogs and sales literature, carry
appropriate notices indicating the Company’s claim to copyright protection under U.S. law and appropriate international
treaties.
8
The Company has U.S. 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.”
While the Company believes its intellectual property portfolio is important to its business operations and in the aggregate
constitutes a valuable asset, no single patent, trademark, license or other intellectual property, or group of such intellectual
property, is critical to the success of the business or any segment.
Seasonality and Cyclicality
The Company’s sales are seasonal and cyclical, 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 the Company's customers tend to purchase construction materials in the late spring and summer months for the
construction season. 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. 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.”
Human Capital Resources
Successful execution of our strategy is dependent on attracting, developing and retaining key employees and members of our
management team. The skills, experience and industry knowledge of our employees significantly benefit our operations and
performance. We continuously evaluate, modify, and enhance our internal processes and technologies to increase employee
engagement, productivity, and efficiency opportunities, skills, and resources they need to be successful.
At December 31, 2020, our employees, including those employed by consolidated subsidiaries, by region were approximately:
Asia Pacific
Europe
North America
301
670
2,591
3,562
At December 31, 2020, we had the following global gender demographics:
All employees
Individual Contributors
Middle Management
Senior Leadership
Inclusion & Diversity
Women
22%
23%
19%
22%
Men
78%
77%
81%
78%
We strive to have a diverse culture of employees representing different genders, ages, ethnicities and abilities. Our commitment
to diversity and inclusion starts at the top with a highly skilled and diverse board. At December 31, 2020, our U.S. employees
had the following race and ethnicity demographics:
9
American Indian or Alaska Native
Asian
Black or African American
Hispanic or Latino
Native Hawaiian or Other Pacific Islander
Two or More Races
White
Talent Development
All U.S.
Employees
Individual
Contributors
Middle
Management
Senior
Leadership
1 %
10 %
11 %
20 %
— %
1 %
58 %
1 %
11 %
11 %
22 %
1 %
1 %
53 %
— %
7 %
2 %
8 %
— %
2 %
81 %
— %
8 %
4 %
— %
— %
— %
88 %
Talent development underpins our efforts to execute our strategy and continue to develop, manufacture and market innovative
products and services. The opportunity to grow and develop skills and abilities, regardless of job role, division, or geographical
location is critical to the success of the Company as a global organization and we continually invest in our employees’ career
growth and provide employees access to a wide variety of learning and development resources, including a suite of online
courses for developing both soft and technical skills. These resources are designed to encourage a growth mindset and
continuous learning. Accordingly, we also have leadership development programs that provide employees with training, tools
and experiences that are targeted to develop their full leadership potential.
Pay Equity
The Company’s compensation philosophy is to attract, retain, motivate, and differentiate employees through its rewards
programs. We believe people should be paid for what they do and how they do it, regardless of their gender, race, or other
personal characteristics and are committed to internal pay equity. Our Board of Directors, through its Compensation and
Leadership Development Committee, monitors the relationship between the pay received by our executive officers and non-
managerial employees. We believe our compensation philosophy and strategy are strongly aligned with our corporate strategic
priorities and our vision for stockholder value creation.
In addition to our financial compensation we offer a health and wellness package to our employees, which is designed to
provide employees with options for their individual and/or family needs. In addition, in an effort to continue to attract, retain,
and motivate our workforce, in the U.S., we offer remote and flexible work packages for positions which allow for remote
work. We continue to engage our partners and benefits consultants to ensure our health and wellness package continues to meet
the needs of our diverse workforce today and into the future.
Workplace Safety and Health
A vital part of our business is providing our workforce with a safe, healthy and sustainable working environment. Our
Environmental, Health and Safety program focuses on implementing change through our employee observation feedback
channels to recognize risk and continuously improve our processes, as well as conducting regular risk reviews and self-audits at
our manufacturing facilities around the world to explore new opportunities to reduce potential employee exposure to
occupational injuries.
Importantly during 2020, our experience and continuing focus on workplace safety have enabled us to preserve business
continuity without sacrificing our commitment to keeping our colleagues and workplace visitors safe during the COVID-19
pandemic.
At the onset of the pandemic we established a Crisis Management Team (the "CMT") to monitor new COVID-19 related
developments and support our operations to respond to the ever-changing landscape:
•
•
•
•
The CMT consists of senior members of management including our CEO, CFO, President of Sales, General Counsel,
and Heads of HR, Manufacturing, IT, Internal Communications, and Safety.
Currently the CMT meets weekly and at onset of the pandemic met daily.
The CMT provides updates to the Board of Directors on a regular basis.
Our goals are to:
◦
◦
◦
Support safe working environments in our operations,
Regularly communicate to inform and update employees, and
Provide oversight of training on COVID-19 safety practices.
10
The Company took immediate action at the onset of this crisis to enact rigorous safety protocols in all of our facilities by
improving sanitation measures, implementing mandatory social distancing, temperature screening, use of facing coverings,
reducing on-site staff through staggered shifts and schedules, remote working where possible, and restricting visitor access to
our locations. These actions, in addition to generally being deemed an essential business, have enabled us to continue operating
our business with minimal disruptions during the pandemic.
Labor Relations
As of December 31, 2020, 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 June 2023
and September 2023, respectively. Also, we have two contracts in San Bernardino County, California that will expire by the
end of March 2021 and June 2022, respectively. 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's website address is www.simpsonmfg.com. We file or furnish annual, quarterly and current reports, proxy
statements and other information with the Unites States Securities and Exchange Commission (the “SEC”). You may obtain a
copy of any of these reports, free of charge, on the "Investor Relations" page our website, as soon as reasonably practicable
after we file such material with, or furnish it to the SEC. Printed copies of any of these materials will also be provided free of
charge on request.
The SEC maintains an Internet site that also contains these reports at www.sec.gov.
Item 1A. Risk Factors.
Investing in our common stock involves a high degree of risk. You should carefully review the following discussion of the risks
that may affect our business, results of operations and financial condition, as well as our consolidated financial statements and
notes thereto and the other information appearing in this report, for important information regarding risks that affect us.
Current global economic events and conditions may amplify many of these risks. These risks are not the only risks that may
affect us. Additional risks that we are not aware of or do not believe are material at the time of this filing, may also become
important factors that adversely affect our business.
Risks Related to the COVID-19 Pandemic
The impact of the COVID-19 pandemic, or similar health concerns, could have a significant effect on supply and/or
demand for our products and services and have a negative impact on our business, financial condition and results of
operations.
Our operations expose us to risks associated with a pandemic, or outbreak of contagious diseases in the human population,
including the COVID‑19 pandemic. The COVID-19 pandemic has resulted in governments around the world implementing
increasingly stringent measures to help control the spread of the virus, including quarantines, “shelter in place” and “stay at
home” orders, travel restrictions, business curtailments, school closures, and other measures. Notwithstanding our level of
continued operations, the COVID-19 pandemic may have negative impacts on our operations, supply chain, transportation
networks and customers, which may compress our margins, including as a result of preventative and precautionary measures
that we, other businesses and governments are taking. The COVID-19 pandemic is adversely affecting the economies and
financial markets of many countries and could result in an economic downturn. Any resulting economic downturn could
adversely affect our business, financial condition, demand for our products, services, and contribute to volatile supply and
demand conditions affecting prices and volumes in the markets for our products, services and raw materials.
In addition, the ability of our employees and our suppliers' and customers' employees to work may be significantly impacted by
individuals contracting or being exposed to COVID-19, or as a result of the control measures noted above, which may
significantly hamper our production throughout the supply chain and constrict distribution channels. The extent to which
COVID-19 may adversely impact our business depends on future developments, which are highly uncertain and unpredictable,
including new information concerning the severity of the outbreak and the effectiveness of actions globally to contain or
11
mitigate its effects and we are unable to predict the potential future impact that the COVID‑19 pandemic will have on our
business, financial condition or results of operations.
Changes in government and industry regulatory standards could have a material adverse effect on our business,
financial condition or results of operations.
Government regulations pertaining to health and safety and environmental concerns continue to emerge, domestically as well as
internationally, including regulations due to the COVID-19 pandemic. These regulations include the Occupational Safety and
Health Administration and other worker safety regulations for the protection of employees, as well as regulations for the
protection of consumers. It is necessary for us to comply with current requirements (including requirements that do not become
effective until a future date), and even more stringent requirements could be imposed on our products or processes. Compliance
with these regulations may require us to alter our manufacturing processes and our sourcing. For example, at our manufacturing
locations we use enhanced cleaning processes, established health screening procedures, modified work stations and material
flows with established social distancing practices in response to the COVID-19 pandemic in accordance with guidelines
provided by the U.S. Centers for Disease Control and Prevention, as well as local and state health departments. Such actions
could increase our capital expenditures and other similar expenses and adversely impact our business, financial condition or
results of operations, and our inability to effectively and timely meet such regulations could adversely impact our competitive
position.
Risks Related To Our Business And Our Industry
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.
A significant portion of our total product sales is dependent on housing starts. Accordingly, our business, financial condition
and results of operations depends significantly on the stability of the housing and residential construction and home
improvement markets, which are affected by conditions and other factors that are beyond our control. These conditions include,
but are not limited to, the following:
•
•
•
•
•
•
•
•
•
•
•
uncertainty about the housing and residential construction and home improvement markets;
consumer confidence and spending;
unemployment levels;
foreclosure rates;
interest rates;
raw material, logistics and energy costs;
labor and healthcare costs;
capital availability, or lack thereof, to builders, developers and consumers;
the state of the credit markets, including mortgages and home equity loans;
unfavorable weather conditions and natural disasters; and
acts of terrorism.
These factors could adversely affect demand for our products and services, our costs of doing business, and our business,
financial condition and results of operations. Further, many of our customers in the construction industry are small and
medium-sized businesses that are more likely to be adversely 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 results of operations.
Additionally, declines in commercial and residential construction, such as housing starts and home improvement 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 services, which could also adversely affect our financial condition and results of
operations.
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, 2020, 2019 and 2018.
Any reduction in, or termination of, our sales to these customers would at least temporarily, and possibly on a longer term
12
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 and builders have increasingly consolidated over time, which has increased the material
adverse effect risk 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.
Our growth may depend on our ability to develop new products and services and penetrate new markets, which could
reduce our profitability.
Our continued growth depends upon our ability to develop additional products, services and technologies that meet our
customers’ expectations of our brand and quality and that allow us to expand our product and service offerings and enter into
new markets. Expansion into new markets and the development of new products and services 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 investments we make in attempting to develop new products and technologies and penetrate new markets.
Risks Related to Seasonality and Weather Conditions
Seasonality and weather-related conditions may have a significant impact on our financial condition from period to
period.
The demand for our products and services is heavily correlated to both seasonal changes, with operating results varying from
quarter to quarter, and unpredictable weather patterns. 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 minimum
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.
Climate change, weather conditions and storm activity could have a material adverse impact on our results of
operations.
Weather conditions and the level of severe storms can have a significant impact on the markets for residential construction and
home improvement. As a result, climate change that results in altered weather conditions or storm activity could have a
significant impact on our business by:
•
•
•
•
•
•
depressing or reversing economic development;
reducing the demand for construction;
increasing the cost and reducing the availability of wood products used in construction;
increasing the cost and reducing the availability of raw materials and energy;
increasing the cost and reducing the availability of insurance covering damage from natural disasters; and
lead to new laws and regulations that increase our expenses and reduce our sales.
Generally, any weather conditions that slow or limit residential or construction activity can adversely impact demand for our
products and services.
Lower demand for our products or services as a result of this scenario could adversely impact our business, financial condition
and results of operations. Additionally, severely low temperatures may lead to significant and immediate spikes in costs of
natural gas, electricity and other commodities that could negatively affect our results of operation.
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Natural disasters could decrease our manufacturing capacity.
Some of our 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 inoperable, whether or not covered by
insurance, would materially and adversely affect our business and financial condition.
We face significant competition in the markets we serve and we may not be able to compete successfully.
In order to effectively compete we must continue to develop enhancements to our existing products, new products and services
on a timely basis that meet changing consumer preferences and successfully develop, manufacture and market these new
products, product enhancements and services. There can be no assurance that we will be successful in developing and
marketing new products, product enhancements, additional technologies and 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. Our inability to effectively compete could reduce the sales of our products and services,
which could have a material adverse impact on our business, financial condition and results of operations.
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.
Increases in prices of raw materials and energy could negatively affect our sales and profits.
Steel is the principal raw material used in the manufacture of many of our products. The price of steel has historically fluctuated
on a cyclical basis and has often depended on a variety of factors over which we have no control. Import tariffs and/or other
mandates could significantly increase the prices on raw materials that are critical to our business, such as steel. The cost of
producing our products is also sensitive to the price of energy.
The selling prices of our products have not always increased in response to raw material, energy or other cost increases, and we
are unable to determine to what extent, if any, we will be able to pass future cost increases through to our customers. Our
inability to pass increased costs through to our customers could materially and adversely affect our financial condition or results
of operations.
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 if
we are not able to receive raw materials 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 operations. In addition, a material increase in transportation rates or fuel surcharges could have a material adverse
effect on our profitability.
Product, Services and Sales Risks
Product liability claims and litigation could affect our business, reputation, financial condition, results of operations and
cash flows.
In the ordinary course of business, the products that we design and/or manufacture, and/or the services we provide, have led to
product liability claims or other legal claims being filed against us. To the extent that plaintiffs are successful in showing that a
defect in a product’s design, manufacture or warnings led to personal injury or property damage, or that our provision of
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services resulted in similar injury or damage, we may be subject to claims for damages. Although we are insured for damages
above a certain amount, we bear the costs and expenses associated with defending claims, including frivolous lawsuits, and are
responsible for damages up to the insurance retention amount. The insurance that we carry is limited in the amount of coverage
and may not be adequate to cover all of our resulting costs, business interruption and lost profits if we are subject to product
liability claims. We might also face increases in premiums and reductions in the availability of insurance covering product
liability, which could have a significant impact on our business. In addition to claims concerning individual products, as a
manufacturer, we can be subject to costs, potential negative publicity and lawsuits related to product recalls, which could
adversely impact our results of operations and damage our reputation.
Design defects, labeling defects, product formula defects, inaccurate chemical mixes, product recalls and/or product
liability claims could harm our business, reputation, financial condition and results of operations.
Many of our products are integral to the structural soundness or safety of the structures in which they are used and 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 or used by customers.
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. 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 business, reputation, financial condition, results of operations and cash flows could be
materially and adversely affected.
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, reputation, financial condition and
results of operations. 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.
Some of our technology offerings provide planning and 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 business, reputation, financial condition, results of operations and cash flows
Our planning/design software applications facilitate the creation by customers of complex construction and building designs
and is extremely complex. If our software applications contain defects or errors, our engineers prepare, approve or seal
drawings that contain defects or we are otherwise involved in any design or construction that contains flaws, regardless of
whether we caused such flaws, we may be required to correct deficiencies and may become involved in litigation. 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 business, reputation, financial condition, results of
operations and cash flows could be materially and adversely affected.
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Risks Related to Our Intellectual Property and Information Technology
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 develop and market sophisticated software and applications to facilitate the
specification, selection and use 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 2021.
We may not be able to create and develop commercially successful software and applications. Even if we are able to create and
develop 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 intellectual property, we will not be able to compete effectively.
We monitor and protect against activities that might infringe, dilute, or otherwise harm our patents, trademarks and other
intellectual property and rely on the patent, trademark and other laws of the U.S. and other countries. However, we may be
unable to prevent third parties from using our intellectual property without our authorization. To the extent we cannot protect
our intellectual property, unauthorized use and misuse of our intellectual property could harm our competitive position and have
a material adverse impact on our business, financial condition and results of operations. In addition, the laws of some non-U.S.
jurisdictions provide less protection for our proprietary rights than the laws of the U.S. and we therefore may not be able to
effectively enforce our intellectual property rights in these jurisdictions. If we are unable to maintain certain exclusive licenses,
our brand recognition and sales could be adversely impacted. Current employees, contractors and suppliers have, and former
employees, contractors and suppliers may have, access to trade secrets and confidential information regarding our operations
which could be disclosed improperly and in breach of contract to our competitors or otherwise used to harm us.
Third parties may also claim that we are infringing upon their intellectual property rights. If we are unable to successfully
defend or license such alleged infringing intellectual property or if we are required to substitute similar technology from another
source, our operations could be adversely affected. Even if we believe that such intellectual property claims are without merit,
defending such claims can be costly, time consuming and require significant resources. Claims of intellectual property
infringement also might require us to redesign affected products, pay costly damage awards, or face injunctions prohibiting us
from manufacturing, importing, marketing or selling certain of our products. Even if we have agreements to indemnify us,
indemnifying parties may be unable or unwilling to do so.
We are subject to cyber security risks and may incur increasing costs in efforts to minimize those risks and to comply
with regulatory standards.
We employ information technology systems and operate websites which allow for the secure storage and transmission of
proprietary or confidential information regarding our customers, employees and others. We make significant efforts to secure
our computer network to mitigate the risk of possible cyber-attacks, including, but not limited to, data breaches, and are
continuously working to upgrade our existing information technology systems to ensure that we are protected, to the greatest
extent possible, against cyber risks and security breaches. Despite these efforts security of our computer networks could be
compromised which could impact operations and confidential information could be misappropriated, which could lead to
negative publicity, loss of sales and profits or cause us to incur significant costs to reimburse third- parties for damages, which
could adversely impact profits.
Additionally, we must comply with increasingly complex and rigorous regulatory standards enacted to protect businesses and
personal data, including the General Data Protection Regulation (“GDPR”) and the California Consumer Privacy Act. GDPR is
a comprehensive European Union privacy and data protection reform, effective in 2018, which applies to companies that are
organized in the European Union or otherwise provide services to consumers who reside in the European Union, and imposes
strict standards regarding the sharing, storage, use, disclosure and protection of end user data and significant penalties
(monetary and otherwise) for non-compliance. The California Consumer Privacy Act creates new data privacy rights, effective
in 2020. Any failure to comply with GDPR, the California Consumer Privacy Act, or other regulatory standards, could subject
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the Company to legal and reputational risks. Misuse of or failure to secure personal information could also result in violation of
data privacy laws and regulations, proceedings against us by governmental entities or others, damage to our reputation and
credibility, and could have a material adverse effect on our business and results of operations.
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.
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-parties with which we do business, we 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 parties with which we do business, we 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.
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We publicly post our privacy policies and practices concerning our processing, use, and disclosure of personally identifiable
information on our websites. 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 business, reputation, financial condition, results of operations and cash flows.
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-a-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:
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zinc and lead used in some steel galvanizing processes;
chemicals used in our acrylic and epoxy anchoring products, our concrete repair, strengthening and protecting
products; and
gun powder used in our powder-actuated tools, which 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.
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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 may consider and evaluate acquisitions and compete for acquisitions with other potential acquirers, some of which may
have greater financial or operational resources than we do. Any acquisitions we undertake involve numerous risks, including:
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unforeseen difficulties in integrating operations, products, technologies, services, accounting and employees;
diversion of financial and management resources attention from existing operations;
unforeseen difficulties integrating geographic regions where we do not have prior experience;
the potential loss of key employees of acquired businesses;
unforeseen liabilities associated with businesses acquired; and
inability to generate sufficient revenue or realize sufficient cost savings to offset acquisition or investment costs.
As a result, if we fail to evaluate and execute acquisitions properly, we might not achieve the anticipated benefits of such
acquisitions and we may incur costs in excess of what we anticipate. These risks would likely be greater in the case of larger
acquisitions.
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.
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.
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Risks Related to Human Capital
We depend on executives and other key employees, the loss of whom could harm our business.
We depend, in part, on the efforts and skills of our executives and other key employees, including members of our sales force.
Our executives and key employees are experienced and highly qualified. The loss of any of our executive officers or other key
employees could harm the business and the Company’s ability to timely achieve its strategic initiatives. Our success also
depends on our ability to identify, attract, hire and retain our key personnel. 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. We may not be able
to attract and retain key personnel or may incur significant costs to do so.
Our work force could become increasingly unionized in the future and our unionized or union-free work force could
strike, which could adversely affect the stability of our production and reduce our profitability.
A significant number of our employees are represented by labor unions and covered by collective bargaining agreements that
will expire between 2021 and 2023. Generally, collective bargaining agreements that expire may be terminated after notice by
the union. After termination, the union may authorize a strike similar to the strike which was initiated at our Stockton facility in
the third quarter of 2019. 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. If we fail to
extend or renegotiate our collective bargaining agreements, if disputes with our unions arise, or if the workers covered by one
or more of the collective bargaining agreements engage in a strike, lockout, or other work stoppage, we could have a material
adverse effect on production at one or more of our facilities, incur higher labor costs, and, depending upon the length of such
dispute or work stoppage, on our business, results of operations, financial position and liquidity.
Risks Related to Our International Operations
International operations and our financial results in those markets may be affected by legal, regulatory, political,
currency exchange and other economic risks.
During 2020, revenue from sales outside of the U.S. was $222.4 million, representing approximately 17.5% of consolidated
sales. In addition, a significant amount of our manufacturing and production operations are located outside the U.S. As a result,
our business is subject to risks and uncertainties associated with international operations, including:
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difficulties and costs associated with complying with a wide variety of complex and changing laws, including
securities laws, tax laws, employment and pension-related laws, competition laws, U.S. and foreign export and trading
laws, and laws governing improper business practices, treaties and regulations;
limitations on our ability to enforce legal rights and remedies;
adverse domestic or international economic and political conditions, business interruption, war and civil disturbance;
changes to tax, currency, or other laws or policies that may adversely impact our ability to repatriate cash from non-
U.S. subsidiaries, make cross-border investments, or engage in other intercompany transactions;
future regulatory guidance and interpretations of the tax legislation commonly known as the U.S. Tax Cuts and Jobs
Act of 2017 (the "Tax Act"), as well as assumptions that the Company makes related to the Tax Act;
changes to tariffs or other import or export restrictions, penalties or sanctions, including modification or elimination of
international agreements covering trade or investment;
costs and availability of shipping and transportation;
nationalization or forced relocation of properties by foreign governments;
currency exchange rate fluctuations between the U.S. dollar and foreign currencies; and
uncertainty with respect to any potential changes to laws, regulations and policies that could exacerbate the risks
described above.
All of these factors could result in increased costs or decreased revenues and could materially and adversely affect our sales,
financial condition and results of operations. Additionally, international construction standards, techniques and methods differ
from those in the U.S. and as a result, we may need to redesign our products, or design new products, to compete effectively
and profitably in international markets.
In addition, we operate in many parts of the world that have experienced governmental corruption and we could be adversely
affected by violations of the Foreign Corrupt Practices Act ("FCPA") and similar worldwide anti-corruption laws. The FCPA
and similar anti-corruption laws in other jurisdictions generally prohibit companies and their intermediaries from making
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improper payments to officials for the purpose of obtaining or retaining business. Although we mandate compliance with these
anti-corruption laws, we cannot provide assurance that these measures will necessarily prevent violations of these laws by our
employees or agents. If we were found to be liable for violations of anti-corruption laws, we could be liable for criminal or civil
penalties or other sanctions, which could have a material adverse impact on our business, financial condition and results of
operations.
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, including Jiangsu, China, in part to allow us to serve our
customers with prompt delivery of needed products. In recent years, we have significantly expanded our manufacturing
capabilities in China. Substantially all of our manufacturing output in China was and is currently intended for export to other
parts of the world. If a widespread outbreak of an illness, such as the COVID-19 pandemic, occurred at or near our Jiangsu,
China manufacturing facility, it could substantially interfere with our general commercial activity related to our supply chain
and customer base, which could have a material adverse effect on our financial condition, results of operations, business or
prospects. If this outbreak caused us to curtail our operations, we may need to seek alternative sources of supply for products
for our customers, which may increase the costs to manufacture and deliver our products.
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 countermeasures are taken by
China or other countries, our costs of doing business, revenue and results of operations may be materially harmed. If 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.
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. 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.
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Significant judgment and certain estimates are required in determining our worldwide provision for income taxes.
Future tax law changes may materially increase the Company’s prospective income tax expense.
We are subject to income taxation in the U.S. as well as numerous foreign jurisdictions. Significant judgment is required in
determining our worldwide income tax provision 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 Tax Act was signed into law. The impact of the Tax 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.
Risks Related to Ownership of Our Common Stock
Any issuance of preferred stock may dilute your investment and reduce funds available for dividends.
Our Board of Directors is authorized by our amended and restated 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.
Provisions in our amended and restated certificate of incorporation and bylaws or Delaware law might discourage,
delay or prevent a change in control of our company or changes in our management.
Our amended and restated certificate of incorporation and bylaws contain provisions that may discourage, delay or prevent a
change in control of our Company or changes in our management that our stockholders may deem advantageous. For example,
under our charter documents, our stockholders cannot call special meetings and cannot take action by written consent.
Additionally, we are subject to Section 203 of the Delaware General Corporation Law, which generally prohibits a Delaware
corporation from engaging in any of a broad range of business combinations with any “interested” stockholder for a period of
three years following the date on which the stockholder became an “interested” stockholder and which may discourage, delay or
prevent a change in control of our company. Delaware law and our corporate governance documents could deter takeover
attempts that might otherwise be beneficial to our stockholders.
If we were required to write down all or part of our goodwill or other indefinite-lived intangible assets, our results of
operations or financial condition could be materially adversely affected in a particular period.
Declines in the Company’s business may result in an impairment of the Company’s tangible and intangible assets which could
result in a material non-cash charge. At least annually, or at other times when events occur that could affect the value of such
assets, we perform impairment tests on our goodwill, indefinite-lived intangible assets and definite-lived intangible assets. To
determine whether an 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 negatively impact our
results of operations.
Item 1B. Unresolved Staff Comments.
None.
Item 2. Properties.
Our headquarters and principal executive offices in Pleasanton, California, and our principal U.S. manufacturing facilities in
Stockton and San Bernardino County, California, McKinney, Texas, West Chicago, Illinois, Columbus, Ohio, and Gallatin,
Tennessee are located in owned premises. The principal manufacturing facilities located outside the U.S., the majority of which
we own, are in 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 U.S., Canada, the United
22
Kingdom, Europe, Asia, Australia, New Zealand, and Chile. As of February 25, 2021, the Company’s owned and leased
facilities were as follows:
North America
Europe
Asia/Pacific
Administrative and all other
Total
Number
Of
Properties
Approximate Square Footage
Owned
Leased
Total
(in thousands of square feet)
25
17
10
1
53
2,235
533
175
89
3,032
821
342
41
—
1,204
3,056
875
216
89
4,236
We believe that our properties are maintained in good operating condition. Our manufacturing facilities are equipped with
specialized equipment and use extensive automation. Our leased facilities typically have renewal options and have expiration
dates through 2031. 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 2019, we sold our real estate in Maple Ridge, British Columbia, Canada and received $9.4 million, after closing
costs. This property is classified under the “North America” segment. 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. This property is 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. Refer to Note 14, “Commitments and Contingencies,” to the Company’s Consolidated Financial Statements included
in this Annual Report on Form 10-K for a discussion of recent developments related to certain of the legal proceedings in which
we are involved.
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 Company’s common stock is listed on the New York Stock Exchange (the “NYSE”) under the symbol “SSD.”
As of February 16, 2021, there were 30,945 holders of record of the Company’s common stock although we believe that there
are a significantly larger number of beneficial owners of our common stock.
Dividends
During 2020, the Company paid a total of $40.3 million in cash dividends. In January 2021, we declared a quarterly cash
dividend of $0.23 per share of common stock to be paid on April 22, 2021 to stockholders of record as of April 1, 2021. 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.”
23
Stock Performance Graph
The following graph compares the cumulative total stockholder return on the Company’s common stock from December 31,
2015, through December 31, 2020, 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, 2015, 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.,
Advance Drainage Systems, Inc., American Woodmark Corp, Apogee Enterprises, Inc., Armstrong World Industries, Inc.,
Eagle Materials Corp., GCP Applied Technologies, Inc., Gibraltar Industries, Inc., Insteel Industries, Inc., Masonite
International Corp., Patrick Industries, Inc., PGT Innovations, Inc., Quanex Building Products Corp., Summit Material, LLC.,
and Trex Company, Inc.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
The table below presents the monthly repurchases of shares of our common stock during the fourth quarter of the fiscal year
ended December 31, 2020.
24
(a)
(b)
(c)
(d)
Total
Number of
Shares
Purchased
Average
Price Paid
per Share
Total Number of
Shares Purchased
as Part of
Publicly
Announced Plans
or Programs
Approximate
Value of Shares
that May Yet Be
Purchased Under
the Plans or
Programs (1)
(in millions)
Period
October 1 - October 31, 2020
November 1 - November 30, 2020
December 1 - December 31, 2020
Total
(1)Pursuant to the $100.0 million repurchase authorization that was publicly announced on December 9, 2019, and expired on December 31,
2020. See “Note 3 — Net Income per Share” to the Company’s Consolidated Financial Statements.
55,624 $
32,630 $
63,344 $
151,598
55,000
32,630
63,344
88.97
89.86
89.74
$32.4
$29.5
$23.8
On December 16, 2020, the Company’s Board of Directors authorized the repurchase up to $100.0 million of the Company’s
common stock from January 1, 2021 through December 31, 2021.
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, 2020, 2019 and 2018 and the
consolidated balance sheets data as of December 31, 2020 and 2019 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, 2017 and 2016
and the consolidated balance sheets data as of December 31, 2018, 2017 and 2016 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.
25
(in thousands, except per-share data)
Statement of Operations Data:
Net sales
Income from operations
Percentage of sales
Net income
Percentage of sales
2020
Years Ended December 31,
2018
2017
2019
2016
$ 1,267,945 $ 1,136,539 $ 1,078,809 $ 977,025
$ 860,661
252,363
181,254
172,625
138,273
141,670
19.9 %
15.9 %
16.0 %
14.2 %
16.5 %
$ 187,000
$ 133,982
$ 126,633
$ 92,617
$ 89,734
14.7 %
11.8 %
11.7 %
9.5 %
10.4 %
Earnings per share of common stock:
Basic
Diluted
Cash dividends declared per share of common stock
(in thousands)
Balance Sheet Data:
Lease obligations, deferred income taxes and other
long-term liabilities
$
$
$
4.28
4.27
0.92
$
$
$
3.00
2.98
0.91
$
$
$
2.74
2.72
0.87
$
$
$
1.95
1.94
0.81
$
$
$
1.87
1.86
0.70
2020
2019
2018
2017
2016
$ 57,565
$ 44,502
$ 14,569
$ 16,254
$
5,336
Total stockholders’ equity
980,943
891,957
855,514
884,778
865,842
Total assets
1,232,569
1,095,366
1,021,663
1,037,523
979,974
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion and analysis of our financial condition and results of operations together with our
consolidated financial statements and related notes thereto included in Part II, Item 8 of this Annual Report on Form 10-K.
Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report on Form 10-K,
including information with respect to our plans and strategy for our business, includes forward-looking statements that involve
risks and uncertainties. See “Note About Forward-Looking Statements” and “Item 1A—Risk Factors” for a discussion of
forward-looking statements and important factors that could cause actual results to differ materially from the results described
in or implied by the forward-looking statements.
Overview
We design, engineer and are a leading manufacturer of high quality wood and concrete building construction products designed
to make structures safer and more secure that perform at high levels and are 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 strategic plan for growth includes increasing our market share and profitability in our Europe segment; growing our market
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 effect of 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 updated certain of these goals in 2019 to reflect changes in the macro-economic landscape. During the first
quarter of 2020, the execution of our 2020 Plan continued to deliver financial and operational efficiencies. However, given the
uncertainties surrounding the impact of COVID-19 on our business, on April 27, 2020, we withdrew our prior full year 2020
guidance originally issued on February 3, 2020, as well as the financial targets associated with the 2020 Plan.
The magnitude and duration of the pandemic including its impact on our operations, supply chain partners and general
economic conditions, is uncertain and we continue to monitor the impact of the pandemic on our operations and financial
condition, which was not significantly adversely impacted in 2020. We are uncertain of the long-term effects on the North
America segment and Europe segment at this time. Management continues to monitor the impact of the global pandemic on its
26
financial condition, liquidity, operations, suppliers, industry, and workforce. The extent to which COVID-19 may adversely
impact our business depends on future developments, which are highly uncertain and unpredictable, including new information
concerning the severity of the outbreak and the effectiveness of actions globally to contain or mitigate its effects and we are
unable to predict the potential future impact that the COVID‑19 pandemic will have on our business, financial condition or
results of operations.
In December 2019, COVID-19 was first identified in Wuhan, China. Over the next several months, COVID-19 quickly spread
across the world. In March 2020, the WHO declared COVID-19 a worldwide pandemic based on the rapid increase in exposure
globally, and the President of the United States declared the COVID-19 outbreak a national emergency. As of January 31, 2021,
the virus continues to spread infecting over 46 million people worldwide. Vaccines are available in various countries and
distribution of the vaccine also varies by country and in the U.S. by state. The duration and severity of its effects are still
unknown.
Government authorities in the countries and states where we operate have issued various and differing shelter in place, stay at
home, social distancing guidelines and other measures in response to the COVID-19 pandemic. In many of those locations our
operations are classified as an essential business and all of our manufacturing and distribution facilities continue to operate in
accordance with those orders. In late March 2020, two of our larger European manufacturing facilities in the United Kingdom
and France were ordered to cease nearly all operations. Those two facilities have since re-opened. And since then, there have
been no orders to close any of our manufacturing or distribution facilities. The Company’s management team continues to
monitor and manage its ability to operate effectively and, to date, the Company has not experienced any significant disruptions
within its supply chain. Our supply chain partners have been very supportive and continue to do their part to ensure that service
levels to our customers remain strong and, to date, we have not experienced any supply-chain disruptions related to COVID-19
and have been able to meet our customers’ needs. We will continue to communicate with our supply chain partners to identify
and mitigate risk and to manage inventory levels.
In response to the COVID-19 pandemic the Company proactively took measures to maintain and preserve its strong financial
position and flexibility, including drawing down on its credit facility, suspending its stock repurchase program, implementing a
hiring freeze and adjusting employee hours to meet production requirements. Based on updated expectations in mid-2020, the
Company had resumed hiring to meet increased demand levels that it has experienced. The Company repaid the amount
outstanding on its credit facility and resumed its stock repurchase program. As a result of COVID-19 and in support of
continuing its manufacturing efforts, the Company has undertaken steps to protect its employees, suppliers and customers, as
their safety and well-being is one of our top priorities. We have instituted additional precautions in our manufacturing and
distribution facilities to comply with health and safety guidelines and to protect our employees, including enhanced deep
cleaning, staggered shifts, temperature checking, use of face masks, practicing social distancing and limiting non-employees at
our locations, amongst other safety related policies and procedures. Many of our office workers in our manufacturing and
distribution facilities, as well as the corporate headquarters, continue to work remotely, where possible. The Crisis Management
Team, which includes members of senior management, meets regularly to review and assess the status of the Company's
operations and the health and safety of its employees.
A significant portion of the Company's total product sales is dependent on U.S. housing starts and its business, financial
condition, and results of operations depends significantly on the level of housing and residential construction activity. We
anticipated previously that the effects of responses to the pandemic would have a negative effect on our North America
operations. However, single-family housing starts increased from April's and May's lower levels and increased from prior-year's
level of starts. Due to the return of Lowe's, increased housing starts and a strong home repair and remodel market, sales for the
fiscal year 2020 sales increased compared to the fiscal year 2019. Whether this trend continues at the same pace or decline for
the year 2021 is not known.
Our first 2020 Plan objective was a continued focus on organic growth with the goal of achieving a compounded annual growth
rate in net sales of approximately 8% from 2016 through 2020. Since 2016 net sales has grown 47.3% or at a compound annual
growth rate of 10.2%. Milestones that helped support this goal included a price increase for the majority of our U.S. wood
connector products in the third quarter of 2018, the signing of one of the largest U.S. homebuilding companies onto our builder
program, resulting in 23 of the top 25 U.S. builders now engaged on our program, strong repair and remodel trends associated
with the COVID-19 pandemic, as well as the return of Lowe's in mid-2020.
Our second objective involved rationalizing our cost structure to improve company-wide profitability. Our goal was to reduce
total operating expenses as a percent of net sales to a range of 26% to 27% by the end of 2020 through a combination of zero-
based budgeting, lowering our indirect procurement costs and taking other cost reduction measures in both Europe and our
concrete business. Specifically in 2020 we also experienced cost savings from our expense management practices as well as
one-time benefits from reduced travel and trade show costs as a result of COVID-19 restrictions. These factors, combined with
27
strong sales growth, resulted in operating expenses as a percentage of net sales improving 570 basis points lowering to 25.6%
for the year ended December 31, 2020 from 31.3% for the year ended December 31, 2016.
Our third objective was to improve company-wide operating margins to a range of 16% to 17% by the end of 2020. This goal
was going to be largely affected by another profitability goal to improve operating margins in Europe by rolling out our fastener
lines in the Nordic Region and France, the consolidation of our European management team to create efficiencies, and through
other cost cutting initiatives. Further, in late 2017 we implemented a new concrete strategy, which narrowed our concentration
to six distinct product categories to improve gross margins. As a result of these initiatives, favorable raw material prices in
2020, as well as limited spending on certain operating expenses due to COVID-19 restrictions during 2020, operating margins
improved 340 basis points increasing to 19.9% for the year ended December 31, 2020 from 16.5% for the year ended December
31, 2016.
Our fourth objective focused on improving our working capital management and overall balance sheet discipline. Since the
onset of the 2020 Plan we’ve implemented lean principles in our factories. We also completed a 3-phased SKU reduction
program, eliminating over 12,000 non-moving or slow-removing SKUs and converting our customers over to replacement
products. In addition, we carried out rapid improvement events in our U.S. production facilities resulting in efficiency
enhancements as well as improved management of inventory and purchasing practices.
The final element of our 2020 Plan was focused on maximizing stockholder value, with the goal of improving our return on
invested capital from 10.5% in 2016 to a range of 15% to 16% by year end 2020. Through our operational execution, combined
with the enactment of the U.S. Tax Cuts and Jobs Act of 2017, which lowered our effective income tax rate beginning in 2018,
return on invested capital (1) increased to 20.0% for the year ended December 31, 2020.
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 manner
that follows the construction process. Residential, light industrial 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.
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
customers tend to purchase construction materials in the late spring and summer months for the construction season. 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, economic events such as tariffs and the possibility of additional tariffs on
imported raw materials or finished goods or such as labor disputes can also have an effect on our gross and operating profits as
well as the amount of inventory on-hand.
Our operations expose us to risks associated with pandemics, epidemics or other public health emergencies, such as the
COVID-19 pandemic which spread from China to many other countries including the U.S. See "Item IA—Risk Factors."
ERP Integration
In July 2016, our Board of Directors 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 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, and we implemented SAP at five
additional locations in 2019, 2020 and early 2021, completing our North America operations. We are tracking toward rolling
out SAP technology with a company-wide completion currently targeted for 2022. Meeting the 2022 goal is highly dependent
on the lifting of current travel restrictions, which are the result of the COVID-19 pandemic. While we believe the SAP
implementation will be beneficial to the Company over time, annual operating expenses have and are expected to continue to
increase through 2024 as a result of the SAP implementation, primarily due to increases in training costs and the depreciation of
previously capitalized costs. As of December 31, 2020, we have capitalized $21.4 million and expensed $39.1 million of the
costs, including $5.9 million in amortization expense of capitalized costs.
28
Business Segment Information
Historically our North America segment has generated more revenues from wood construction products compared to concrete
construction products. During 2020, the return of Lowe's, favorable weather conditions, increased home improvement activity
and increased housing starts resulted in higher sales volumes over the same time period of 2019, which had extremely wet
weather in the first half of the year. Wood construction product sales volume increased 15.6% for the year ended December 31,
2020 compared to the year ended December 31, 2019, primarily due to increased sales volumes in connection with the return of
Lowe's and increased housing starts and repair and remodel activity, which resulted in increased sales to some of our other sales
distributor channels.Net sales of our concrete construction product increased slightly for the year ended December 31, 2020
compared to the year ended December 31, 2019 mostly due to increased sales volumes. Operating profits increased due to
higher sales, and lower cost of goods sold mostly due to lower material costs. In operating expenses, increases in cash profit
sharing and stock-based compensation expense were partially offset by reductions in consulting fees and travel related expense.
Our Europe segment also generates more revenues from wood construction products than concrete construction products.
Europe net sales increased due to approximately $2.2 million of positive foreign currency translations resulting from some
Europe currencies strengthening against the U.S. dollar. In local currency, Europe net sales decreased primarily due to lower
sales volume. In U.S. dollars, wood construction product sales increased 4.3% for the year ended December 31, 2020 compared
to the year ended December 31, 2019. Concrete construction product sales are mostly project based, and net sales decreased
9.9% for the year ended December 31, 2020 compared to the year ended December 31, 2019. Operating profits increased due to
lower material costs, and lower operating expenses as well as benefiting from foreign currency translation from most Europe
currencies strengthening against the U.S. dollar. 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 total stockholders’ equity and total long-term interest bearing liabilities, (which for the
Company are long-term capital lease obligations), 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 GAAP financial measures.
Business Outlook
Based on current information and subject to future events and circumstances the Company estimates that its full year 2021:
•
•
•
•
Operating margin will be between approximately 16.5% and 18.5%.
Depreciation and amortization expense will be approximately $44 million to $48 million, of which approximately $38
million to $42 million is related to depreciation.
Effective tax rate will be approximately 25.0% to 26.0%, including both federal and state income tax rates.
Capital expenditures for the full year are estimated to be in the range of $50 million to $55 million.
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, 2020, 2019 and 2018, respectively:
29
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
Interest expense, net and other
Foreign exchange gain (loss), net
Income before taxes
Provision for income taxes
Net income
Years Ended December 31,
2020
2019
2018
100.0 %
54.5 %
45.5 %
4.0 %
8.9 %
12.7 %
25.6 %
— %
— %
19.9 %
(0.2) %
(0.1) %
19.7 %
4.9 %
14.8 %
100.0 %
56.7 %
43.3 %
4.1 %
9.9 %
13.9 %
27.9 %
(0.5) %
— %
15.9 %
(0.2) %
(0.1) %
15.7 %
3.9 %
11.8 %
100.0 %
55.5 %
44.5 %
4.0 %
10.2 %
14.7 %
28.9 %
(1.0) %
0.6 %
16.0 %
— %
— %
15.9 %
4.2 %
11.7 %
Comparison of the Years Ended December 31, 2020 and 2019
Unless otherwise stated, the below results, 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,
2020, against the results of operations for the year ended December 31, 2019. Unless otherwise stated, the results announced
below, when referencing “both years,” refer to the year ended December 31, 2019 and the year ended December 31, 2020.
The following table shows the change in the Company’s operations from 2019 to 2020, 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
47,058
112,568
157,274
316,900
Net gain (loss) on disposal of assets
(6,024)
Impairment of goodwill
Income from operations
Interest expense, net and other
Foreign exchange loss
Income before income taxes
Provision for income taxes
—
181,254
(1,730)
(1,167)
178,357
44,375
Increase (Decrease) in Operating Segment
2019
North
America
Europe
Asia/
Pacific
Admin &
All Other
2020
$ 1,136,539 $ 129,042 $
1,569 $
795 $
— $ 1,267,945
644,409
47,400
(66)
10
(192)
691,561
492,130 $
81,642 $
1,635 $
785 $
192
576,384
85
13
(469)
(260)
3,635
648
(927)
3,356
5,363
—
72,923
1,388
2,592
76,903
17,749
69
(315)
371
—
1,579
59
385
2,023
1,883
16
30
4,579
4,625
—
—
50,807
112,517
161,029
324,353
(332)
—
(4,433)
252,363
34
(213)
(42)
—
1,040
75
(906)
(1,804)
(1,691)
(2,012)
(787)
209
—
(7,928)
249,564
(1,443)
62,564
Net income
$ 133,982 $
59,154 $
140 $
209 $
(6,485) $ 187,000
Net Sales increased 11.6% to $1,267.9 million from $1,136.5 million. Net sales to home centers, lumber dealers and dealer
distributors increased due to higher sales volumes while net sales to contractor distributors decreased due to lower sales
30
volumes. Wood construction product net sales, including sales of connectors, truss plates, fastening systems, fasteners and
shearwalls, represented 85% and 84% of the Company’s total net sales for the years ended December 31, 2020 and 2019,
respectively. Concrete construction product net sales, including sales of adhesives, chemicals, mechanical anchors, powder
actuated tools and reinforcing fiber materials, represented 15% and 16% of the Company’s total net sales for the years ended
December 31, 2020 and 2019.
Gross profit increased to $576.4 million from $492.1 million. Gross profit margins increased to 45.5% from 43.3%, mostly due
to lower material costs. The gross profit margins, including some intersegment expenses eliminated in consolidation, and
excluding other expenses that are allocated according to product group, increased to 45.5% from 42.9% for wood construction
products and decreased to 41.6% from 42.2% for concrete construction products.
Research and development and other engineering expense increased 8.0% to $50.8 million from $47.1 million, primarily due to
increases of $2.1 million in cash profit sharing expense, $1.4 million in personnel costs, $0.4 million for computer, software
and phone expense and $0.3 million in in stock-based compensation, partly offset by a decrease of $0.8 million in travel and
entertainment expense.
Selling expense decreased slightly to $112.5 million from $112.6 million, primarily due to decreases of $4.7 million in travel
and entertainment expenses, $2.4 million in marketing, promotion and advertising expenses, $0.6 million in professional fees,
$0.6 million in lease expense and $0.6 million in royalty expense, which was partly offset by increases of $3.8 million in cash
profit sharing expense, $3.5 million in personnel costs, $1.3 million in sales commissions and $0.4 million in stock-based
compensation expense.
General and administrative expense increased 2.4% to $161.0 million from $157.3 million, primarily due to increases of $7.0
million in cash profit sharing expense, $3.2 million in personnel costs, $1.8 million in computer costs including software
subscription and licensing fees, $1.6 million in depreciation and amortization expense $0.8 million in insurance expense, and
$0.7 million in stock-based compensation, which was partly offset by decreases of $5.6 million in consulting and other
professional fees, $3.0 million in travel and entertainment expense, $1.1 million in bad debt expense, $1.0 million in legal fees
and $0.5 million in facilities expense. Costs associated with the SAP, including implementation and support costs of $13.2
million were the same in both years. These expenses were primarily for professional fees and 2020 and 2019 included $2.2
million and $2.1 million, respectively, in incremental related amortization expense.
Gain on sale of assets - In November 2019, the Company sold a facility that was used for selling and distributing. The
Company received net proceeds of $9.4 million, which resulted in a pre-tax gain of $5.6 million.
Our effective income tax rate increased to 25.1% from 24.9%.
Net income was $187.0 million compared to $134.0 million. Diluted net income per share of common stock was $4.27
compared to $2.98.
Net Sales
The following table shows net sales by segment for the years ended December 31, 2019 and 2020, respectively:
(in thousands)
December 31, 2019
December 31, 2020
Increase
Percentage increase
North
America
$ 972,849
1,101,891
$ 129,042
Europe
$ 155,144
156,713
$ 1,569
13.3 %
1.0 %
Asia/
Pacific
$ 8,546
9,341
795
9.3 %
$
Total
$ 1,136,539
1,267,945
$ 131,406
11.6 %
31
The following table shows segment net sales as percentages of total net sales for the years ended December 31, 2019 and 2020,
respectively:
Percentage of total 2019 net sales
Percentage of total 2020 net sales
Gross Profit
North
America
Europe
Asia/
Pacific
86 %
87 %
14 %
12 %
— %
1 %
Total
100 %
100 %
The following table shows gross profit by segment for the years ended December 31, 2019 and 2020, respectively:
(in thousands)
December 31, 2019
December 31, 2020
Increase
Percentage increase
* The statistic is not meaningful or material.
North
America
$ 435,738
517,380
$ 81,642
Europe
$ 53,906
55,541
$ 1,635
Asia/
Pacific
Admin &
All Other
Total
$
$
2,692 $
3,477
785 $
(206) $ 492,130
(14) 576,384
192 $ 84,254
18.7 %
3.0 %
*
*
17.1 %
The following table shows gross profit margins by segment for the years ended December 31, 2019 and 2020, respectively:
2019 gross profit margin
2020 gross profit margin
* The statistic is not meaningful or material.
North America
North
America
44.8 %
47.0 %
Europe
34.7 %
35.4 %
Asia/
Pacific
31.5 %
37.2 %
Admin &
All Other
*
*
Total
43.3 %
45.5 %
•
•
•
•
•
•
Net sales increased 13.3% primarily due to increased sales volume. Canada's net sales increased in local currency from
higher volumes, but were negatively affected by approximately $0.7 million due to foreign currency translation.
Gross profit margin increased to 47.0% from 44.8%, primarily due to decreases in raw material costs, partly offset by
increased labor, factory overhead and warehouse costs.
Research and development and engineering expense increased $3.6 million, primarily due to increases of $2.1 million in
cash profit sharing expense, $1.0 million in personnel costs, $0.3 million in stock-based compensation and $0.3 million
in computer, software and phone expense, partly offset by a decrease of $0.7 million in travel and entertainment
expenses.
Selling expense increased $0.6 million, primarily due to increases of $3.7 million in cash profit sharing expense, $3.1
million in personnel costs, $1.2 million in sales commissions and $0.4 million in stock-based compensation expense,
partly offset by decreases of $3.8 million in travel and entertainment expenses, $1.9 million in marketing, promotion and
advertising expenses, $0.5 million in professional fees, $0.6 million in royalty expense and $0.5 million in lease expense.
General and administrative expense decreased $0.9 million, primarily due to decreases of $5.4 million in consulting and
other professional fees, $2.1 million in travel and entertainment expense, $1.0 million in legal fees, $0.9 million in bad
debt expense and $0.5 million in facilities expense, partly offset by increases of $3.8 million in cash profit sharing
expense, $1.9 million in personnel costs, $1.8 million in computer costs including software subscription and licensing
fees, $1.0 million in depreciation and amortization expense and $0.3 million in stock-based compensation. Costs
associated with SAP implementation and support of $10.5 million were the same in both years.
Gain on sale of assets - In November 2019, the Company sold a sales and distribution facility for proceeds of $9.4
million, net of closing costs, which resulted in a gain of $5.6 million.
32
•
Income from operations increased $72.9 million, mostly due to higher gross margins, partly offset by higher operating
expenses and the gain on sale in 2019.
Europe
•
•
•
•
•
Net sales increased 1.0%, primarily due to approximately $2.2 million of positive foreign currency translations resulting
from some Europe currencies strengthening against the U.S. dollar. In local currency, Europe net sales decreased
primarily due to lower sales volume.
Gross profit margin increased to 35.4% from 34.7%, primarily due to decreases in material costs, partly offset by
increases in labor, warehouse and shipping costs.
Selling expense decreased $0.5 million primarily due to decreases of $0.8 million in travel and entertainment costs and
$0.3 million in marketing, promotion and advertising expenses, partly offset by an increase of $0.5 million in personnel
costs.
General and administrative expenses include costs associated with SAP implementation and support of $2.5 million, an
increase of $0.1 million over the prior year. These expenses were primarily for professional fees.
Income from operations increased $1.6 million, mostly due to the increases in gross margins and slightly lower operating
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, 2020 and 2019.
Administrative and All Other
•
General and administrative expense increased $4.6 million, primarily due to increases of $3.0 million in cash profit
sharing expense, $0.7 million in insurance expense, $0.3 million in stock-based compensation and $0.2 million in
personnel expense.
Comparison of the years ended December 31, 2019 and 2018 are incorporated by reference to Form 10-K 2019 filing
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 makes estimates for obsolescence to the gross value of inventory. The Company
estimates net realizable value based on estimated selling price less further costs through 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. The
33
Company believes that this approach is suitable for impairments of slow-moving and obsolete inventory. When impairments are
established, a new cost basis of the inventory is created. Unexpected changes in market demand, building codes or buyer
preferences could reduce the rate of inventory turnover and require the Company to recognize more obsolete inventory.
Goodwill and Other Intangible Assets
Our goodwill balance is not amortized to expense, and we may assess qualitative factors to determine whether it is more likely
than not that the fair value of each reporting unit is less than its carrying amount as a basis for determining whether it is
necessary to complete quantitative impairment assessments. The Company evaluates the recoverability of goodwill in
accordance with Accounting Standard Codification (“ASC”) Topic 350, “Intangibles - Goodwill and Other,” annually, or more
frequently if an event occurs or circumstances change in the interim that would more likely than not reduce the fair value of the
asset below its carrying amount.
The Company identified a reporting unit whereby the fair value was less than its carrying amount using quantitative methods
during its annual review in 2018, and as a result, recognized an impairment of all associated goodwill in the fourth quarter of
fiscal 2018. In 2020 and 2019, we performed qualitative assessments, taking into consideration the current market value of the
company, any changes in management, key personnel, strategy and any relevant macroeconomic conditions (e.g. general
economic conditions, limiting access to capital). Based on our qualitative assessments we concluded that the fair value of the
reporting units substantially exceeded the respective reporting unit's carrying value, including goodwill.
Intangible assets acquired are recognized at their fair value at the date of acquisition. Finite-lived intangibles are amortized over
their applicable useful lives. We monitor conditions related to these assets to determine whether events and circumstances
warrant a revision to the remaining amortization or depreciation period. We test these assets for potential impairment annually
and whenever management concludes events or changes in circumstances indicate that the carrying amount may not be
recoverable.
Revenue from Contracts with Customers
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).
Volume rebates, discounts and rights of return are accounted for as variable considerations because the transaction price is
either uncertain until the customer completes or fails the specified volumes or returned product are not returned by the return
period. The Company estimates allowances based on historical experience from prior periods and the customer’s historical
purchasing pattern. These estimates are deducted from revenues and are reevaluated periodically during the reporting period.
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 on hand, our cash flow from operations and our $300.0 million
credit facility that expires on July 23, 2022. See "Note 13 — Debt" to the Company's Consolidated Financial Statements. As of
December 31, 2020, there were no amounts outstanding under this facility.
Our principal uses of liquidity include the costs and expenses associated with our operations, including financing working
capital requirements and continuing our capital allocation strategy, which includes supporting capital expenditures,
repurchasing our common stock, paying cash dividends, and financing other investment opportunities over the next twelve
months.
As of December 31, 2020, our cash and cash equivalents consisted of deposits and money market funds held with established
national financial institutions, and includes $74.6 million held in the local currencies of our foreign operations and could be
subject to additional taxation if repatriated to the U.S. The Company maintains a permanent reinvestment assertion on its
foreign earnings relative to remaining cash held outside the U.S.
34
The following table presents selected financial information as of December 31, 2020, 2019 and 2018, respectively:
(in thousands)
Cash and cash equivalents
Property, plant and equipment, net
Equity investment, goodwill and intangible assets
Working capital
At December 31,
2020
2019
2018
$
274,639 $
230,210 $
160,180
255,184
165,110
559,078
249,012
159,430
482,000
254,597
157,139
447,949
The following table presents the significant categories of cash flows for the twelve months ended December 31, 2020, 2019 and
2018, respectively:
(in thousands)
Net cash provided by (used in):
Operating activities
Investing activities
Financing activities
Years Ended December 31,
2020
2019
2018
$
207,572 $
205,662 $
(39,853)
(126,777)
(28,021)
(108,154)
160,080
(10,249)
(155,393)
Cash flows from operating activities result primarily from our earnings or losses before depreciation and amortization, and are
also affected by changes in operating assets and liabilities which consist primarily of working capital balances. As a building
materials manufacturer, our 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 2020, operating activities provided $207.6 million in cash and cash equivalents, as a result of $187.0 million from net income
and $62.0 million from non-cash adjustments to net income which includes depreciation and amortization, stock-based
compensation and non-cash lease expense, partially offset by a decrease of $41.4 million for the net change in operating assets
and liabilities primarily from increases of $27.2 million in inventory and $22.1 million in trade accounts receivables, partly
offset by an increase of $11.4 million in trade accounts payable. Cash used in investing activities of $39.9 million during the
year ended December 31, 2020, consisted primarily of $37.9 million for machinery and equipment, software development and
office equipment, as well as the purchase of an intangible asset for $5.3 million in cash. Cash used in financing activities of
$126.8 million during the year ended December 31, 2020, consisted primarily of $76.2 million for the repurchase of the
Company’s common stock and $40.4 million used to pay cash dividends.
Cash flows from operating activities years ended December 31, 2019 and 2018 are incorporated by reference to Form 10-K
2019 filing
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 capital spending in 2018, 2019 and 2020 was $29.3 million, $37.5 million and $37.9 million, respectively, which
was primarily used for real estate improvements, machinery and equipment purchases and software in development. Also
in 2020, we purchased an intangible asset of $6.7 million, including $1.7 million in deferred payments to be made over
the next couple of years. Based on current information and subject to future events and circumstances, we estimate that
our full-year 2021 capital spending will be approximately $50 million to $55 million, including capital projects
postponed in 2021 out of liquidity concerns from the COVID-19 pandemic and $10 to $13 million in maintenance type
capital expenditures, assuming all such projects will be completed by the end of 2021.
35
•
•
•
•
For 2020, we purchased and received 1,053,314 shares of the Company’s common stock on the open market at an
average price of $72.33 per share, for a total of $76.2 million under a previously announced $100.0 million share
repurchase authorization (which expired at the end of 2020).
In total, as illustrated in the table below, we have repurchased over seven million shares of the Company’s common
stock, which represents approximately 15.7% of our shares of common stock outstanding at the beginning of 2015.
Including dividends, we have returned cash of $637.8 million, which represents 70.2% of our total cash flow from
operations during the same period.
On December 16, 2020, our 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, 2021 through December 31, 2021.
On January 22, 2021, the Board of Directors declared a cash dividend of $0.23 per share, estimated to be $10.0 million in
total. Such dividend is scheduled to be paid on April 22, 2021, to stockholders of record on April 1, 2021.
The following table presents our dividends paid and share repurchases for the period from January 1, 2015 through
December 31, 2020, in aggregated amounts:
(in thousands)
January 1 - December 31, 2020
January 1 - December 31, 2019
January 1 - December 31, 2018
January 1 - December 31, 2017
January 1 - December 31, 2016
January 1 - December 31, 2015
Total
Contractual Obligations
Number of Shares
Repurchased
Cash Paid for
Repurchases
Cash Paid for
Dividends
Total
1,053 $
972
1,955
1,138
1,244
1,339
76,189
60,816
110,540
70,000
53,502
47,144
40,400
$
40,258
39,891
36,981
32,711
29,352
7,701 $
418,191 $
219,593
$
116,589
101,074
150,431
106,981
86,213
76,496
637,784
The following table summarizes our known material contractual obligations and commitments as of December 31, 2020:
Payments Due by Period
Total
all
periods
Less
than 1
year
1 — 3
years
3 — 5
years
More
than 5
years
Contractual Obligation (in thousands)
Primary line-of credit annual facility fees (1)
Operating lease obligations, including imputed interest (2)
Purchase obligations (3)
—
9,685
Total
(1)Includes annual facility fees on the Company’s primary line-of-credit facility. The Company’s primary line-of-credit facility requires the Company pay an
annual facility fee from 0.20% to 0.35%, depending on the Company’s leverage ratio, on the unused portion of the facilities.
(2)Refer to Note 111 - Leases of the Notes to Consolidated Financial Statements (Part II, Item 8 of this Form 10-K)
(3)Consists of other purchase commitments related to facility equipment, consulting services, and 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.
$ 85,361 $ 48,832 $ 16,496 $ 10,348 $
300 $
15,613
— $
10,348
900 $
46,342
600 $
10,696
—
9,685
37,536
38,119
583
$
Off-Balance Sheet Arrangements
The Company did not have any off-balance sheet arrangements as of December 31, 2020.
36
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 liability when we believe that it is both probable that a loss has been incurred, and the amount is
reasonably estimable. Significant judgment is required to determine both probability of a loss 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.
See “Item 3 — Legal Proceedings” above and “Note 14 — Commitments and Contingencies” to the Company’s Consolidated
Financial Statements.
Inflation and Raw Materials
We believe that the effect of inflation has not been material in recent years, as general inflation rates have remained relatively
low. Our main raw material is steel, and as such, increases in steel prices may adversely affect our gross profit margin if we
cannot recover the higher costs through price increases. 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, 2020.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
We have operations both within the U.S. 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 Exchange Risk
We transact business in various foreign countries and may therefore be exposed to foreign currency exchange rate risk. We
have manufacturing facilities in China, the United Kingdom, Denmark, France, Germany, Poland, Portugal, Sweden and
Switzerland. We sell and distribute products throughout the world and also purchase raw materials from suppliers in foreign
countries. As a result, our financial results are affected by changes in foreign currency exchange rates and economic conditions
in the foreign markets in which we do business. In fiscal 2020, our consolidated financial results are impacted by the translation
of revenue and expenses in foreign currencies into U.S. dollars. These translation impacts are primarily affected by changes in
exchange rates between the U.S. dollar and with European and Chinese Yuan currencies.
We may manage our exposure to transactional exposures by entering into foreign currency forward contracts for forecasted
transactions and projected cash flows for foreign currencies in future periods. In 2020, we entered into financial contracts to
hedge the risk of fluctuations associated with the Chinese Yuan.
The translation adjustment on the Company’s underlying assets and liabilities resulted in an increase in accumulated other
comprehensive income of $14.2 million for the year ended December 31, 2020.
37
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.
38
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 Firm
Consolidated Balance Sheets at December 31, 2020 and 2019
Consolidated Statements of Operations for the years ended December 31, 2020, 2019 and 2018
Consolidated Statements of Stockholders' Equity for the years ended December 2020, 2019 and 2018
Consolidated Statements of Cash Flows for the years ended December 31, 2020, 2019 and 2018
Notes to the Consolidated Financial Statements
Financial Statement Schedule
Schedule II — Valuation and Qualifying Accounts
40
43
44
45
46
47
71
39
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders
Simpson Manufacturing Co., Inc.
Opinion on the financial statements
We have audited the accompanying consolidated balance sheets of Simpson Manufacturing Co. Inc., a Delaware corporation
and subsidiaries (the “Company”) as of December 31, 2020 and 2019, the related consolidated statements of operations,
stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2020, and the related notes
and financial statement schedule (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, 2020 and 2019, and the results
of its operations and its cash flows for each of the three years in the period ended December 31, 2020, 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, 2020, 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 25, 2021 expressed an unqualified opinion.
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 regarding 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.
Critical audit matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that
was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that
are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The
communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and
we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the
accounts or disclosures to which it relates.
Inventory valuation
As described further in Note 1 to the financial statements, the Company accounts for inventory at the lower of cost or net
realizable value. The Company impairs slow-moving products by comparing inventories on hand to projected demand.
Unexpected changes in market demand, building codes or buyer preferences could reduce the rate of inventory turn and require
the Company to recognize an impairment. We identified the net realizable value of inventory as a critical audit matter.
The principal considerations for our determination that the net realizable value of inventory is a critical audit matter is that the
evaluation of slow moving and obsolete inventory relies on the use of management judgment to forecast future demand and
assess market conditions, resulting in estimation uncertainty. Auditor subjectivity and effort was required to evaluate
management’s judgments and assumptions.
Our audit procedures related to net realizable value of inventory included the following, among others.
• We tested the design and operating effectiveness of controls related to the calculation of the net realizable value of
inventory, including controls over the review of the demand forecast.
• We tested the completeness and accuracy of the underlying data used in the calculation of net realizable value.
• We evaluated the reasonableness of management’s demand forecasts by performing the following:
◦
Compared prior year forecasts with actual results to evaluate management’s ability to estimate future demand.
40
◦
◦
Assessed forecasted demand for consistency with evidence obtained in other areas of the audit.
Performed a sensitivity analysis on demand assumptions to determine the impact on the net realizable value.
• We recalculated and assessed the appropriateness of the formulaic calculation and management adjustments by making
inquiries of management and various individuals outside of the accounting team to obtain support for selected
adjustments and obtain supporting documentation when applicable.
We have served as the Company’s auditor since 2015.
/s/ Grant Thornton LLP
San Francisco, California
February 25, 2021
41
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 Co, Inc., (a Delaware corporation) and
subsidiaries (the “Company”) as of December 31, 2020, 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, 2020, 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, 2020, and our
report dated February 25, 2021 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 Financing 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 25, 2021
42
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
Operating lease right-of-use assets
Goodwill
Equity investment (see Note 1)
Intangible assets, net
Other noncurrent assets
Total assets
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Trade accounts payable
Accrued liabilities and other current liabilities
Total current liabilities
Operating lease liabilities
Deferred income tax and other long-term liabilities
Total liabilities
Commitments and contingencies (see Note 14)
Stockholders’ equity
Common stock, par value $0.01; authorized shares, 160,000; issued and outstanding shares,
43,326 and 44,209 at December 31, 2020 and 2019, respectively
Additional paid-in capital
Retained earnings
Treasury stock
Accumulated other comprehensive loss
Total stockholders’ equity
Total liabilities and stockholders’ equity
December 31,
2020
2019
$ 274,639 $ 230,210
139,364
251,907
19,426
640,907
249,012
35,436
131,879
2,480
25,071
10,581
$ 1,232,569 $ 1,095,366
165,128
283,742
29,630
753,139
255,184
45,792
135,844
2,466
26,800
13,344
$
48,271 $ 33,351
125,556
145,790
158,907
194,061
27,930
37,199
16,572
20,366
203,409
251,626
433
284,007
720,441
(13,510)
(10,428)
980,943
442
280,216
645,507
(9,379)
(24,829)
891,957
$ 1,232,569 $ 1,095,366
The accompanying notes are an integral part of these consolidated financial statements
43
Simpson Manufacturing Co., Inc. and Subsidiaries
Consolidated Statements of Operations
(In thousands, except per share data)
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
Interest expense, net and other
Foreign exchange gain (loss), net and other
Income before taxes
Provision for income taxes
Net income
Other comprehensive income
Translation adjustment
Unamortized pension adjustments, net of taxes
Unrealized gains on derivative instruments
Comprehensive income
Net income per common share:
Basic
Diluted
Weighted average number of shares of common stock outstanding
Basic
Diluted
Years Ended December 31,
2020
2019
2018
$ 1,267,945 $ 1,136,539 $ 1,078,809
691,561
576,384
50,807
112,517
161,029
324,353
644,409
492,130
47,058
112,568
157,274
316,900
(332)
—
(6,024)
—
598,522
480,287
43,056
109,931
158,568
311,555
(10,579)
6,686
$
252,363 $
181,254 $
172,625
(2,012)
(787)
249,564
62,564
(1,730)
(1,167)
178,357
44,375
(634)
137
172,128
45,495
$
187,000 $
133,982 $
126,633
$
$
$
14,172
885
(12,911)
(161)
(1,064)
390
—
376
—
201,401 $
133,803 $
114,098
4.28 $
4.27 $
3.00 $
2.98 $
2.74
2.72
43,709
43,841
44,735
44,921
46,213
46,540
The accompanying notes are an integral part of these consolidated financial statements
44
Simpson Manufacturing Co., Inc. and Subsidiaries
Consolidated Statements of Stockholders’ Equity
For the years ended December 31, 2018, 2019 and 2020
(In thousands, except per share data)
Balance at January 1, 2018
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 $44.26 per
share
Balance at December 31, 2018
Net income
Translation adjustment, net of tax
Pension adjustment, net of tax
Stock-based compensation expense
Repurchase of common stock
Retirement of common stock
Cash dividends declared on common
stock, $0.91 per share
Shares issued from release of restricted
stock units
Common stock issued at $57.41 per
share
Balance at December 31, 2019
Net income
Translation adjustment, net of tax
Pension adjustment, net of tax
Unrealized gains on derivative
instruments
Stock-based compensation expense
Repurchase of common stock
Retirement of common stock
Cash dividends declared on common
stock, $0.92 per share
Shares issued from release of restricted
stock units
Common stock issued at $88.31 per
share
Common Stock
Shares
Par Value
Additional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Treasury
Stock
Total
46,745 $
—
—
—
—
23
—
(1,955)
—
473 $ 260,157 $ 676,644 $
—
—
—
—
—
—
—
(22)
—
— 126,633
—
—
—
695
10,334
10,000
—
—
410
—
—
—
— (135,518)
—
(39,962)
177
2
(5,147)
—
(12,496) $ (40,000) $ 884,778
— 126,633
—
(12,911)
—
(12,911)
376
—
376
791
—
381
695
—
—
—
10,334
—
— (120,540) (110,540)
—
135,540
—
—
—
(39,962)
—
(5,145)
8
44,998
—
—
—
—
(972)
—
—
178
5
44,209
—
—
—
—
—
(1,053)
—
—
166
4
—
—
465
453 276,504 628,207
— 133,982
—
—
—
—
—
—
—
—
9,325
—
—
—
—
(76,424)
—
(13)
—
—
465
(24,650) (25,000) 855,514
133,982
885
(1,064)
9,325
(60,816)
—
—
—
885
—
(1,064)
—
—
— (60,816)
— 76,437
—
—
(40,258)
2
(5,905)
—
—
—
—
(40,258)
—
(5,903)
—
—
292
442 280,216 645,507
— 187,000
—
—
—
—
—
—
—
—
—
—
(10)
—
—
11,410
—
—
—
—
—
(72,048)
—
(40,018)
1
(7,960)
—
—
341
433 $ 284,007 $ 720,441 $
—
(24,829)
—
14,172
(161)
—
292
(9,379) 891,957
187,000
14,172
(161)
—
—
—
390
—
—
— (76,189)
— 72,058
390
11,410
(76,189)
—
—
—
—
(40,018)
—
(7,959)
—
341
(10,428) $ (13,510) $ 980,943
—
Balance at December 31, 2020
43,326 $
The accompanying notes are an integral part of these consolidated financial statements
45
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 and other
Depreciation and amortization
Noncash lease expense
Impairment of goodwill
Deferred income taxes
Noncash compensation related to stock plans
Provision for (benefit from ) doubtful accounts
Changes in operating assets and liabilities, net of effects of acquisitions and dispositions:
Trade accounts receivable
Inventories
Other current assets
Trade accounts payable
Accrued liabilities and other current liabilities
Other noncurrent assets and liabilities
Net cash provided by operating activities
Cash flows from investing activities
Capital expenditures
Acquisitions, net of cash acquired
Proceeds from sale of property and equipment
Net cash used in investing activities
Cash flows from financing activities
Proceeds from lines of credit
Repayments of line of credit and capital leases
Debt issuance costs
Deferred and contingent consideration paid for acquisitions
Repurchase of common stock
Issuance of Company’s common stock
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 increase (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
Contingent consideration for acquisition
Issuance of Company’s common stock for compensation
Dividends declared but not paid
Years Ended December 31,
2019
2018
2020
$
187,000 $
133,982 $
126,633
(318)
38,767
6,984
—
3,179
13,507
(98)
(22,107)
(27,219)
(845)
11,360
7,754
(10,392)
207,572
(37,909)
(2,797)
853
(39,853)
(6,023)
38,402
7,136
—
2,557
10,434
977
6,096
23,655
(3,808)
(845)
(145)
(6,756)
205,662
(37,526)
(2,650)
12,155
(28,021)
169,164
(170,680)
(712)
—
(76,189)
—
(40,400)
(7,960)
(126,777)
3,487
44,429
230,210
274,639 $
16,647
(17,883)
—
—
(60,816)
—
(40,197)
(5,905)
(108,154)
543
70,030
160,180
230,210 $
(12,357)
39,393
—
6,686
4,950
11,176
569
(12,573)
(26,425)
5,297
4,670
13,804
(1,743)
160,080
(29,310)
(2,007)
21,068
(10,249)
—
(147)
—
(364)
(110,540)
695
(39,891)
(5,146)
(155,393)
(2,772)
(8,334)
168,514
160,180
1,598 $
63,035
143 $
37,730
160
40,123
3,719 $
547
341
9,999
557 $
—
292
10,170
908
—
465
9,988
$
$
$
The accompanying notes are an integral part of these consolidated financial statements
46
Simpson Manufacturing Co., Inc. and Subsidiaries
Notes to Consolidated Financial Statements
1. 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 U.S.,
Canada, Europe and Pacific Rim. A significant portion of the Company’s business is 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. 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 ("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. Management believes that these consolidated
financial statements include all normal and recurring adjustments necessary for a fair presentation under GAAP. Uncertainty
created by the COVID-19 pandemic will likely impact our operations, customers, and various areas of risk. We assessed certain
accounting matters that require the use of estimates and assumptions in context with the known and projected future impacts of
COVID-19. The Company's actual results could differ materially from those estimates.
Cash Equivalents
The Company classifies investments that are highly liquid and have maturities of three months or less at the date of purchase as
cash equivalents. As of December 31, 2020 and 2019, the value of these investments were $45.4 million and $0.1 million,
respectively, consisting of U.S. Treasury securities and money market funds. The value of the investments is based on cost,
which approximates fair value based on Level 1 inputs.
Current Estimated Credit Loss - Allowance for doubtful accounts
The Company maintains an allowance for doubtful accounts receivable for estimated future expected credit losses resulting
from customers' failure to make payments on its accounts receivable. The Company determines the estimate of the allowance
for doubtful accounts receivable by considering several factors, including (1) specific information on the financial condition
and the current creditworthiness of customers, (2) credit rating, (3) payment history and historical experience, (4) aging of the
accounts receivable, and (5) reasonable and supportable forecasts about collectability. The Company also reserves 100% of the
amounts deemed uncollectible due to a customer's deteriorating financial condition or bankruptcy.
Every quarter, the Company evaluates the customer group using the accounts receivable aging report and its best judgment
when considering changes in customers' credit ratings, level of delinquency, customers' historical payments and loss
experience, current market and economic conditions, and expectations of future market and economic conditions.
47
The changes in the allowance for doubtful accounts receivable for the year ended December 31, 2020 are outlined in the table
below:
(in thousands)
Balance
at
December 31,
2019
Amounts
Charged to
Expense Write-Offs1
Balance
at
December 31,
2020
Allowance for Doubtful Accounts
$
1,935 $
(98) $
(273) $
2,110
1Amount is net of recoveries and the effect of foreign currency fluctuations for the year ended December 31, 2020
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 in 17 banks, and at times these cash and investments may be in excess of amounts insured by the
Federal Deposit Insurance Corporation (FDIC). However, we have not experienced any losses on these accounts.
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 a cost determined on a weighted
average basis; and
In-process products and finished goods — the cost of direct materials and labor plus attributable overhead based on
a normal level of activity.
The Company applies net realizable value and makes estimates for obsolescence to the gross value of the inventory. Estimated
net realizable value is 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 the 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. An unexpected change in market demand, building
codes or buyer preferences could reduce the rate of inventory turnover and require the recognition of 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 its consolidated results of operations, cash flows or financial position.
Equity Investments
The Company accounts for investments and ownership interests under equity method accounting when it has the ability to
exercise significant influence, but does not have a controlling financial interest. The Company records its interest in the net
earnings of its equity method investees, along with adjustments for unrealized profits or losses within earnings or loss from
equity interests in the consolidated statements of operations. The investment is reviewed for impairment whenever factors
indicate that its carrying amount might not be recoverable and the decrease in value, if any, is recognized in the period the
impairment occurs in the consolidated statement of operations.
In December 2016, the Company acquired a 25% equity interest in Ruby Sketch Pty Ltd. (“Ruby Sketch”), an Australian
proprietary limited company, for $2.5 million. The Company recognized this investment as an asset at cost, and has accounted
for its ownership interest using the equity accounting method. The Company has no obligation to make any additional capital
48
contributions to Ruby Sketch. The carrying amount of the investment as of December 31, 2020 and December 31, 2019 was
approximately $2.5 million.
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. The carrying amounts of trade accounts receivable, accounts payable, accrued liabilities and other current
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 and equity investment are 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. The
fair value of foreign currency forward contracts, calculated based on Level 1 inputs, was not material as of December 31, 2020.
Derivative Instruments - Foreign Currency Contracts
The Company uses derivative instruments as a risk management tool to mitigate the potential impact of certain market risks.
Foreign currency exchange rate risk is the primary market risk the Company manages through the use of derivative instruments,
which are accounted for as cash flow hedges under the accounting standards and carried at fair value as other current assets or
other current liabilities in the consolidated balance sheets. Net deferred gains and losses related to changes in fair value are
included in accumulated other comprehensive loss, a component of shareholders' equity in the consolidated balance sheets, and
are reclassified into the line item in the consolidated statement of income in which the hedged items are recorded in the same
period the hedged item affects earnings. Changes in fair value of any derivatives that are determined to be ineffective are
immediately reclassified from other comprehensive income into earnings. The cash flow impact of the Company's derivative
instruments is primarily included in the consolidated statement of cash flows in net cash provided by operating activities. Refer
to Note 8.
Business Combinations and Asset Acquisitions
Business combinations are accounted for under the acquisition method in accordance with ASC 805, Business Combinations.
The acquisition method requires identifiable assets acquired and liabilities assumed and any noncontrolling interest in the
business acquired be recognized and measured at fair value on the acquisition date, which is the date that the acquirer obtains
control of the acquired business. The amount by which the fair value of consideration transferred as the purchase price exceeds
the net fair value of assets acquired and liabilities assumed is recorded as goodwill.
Acquisitions that do not meet the definition of a business under the ASC are accounted for as an acquisition of assets, whereby
all of the cost of the individual assets acquired and liabilities assumed, including certain transactions costs, are allocated on a
relative fair value basis. Accordingly, goodwill is never recognized in an asset acquisition.
Property, Plant and Equipment
Property, plant and equipment are carried at cost. Major renewals and betterments are capitalized while 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 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.
49
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 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. The weighted-average
amortization period for all amortizable intangibles on a combined basis is 6.5 years.
Preferred Stock
The Company’s Board of Directors has the authority to issue 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 of Directors. Accordingly, the
Board of Directors 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 dividends, if any, as may be declared from time to time by the Board of Directors 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 of
Directors, 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 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, changes in unamortized pension adjustments and changes in the fair
value of derivative instruments classified as cash flow hedge instruments, all of which are recorded directly in accumulated
other comprehensive income within stockholders’ equity.
Foreign Currency Translation
The local currency is the functional currency for 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 presented below operating income.
Revenue Recognition
Generally, the Company’s revenue contract with a customer exists when goods are shipped, and services (if any) 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 term 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 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 additional information.
50
Sales Taxes
The Company presents taxes collected and remitted to governmental authorities on a net basis in the consolidated statements of
operations.
Cost of Sales
Cost of sales includes material, labor, factory and tooling overhead, shipping, and freight costs. Major components of these
expenses are steel and other materials, 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.
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 $10.1 million, $10.9 million and $10.8 million in 2020, 2019 and 2018, respectively. Product research and development
expenses 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 2020, 2019 and 2018, the Company
incurred software development expenses related to its continued 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 and were $8.2 million, $7.9 million and $7.6 million in 2020, 2019, and
2018, 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 Leases
The Company has operating and finance leases for certain facilities, equipment, autos and data centers. As an accounting policy
for short-term leases, the Company elected to not recognize a right-of-use asset ("ROU asset") and liability if, at the
commencement date, the lease (1) has a term of 12 months or less and (2) does not include renewal and purchase options that
the Company is reasonably certain to exercise. Monthly payments on short-term leases are recognized on a straight-line basis
over the full lease term.
Accounting for Stock-Based Compensation
The Company recognizes stock-based expense related to the estimated fair value of restricted stock awards on a straight-line
basis, net of estimated 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 performance
conditions are based on the Company's achievement of revenue growth and return on invested capital over the performance
51
period, and are evaluated for the probability of vesting at each reporting period end with changes in expected results recognized
as an adjustment to expense. The assumptions used to calculate the fair value of restricted stock grants 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.
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 are included in the diluted per-share calculations using the treasury stock method for all periods when
the effect of their inclusion is dilutive.
Recently Adopted Accounting Pronouncements
In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit
Losses on Financial Instruments.” ASU 2016-13 amendments provide guidance on accounting for current expected credit losses
on financial instruments that are not accounted for at fair value through net income, including loans held for investment, held-
to-maturity debt securities, trade and other receivables, net investment in leases and other commitments to extend credit held by
a reporting entity at each reporting date. The required measurement methodology is based on an expected loss model that
includes historical experience, current conditions, and reasonable and supportable forecasts. ASU 2016-13 eliminates the
probable incurred loss recognition in current GAAP. The Company adopted ASU 2016-13 prospectively on January 1, 2020.
Historically, the Company's actual credit losses have not been material. The Company's financial assets in the scope of ASU
2016-13 mainly consist of short-term trade receivables. In estimating expected credit loss, management uses the aging method,
such as pooling receivables based on the levels of delinquency and applying historical loss rates, adjusted for current conditions
and reasonable and supportable forecasts, to each pool. The Company will regularly reassess the customer groups by using its
best judgment when considering changes in customers' credit ratings, customers' historical payments and loss experience,
current market and economic conditions, and expectations of future market and economic conditions. Adoption of ASU
2016-13 had no material effect on the Company's consolidated financial statements and footnote disclosures.
All other newly issued and effective accounting standards during 2020 were determined to be not relevant or material to the
Company.
2. Revenue from Contracts with Customers
Disaggregated revenue
The Company disaggregates net sales into the following major product groups as described in its segment information included
in these financial statements under Note 18.
Wood Construction Products Revenue. Wood construction products represented almost 85% and 84% of total net sales in the
year ended December 31, 2020 and 2019, respectively.
Concrete Construction Products Revenue. Concrete construction products represented 15% and 16% of total net sales in the
year ended December 31, 2020 and 2019, respectively.
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 after the issue date.
52
Other revenue. Service sales, representing after-market repair and maintenance, engineering activities and software license sales
and services were less than 1.0% of net sales and recognized as the services are completed or by transferring control over a
product to a customer at a point in time. 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 when
they are distinct within the context of the contract. 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, 2020, the Company had no contract assets or contract
liabilities from contracts with customers.
Other accounting considerations
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. Estimated
rebates are deducted from revenues based on the gross transaction price and 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.
53
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 Repurchases
For the Year Ended December 31,
2020
$ 187,000 $
2019
133,982 $ 126,633
2018
43,709
132
43,841
44,735
186
44,921
46,213
327
46,540
$
$
4.28 $
4.27 $
3.00 $
2.98 $
2.74
2.72
For the fiscal year ended December 31, 2020, the Company repurchased 1,053,314 shares of the Company’s common stock in
the open market at an average price of $72.33 per share, for a total of $76.2 million. As of December 31, 2020, approximately
$23.8 million was not used for repurchase under the previously announced $100.0 million share repurchase authorization
(which expired at the end of 2020). On December 16, 2020, the Company’s Board of Directors authorized the Company to
repurchase up to $100.0 million of the Company’s common stock from January 1, 2021 through December 31, 2021.
As of December 31, 2020, the Company held 150,974 shares of its common stock as treasury shares and in 2020, retired a total
of 1,028,328 of its common stock.
Comprehensive Income or Loss
The following shows the components of accumulated other comprehensive income or loss as of December 31, 2020 and 2019,
respectively:
(in thousands)
Balance at January 1, 2018
Other comprehensive gain/(loss), net of tax effect
Balance at December 31, 2018
Other comprehensive gain/(loss), net of tax effect
Balance at December 31, 2019
Other comprehensive gain/(loss), net of tax effect
Foreign
Currency
Translation
Pension
Benefit
Derivative
Instruments
$
(10,054) $
(12,911)
(22,965)
885
(22,080)
14,172
(2,442) $
757
(1,685)
(1,064)
(2,749)
(161)
— $
—
—
—
—
390
Total
(12,496)
(12,154)
(24,650)
(179)
(24,829)
14,401
Balance at December 31, 2020
$
(7,908) $
(2,910) $
390 $
(10,428)
5. Stock-Based Compensation
The Company currently maintains the Simpson Manufacturing Co., Inc. Amended and Restated 2011 Incentive Plan (the “2011
Plan”) as its only equity incentive 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. The Company currently intends to award only
performance-based stock units ("PSUs") and/or time-based restricted stock units ("RSUs").
54
The following table shows the Company’s stock-based compensation activity:
(in thousands)
Stock-based compensation expense recognized
Fiscal Years Ended December 31,
2020
2019
2018
$ 11,384 $
9,480 $ 10,356
Tax benefit of stock-based compensation expense in provision for income taxes
2,859
2,330
2,476
Stock-based compensation expense, net of tax
Fair value of shares vested
$
8,525 $
7,150 $
7,880
$ 21,921 $ 16,760 $ 15,372
Proceeds to the Company from the exercise of stock options
$
— $
— $
695
The Company allocates stock-based compensation expense amongst 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 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, 2020:
Unvested Restricted Stock Units (RSUs)
Outstanding at January 1, 2020
Awarded
Vested
Forfeited
Outstanding at December 31, 2020
Outstanding and expected to vest at December 31, 2020
Shares
(in thousands)
Weighted-
Average
Price
462 $
167
(259)
(13)
357 $
351 $
47.75 $
74.91
40.92
57.83
66.13 $
66.05 $
Aggregate
Intrinsic
Value *
(in thousands)
37,065
33,188
32,839
* The intrinsic value for outstanding and expected to vest is calculated using the closing price per share of $93.45, as reported
by the New York Stock Exchange on December 31, 2020.
During the year ended December 31, 2020, the Company granted 166,951 RSUs and PSUs to the Company’s employees,
including officers at an estimated weighted average fair value of $74.91 per share, based on the closing price (adjusted for
certain market factors primarily the present value of dividends) of the Company’s common stock on the grant date. The RSUs
and PSUs granted to the Company’s employees may be time-based, performance-based or time- and performance-based.
Certain of the PSUs 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 award 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 granted to the
Company’s employees excluding officers and certain key employees, vest ratably over the four year life of the award and
through 2019, required the underlying shares of the Company's common stock to be subject to a performance-based adjustment
during the first year and starting in 2020, were time-based awards which vest ratable over the four year life of the award.
The Company’s seven non-employee directors are entitled to receive approximately $690 thousand in equity compensation
annually. The number of shares ultimately granted are based on the average closing share price for the Company over the 60
day period prior to approval of the award in April of each year. In April 2020, the Company granted 9,239 shares of common
stock to the Company's non-employee directors, based on the average closing price of $74.66 per share. The Company
recognized expense on these shares at an estimated fair value of $58.72 per share based on the closing price of the Company's
common stock on the grant date, for a total expense of $543 thousand.
The total intrinsic value of RSUs vested during the years ended December 31, 2020, 2019 and 2018 was $21.9 million, $16.7
million and $9.8 million, respectively, based on the market value on the vest date.
As of December 31, 2020, the Company’s aggregate unamortized stock compensation expense was approximately $13.3
million, which is expected to be recognized in expense over a weighted-average period of approximately 2.1 years.
55
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. 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 12,600 shares for service through 2020, (7,400 shares to be issued and 5,200 shares of which
were settled in cash for the Company’s foreign employees) and awarded 7,000 shares for service through 2019, (4,000 shares to
be issued and 3,000 shares of which were settled in cash for the Company’s foreign employees). As a result, we recorded pre-
tax compensation charges of $1.2 million in 2020, and $0.8 million for both of the years ended December 31, 2019 and 2018,
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
7.
Inventories
The components of inventories consisted of the following:
(in thousands)
Raw materials
In-process products
Finished products
8. Derivative Instruments
December 31,
2020
2019
170,001 $
(2,110)
(2,763)
165,128 $
144,729
(1,935)
(3,430)
139,364
December 31,
2020
2019
95,777 $
21,803
166,162
283,742 $
95,575
23,672
132,660
251,907
$
$
$
$
The Company transacts business in various foreign countries and may therefore be exposed to foreign currency exchange rate
risk. The Company has established risk management programs to protect against volatility in the value of non-functional future
cash flows caused by changes in foreign currency exchange rates and tries to maintain a partial or fully hedged position for
certain transaction exposures when management considers appropriate. The Company enters into short-term foreign currency
derivatives contracts, namely forward contracts, to hedge only those currency exposures associated with cash flows
denominated in non-functional currencies. Gains and losses on the Company's derivative contracts are designed to offset losses
and gains on the transactions hedged, and accordingly, generally do not subject the Company to risk of significant accounting
losses. The Company hedges committed exposures and does not engage in speculative transactions. The credit risk of these
derivative contracts is minimized since the contracts are with a large financial institution and accordingly, fair value
adjustments related to the credit risk of the counterparty financial institution are not material.
The Company sources certain materials for its concrete products from a wholly owned subsidiary in China, and as a result is
exposed to variability in cash outflows associated with changes in the foreign exchange rate between the U.S. Dollar and the
Chinese Yuan (CNY). As of December 31, 2020, the aggregate notional amount of the Company's outstanding foreign currency
derivative contracts was to buy CNY 70.7 million by selling $10.2 million throughout fiscal 2021. These forward contracts are
accounted for as cash flow hedges under the accounting standards, and fair value is included in other current assets or other
current liabilities, as applicable, in the consolidated balance sheet as follows (in thousands):
56
Fair Value
Consolidated Balance Sheet Location
At December 31, 2020
At December 31, 2019
Assets:
Foreign currency contracts
Other current assets
$
390 $
—
Net deferred gains and losses on these contracts relating to changes in fair value are included in accumulated other
comprehensive loss ("OCI"), a component of shareholders' equity in the consolidated balance sheets, and are reclassified into
the line item in the consolidated statement of income in the which the hedged items are recorded in the same period the hedged
item affects earnings. There were no amounts recognized for gains or losses on these contracts during the year ended December
31, 2020. Changes in fair value of any forward contracts that are determined to be ineffective are immediately reclassified from
OCI into earnings. The amounts deferred in OCI are expected to be recognized as a component of cost of sales in the
consolidated statement of operations from 2021 to 2022. There were no amounts recognized due to ineffectiveness during the
year ended December 31, 2020.
9. 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,
2020
2019
$
$
28,553 $
203,421
7,091
372,923
611,988
(377,460)
234,528
20,656
255,184 $
28,092
195,210
4,911
351,379
579,592
(346,594)
232,998
16,014
249,012
Property, plant and equipment as of December 31, 2020 and 2019, includes fully depreciated assets with an original cost of
$200.5 million and $211.2 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, 2020 and 2019, the Company had capitalized software
development costs net of accumulated amortization of $29.4 million and $28.6 million, respectively, included in Machinery and
equipment and as of December 31, 2020 and 2019, $5.5 million and $3.2 million, respectively, was included in capital projects
in progress.
In November 2019, the Company sold its selling and distribution facility in British Columbia, Canada for approximately $9.5
million in net proceeds after closing costs and sale price adjustments, which resulted in an estimated gain on disposal of fixed
assets of $5.6 million.
Depreciation expense, including depreciation of equipment and amortization of internally developed software and software
acquired through capital lease arrangements, was $32.1 million, $32.6 million and $33.3 million for the years ended December
31, 2020, 2019 and 2018, respectively.
57
10. Goodwill and Intangible Assets
Goodwill
The annual changes in the carrying amount of goodwill, by segment, as of December 31, 2019 and 2020, were as follows,
respectively:
North
America
Asia
Pacific
$
Europe
(in thousands)
Balance as of January 1, 2019
Goodwill acquired
Foreign exchange
Reclassifications (1)
Balance as of December 31, 2019
Goodwill acquired
Foreign exchange
Reclassifications
Balance as of December 31, 2020
(1) Reclassifications during 2019 for an acquisition included the recognition of $481 thousand in non-compete agreements, trademarks and other, with a
corresponding reductions of $320 thousand in goodwill and $161 thousand in other assets.
96,435 $
—
129
(320)
96,244
—
67
—
96,311 $
32,471 $
1,815
14
—
34,300
106
3,661
1,335
—
139
—
1,474 $
1,344 $
—
(9)
—
Total
130,250
1,815
134
(320)
131,879
106
3,867
(8)
135,844
(8)
38,059 $
$
Goodwill Impairment Testing
The Company tests goodwill for impairment at the reporting unit level on an annual basis (in the fourth quarter). Our goodwill
balance is not amortized to expense, and we may assess qualitative factors and quantitative factors to determine whether it is
more likely than not that the fair value of each reporting unit is less than its carrying amount as a basis for determining whether
it is necessary to complete quantitative impairment assessments. The reporting unit level is generally one level below the
operating segment, which is at the country level, except for the U.S., Australia and S&P Clever reporting units.
The Company determined that the U.S. reporting unit includes four components: Northwest United States, Southwest United
States, Northeast United States and Southeast United States. The Australia reporting unit includes two components: Australia
and New Zealand. The S&P Clever reporting unit includes ten components: S&P Switzerland, S&P Poland, S&P The
Netherlands, S&P Portugal, S&P Germany, S&P France, Socom, S&P Nordic and S&P Spain. For each of these reporting
units, the Company aggregated the components because management concluded that they are economically similar and that the
goodwill is recoverable from these components working in concert.
We evaluate the recoverability of goodwill in accordance with Accounting Standard Codification (“ASC”) Topic 350,
“Intangibles - Goodwill and Other. In addition, the Company prospectively adopted as part of its review in 2018 the Financial
Accounting Standard Board (FASB) issued ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the
Test for Goodwill Impairment.
We assessed the qualitative factors related to the goodwill of the reporting units to determine whether it is necessary to perform
an impairment test. We also considered quantitative factors due to the effects of the COVID-19 pandemic. 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, including
goodwill, no further testing is required. This assessment method was utilized in our 2020 and 2019 annual goodwill impairment
test.
The 2020 and 2019 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 on 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, 2020 were
$67.1 million and $59.3 million, respectively. The aggregate amount of amortization expense of intangible assets for the years
58
ended December 31, 2020, 2019 and 2018 was $6.1 million, $5.5 million and $6.0 million, respectively. The weighted-average
remaining amortization period for all amortizable intangibles on a combined basis is 6.5 years.
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, 2020 and 2019 were as
follows:
(in thousands)
Patents
Balance at January 1, 2019
Purchases of intangibles
Amortization
Balance at December 31, 2019
Purchases of intangible assets
Amortization
Balance at December 31, 2020
(in thousands)
Unpatented Technology
Balance at January 1, 2019
Amortization
Assets acquisitions, net of cash acquired
Foreign exchange
Balance at December 31, 2019
Amortization
Foreign exchange
Balance at December 31, 2020
(in thousands)
Non-Compete Agreements,
Trademarks and Other
Balance at January 1, 2019
Purchases of intangibles assets - other
Assets acquisitions, net of cash acquired
Amortization
Foreign exchange
Reclassifications(1)
Removal of fully amortized assets
Balance at December 31, 2019
Purchases of intangible assets - licenses
Amortization
Foreign exchange
Balance at December 31, 2020
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
2,109 $
2,550
—
4,659
40
—
4,699 $
(411) $
—
(150)
(561)
—
(373)
(934) $
1,698
2,550
(150)
4,098
40
(373)
3,765
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
20,662 $
—
788
166
21,616
—
488
22,104 $
(12,344) $
(2,017)
—
—
(14,361)
(2,131)
—
(16,492) $
8,318
(2,017)
788
166
7,255
(2,131)
488
5,612
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
12,225 $
2,081
6
—
10
481
(100)
14,703
6,700
—
179
21,582 $
(3,719) $
—
—
(1,910)
—
—
100
(5,529)
(2,195)
—
(7,724) $
8,506
2,081
6
(1,910)
10
481
—
9,174
6,700
(2,195)
179
13,858
$
$
$
$
$
$
59
(1)Reclassifications during 2019 for an acquisition included $481 thousand recognized for non-compete agreements, trademarks and other, with a corresponding
reductions of $320 thousand in goodwill and $161 thousand in other assets.
(in thousands)
Customer Relationships
Balance at January 1, 2019
Acquisition
Amortization
Foreign exchange
Balance at December 31, 2019
Purchases of intangible assets
Amortization
Foreign exchange
Balance at December 31, 2020
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
$
$
17,563 $
124
—
(27)
17,660
290
—
173
18,123 $
(12,299) $
—
(1,433)
—
(13,732)
—
(1,443)
—
(15,175) $
5,264
124
(1,433)
(27)
3,928
290
(1,443)
173
2,948
6,304
4,205
3,339
2,290
2,022
8,024
26,184
At December 31, 2020, estimated future amortization of intangible assets was as follows:
(in thousands)
2021
2022
2023
2024
2025
Thereafter
$
$
Indefinite-Lived Intangible Assets
As of December 31, 2020, the only indefinite-lived intangible asset was a trade name in the amount of $0.6 million.
Definite-lived and indefinite-lived assets, net, by segment as of December 31, 2020 and 2019 were as follows:
(in thousands)
Total Intangible Assets
North America
Europe
Total
(in thousands)
Total Intangible Assets
North America
Europe
Total
11. Leases
Gross
Carrying
Amount
December 31, 2019
Accumulated
Amortization
Net
Carrying
Amount
33,756 $
25,500
59,256 $
(19,173) $
(15,012)
(34,185) $
14,583
10,488
25,071
At December 31, 2020
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
40,786 $
26,341
67,127 $
(22,697) $
(17,630)
(40,327) $
18,089
8,711
26,800
$
$
$
$
On January 1, 2019, the Company adopted ASU 2016-02 using the optional transition method. The Company has operating
leases for certain facilities, equipment and autos. The existing operating leases expire at various dates through 2025, some of
which include options to extend for up to five years. The Company measures its lease liability as the present value of the lease
payments to be made over the lease term discounted using the Company’s incremental borrowing rate. The Company measures
60
its ROU assets at the amount at which the lease liability is recognized plus initial direct costs incurred or prepayment amounts.
The ROU assets are amortized on a straight-line basis over the lease term.
Finance Lease Obligations
During 2017, the Company entered into two to 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.
The following table provides a summary of leases included on the consolidated balance sheets, consolidated statements of
earnings, and consolidated statements of cash flows as of December 31, 2020:
Consolidated Balance Sheets Line Item
At December 31,
2020
2019
(in thousands)
Operating leases
Assets
Operating leases
Liabilities
Operating-current
Operating lease right-of-use assets
Accrued expenses and other current liabilities
Operating-noncurrent
Operating lease liabilities
Total operating lease liabilities
Finance leases
Assets
Property and equipment, gross
Property, plant and equipment, net
Accumulated amortization
Property, plant and equipment, net
Property and equipment, net
Property, plant and equipment, net
Liabilities
Other current liabilities
Accrued expenses and other current liabilities
Other long-term liabilities
Deferred income tax and other long-term liabilities
Total finance lease liabilities
The components of lease expense were as follows:
$
$
$
$
$
$
$
45,792 $
35,436
9,143 $
37,199
46,342 $
7,392
27,930
35,322
3,569 $
(3,112)
457 $
384 $
—
384 $
3,569
(2,739)
830
1,125
386
1,511
(in thousands)
Operating lease cost
Finance lease cost:
Consolidated Statements of Operations Line Item
General administrative expenses and
cost of sales
Amortization of right-of-use assets
General administrative expenses
Interest on lease liabilities
Interest expense, net
Total finance lease cost
Other information
Supplemental cash flow information related to leases is as follows:
Years Ended
December 31,
2020
2019
$
9,804 $
9,234
864 $
30
894 $
872
68
940
$
61
(in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases
Finance cash flows for finance leases
Operating right-of-use assets obtained in exchange for new lease liabilities
Operating leases
Years Ended
December 31,
2020
2019
$
9,306 $
8,988
1,160
1,160
20,308
5,920
following is a schedule, by years, of maturities for lease liabilities as of December 31, 2020:
(in thousands)
2021
2022
2023
2024
2025
Thereafter
Total lease payments
Less: Present value discount
Total lease liabilities
Operating
Leases
Finance
Leases
$
10,696 $
387
8,862
6,751
5,303
5,046
19,196
55,854
(9,512)
$
46,342 $
—
—
—
—
—
387
(3)
384
The following table summarizes the Company’s lease terms and discount rates as of December 31, 2020:
Weighted-average remaining lease terms (in years):
Operating leases
Finance leases
Weighted-average discount rate:
Operating leases
Finance leases
12. Accrued Liabilities
Accrued liabilities consisted of the following:
(in thousands)
Labor related liabilities
Sales incentives & advertising allowances
Accrued cash profit sharing and commissions
Sales tax payable and other
Dividends payable
Accrued profit sharing trust contributions
Operating lease - current portion
62
Years Ended
December 31,
2020
2019
7.27
0.42
6.54
1.44
5.29 %
3.3 %
5.37 %
3.23 %
December 31,
2020
2019
41,188 $
42,783
15,693
16,832
9,999
10,152
9,143
145,790 $
41,991
36,595
10,210
10,175
10,146
9,047
7,392
125,556
$
$
13. Debt
In May 2020, the Company entered into a third amendment to the unsecured credit agreement dated July 27, 2012 with Wells
Fargo Bank, National Association, and certain other institutional lenders that provides for a $300.0 million unsecured revolving
credit facility (“Credit Facility”). The Amendment extends the term of the Credit Agreement from July 23, 2021, to July 23,
2022. The Company is required to pay an annual facility fee of 0.20 to 0.35 percent on 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. The fee is included within other expense in the Company's condensed consolidated statement of operations.
Amounts borrowed under the Credit Agreement 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 U.S. dollars as published by the ICE Benchmark
Administration Limited, a United Kingdom company, or a comparable or successor quoting service approved by the Agent (the
“LIBOR Rate”), adjusted for any reserve requirement in effect, plus a spread of from 0.80 to 1.65 percent, as determined on a
quarterly basis based on the Company’s leverage ratio, or (b) a base rate, plus a spread of 0.20 to 0.65 percent, as determined on
a quarterly basis based on the Company’s leverage ratio. In no event shall the LIBOR Rate be less than 0.25 percent. 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 LIBOR Rate plus the applicable spread described in the preceding clause (a), and will pay
market-based fees for commercial letters of credit. The spread applicable to a particular LIBOR Rate loan or base rate loan
depends on the consolidated leverage ratio of the Company and its subsidiaries at the time the loan is made. Loans outstanding
under the Credit Agreement may be prepaid at any time without penalty except for LIBOR Rate breakage costs and expenses.
In March 2020, the Company borrowed $150.0 million from the Credit Facility to increase its cash position and preserve
financial flexibility in light of uncertainty resulting from the COVID-19 outbreak; and subsequently paid down the balance in
full by December 2020. As of December 31, 2020, no amounts are outstanding under the Credit Facility.
As of December 31, 2020, in addition to the Credit Facility, certain of the Company’s domestic subsidiaries are guarantors for a
credit agreement between certain of its foreign subsidiaries and institutional lenders. Together, all of its credit facilities provide
the Company with a total of $303.8 million in revolving credit lines and an irrevocable standby letter of credit in support of
various insurance deductibles.
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, 2020.
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, 2020, 2019 and 2018, consisted of the following:
Interest costs incurred
Less: Interest capitalized
Interest expense
14. Commitments and Contingencies
Purchase Obligations
Years Ended December 31,
2020
2019
2018
$
$
2,796 $
(512)
2,284 $
2,172 $
(144)
2,028 $
1,224
(160)
1,064
In addition to the debt and lease obligations described elsewhere in the footnotes, the Company has certain purchase obligations
in the ordinary course of business. These purchase obligations are primarily related to the acquisition, construction or expansion
of facilities and equipment, 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. As of December 31, 2020, these purchase
obligations were $85.7 million, of which $49.2 million is payable in 2021 and the remainder over the following three years.
Debt interest obligations include annual facility fees on the Company’s primary line-of-credit facility in the amount of $0.9
million at December 31, 2020.
63
Employee Relations
As of December 31, 2020, approximately 14% of our employees are represented by labor unions and are covered by collective
bargaining agreements in the U.S. 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 2023 and June 2023, respectively. Also, the Company has two contracts in San Bernardino County, California that
will expire in June 2022 and by the end of March 2021, respectively. 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
From time to time, the Company is involved in various legal proceedings and other matters arising in the normal course of
business. Corrosion, hydrogen embrittlement, 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.
Given the nature and the complexities involved in the Gentry proceeding, 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.
64
15. Income Taxes
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,
2020
2019
2018
$
$
42,337 $
12,571
4,478
0
2,330
598
250
62,564 $
28,314 $
7,465
6,039
3,329
805
(1,577)
44,375 $
27,410
9,515
4,605
3,179
263
523
45,495
Income and loss from operations before income taxes for the years ended December 31, 2020, 2019, and 2018, respectively,
consisted of the following:
(in thousands)
Domestic
Foreign
Years Ended December 31,
2020
2019
2018
$
$
238,320 $
11,244
249,564 $
163,257 $
15,100
178,357 $
169,109
3,019
172,128
At December 31, 2020, the Company had $40.4 million of pre-tax loss carryforwards in various foreign taxing jurisdictions, of
which $0.1 million will begin to expire between 2021 and 2022. The remaining tax losses can be carried forward indefinitely.
At December 31, 2020, and 2019, the Company had deferred tax valuation allowances of $11.3 million and $11.6 million,
respectively. The valuation allowance decreased $0.3 million and $1.6 million for the years ended December 31, 2020, and
December 31, 2019, respectively. The decrease in 2020 valuation allowances was primarily a result of the release of valuation
allowance of foreign losses in Simpson Strong-Tie A/S, a subsidiary in Denmark. The decrease in 2019 valuation allowances
was primarily a result of the releases of valuation allowance of foreign losses in Simpson Strong-Tie GmbH, a subsidiary of
Germany.
The Company has not historically recorded federal income taxes on the undistributed earnings of its foreign subsidiaries
because such earnings are reinvested.
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.
As of December 31, 2020, the Company asserts that its accumulated undistributed earnings generated by our foreign
subsidiaries are permanently reinvested and as such, has not recognized a deferred tax liability on its investment in foreign
subsidiaries. The Company will continue to assess its permanent reinvestment assertion on a quarterly basis.
65
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
Change in valuation allowance
True-up of prior year tax returns to tax provision
Difference between U.S. statutory and foreign local tax rates
Change in uncertain tax position
Other
Effective income tax rate
Years Ended December 31,
2020
2019
2018
21.0 %
4.2 %
0.1 %
(0.4) %
0.4 %
— %
(0.2) %
25.1 %
21.0 %
3.6 %
(0.1) %
(0.3) %
0.8 %
0.1 %
(0.2) %
24.9 %
21.0 %
4.5 %
1.3 %
(1.2) %
0.5 %
(0.1) %
0.4 %
26.4 %
The tax effects of the significant temporary differences that constitute the deferred tax assets and liabilities at December 31,
2020 and 2019, respectively, were as follows:
December 31,
2020
2019
$
$
$
$
$
1,076 $
883
1,207
374
384
6,108
1,086
11,631
2,148
344
4,744
77
7,717
—
37,779 $
(11,316)
26,463 $
(12,933) $
(15,642)
(568)
(11,489)
(247)
(40,879)
(14,416) $
721
828
775
341
324
4,275
1,150
8,812
2,695
327
4,945
68
7,763
1,026
34,050
(11,617)
22,433
(10,416)
(13,737)
(523)
(8,764)
—
(33,440)
(11,007)
(in thousands)
Deferred asset taxes
State tax
Workers’ compensation
Health claims
Vacation liability
Allowance for doubtful accounts
Inventories
Sales incentive and advertising allowances
Lease obligations
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
Right of use assets
Other
Total deferred tax liabilities
Total Deferred tax asset/(liability)
66
A reconciliation of the beginning and ending amounts of unrecognized tax benefits in 2020, 2019 and 2018, 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
2020
2019
2018
1,706 $
78
(7)
48
(657)
1,168 $
1,757 $
8
(30)
167
(196)
1,706 $
1,895
—
(171)
100
(67)
1,757
$
$
Tax positions of $0.3, $0.2, and $0.1 million are included in the balance of unrecognized tax benefits at December 31, 2020,
2019, and 2018, respectively, which if recognized, would reduce the effective tax rate.
The Company accrues interest and penalties related to unrecognized tax benefits in income tax expense in accordance with the
Company’s historical accounting policy. During the year ended December 31, 2020, and 2019, accrued interest decreased by
$108 thousand and $20 thousand, respectively. During the year ended December 31, 2018, accrued interest increased by $5
thousand. The Company had accrued $0.3 million for fiscal year ended 2020, and $0.4 million for each of the fiscal years ended
2019 and 2018, for the potential payment of interest, before income tax benefits. The Company does not expect any material
changes in the unrecognized tax benefits within the next 12 months.
At December 31, 2020, the Company remained subject to federal income tax examinations in the U.S. for the tax years 2017
through 2020. In addition, tax years 2015 through 2020 remain open to examination in states, local and foreign jurisdictions.
16. Retirement Plans
The Company has six defined contribution retirement plans covering substantially all salaried employees and nonunion hourly
employees. The Simpson Manufacturing Co., Inc. 401(k) Profit Sharing Plan (the "Plan") covers U.S. employees and provides
for quarterly safe harbor contributions, limited to 3% of the employees' quarterly eligible compensation and for annual
discretionary contributions, subject to certain limitations. The discretionary amounts for 2020, 2019 and 2018 were equal to 7%
of qualifying salaries or wages of the covered employees. The other five defined contribution 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, 2020, 2019 and 2018, was $17.7
million, $16.8 million, and $15.8 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 withdraw from participation in any of these plans, the 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, 2020, 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 $5.1 million for the year ended December 31, 2020 and $4.5 million for the years ended
2019 and 2018, respectively.
17. Related Party Transactions
During 2020, 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, 2020.
67
18. Segment Information
The Company is organized into three reporting segments 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 U.S. 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, 2020, 2019 and 2018, respectively:
(in thousands)
2020
Net sales
Sales to other segments *
Income from operations
Depreciation and amortization
Significant non-cash charges
Provision for income taxes
Capital expenditures, including purchases of
intangible assets, and business acquisitions, net of
cash acquired
North
America
Europe
Asia/
Pacific
Administrative
& All Other
Total
$ 1,101,891 $ 156,713 $
9,341 $
— $ 1,267,945
613
249,252
30,218
6,929
58,201
1,820
8,396
5,856
1,226
3,817
7,604
308
1,709
376
613
—
10,037
(5,593) 252,363
984
4,975
38,767
13,506
(67)
62,564
29,937
4,248
705
5,816
40,706
Total assets
1,001,168
198,647
32,754
—
1,232,569
(in thousands)
2019
Net sales
Sales to other segments *
Income (loss) from operations
Depreciation and amortization
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
$ 972,849 $ 155,144 $
1,977
176,329
30,652
5,273
40,452
31,695
2,068
6,817
5,457
1,141
1,934
8,245
8,546 $
26,764
(731)
1,698
211
577
236
— $ 1,136,539
30,809
—
181,254
(1,161)
38,402
595
10,782
4,157
44,375
1,412
40,176
—
1,269,545
169,785
30,055
(374,019) 1,095,366
68
(in thousands)
2018
Net sales
Sales to other segments *
Income (loss) from operations
Depreciation and amortization
Impairment of goodwill
Significant non-cash charges
Provision for (benefit from) income taxes
Capital expenditures and business acquisitions, net of
cash acquired
North
America
Europe
Asia/
Pacific
Administrative
& All Other
Total
$ 910,587 $ 159,027 $
2,279
168,139
30,505
—
6,340
39,638
27,059
1,773
(2,656)
6,297
6,686
1,169
2,947
2,556
9,195 $
28,292
(2,029)
1,794
—
48
113
1,702
— $ 1,078,809
32,344
—
172,625
9,171
39,393
797
6,686
—
11,176
3,619
45,495
2,797
31,317
—
Total assets
1,119,012
157,437
25,644
(280,430) 1,021,663
* Sales to other segments are eliminated in consolidation.
Cash collected by the Company’s U.S. subsidiaries is routinely transferred into the Company’s cash management accounts, and
therefore has been in the total assets of "Administrative & All Other." Cash and cash equivalent balances in "Administrative &
All Other" were $199.8 million, $161.4 million and $114.8 million as of December 31, 2020, 2019 and 2018, respectively. As
of December 31, 2020, the Company had $74.6 million, or 27.2%, of its cash and cash equivalents held outside the U.S. 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 U.S.
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), net and other, foreign exchange gain (loss), net 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,
2020, 2019 and 2018, respectively:
(in thousands)
United States
Canada
United Kingdom
Germany
France
Poland
Sweden
Denmark
Norway
Switzerland
Australia
Belgium
The Netherlands
New Zealand
Chile
Other countries
2020
2019
2018
Net
Sales
Long-Lived
Assets
Net
Sales
Long-Lived
Assets
Net
Sales
Long-Lived
Assets
$ 1,045,509 $ 215,082 $ 921,703 $ 210,349 $ 860,482 $ 210,063
52,889
24,290
24,069
40,672
11,648
15,241
11,931
11,138
5,246
5,749
5,311
4,526
3,593
3,493
2,640
3,059
2,073
11,163
7,095
2,779
2,986
2,445
—
8,172
134
2,268
61
167
49
9,797
47,948
26,376
22,357
39,969
11,826
13,792
10,761
11,238
5,600
4,939
5,605
4,019
3,606
3,198
3,602
1,181
1,683
10,529
7,010
2,770
1,762
2,235
—
7,781
110
1,913
93
166
28
10,647
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
81
111
41
11,635
$ 1,267,945 $ 267,330 $ 1,136,539 $ 258,257 $ 1,078,809 $ 264,346
69
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, 2020, 2019 and 2018, respectively:
(in thousands)
Wood Construction
Concrete Construction
Other
Total
2020
1,082,877 $
184,631
437
1,267,945 $
2019
948,768 $
187,462
309
1,136,539 $
2018
913,202
165,317
290
1,078,809
$
$
No customers accounted for as much as 10% of net sales for the years ended 2020, 2019 and 2018.
19. Subsequent Events
On January 22, 2021, the Board of Directors declared a cash dividend of $0.23 per share of our common stock, estimated to be
$10.0 million in total. The record date for the dividend will be April 1, 2021, and will be paid on April 22, 2021.
70
SCHEDULE II
Simpson Manufacturing Co., Inc. and Subsidiaries
VALUATION AND QUALIFYING ACCOUNTS
for the years ended December 31, 2020, 2019 and 2018
(in thousands)
Classification
Year to date December 31, 2020
Allowance for doubtful accounts
Allowance for sales discounts
Allowance for deferred tax assets
Year to date December 31, 2019
Allowance for doubtful accounts
Allowance for sales discounts
Allowance for deferred tax assets
Year to date December 31, 2018
Allowance for doubtful accounts
Allowance for sales discounts
Allowance for deferred tax assets
Additions
Charged
to Costs
Charged
to Other
and
Accounts —
Expenses
Write-offs
Deductions
Balance
at End
of Year
Balance at
Beginning
of Year
$
1,935 $
4,748
11,617
(98) $
(182)
1,166
(273) $
—
— $
—
(1,467)
2,110
4,566
11,316
1,364
3,317
13,254
996
2,956
11,114
977
1,431
1,423
569
361
2,477
406
—
—
201
—
—
—
—
3,060
—
—
337
1,935
4,748
11,617
1,364
3,317
13,254
71
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, 2020, 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, 2020, 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, 2020, 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, 2020.
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,
2020, 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. As
of October 1, 2020, SAP became operational in the U.S., the United Kingdom and Ireland. 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". 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, 2020, 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.
72
Item 9B. Other Information.
None.
73
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 2021 Annual Meeting of
Stockholders to be held on Wednesday, May 5, 2021, to be filed with the SEC not later than 120 days following the end of the
Company’s fiscal year ended December 31, 2020, which information is incorporated herein by reference.
Item 11. Executive Compensation.
The information required by this Item will be contained in the Company’s proxy statement for the 2021 Annual Meeting of
Stockholders to be held on Wednesday, May 5, 2021, to be filed with the SEC not later than 120 days following the end of the
Company’s fiscal year ended December 31, 2020, which information is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The information required by this Item will be contained in the Company’s proxy statement for the 2021 Annual Meeting of
Stockholders to be held on Wednesday, May 5, 2021, to be filed with the SEC not later than 120 days following the end of the
Company’s fiscal year ended December 31, 2020, which information is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
The information required by this Item will be contained in the Company’s proxy statement for the 2021 Annual Meeting of
Stockholders to be held on Wednesday, May 5, 2021, to be filed with the SEC not later than 120 days following the end of the
Company’s fiscal year ended December 31, 2020, which information is incorporated herein by reference.
Item 14. Principal Accounting Fees and Services.
The information required by this Item will be contained in the Company’s proxy statement for the 2021 Annual Meeting of
Stockholders to be held on Wednesday, May 5, 2021, to be filed with the SEC not later than 120 days following the end of the
Company’s fiscal year ended December 31, 2020, which information is incorporated herein by reference.
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, 2020, and 2019
Consolidated Statements of Operations for the years ended December 31, 2020, 2019 and 2018
Consolidated Statements of Comprehensive Income for the years ended December 31, 2020, 2019 and
2018
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2020, 2019 and
2018
Consolidated Statements of Cash Flows for the years ended December 31, 2020, 2019 and 2018
Notes to Consolidated Financial Statements
2. Financial Statement Schedules
74
The following consolidated financial statement schedule for each of the years in the three-year period ended
December 31, 2020, is filed as part of this Annual Report on Form 10-K:
Schedule II - Valuation and Qualifying Accounts-Years ended December 31, 2020, 2019 and 2018.
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 Description of Securities Registered under Section 12 of the Exchange Act incorporated by reference to Exhibit
4.1 of Simpson Manufacturing Co., Inc.’s Annual Report on Form 10-K for the year ended December 31, 2019.
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.
*Management contract or compensatory plan or arrangement.
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 Third Amendment to Credit Agreement, dated as of May 21, 2020, among the Company, as Borrower, Simpson
Strong-Tie Company Inc. and Simpson Strong-Tie International, Inc., as Guarantors, the several financial
institutions party to the Agreement, as Lenders, and Well Fargo Bank, National Association, in its separate
capacities as Swing Line Lender and L/C Issuer and as Administrative Agent, is incorporated by reference to
Exhibit 10.1 of Simpson Manufacturing Co., Inc.’s Current Report on Form 8-K dated May 21, 2020.
10.5* 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.
*Management contract or compensatory plan or arrangement.
75
10.6* 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.
*Management contract or compensatory plan or arrangement.
10.7* 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.
*Management contract or compensatory plan or arrangement.
10.8* Form of Simpson Manufacturing Co., Inc. Director Time Based Restricted Stock Unit Agreement is filed
herewith.
*Management contract or compensatory plan or arrangement.
10.9* Form of Simpson Manufacturing Co., Inc. Performance Based Restricted Stock Unit Agreement is filed
herewith.
*Management contract or compensatory plan or arrangement.
10.10*Form of Simpson Manufacturing Co., Inc. Time Based Restricted Stock Unit Agreement is filed herewith.
* *Management contract or compensatory plan or arrangement.
21. List of Subsidiaries of the Registrant is filed herewith.
23
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.
101 Financial statements from the annual report on Form 10-K of Simpson Manufacturing Co., Inc. for the year
ended December 31, 2020, 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.
104 Cover Page Interactive Data File (embedded within the Inline XBRL document).
76
Item 16. Form 10-K Summary.
None.
SIGNATURES
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.
Dated:
February 25, 2021
Simpson Manufacturing Co., Inc.
(Registrant)
By
/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 25, 2021
/s/Brian J. Magstadt
(Brian J. Magstadt)
Chief Financial Officer and Treasurer
(principal accounting and financial officer)
February 25, 2021
Directors:
/s/James S. Andrasick
Chairman of the Board and Director
February 25, 2021
(James S. Andrasick)
/s/Michael A. Bless
(Michael A. Bless)
Director
February 25, 2021
/s/Jennifer A. Chatman
Director
February 25, 2021
(Jennifer A. Chatman)
/s/Gary M. Cusumano
Director
February 25, 2021
(Gary M. Cusumano)
/s/Celeste Volz Ford
(Celeste Volz Ford)
Director
February 25, 2021
/s/Robin G. MacGillivray
Director
February 25, 2021
(Robin G. MacGillivray)
/s/Philip E. Donaldson
(Philip E. Donaldson)
Director
February 25, 2021
77
Exhibit 10.8
2020 DIRECTOR TIME-BASED RESTRICTED STOCK UNIT AGREEMENT
Company:
Recipient:
The Number of Shares of
Common Stock Subject to RSUs
Granted Hereunder
(the “RSU Shares”):
Simpson Manufacturing Co., Inc.
The recipient’s name (the “Recipient”) is set forth on
the Recipient’s online award acceptance page on
Morgan Stanley Smith Barney’s StockPlan Connect
website (the “Acceptance Page”) at https://
www.stockplanconnect.com, which is incorporated by
reference to this Agreement.
The aggregate number of shares of Common Stock as stated on
the Acceptance Page.
The Effective Date of the Award (the
“Award Date”):
A date in 2020 as determined by the Committee in its absolute
discretion and as set forth on the Acceptance Page.
Vesting Schedule
(the “Vesting Schedule”):
100% of the RSU Shares will vest on the Award Date.
This TIME-BASED RESTRICTED STOCK UNIT AGREEMENT (this “Agreement”) is made as of the
Award Date stated on the Acceptance Page by and between Simpson Manufacturing Co., Inc., a Delaware
corporation (the “Company”), and the Recipient named on the Acceptance Page, with reference to the following
facts:
Capitalized terms used and not otherwise defined in this Agreement have the meanings ascribed to such
terms in the amended and restated Simpson Manufacturing Co., Inc. 2011 Incentive Plan effective on April 21, 2015
(as amended from time to time, the “Plan”). The Board has delegated to the Committee all authority to administer
the Plan. The Committee has determined to grant to the Recipient, under the Plan, time-based Restricted Stock
Units (the “RSUs”) with respect to the RSU Shares stated on the Acceptance Page.
To evidence the RSUs and to set forth the terms and conditions thereof, the Company and the Recipient
agree as follows:
1.
Confirmation of Grant.
(a)
The Company grants the RSUs to the Recipient and the Recipient agrees to accept the
RSUs and participate in the Plan, effective as of the Award Date. As a condition of the grant, this Agreement and
the RSUs shall be governed by the terms and conditions of the Plan and shall be subject to all applicable policies and
guidelines of the Company, including the Company’s compensation recovery policy, stock ownership, and hedging,
pledging and trading policies.
(b)
The RSUs shall be reflected in a bookkeeping account maintained by the Company
through the date on which the RSUs become fully vested pursuant to section 2 or are forfeited pursuant to section 3.
If and when the RSUs become fully vested pursuant to section 2, and on the satisfaction of all other conditions
78
Exhibit 10.8
applicable to the RSUs, the RSUs not forfeited pursuant to section 3 shall be settled in the number of shares of
Common Stock as provided in section 1(d) and otherwise in accordance with the Plan.
(c)
The Company’s obligations under this Agreement shall be unfunded and unsecured. No
special or separate fund shall be established therefor and no other segregation of assets shall be required or made
with respect thereto. The rights of the Recipient under this Agreement shall be no greater than those of a general
unsecured creditor of the Company.
(d)
Except as otherwise provided in this Agreement and the Plan, the RSUs shall be settled
by the issuance and delivery of the RSU Shares, or as provided in this Section 1(d), by cash or a combination thereof
(as determined by the Committee in its sole discretion), within sixty days after the RSUs have vested pursuant to
section 2 subject to satisfaction of any other terms and conditions applicable to the RSUs; provided, however, that,
the number of the RSU Shares issued or delivered (or for which a cash payment is made) to the Recipient in any
calendar year, together with the number of shares of Common Stock issued or delivered (or for which a cash
payment is made) to the Recipient in the same calendar year under any other RSU Awards, shall not exceed the
annual maximum aggregate number of shares of Common Stock issuable or deliverable under RSU Awards as set
forth in the Plan that is effective at the time of the issuance or delivery of (or making a cash payment for) the RSUs.
In settling the RSUs pursuant to the foregoing, the Company (or its acquirer or successor) shall have the option (as
determined by the Committee in its sole discretion) to make or provide for a cash payment to the Recipient, in
exchange for the cancellation of the vested RSUs (or any portion thereof), in an amount equal to the product of (A)
the number of the RSU Shares under the cancelled RSUs and (B) the average closing price of a share of Common
Stock over the period ending on the date the RSUs (or the portion thereof) become vested and starting sixty days
prior to that date. Anything herein to the contrary notwithstanding, this Agreement does not create an obligation on
the part of the Company to adopt any policy or procedure, agree to any amendment hereto, make any arrangement,
or take any other action, to comply with Code section 409A. The Recipient agrees and acknowledges that the
Company makes no representations that this Agreement, including the grant, vesting and/or delivery of the RSU
Shares (and/or cash), does not violate Code section 409A, and the Company shall have no liability whatsoever to the
Recipient if he or she is subject to any taxes or penalties under Code section 409A.
2.
Vesting. Subject to the terms and conditions of this Agreement and the Plan and unless otherwise
forfeited pursuant to section 3, the RSUs shall vest (that is, the Restricted Period with respect thereto shall terminate)
pursuant to the Vesting Schedule. The Recipient explicitly acknowledges and agrees that the granting or vesting of
the RSUs as well as the Recipient’s holding of the RSU Shares shall be subject to all applicable policies and
guidelines of the Company, including the Company’s compensation recovery, stock ownership, and hedging,
pledging and trading policies.
3.
Forfeiture. Anything herein to the contrary notwithstanding, (a) all RSUs that are not vested in
accordance with section 2 shall terminate immediately and be forfeited in their entirety if, and at such time as, the
Recipient ceases to be an Outside Director,1 and (b) all RSUs, to the extent not theretofore settled in accordance with
section 1(d), shall terminate immediately and be forfeited in their entirety when and as provided in section 13(I) of
the Plan.
4.
Tax Withholding. Pursuant to section 10 of the Plan, the Company may require the Recipient to
enter into an arrangement providing for the payment in cash, Common Stock or otherwise by the Recipient to the
Company of any tax withholding obligation of the Company arising by reason of (a) the granting or vesting of the
RSUs, (b) the lapse of any substantial risk of forfeiture to which the RSUs or the RSU Shares are subject, or (c) the
disposition of the RSUs or the RSU Shares, to the extent such arrangement does not cause a loss of the Section 16(b)
exemption pursuant to Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended.
1 For example, pursuant to section 3, before the Award Date, (I) if the Recipient’s engagement with the Company as an Outside
Director is terminated by the Company or by the Recipient for any reason or for no reason, or (II) if the Recipient retires, dies or
becomes Disabled, the RSUs shall be forfeited in their entirety and no distribution or payment of any amount under such RSUs
shall ever be made to the Recipient.
79
Exhibit 10.8
5.
Representations and Warranties of the Company. The Company represents and warrants to the
Recipient that the RSU Shares, when issued and delivered on the vesting of the RSUs in accordance with this
Agreement, will be duly authorized, validly issued, fully paid and non-assessable.
6.
Recipient Representations. The Recipient represents and warrants to the Company that the
Recipient has received and read this Agreement and the Plan, that the Recipient has consulted with the Recipient’s
own legal, financial and other advisers regarding this Agreement and the Plan to the extent that the Recipient
considered necessary or appropriate, that the Recipient fully understands and accepts all of the terms and conditions
of this Agreement and the Plan, and that the Recipient is relying solely on the Recipient’s own advisers with respect
to the tax consequences of this Agreement and the RSUs.
7.
Change in Control. On a Change in Control, the RSUs shall be subject to the applicable
provisions of section 9 of the Plan, as the Committee may determine.
8.
Adjustments to Reflect Capital Changes. Subject to and except as otherwise provided in section 9
of the Plan, the number and kind of shares subject to the RSUs shall be appropriately adjusted, as the Committee
may determine pursuant to section 11 of the Plan, to reflect any stock split, stock dividend, recapitalization, merger,
consolidation, reorganization, combination, exchange of shares, split-up, split-off, spin-off, liquidation or other
similar change in capitalization, or any distribution to common stockholders other than normal cash dividends.
9.
No Rights as Stockholder. Neither the granting or vesting of the RSUs nor the issuance or
delivery of the RSU Shares shall entitle the Recipient, as such, or any of the Recipient’s Beneficiaries or Personal
Representative, to any rights of a stockholder of the Company, unless and until the RSU Shares are registered on the
Company’s records in the name or names of the Recipient or the Recipient’s Beneficiaries or Personal
Representative, as the case may be, and then only with respect to such RSU Shares so registered.
10.
No Right to Continued Employment. Nothing in this Agreement shall confer on the Recipient any
right to continue in the engagement with, or service to, the Company or any Subsidiary or limit, interfere with or
otherwise affect in any way the right of the Company or any Subsidiary to terminate the Recipient’s engagement or
service at any time.
11.
Regulatory Compliance. Notwithstanding anything herein to the contrary, the issuance and
delivery of the RSU Shares shall in all events be subject to and governed by section 13(C) of the Plan.
12.
Notices. Any notice, consent, demand or other communication to be given under or in connection
with this Agreement shall be in writing and shall be deemed duly given and received when delivered personally,
when transmitted by facsimile, one business day after being deposited for next-day delivery with a nationally
recognized overnight delivery service, or three days after being mailed by first class mail, charges or postage
prepaid, properly addressed, if to the Company, at its principal office in California, and, if to the Recipient, at the
Recipient’s address on the Company’s records. Either party may change such party’s address or facsimile number
from time to time by notice hereunder to the other.
13.
Entire Agreement. This Agreement and the Plan together contain the entire agreement of the
parties and supersede all prior or contemporaneous negotiations, correspondence, understandings and agreements,
whether written or oral, between the parties, regarding the RSUs. The Recipient specifically acknowledges and
agrees that all descriptions of the RSUs in any prior letters, memoranda or other documents provided to him or her
by the Company or any Subsidiary are hereby replaced and superseded in their entirety by this Agreement and shall
be of no further force or effect. To the extent there is any inconsistency between the descriptions of any such
documents and the terms of this Agreement, the terms of this Agreement shall prevail.
14.
Amendment. This Agreement may be amended, modified or supplemented only by a written
instrument signed by the Recipient and the Company.
80
Exhibit 10.8
15.
Assignment. The Recipient shall not sell, assign, transfer, pledge, hypothecate or otherwise
encumber or dispose of this Agreement, any of the RSUs or any other rights hereunder, and shall not delegate any
duties hereunder, except only as may be permitted pursuant to section 13(B) of the Plan, and any such action or
transaction that may otherwise be attempted or purported by the Recipient shall be void and of no effect.
16.
Successors. Subject to section 15, this Agreement shall bind and inure to the benefit of the
Company and the Recipient and their respective successors, assigns, heirs, legatees, devisees, executors,
administrators and legal representatives. Nothing in this Agreement, express or implied, is intended to confer on any
other Person any right or benefit in or under this Agreement or the Plan.
17.
Separate Payments. All amounts payable in connection with the RSUs hereunder or any other
Awards granted under the Plan shall be treated as separate payments for the purposes of Code section 409A.
18.
Governing Law. This Agreement shall be governed by and construed and interpreted in
accordance with the laws of the State of Delaware.
19.
Counterparts. This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original but all of which together shall constitute one and the same instrument.
20.
Order of Precedence and Construction. This Agreement, the RSUs and the RSU Shares are
subject to all provisions of the Plan (a copy of which is attached hereto as Exhibit A), including the Restricted Stock
Unit provisions of section 6 thereof, and are further subject to all interpretations and amendments thereto that may
from time to time be adopted pursuant to the Plan. In the event of any inconsistency between any provision of this
Agreement and any provision of the Plan, the provision of the Plan shall govern. The headings of sections herein are
for convenience of reference only, are not part of this Agreement and shall not affect the construction or
interpretation of any provision hereof. Whenever the context requires, the use in this Agreement of the singular
number shall be deemed to include the plural and vice versa, and each gender shall be deemed to include each other
gender. References herein to sections refer to sections of this Agreement, except as otherwise stated. The meaning
of general words is not limited by specific examples introduced by “includes”, “including”, “for example”, “such as”
or similar expressions, which shall be deemed to be followed by the phrase “without limitation”.
21.
Further Assurances. The Recipient agrees to do and perform all acts and execute and deliver all
additional documents, instruments and agreements as the Company or the Committee may reasonably request in
connection with this Agreement.
22.
Data Privacy. Recipient hereby explicitly and unambiguously consents to the collection, use and
transfer, in electronic or other form, of Recipient’s personal data as described in this Agreement by and among, as
applicable, Recipient’s employer, the Company, and any Subsidiary for the exclusive purposes of implementing,
administering, and managing Recipient’s participation in the Plan. Recipient understands that the Company and the
employing Subsidiary may hold certain personal information about Recipient, including, but not limited to,
Recipient’s name, home address and telephone number, date of birth, social insurance number or other identification
number, salary, nationality, job title, and any shares of stock or directorships held in the Company or any Subsidiary,
details of all RSUs or any other entitlement to shares of stock awarded, canceled, exercised, vested, unvested or
outstanding in Recipient’s favor (“Personal Data”). Recipient understands that Personal Data may be transferred to
any third parties assisting in the implementation, administration and management of the Plan, that these entities may
be located in Recipient’s country, or elsewhere, and that the third parties’ country may have different data privacy
laws and protections than Recipient’s country. Recipient understands that he or she may request a list with the
names and addresses of any potential third parties in receipt of the Personal Data by contacting the Company’s
Equity Plans Administrator. Recipient authorizes the third parties to receive, possess, use, retain and transfer the
Personal Data, in electronic or other form, for the purposes of implementing, administering and managing
Recipient’s participation in the Plan, including any requisite transfer of such Personal Data as may be required to a
broker or other third party with whom Recipient may elect to deposit any RSU Shares received upon vest of the
RSUs. Recipient understands that Personal Data will be held as long as is necessary to administer and manage
Recipient’s participation in the Plan. Recipient understands that he or she may, at any time, view Personal Data,
81
Exhibit 10.8
request additional information about the storage and processing of Personal Data, require any necessary amendments
to Personal Data or refuse or withdraw the consents herein, without cost, by contacting in writing the Company’s
Equity Plans Administrator. Recipient understands that refusal or withdrawal of consent may affect Recipient’s
ability to realize benefits from the RSUs. For more information on the consequences of Recipient’s refusal to
consent or withdrawal of consent, Recipient understands that he or she may contact the Company’s Equity Plans
Administrator.
23.
Electronic Delivery. The Company may, in its sole discretion, decide (a) to deliver or effect by
electronic means any documents or communications related to the RSUs granted under the Plan, Recipient’s
participation in the Plan, or future Awards that may be granted under the Plan or (b) to request by electronic means
Recipient’s consent to participate in the Plan and other communications related to the RSUs or the Plan. Recipient
hereby consents to receive such documents and communications by electronic delivery and, if requested, to agree to
participate in the Plan and deliver or effect such other communications through an on-line or electronic system
established and maintained by the Company or any third party designated by the Company.
[Signature Page Follows]
IN WITNESS WHEREOF, this Restricted Stock Unit Agreement has been duly executed by or on behalf of the
Company and the Recipient as of the Award Date.
82
Exhibit 10.8
COMPANY:
SIMPSON MANUFACTURING CO., INC.
By
___________________________________
Authorized Signatory for the Compensation
and Leadership Development Committee
of the Board of Directors
ACCEPTANCE OF AGREEMENT: Through the electronic submission of his or her consent to this Restricted
Stock Unit Agreement in accordance with the instructions on Morgan Stanley Smith Barney’s StockPlan Connect
website, the Recipient hereby confirms, ratifies, approves and accepts all of the terms and conditions of this
Restricted Stock Unit Agreement.
83
Exhibit 10.9
2020 PERFORMANCE-BASED RESTRICTED STOCK UNIT AGREEMENT
Company:
Recipient:
Simpson Manufacturing Co., Inc.
The recipient’s name (the “Recipient”) is set forth on the
Recipient’s online award acceptance page on Morgan Stanley
Smith Barney’s StockPlan Connect website (the “Acceptance
is
Page”) at https://www.stockplanconnect.com, which
incorporated by reference to this Agreement.
Target PSU Shares:
The aggregate number of shares of Common Stock as stated on
the Acceptance Page.
The Number of Shares of
Common Stock Subject to PSUs
Granted Hereunder
(the “PSU Shares”):
200% of the Target PSU Shares.
The Effective Date of the Award (the
“Award Date”):
A date in 2020 as determined by the Committee in its absolute
discretion and as set forth on the Acceptance Page.
Measurement Period
(the “Measurement Period”):
A three-year period beginning on January 1, 2020, and ending
on December 31, 2022.
The Date the PSU Shares Vest
(the “Vesting Date”):
A date subsequent to the Measurement Period as determined
by the Committee in its absolute discretion and as set forth on
the Acceptance Page.
Vesting Period
(the “Vesting Period”):
A period beginning on the Award Date, and ending on the
Vesting Date; provided, however, that if the Vesting Date falls
on a weekend or federal holiday, such period shall end on the
immediately following business day.1
Specific Performance Goals
(the “Specific Performance Goals”):
The Specific Performance Goals are set forth on Exhibit A.
This PERFORMANCE-BASED RESTRICTED STOCK UNIT AGREEMENT (this “Agreement”) is made
as of the Award Date stated on the Acceptance Page by and between Simpson Manufacturing Co., Inc., a Delaware
corporation (the “Company”), and the Recipient named on the Acceptance Page, with reference to the following
facts:
Capitalized terms used and not otherwise defined in this Agreement have the meanings ascribed to such
terms in the amended and restated Simpson Manufacturing Co., Inc. 2011 Incentive Plan effective on April 21, 2015
(as amended and/or restated from time to time, the “Plan”). The Board has delegated to the Committee all authority
1 For example, if the Award Date is determined by the Committee to be March 11, 2020 and the Vesting Date is determined by
the Committee to be February 15, 2023, then the PSU Shares, if any (based on the Specific Performance Goals), will vest on
February 15, 2023 and the Vesting Period will be from March 11, 2020 to February 15, 2023.
84
Exhibit 10.9
to administer the Plan. The Committee has determined to grant to the Recipient, under the Plan, performance-based
Restricted Stock Units (the “PSUs”) with respect to the PSU Shares stated on the Acceptance Page.
To evidence the PSUs and to set forth the terms and conditions thereof, the Company and the Recipient
agree as follows:
1.
Confirmation of Grant.
(a)
The Company grants the PSUs to the Recipient and the Recipient agrees to accept the
PSUs and participate in the Plan, effective as of the Award Date. As a condition of the grant, this Agreement and
the PSUs shall be governed by the terms and conditions of the Plan and shall be subject to all applicable policies and
guidelines of the Company, including the Company’s compensation recovery policy, stock ownership, and hedging,
pledging and trading policies.
(b)
The PSUs shall be reflected in a bookkeeping account maintained by the Company
through the date on which the PSUs become vested pursuant to section 2 or are forfeited pursuant to section 3. The
Recipient acknowledges and agrees that (i) the PSU Shares merely represent the maximum number of shares of
Common Stock that are granted under the PSUs and are not necessarily the number of shares of Common Stock that
will eventually vest in favor of the Recipient, and (ii) pursuant to section 2 and otherwise in accordance with this
Agreement and the Plan, the number of shares of Common Stock, which will eventually vest in favor of the
Recipient under the PSUs (the “Vested Shares”), will be subject to the Specific Performance Goals and will be
between 0% and 200% of the Target PSU Shares.
(c)
The Company’s obligations under this Agreement shall be unfunded and unsecured. No
special or separate fund shall be established therefor and no other segregation of assets shall be required or made
with respect thereto. The rights of the Recipient under this Agreement shall be no greater than those of a general
unsecured creditor of the Company.
(d)
Except as otherwise provided in this Agreement and the Plan, the PSUs shall be settled
by the issuance and delivery of the Vested Shares, or as provided in this Section 1(d), by cash or a combination
thereof (as determined by the Committee in its sole discretion), within sixty days after the last day of the Vesting
Period (a time or fixed schedule specified for the purpose of Code section 409A) subject to satisfaction of any other
terms and conditions applicable to the PSUs; provided, however, that the number of the Vested Shares issued or
delivered (or for which a cash payment is made) to the Recipient in any calendar year, together with the number of
shares of Common Stock issued or delivered (or for which a cash payment is made) to the Recipient in the same
calendar year under any other RSU Awards, shall not exceed the annual maximum aggregate number of shares of
Common Stock issuable or deliverable under RSU Awards as set forth in the Plan that is effective at the time of the
issuance or delivery of (or making a cash payment for) the Vested Shares. In settling the PSUs pursuant to the
foregoing, the Company (or its acquirer or successor) shall have the option (as determined by the Committee in its
sole discretion) to make or provide for a cash payment to the Recipient, in exchange for the cancellation of the
vested PSUs (or any portion thereof), in an amount equal to the product of (A) the number of the Vested Shares
under the cancelled PSUs and (B) the average closing price of a share of Common Stock over the period ending on
the date the PSUs become vested and starting sixty days prior to that date. Anything herein to the contrary
notwithstanding, this Agreement does not create an obligation on the part of the Company to adopt any policy or
procedure, agree to any amendment hereto, make any arrangement, or take any other action, to comply with Code
section 409A. The Recipient agrees and acknowledges that the Company makes no representations that this
Agreement, including the grant, vesting and/or delivery of the PSU Shares (and/or cash), does not violate Code
section 409A, and the Company shall have no liability whatsoever to the Recipient if he or she is subject to any
taxes or penalties under Code section 409A.
2.
Vesting. Subject to the terms and conditions of this Agreement and the Plan and unless otherwise
forfeited pursuant to section 3, the PSUs shall vest, and the Restricted Period with respect to the PSUs shall
terminate, immediately following the last day of the Vesting Period; provided, however, that the PSUs shall vest
during the Vesting Period on the date, (a) immediately preceding the effective date of the Recipient’s Retirement as
85
Exhibit 10.9
determined by the Committee in relation to the PSUs: either (A) after reaching age 70 or (B) after reaching age 55
and having been employed or engaged by the Company or any Subsidiary for 15 years (provided that, if the
Recipient retires after reaching age 56, for each year after age 55, the Recipient may work one year less for the
Company or any Subsidiary, as applicable, and still be qualified for Retirement under this sub-section (B)2), (b)
immediately preceding the Recipient’s death or the effective date of the Recipient’s Disability, and (c) the effective
date of the termination of the Recipient’s employment or engagement with the Company or any Subsidiary by the
Company or Subsidiary (which, whenever used in this Agreement, includes any such entity’s successor) without
Cause,3 or by the Recipient for a Good Reason,4 in either case only in connection with or within 24 months
following a Sale Event.5 On the day that the PSUs become vested pursuant to the foregoing, the PSU Shares stated
on the Acceptance Page shall be adjusted pursuant to the Specific Performance Goals as set forth on Exhibit A
attached hereto, and after the adjustment, become the total number of the Vested Shares that will be used to settle the
PSUs under section 1(d); provided, however, that, if the PSUs have vested during the Vesting Period, the PSUs shall
continue to be subject to the terms and conditions of this Agreement, including adjustment pursuant to the Specific
Performance Goals during the Vesting Period, and in addition, the number of Vested Shares that will be used to
settle the PSUs under section 1(d) will be prorated so that the Recipient will only receive a portion of the Vested
Shares that is equal to the product of (x) the number of the Vested Shares and (y) a percentage that is equal to the
number of days between and including the first day of the Vesting Period and the day when the PSUs become vested
as divided by the number of days of the whole Vesting Period. The Recipient explicitly acknowledges and agrees
2 For example, if the Recipient retires at age 60 during the Vesting Period, he or she only needs to have worked for the Company
or the applicable Subsidiary for 10 years to be qualified for Retirement and receive the Vested Shares; and for example, if the
Recipient retires at age 65 during the Vesting Period, he or she only needs to have worked for the Company or the applicable
Subsidiary for 5 years to be qualified for Retirement and receive the Vested Shares.
3 “Cause” means, in addition to any cause for termination as provided in any other applicable written agreement between the
Company, the applicable Subsidiary, or the acquirer or successor of the Company or Subsidiary, and the Recipient, (i) conviction
of any felony, (ii) any material breach or violation by the Recipient of any agreement to which the Recipient and the Company or
the Subsidiary that employs or engages the Recipient are parties or of any published policy or guideline of the Company, (iii) any
act (other than retirement or other termination of employment or engagement) or omission to act by the Recipient which may
have a material and adverse effect on the business of the Company or Subsidiary or on the Recipient’s ability to perform services
for the Company or Subsidiary, including habitual insobriety or substance abuse or the commission of any crime, gross
negligence, fraud or dishonesty with regard to the Company or Subsidiary, or (iv) any material misconduct or neglect of duties
and responsibilities by the Recipient in connection with the business or affairs of the Company or Subsidiary; provided, however,
that the Recipient first shall have received written notice, which shall specifically identify what the Company or Subsidiary
believes constitutes Cause, and if the breach, act, omission, misconduct or neglect is capable of being cured, the Recipient shall
have failed to cure after 15 days following such notice.
4 A “Good Reason” means the occurrence of any of the following events: (i) a material adverse change in the functions, duties or
responsibilities of the Recipient’s position (other than a termination by the Company or Subsidiary) which would meaningfully
reduce the level, importance or scope of such position (provided that, a change in the person, position and/or department to whom
the Recipient is required to report shall not by itself constitute a material adverse change in the Recipient’s position), (ii) the
relocation of the Company or Subsidiary office at which the Recipient is principally located immediately prior to a Sale Event
(the “Original Office”) to a new location outside of the metropolitan area of the Original Office or the failure to place the
Recipient’s own office in the Original Office (or at the office to which such office is relocated which is within the metropolitan
area of the Original Office), or (iii) a material reduction in the Recipient’s base salary and incentive compensation opportunity as
in effect immediately prior to a Sale Event; provided, however, that, within 90 days of the incident that provides the basis for a
Good Reason termination, the Recipient shall have provided the Company or Subsidiary a written notice specifically identifying
what the Recipient believes constitutes a Good Reason, and the Company or Subsidiary shall have failed to cure the adverse
change, relocation or compensation reduction after 30 days following such notice.
5 A “Sale Event” shall mean (i) the sale or other disposition of all or substantially all of the assets of the Company or the
Subsidiary that employs or engages the Recipient, including a majority or more of all outstanding stock of the Subsidiary, on a
consolidated basis to one or more unrelated persons or entities, (ii) a Change in Control, or (iii) the sale or other transfer of
outstanding Common Stock to one or more unrelated persons or entities (including by way of a merger, reorganization or
consolidation in which the outstanding Common Stock are converted into or exchanged for securities of the successor entity)
where the stockholders of the Company, immediately prior to such sale or other transfer, would not, immediately after such sale
or transfer, beneficially own shares representing in the aggregate more than 50 percent of the voting shares of the acquirer or
surviving entity (or its ultimate parent corporation, if any). For the purpose of sub-section (iii) of this definition, only voting
shares of the acquirer or surviving entity (or its ultimate parent, if any) received by stockholders of the Company in exchange for
Common Stock shall be counted, and any voting shares of the acquirer or surviving entity (or its ultimate parent, if any) already
owned by stockholders of the Company prior to the transaction shall be disregarded.
86
Exhibit 10.9
that (i) the Committee has the absolute discretion to determine the number of the Vested Shares, (ii) the Committee
may engage professional advisors and consultants and rely on their opinions and advice to make such determination,
(iii) such determination shall be binding on the Recipient, and (iv) the granting or vesting of the PSUs as well as the
Recipient’s holding of the Vested Shares shall be subject to all applicable policies and guidelines of the Company,
including the Company’s compensation recovery, stock ownership, and hedging, pledging and trading policies.
3.
Forfeiture. Anything herein to the contrary notwithstanding, (a) all PSUs that are not vested in
accordance with section 2 shall terminate immediately and be forfeited in their entirety if and at such time as (i) the
Recipient ceases to be an Employee, Outside Director or Consultant, as the case may be, or (ii) 24 months have
passed immediately following a Sale Event (provided that, in the event the surviving or acquiring entity or the new
entity resulting from a Sale Event substitutes a similar equity award for the PSUs, such award will continue in
accordance with its own terms and conditions), and (b) all PSUs, to the extent not theretofore settled in accordance
with section 1(d), shall terminate immediately and be forfeited in their entirety when and as provided in section 13(I)
of the Plan.
4.
Tax Withholding. Pursuant to section 10 of the Plan, the Company may require the Recipient to
enter into an arrangement providing for the payment in cash, Common Stock or otherwise by the Recipient to the
Company of any tax withholding obligation of the Company arising by reason of (a) the granting or vesting of the
PSUs, (b) the lapse of any substantial risk of forfeiture to which the PSUs or the Vested Shares are subject, or (c) the
disposition of the PSUs or the Vested Shares, to the extent such arrangement does not cause a loss of the Section
16(b) exemption pursuant to Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended.
5.
Representations and Warranties of the Company. The Company represents and warrants to the
Recipient that the Vested Shares, when issued and delivered on the vesting of the PSUs in accordance with this
Agreement, will be duly authorized, validly issued, fully paid and non-assessable.
6.
Recipient Representations. The Recipient represents and warrants to the Company that the
Recipient has received and read this Agreement and the Plan, that the Recipient has consulted with the Recipient’s
own legal, financial and other advisers regarding this Agreement and the Plan to the extent that the Recipient
considered necessary or appropriate, that the Recipient fully understands and accepts all of the terms and conditions
of this Agreement and the Plan, and that the Recipient is relying solely on the Recipient’s own advisers with respect
to the tax consequences of this Agreement and the PSUs.
7.
Change in Control. Notwithstanding section 9 of the Plan, a Change in Control shall be treated as
a Sale Event with respect to the PSUs granted hereunder.
8.
Adjustments to Reflect Capital Changes. Subject to and except as otherwise provided in section 9
of the Plan, the number and kind of shares subject to the PSUs shall be appropriately adjusted, as the Committee
may determine pursuant to section 11 of the Plan, to reflect any stock split, stock dividend, recapitalization, merger,
consolidation, reorganization, combination, exchange of shares, split-up, split-off, spin-off, liquidation or other
similar change in capitalization, or any distribution to common stockholders other than normal cash dividends.
9.
No Rights as Stockholder. Neither the granting or vesting of the PSUs nor the issuance or delivery
of the Vested Shares shall entitle the Recipient, as such, or any of the Recipient’s Beneficiaries or Personal
Representative, to any rights of a stockholder of the Company, unless and until the Vested Shares are registered on
the Company’s records in the name or names of the Recipient or the Recipient’s Beneficiaries or Personal
Representative, as the case may be, and then only with respect to such Vested Shares so registered.
10.
No Right to Continued Employment. Nothing in this Agreement shall confer on the Recipient any
right to continue in the employment of, or service to, the Company or any Subsidiary or limit, interfere with or
otherwise affect in any way the right of the Company or any Subsidiary to terminate the Recipient’s employment or
service at any time. If the Award of the PSUs is in connection with the Recipient’s performance of services as a
Consultant or Outside Director, references to employment, employee and similar terms shall be deemed to include
87
Exhibit 10.9
the performance of services as a Consultant or an Outside Director, as the case may be; provided that no rights as an
Employee shall arise by reason of the use of such terms.
11.
Regulatory Compliance. Notwithstanding anything herein to the contrary, the issuance and
delivery of the Vested Shares shall in all events be subject to and governed by section 13(C) of the Plan.
12.
Notices. Any notice, consent, demand or other communication to be given under or in connection
with this Agreement shall be in writing and shall be deemed duly given and received when delivered personally,
when transmitted by facsimile, one business day after being deposited for next-day delivery with a nationally
recognized overnight delivery service, or three days after being mailed by first class mail, charges or postage
prepaid, properly addressed, if to the Company, at its principal office in California, and, if to the Recipient, at the
Recipient’s address on the Company’s records. Either party may change such party’s address or facsimile number
from time to time by notice hereunder to the other.
13.
Entire Agreement. This Agreement and the Plan together contain the entire agreement of the
parties and supersede all prior or contemporaneous negotiations, correspondence, understandings and agreements,
whether written or oral, between the parties, regarding the PSUs. The Recipient specifically acknowledges and
agrees that all descriptions of the PSUs in any prior letters, memoranda or other documents provided to him or her
by the Company or any Subsidiary are hereby replaced and superseded in their entirety by this Agreement and shall
be of no further force or effect. To the extent there is any inconsistency between the descriptions of any such
documents and the terms of this Agreement, the terms of this Agreement shall prevail.
14.
Amendment. This Agreement may be amended, modified or supplemented only by a written
instrument signed by the Recipient and the Company.
15.
Assignment. The Recipient shall not sell, assign, transfer, pledge, hypothecate or otherwise
encumber or dispose of this Agreement, any of the PSUs or any other rights hereunder, and shall not delegate any
duties hereunder, except only as may be permitted pursuant to section 13(B) of the Plan, and any such action or
transaction that may otherwise be attempted or purported by the Recipient shall be void and of no effect; provided,
however, that this section 15 does not restrict the sale, assignment, transfer, pledging, hypothecation or other
encumbrance or disposal of Vested Shares.
16.
Successors. Subject to section 15, this Agreement shall bind and inure to the benefit of the
Company and the Recipient and their respective successors, assigns, heirs, legatees, devisees, executors,
administrators and legal representatives. Nothing in this Agreement, express or implied, is intended to confer on any
other Person any right or benefit in or under this Agreement or the Plan.
17.
Separate Payments. All amounts payable in connection with the PSUs hereunder or any other
Awards granted under the Plan shall be treated as separate payments for the purposes of Code section 409A.
18.
Governing Law. This Agreement shall be governed by and construed and interpreted in
accordance with the laws of the State of Delaware.
19.
Counterparts. This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original but all of which together shall constitute one and the same instrument.
20.
Order of Precedence and Construction. This Agreement and the PSUs are subject to all provisions
of the Plan (a copy of which is attached hereto as Exhibit B), including the Restricted Stock Unit provisions of
section 6 thereof, and are further subject to all interpretations and amendments thereto that may from time to time be
adopted pursuant to the Plan. In the event of any inconsistency between any provision of this Agreement and any
provision of the Plan, the provision of the Plan shall govern. The headings of sections herein are for convenience of
reference only, are not part of this Agreement and shall not affect the construction or interpretation of any provision
hereof. Whenever the context requires, the use in this Agreement of the singular number shall be deemed to include
the plural and vice versa, and each gender shall be deemed to include each other gender. References herein to
88
Exhibit 10.9
sections refer to sections of this Agreement, except as otherwise stated. The meaning of general words is not limited
by specific examples introduced by “includes”, “including”, “for example”, “such as” or similar expressions, which
shall be deemed to be followed by the phrase “without limitation”.
21.
Further Assurances. The Recipient agrees to do and perform all acts and execute and deliver all
additional documents, instruments and agreements as the Company or the Committee may reasonably request in
connection with this Agreement.
22.
Data Privacy. Recipient hereby explicitly and unambiguously consents to the collection, use and
transfer, in electronic or other form, of Recipient’s personal data as described in this Agreement by and among, as
applicable, Recipient’s employer, the Company, and any Subsidiary for the exclusive purposes of implementing,
administering, and managing Recipient’s participation in the Plan. Recipient understands that the Company and the
employing Subsidiary may hold certain personal information about Recipient, including, but not limited to,
Recipient’s name, home address and telephone number, date of birth, social insurance number or other identification
number, salary, nationality, job title, and any shares of stock or directorships held in the Company or any Subsidiary,
details of all PSUs or any other entitlement to shares of stock awarded, canceled, exercised, vested, unvested or
outstanding in Recipient’s favor (“Personal Data”). Recipient understands that Personal Data may be transferred to
any third parties assisting in the implementation, administration and management of the Plan, that these entities may
be located in Recipient’s country, or elsewhere, and that the third parties’ country may have different data privacy
laws and protections than Recipient’s country. Recipient understands that he or she may request a list with the
names and addresses of any potential third parties in receipt of the Personal Data by contacting the Company’s
Equity Plans Administrator. Recipient authorizes the third parties to receive, possess, use, retain and transfer the
Personal Data, in electronic or other form, for the purposes of implementing, administering and managing
Recipient’s participation in the Plan, including any requisite transfer of such Personal Data as may be required to a
broker or other third party with whom Recipient may elect to deposit any Vested Shares received upon vest of the
PSUs. Recipient understands that Personal Data will be held as long as is necessary to administer and manage
Recipient’s participation in the Plan. Recipient understands that he or she may, at any time, view Personal Data,
request additional information about the storage and processing of Personal Data, require any necessary amendments
to Personal Data or refuse or withdraw the consents herein, without cost, by contacting in writing the Company’s
Equity Plans Administrator. Recipient understands that refusal or withdrawal of consent may affect Recipient’s
ability to realize benefits from the PSUs. For more information on the consequences of Recipient’s refusal to
consent or withdrawal of consent, Recipient understands that he or she may contact the Company’s Equity Plans
Administrator.
23.
Electronic Delivery. The Company may, in its sole discretion, decide (a) to deliver or effect by
electronic means any documents or communications related to the PSUs granted under the Plan, Recipient’s
participation in the Plan, or future Awards that may be granted under the Plan or (b) to request by electronic means
Recipient’s consent to participate in the Plan and other communications related to the PSUs or the Plan. Recipient
hereby consents to receive such documents and communications by electronic delivery and, if requested, to agree to
participate in the Plan and deliver or effect such other communications through an on-line or electronic system
established and maintained by the Company or any third party designated by the Company.
[Signature Page Follows]
IN WITNESS WHEREOF, this Restricted Stock Unit Agreement has been duly executed by or on behalf of the
Company and the Recipient as of the Award Date.
89
Exhibit 10.9
COMPANY:
SIMPSON MANUFACTURING CO., INC.
By
___________________________________
Authorized Signatory for the Compensation
and Leadership Development Committee
of the Board of Directors
ACCEPTANCE OF AGREEMENT: Through the electronic submission of his or her consent to this Restricted
Stock Unit Agreement in accordance with the instructions on Morgan Stanley Smith Barney’s StockPlan Connect
website, the Recipient hereby confirms, ratifies, approves and accepts all of the terms and conditions of this
Restricted Stock Unit Agreement.
90
Company:
Recipient:
Exhibit 10.10
2020 TIME-BASED RESTRICTED STOCK UNIT AGREEMENT
Simpson Manufacturing Co., Inc.
The recipient’s name (the “Recipient”) is set forth on
the Recipient’s online award acceptance page on
Morgan Stanley Smith Barney’s StockPlan Connect
https://
website
www.stockplanconnect.com, which is incorporated by
reference to this Agreement.
“Acceptance Page”)
(the
at
The Number of Shares of
Common Stock Subject to RSUs
Granted Hereunder
(the “RSU Shares”):
The aggregate number of shares of Common Stock as stated on
the Acceptance Page.
The Effective Date of the Award (the
“Award Date”):
A date in 2020 as determined by the Committee in its absolute
discretion and as set forth on the Acceptance Page.
The Date the RSU Shares Start
To Vest
(the “Vesting Start Date”):
A date subsequent to the Award Date as determined by the
Committee in its absolute discretion and as set forth on the
Acceptance Page.
Vesting Schedule
(the “Vesting Schedule”):
Vesting Period
(the “Vesting Period”):
One fifth of the RSU Shares will vest on the first anniversary of
the Vesting Start Date and two fifths of the RSU Shares will
vest on each of the second and third anniversaries of the
Vesting Start Date; provided, however, that if any of such
dates falls on a weekend or federal holiday, the applicable
portion of the RSU Shares shall vest on the immediately
following business day.1
A period beginning on the Vesting Start Date, and ending on
the third anniversary of the Vesting Start Date; provided,
however, that if such anniversary date falls on a weekend or
federal holiday, such period shall end on the immediately
following business day.2
This TIME-BASED RESTRICTED STOCK UNIT AGREEMENT (this “Agreement”) is made as of the
Award Date stated on the Acceptance Page by and between Simpson Manufacturing Co., Inc., a Delaware
corporation (the “Company”), and the Recipient named on the Acceptance Page, with reference to the following
facts:
1 For example, if the Vesting Start Date is determined by the Committee to be February 15, 2020, then 1/5 of the RSU Shares will
vest on February 16, 2021 (because February 15, 2021 is a federal holiday, President’s Day, the immediately following business
day is February 16, 2021), 2/5 of the RSU Shares will vest on each of February 15, 2022 and February 15, 2023.
2 See footnote 1, supra.
91
Exhibit 10.10
Capitalized terms used and not otherwise defined in this Agreement have the meanings ascribed to such
terms in the amended and restated Simpson Manufacturing Co., Inc. 2011 Incentive Plan effective on April 21, 2015
(as amended and/or restated from time to time, the “Plan”). The Board has delegated to the Committee all authority
to administer the Plan. The Committee has determined to grant to the Recipient, under the Plan, time-based
Restricted Stock Units (the “RSUs”) with respect to the RSU Shares stated on the Acceptance Page.
To evidence the RSUs and to set forth the terms and conditions thereof, the Company and the Recipient
agree as follows:
1.
Confirmation of Grant.
(a)
The Company grants the RSUs to the Recipient and the Recipient agrees to accept the
RSUs and participate in the Plan, effective as of the Award Date. As a condition of the grant, this Agreement and
the RSUs shall be governed by the terms and conditions of the Plan and shall be subject to all applicable policies and
guidelines of the Company, including the Company’s compensation recovery policy, stock ownership, and hedging,
pledging and trading policies.
(b)
The RSUs shall be reflected in a bookkeeping account maintained by the Company
through the date on which the RSUs become fully vested pursuant to section 2 or are forfeited pursuant to section 3.
If and when the RSUs become fully vested pursuant to section 2, and on the satisfaction of all other conditions
applicable to the RSUs, the RSUs not forfeited pursuant to section 3 shall be settled in the number of shares of
Common Stock as provided in section 1(d) and otherwise in accordance with the Plan.
(c)
The Company’s obligations under this Agreement shall be unfunded and unsecured. No
special or separate fund shall be established therefor and no other segregation of assets shall be required or made
with respect thereto. The rights of the Recipient under this Agreement shall be no greater than those of a general
unsecured creditor of the Company.
(d)
Except as otherwise provided in this Agreement and the Plan, the RSUs shall be settled
by the issuance and delivery of the RSU Shares, or as provided in this Section 1(d), by cash or a combination thereof
(as determined by the Committee in its sole discretion), within sixty days after the RSUs have vested pursuant to
section 2 subject to satisfaction of any other terms and conditions applicable to the RSUs; provided, however, that to
the extent the Committee determines that any of the RSUs are subject to Code section 409A, to the extent necessary
to comply with Code section 409A, no distribution or payment of any amount under such RSUs shall be made until
the earliest of the date (i) set for such RSUs to vest according to the Vesting Schedule (a time or fixed schedule
specified for the purpose of Code section 409A), (ii) of the Recipient’s “separation from service” (as defined in
Code section 409A), (iii) of the Recipient’s death, or (iv) when the Recipient becomes “disabled” (as defined in
Code section 409A); and further provided that, the number of the RSU Shares issued or delivered (or for which a
cash payment is made) to the Recipient in any calendar year, together with the number of shares of Common Stock
issued or delivered (or for which a cash payment is made) to the Recipient in the same calendar year under any other
RSU Awards, shall not exceed the annual maximum aggregate number of shares of Common Stock issuable or
deliverable under RSU Awards as set forth in the Plan that is effective at the time of the issuance or delivery of (or
making a cash payment for) the RSU Shares. Notwithstanding the foregoing, to the extent the Committee
92
Exhibit 10.10
determines that any of the RSUs are subject to Code section 409A and the Recipient is a Specified Employee3 on the
date of his or her “separation from service” (as defined in Code section 409A), to the extent necessary to comply
with Code section 409A, no distribution or payment of any amount under such RSUs that is otherwise payable
pursuant to this Section 1(d) upon a separation from service shall be made before the date that is six months after the
date of the Recipient’s separation from service. In settling the RSUs pursuant to the foregoing, the Company (or its
acquirer or successor) shall have the option (as determined by the Committee in its sole discretion) to make or
provide for a cash payment to the Recipient, in exchange for the cancellation of the vested RSUs (or any portion
thereof), in an amount equal to the product of (A) the number of the RSU Shares under the cancelled RSUs and (B)
the average closing price of a share of Common Stock over the period ending on the date the RSUs (or the portion
thereof) become vested and starting sixty days prior to that date. Anything herein to the contrary notwithstanding,
this Agreement does not create an obligation on the part of the Company to adopt any policy or procedure, agree to
any amendment hereto, make any arrangement, or take any other action, to comply with Code section 409A. The
Recipient agrees and acknowledges that the Company makes no representations that this Agreement, including the
grant, vesting and/or delivery of the RSU Shares (or cash equivalent), does not violate Code section 409A, and the
Company shall have no liability whatsoever to the Recipient if he or she is subject to any taxes or penalties under
Code section 409A.
2.
Vesting. Subject to the terms and conditions of this Agreement and the Plan and unless otherwise
forfeited pursuant to section 3,4 the RSUs shall vest (that is, the Restricted Period with respect thereto shall
terminate) pursuant to the Vesting Schedule; provided, however, that the unvested RSUs shall vest in full during the
Vesting Period on the date, (a) immediately preceding the effective date of the Recipient’s Retirement as determined
by the Committee in relation to the RSUs: either (A) after reaching age 70 or (B) after reaching age 55 and having
been employed or engaged by the Company or any Subsidiary for 15 years (provided that, if the Recipient retires
after reaching age 56, for each year after age 55, the Recipient may work one year less for the Company or any
Subsidiary, as applicable, and still be qualified for Retirement under this sub-section (B)5), (b) immediately
preceding the Recipient’s death or the effective date of the Recipient’s Disability, or (c) immediately preceding the
effective date of the termination of the Recipient’s employment or engagement with the Company or any Subsidiary
by the Company or Subsidiary (which, whenever used in this Agreement, includes any such entity’s successor)
3 The determination of whether the Recipient is a Specified Employee will be made annually by the Committee or its delegate
pursuant to Code section 409A for the 12-month period ending every December 31st (the “Specified Employee Identification
Date”). The Committee’s determination shall be final and binding on the Recipient. If the Recipient was determined by the
Committee as a Specified Employee at any time during such 12-month period ending on the Specified Employee Identification
Date, he or she shall be considered a Specified Employee for the 12-month period commencing on the February 1st immediately
following the Specified Employee Identification Date (i.e., from February 1st to the following January 31st), even if he or she is
no longer employed or engaged by the Company on or after the Specified Employee Identification Date. For the purposes of this
section 1(d), a “Specified Employee” shall mean:
•
•
•
the Recipient owns 5% or more of all outstanding Common Stock;
the Recipient owns 1% or more of all outstanding Common Stock and has an annual compensation of more than
$150,000; and/or
the Recipient is among the top 50 most highly-compensated officers of the Company and the Subsidiaries forming a
controlled group of corporations within the meaning of Code section 1563(a) (based on total W-2 compensation plus
elective 401(k) plan deferrals) and has an annual compensation exceeding the indexed dollar limit then in effect
pursuant to Treas. Reg. § 1.409A-1(i) promulgated under Code (which is $180,000 for 2019).
4 For example, pursuant to section 3, before the Vesting Start Date, (I) if the Recipient’s employment or engagement with the
Company or any Subsidiary is terminated by the Recipient for any reason, or (II) if the Recipient retires, dies or becomes
Disabled, the RSUs shall be forfeited in their entirety and no distribution or payment of any amount under such RSUs shall ever
be made to the Recipient.
5 For example, if the Recipient retires at age 60 during the Vesting Period, he or she only needs to have worked for the Company
or the applicable Subsidiary for 10 years to be qualified for Retirement and receive the RSU Shares; and for example, if the
Recipient retires at age 65 during the Vesting Period, he or she only needs to have worked for the Company or the applicable
Subsidiary for 5 years to be qualified for Retirement and receive the RSU Shares.
93
Exhibit 10.10
without Cause,6 or by the Recipient for a Good Reason,7 in either case only in connection with or within 24 months
following a Sale Event.8 The Recipient explicitly acknowledges and agrees that the granting or vesting of the RSUs
as well as the Recipient’s holding of the RSU Shares shall be subject to all applicable policies and guidelines of the
Company, including the Company’s compensation recovery, stock ownership, and hedging, pledging and trading
policies.
3.
Forfeiture. Anything herein to the contrary notwithstanding, (a) all RSUs that are not vested in
accordance with section 2 shall terminate immediately and be forfeited in their entirety if and at such time as (i) the
Recipient ceases to be an Employee, Outside Director or Consultant, as the case may be, or (ii) 24 months have
passed immediately following a Sale Event (provided that, in the event the surviving or acquiring entity or the new
entity resulting from a Sale Event substitutes a similar equity award for the RSUs, such award will continue in
accordance with its own terms and conditions), and (b) all RSUs, to the extent not theretofore settled in accordance
with section 1(d), shall terminate immediately and be forfeited in their entirety when and as provided in section 13(I)
of the Plan.
4.
Tax Withholding. Pursuant to section 10 of the Plan, the Company may require the Recipient to
enter into an arrangement providing for the payment in cash, Common Stock or otherwise by the Recipient to the
Company of any tax withholding obligation of the Company arising by reason of (a) the granting or vesting of the
RSUs, (b) the lapse of any substantial risk of forfeiture to which the RSUs or the RSU Shares are subject, or (c) the
disposition of the RSUs or the RSU Shares, to the extent such arrangement does not cause a loss of the Section 16(b)
exemption pursuant to Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended.
6 “Cause” means, in addition to any cause for termination as provided in any other applicable written agreement between the
Company, the applicable Subsidiary, or the acquirer or successor of the Company or Subsidiary, and the Recipient, (i) conviction
of any felony, (ii) any material breach or violation by the Recipient of any agreement to which the Recipient and the Company or
the Subsidiary that employs or engages the Recipient are parties or of any published policy or guideline of the Company, (iii) any
act (other than retirement or other termination of employment or engagement) or omission to act by the Recipient which may
have a material and adverse effect on the business of the Company or Subsidiary or on the Recipient’s ability to perform services
for the Company or Subsidiary, including habitual insobriety or substance abuse or the commission of any crime, gross
negligence, fraud or dishonesty with regard to the Company or Subsidiary, or (iv) any material misconduct or neglect of duties
and responsibilities by the Recipient in connection with the business or affairs of the Company or Subsidiary; provided, however,
that the Recipient first shall have received written notice, which shall specifically identify what the Company or Subsidiary
believes constitutes Cause, and if the breach, act, omission, misconduct or neglect is capable of being cured, the Recipient shall
have failed to cure after 15 days following such notice.
7 A “Good Reason” means the occurrence of any of the following events: (i) a material adverse change in the functions, duties or
responsibilities of the Recipient’s position (other than a termination by the Company or Subsidiary) which would meaningfully
reduce the level, importance or scope of such position (provided that, a change in the person, position and/or department to whom
the Recipient is required to report shall not by itself constitute a material adverse change in the Recipient’s position), (ii) the
relocation of the Company or Subsidiary office at which the Recipient is principally located immediately prior to a Sale Event
(the “Original Office”) to a new location outside of the metropolitan area of the Original Office or the failure to place the
Recipient’s own office in the Original Office (or at the office to which such office is relocated which is within the metropolitan
area of the Original Office), or (iii) a material reduction in the Recipient’s base salary and incentive compensation opportunity as
in effect immediately prior to a Sale Event; provided, however, that, within 90 days of the incident that provides the basis for a
Good Reason termination, the Recipient shall have provided the Company or Subsidiary a written notice specifically identifying
what the Recipient believes constitutes a Good Reason, and the Company or Subsidiary shall have failed to cure the adverse
change, relocation or compensation reduction after 30 days following such notice.
8 A “Sale Event” shall mean (i) the sale or other disposition of all or substantially all of the assets of the Company or the
Subsidiary that employs or engages the Recipient, including a majority or more of all outstanding stock of the Subsidiary, on a
consolidated basis to one or more unrelated persons or entities, (ii) a Change in Control, or (iii) the sale or other transfer of
outstanding Common Stock to one or more unrelated persons or entities (including by way of a merger, reorganization or
consolidation in which the outstanding Common Stock are converted into or exchanged for securities of the successor entity)
where the stockholders of the Company, immediately prior to such sale or other transfer, would not, immediately after such sale
or transfer, beneficially own shares representing in the aggregate more than 50 percent of the voting shares of the acquirer or
surviving entity (or its ultimate parent corporation, if any). For the purpose of sub-section (iii) of this definition, only voting
shares of the acquirer or surviving entity (or its ultimate parent, if any) received by stockholders of the Company in exchange for
Common Stock shall be counted, and any voting shares of the acquirer or surviving entity (or its ultimate parent, if any) already
owned by stockholders of the Company prior to the transaction shall be disregarded.
94
Exhibit 10.10
5.
Representations and Warranties of the Company. The Company represents and warrants to the
Recipient that the RSU Shares, when issued and delivered on the vesting of the RSUs in accordance with this
Agreement, will be duly authorized, validly issued, fully paid and non-assessable.
6.
Recipient Representations. The Recipient represents and warrants to the Company that the
Recipient has received and read this Agreement and the Plan, that the Recipient has consulted with the Recipient’s
own legal, financial and other advisers regarding this Agreement and the Plan to the extent that the Recipient
considered necessary or appropriate, that the Recipient fully understands and accepts all of the terms and conditions
of this Agreement and the Plan, and that the Recipient is relying solely on the Recipient’s own advisers with respect
to the tax consequences of this Agreement and the RSUs.
7.
Change in Control. Notwithstanding section 9 of the Plan, a Change in Control shall be treated as
a Sale Event with respect to the RSUs granted hereunder.
8.
Adjustments to Reflect Capital Changes. Subject to and except as otherwise provided in section 9
of the Plan, the number and kind of shares subject to the RSUs shall be appropriately adjusted, as the Committee
may determine pursuant to section 11 of the Plan, to reflect any stock split, stock dividend, recapitalization, merger,
consolidation, reorganization, combination, exchange of shares, split-up, split-off, spin-off, liquidation or other
similar change in capitalization, or any distribution to common stockholders other than normal cash dividends.
9.
No Rights as Stockholder. Neither the granting or vesting of the RSUs nor the issuance or
delivery of the RSU Shares shall entitle the Recipient, as such, or any of the Recipient’s Beneficiaries or Personal
Representative, to any rights of a stockholder of the Company, unless and until the RSU Shares are registered on the
Company’s records in the name or names of the Recipient or the Recipient’s Beneficiaries or Personal
Representative, as the case may be, and then only with respect to such RSU Shares so registered.
10.
No Right to Continued Employment. Nothing in this Agreement shall confer on the Recipient any
right to continue in the employment of, or service to, the Company or any Subsidiary or limit, interfere with or
otherwise affect in any way the right of the Company or any Subsidiary to terminate the Recipient’s employment or
service at any time. If the Award of the RSUs is in connection with the Recipient’s performance of services as a
Consultant or Outside Director, references to employment, employee and similar terms shall be deemed to include
the performance of services as a Consultant or an Outside Director, as the case may be; provided that no rights as an
Employee shall arise by reason of the use of such terms.
11.
Regulatory Compliance. Notwithstanding anything herein to the contrary, the issuance and
delivery of the RSU Shares shall in all events be subject to and governed by section 13(C) of the Plan.
12.
Notices. Any notice, consent, demand or other communication to be given under or in connection
with this Agreement shall be in writing and shall be deemed duly given and received when delivered personally,
when transmitted by facsimile, one business day after being deposited for next-day delivery with a nationally
recognized overnight delivery service, or three days after being mailed by first class mail, charges or postage
prepaid, properly addressed, if to the Company, at its principal office in California, and, if to the Recipient, at the
Recipient’s address on the Company’s records. Either party may change such party’s address or facsimile number
from time to time by notice hereunder to the other.
13.
Entire Agreement. This Agreement and the Plan together contain the entire agreement of the
parties and supersede all prior or contemporaneous negotiations, correspondence, understandings and agreements,
whether written or oral, between the parties, regarding the RSUs. The Recipient specifically acknowledges and
agrees that all descriptions of the RSUs in any prior letters, memoranda or other documents provided to him or her
by the Company or any Subsidiary are hereby replaced and superseded in their entirety by this Agreement and shall
be of no further force or effect. To the extent there is any inconsistency between the descriptions of any such
documents and the terms of this Agreement, the terms of this Agreement shall prevail.
95
Exhibit 10.10
14.
Amendment. This Agreement may be amended, modified or supplemented only by a written
instrument signed by the Recipient and the Company.
15.
Assignment. The Recipient shall not sell, assign, transfer, pledge, hypothecate or otherwise
encumber or dispose of this Agreement, any of the RSUs or any other rights hereunder, and shall not delegate any
duties hereunder, except only as may be permitted pursuant to section 13(B) of the Plan, and any such action or
transaction that may otherwise be attempted or purported by the Recipient shall be void and of no effect; provided,
however, that this section 15 does not restrict the sale, assignment, transfer, pledging, hypothecation or other
encumbrance or disposal of RSU Shares that have fully vested.
16.
Successors. Subject to section 15, this Agreement shall bind and inure to the benefit of the
Company and the Recipient and their respective successors, assigns, heirs, legatees, devisees, executors,
administrators and legal representatives. Nothing in this Agreement, express or implied, is intended to confer on any
other Person any right or benefit in or under this Agreement or the Plan.
17.
Separate Payments. All amounts payable in connection with the RSUs hereunder or any other
Awards granted under the Plan shall be treated as separate payments for the purposes of Code section 409A.
18.
Governing Law. This Agreement shall be governed by and construed and interpreted in
accordance with the laws of the State of Delaware.
19.
Counterparts. This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original but all of which together shall constitute one and the same instrument.
20.
Order of Precedence and Construction. This Agreement, the RSUs and the RSU Shares are
subject to all provisions of the Plan (a copy of which is attached hereto as Exhibit A), including the Restricted Stock
Unit provisions of section 6 thereof, and are further subject to all interpretations and amendments thereto that may
from time to time be adopted pursuant to the Plan. In the event of any inconsistency between any provision of this
Agreement and any provision of the Plan, the provision of the Plan shall govern. The headings of sections herein are
for convenience of reference only, are not part of this Agreement and shall not affect the construction or
interpretation of any provision hereof. Whenever the context requires, the use in this Agreement of the singular
number shall be deemed to include the plural and vice versa, and each gender shall be deemed to include each other
gender. References herein to sections refer to sections of this Agreement, except as otherwise stated. The meaning
of general words is not limited by specific examples introduced by “includes”, “including”, “for example”, “such as”
or similar expressions, which shall be deemed to be followed by the phrase “without limitation”.
21.
Further Assurances. The Recipient agrees to do and perform all acts and execute and deliver all
additional documents, instruments and agreements as the Company or the Committee may reasonably request in
connection with this Agreement.
22.
Data Privacy. Recipient hereby explicitly and unambiguously consents to the collection, use and
transfer, in electronic or other form, of Recipient’s personal data as described in this Agreement by and among, as
applicable, Recipient’s employer, the Company, and any Subsidiary for the exclusive purposes of implementing,
administering, and managing Recipient’s participation in the Plan. Recipient understands that the Company and the
employing Subsidiary may hold certain personal information about Recipient, including, but not limited to,
Recipient’s name, home address and telephone number, date of birth, social insurance number or other identification
number, salary, nationality, job title, and any shares of stock or directorships held in the Company or any Subsidiary,
details of all RSUs or any other entitlement to shares of stock awarded, canceled, exercised, vested, unvested or
outstanding in Recipient’s favor (“Personal Data”). Recipient understands that Personal Data may be transferred to
any third parties assisting in the implementation, administration and management of the Plan, that these entities may
be located in Recipient’s country, or elsewhere, and that the third parties’ country may have different data privacy
laws and protections than Recipient’s country. Recipient understands that he or she may request a list with the
names and addresses of any potential third parties in receipt of the Personal Data by contacting the Company’s
Equity Plans Administrator. Recipient authorizes the third parties to receive, possess, use, retain and transfer the
96
Exhibit 10.10
Personal Data, in electronic or other form, for the purposes of implementing, administering and managing
Recipient’s participation in the Plan, including any requisite transfer of such Personal Data as may be required to a
broker or other third party with whom Recipient may elect to deposit any RSU Shares received upon vest of the
RSUs. Recipient understands that Personal Data will be held as long as is necessary to administer and manage
Recipient’s participation in the Plan. Recipient understands that he or she may, at any time, view Personal Data,
request additional information about the storage and processing of Personal Data, require any necessary amendments
to Personal Data or refuse or withdraw the consents herein, without cost, by contacting in writing the Company’s
Equity Plans Administrator. Recipient understands that refusal or withdrawal of consent may affect Recipient’s
ability to realize benefits from the RSUs. For more information on the consequences of Recipient’s refusal to
consent or withdrawal of consent, Recipient understands that he or she may contact the Company’s Equity Plans
Administrator.
23.
Electronic Delivery. The Company may, in its sole discretion, decide (a) to deliver or effect by
electronic means any documents or communications related to the RSUs granted under the Plan, Recipient’s
participation in the Plan, or future Awards that may be granted under the Plan or (b) to request by electronic means
Recipient’s consent to participate in the Plan and other communications related to the RSUs or the Plan. Recipient
hereby consents to receive such documents and communications by electronic delivery and, if requested, to agree to
participate in the Plan and deliver or effect such other communications through an on-line or electronic system
established and maintained by the Company or any third party designated by the Company.
[Signature Page Follows]
IN WITNESS WHEREOF, this Restricted Stock Unit Agreement has been duly executed by or on behalf of the
Company and the Recipient as of the Award Date.
97
Exhibit 10.10
COMPANY:
SIMPSON MANUFACTURING CO., INC.
By
___________________________________
Authorized Signatory for the Compensation
and Leadership Development Committee
of the Board of Directors
ACCEPTANCE OF AGREEMENT: Through the electronic submission of his or her consent to this Restricted
Stock Unit Agreement in accordance with the instructions on Morgan Stanley Smith Barney’s StockPlan Connect
website, the Recipient hereby confirms, ratifies, approves and accepts all of the terms and conditions of this
Restricted Stock Unit Agreement.
98
Simpson Manufacturing Co., Inc. and Subsidiaries
List of Subsidiaries of Simpson Manufacturing Co., Inc.
At February 25, 2021
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. Simpson Strong-Tie (New Zealand) Limited, a New Zealand company
16. Simpson Strong-Tie Switzerland GmbH, a Switzerland company
17. S&P Clever Reinforcement Company AG, a Switzerland company
18. S&P Clever Reinforcement GmbH, a Germany company
19. S&P Clever Reinforcement Company Benelux B.V., a Dutch company
20. S&P Polska Sp. z.o.o., a Polish corporation
21. Clever Reinforcement Iberica - Materiais de Construção, Lda., a Portugal company
22. S&P Reinforcement France SAS, a French company
23. Simpson Strong-Tie Vietnam Company Limited, a Vietnam company
24. Simpson Strong-Tie South Africa (PTY) Ltd, a South Africa company
25. Simpson Strong-Tie Chile Limitada, a Chile company
26. S&P Reinforcement Nordic ApS, a Danish company
27. Simpson Strong-Tie Structural Connectors Ireland Ltd, an Ireland company
28. Multi Services Dêcoupe S.A., a Belgium company
29. CG Visions, LLC, an Indiana corporation
30. Gbo Fastening Systems AB, a Swedish corporation
31. Christiania Spigerverk AS, a Norwegian company
32. Simpson LotSpec, LLC, a Delware Company
33. D.P.P. B.V Limited, a Dutch Company
34. Sabrefix (UK) Limited, a UK Company
35. S&P Reinforcement Spain S.L., a Spanish company
99
Consent of Independent Registered Public Accounting Firm
Exhibit 23
We have issued our reports dated February 25, 2021, 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, 2020. 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) and Forms S-3 (File Nos. 333-44603 and 333-102910)).
/s/ Grant Thornton LLP
San Francisco, California
February 25, 2021
100
Simpson Manufacturing Co., Inc. and Subsidiaries
Rule 13a-14(a)/15d-14(a) Certifications
Exhibit 31.1
I, Karen Colonias, certify that:
1.
I have reviewed this annual report on Form 10-K of Simpson Manufacturing Co., Inc.;
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 25, 2021
By /s/Karen Colonias
Karen Colonias
Chief Executive Officer
101
Simpson Manufacturing Co., Inc. and Subsidiaries
Rule 13a-14(a)/15d-14(a) Certifications
Exhibit 31.2
I, Brian J. Magstadt, certify that:
1.
I have reviewed this annual report on Form 10-K of Simpson Manufacturing Co., Inc.;
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 25, 2021
By /s/Brian J. Magstadt
Brian J. Magstadt
Chief Financial Officer
102
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, 2020, 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 25, 2021
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.
103
Simpson Manufacturing Co., Inc.
5956 W. Las Positas Boulevard
Pleasanton, CA 94588
Tel: (800) 925-5099 Fax: (925) 847-1608
simpsonmfg.com
Tuutuu Greaney Welder, 9 years
© 2021 Simpson Manufacturing Co., Inc. P48325_AR20