PLEASANTON, Calif., July 29 /PRNewswire-FirstCall/ -- Simpson Manufacturing Co., Inc. (the "Company") announced today that its second quarter 2008 net sales decreased 5.2% to $219.3 million as compared to net sales of $231.3 million for the second quarter of 2007. Net income decreased 28.0% to $20.4 million for the second quarter of 2008 as compared to net income of $28.3 million for the second quarter of 2007. Diluted net income per common share was $0.42 for the second quarter of 2008 as compared to $0.58 for the second quarter of 2007. In the first half of 2008, net sales decreased 8.8% to $386.9 million as compared to net sales of $424.4 million for the first half of 2007. Net income decreased 37.0% to $28.7 million for the first half of 2008 as compared to net income of $45.6 million for the first half of 2007. Diluted net income per common share was $0.59 for the first half of 2008 as compared to $0.93 for the first half of 2007.
In the second quarter of 2008, sales declined throughout the United States, with the exception of the northeastern and midwestern regions of the country. California and the western states had the largest decrease in sales. Sales during the quarter in Canada and in continental Europe increased significantly, while sales were down in the United Kingdom. Simpson Strong-Tie's second quarter sales decreased 4.9% from the same quarter last year, while Simpson Dura-Vent's sales decreased 10.2%. Simpson Strong-Tie's sales to contractor distributors had the largest percentage rate decrease and sales to dealer distributors and home centers also decreased. Sales decreased across all of Simpson Strong-Tie's major product lines, particularly those used in new home construction. Sales of the Swan Secure product line, acquired in July 2007, accounted for approximately 4.5% of Simpson Strong-Tie's second quarter sales. Sales of Simpson Dura-Vent's pellet vent and chimney products increased while sales of its gas vent and Direct-Vent product lines decreased as a result of several factors, including the decline in new home construction.
Income from operations decreased 25.8% from $43.6 million in the second quarter of 2007 to $32.4 million in the second quarter of 2008. Gross margins decreased from 40.4% in the second quarter of 2007 to 38.2% in the second quarter of 2008. The decrease in gross margins was primarily due to higher manufacturing and distribution costs and a higher proportion of fixed overhead costs to total costs, resulting primarily from the lower sales volume. The steel market continues to be dynamic with a high degree of uncertainty. Since December 31, 2007, the Company's total inventories have increased 6.5%. In the second half of 2008, the Company is anticipating further increases in steel prices. If steel prices continue to increase and the Company is not able to increase its prices sufficiently, the Company's margins could further deteriorate.
Selling expenses increased 10.4% from $20.1 million in the second quarter of 2007 to $22.1 million in the second quarter of 2008. The increase was driven primarily by a $3.5 million increase in expenses associated with sales and marketing personnel, including those at businesses acquired since July 2007. This increase was offset by decreases in donations of $0.7 million, primarily related to the gift made in the second quarter of 2007 to Habitat for Humanity International, Inc., professional services expenses of $0.3 million and promotional expenses of $0.2 million. General and administrative expenses decreased 2.0% from $24.2 million in the second quarter of 2007 to $23.8 million in the second quarter of 2008. The decrease mainly comprised a $5.2 million decrease in cash profit sharing, the result of both lower operating profit and a shift begun in the second quarter of 2008 of some of the compensation of U.S. based salaried employees from cash profit sharing to salary. This decrease was mostly offset by increases in personnel expenses of $3.0 million, including the shift in compensation as well as the expenses associated with personnel at businesses acquired since July 2007, legal and professional service expenses of $1.3 million and higher amortization expense of $0.5 million, primarily related to intangible assets acquired from Swan Secure Products, Inc. in July 2007. The effective tax rate was 38.0% in the second quarter of 2008, up from 37.2% in the second quarter of 2007. The increase in the effective tax rate was caused by many factors, including a decrease in tax-exempt interest income and the expiration of the federal research and development tax credit in 2008.
In the first half of 2008, sales declined throughout the United States, with the exception of the northeastern region of the country. California and the western states had the largest decrease in sales. Sales during the period in Canada and in continental Europe increased significantly, while sales were down in the United Kingdom. Simpson Strong-Tie's first half sales decreased 9.0% from the first half of last year, while Simpson Dura-Vent's sales decreased 6.0%. Simpson Strong-Tie's sales to contractor distributors had the largest percentage rate decrease and sales to dealer distributors and home centers also decreased. Sales decreased across all of Simpson Strong-Tie's major product lines, particularly those used in new home construction. Sales of the Swan Secure product line, acquired in July 2007, accounted for approximately 4.8% of Simpson Strong-Tie's first half sales. Sales of Simpson Dura-Vent's pellet vent and chimney products increased while sales of its gas vent and Direct-Vent product lines decreased.
Income from operations decreased 34.7% from $70.2 million in the first half of 2007 to $45.8 million in the first half of 2008. Gross margins decreased from 38.9% in the first half of 2007 to 36.2% in the first half of 2008. The decrease in gross margins was due primarily to higher manufacturing and distribution costs and a higher proportion of fixed overhead costs to total costs, resulting primarily from the lower sales volume.
Selling expenses increased 9.8% from $38.2 million in the first half of 2007 to $41.9 million in the first half of 2008. The increase was driven primarily by a $5.1 million increase in expenses associated with sales and marketing personnel, including those at businesses acquired since July 2007. This increase was partly offset by decreases in donations of $0.5 million and promotional expenses of $0.3 million. General and administrative expenses decreased 9.2% from $45.9 million in the first half of 2007 to $41.6 million in the first half of 2008. The major components of the decrease were decreases in cash profit sharing of $9.1 million, resulting primarily from decreased operating profit, and adjustments to the bad debt reserves of $0.9 million. These decreases were partly offset by increases in personnel expenses of $4.1 million, including those at businesses acquired since July 2007, higher amortization expense of $1.1 million and increased legal and professional service expenses of $0.6 million. The effective tax rate was 39.5% in the first half of 2008, up from 37.5% in the first half of 2007. The increase in the effective tax rate resulted from many of the same factors that affected the effective tax rate in the second quarter.
In June 2008, the Company's subsidiary, Simpson Dura-Vent Company, Inc., purchased 100% of the equity of ProTech Systems, Inc. ("ProTech"). ProTech manufactures venting products in New York and distributes them throughout North America. The purchase price (subject to post-closing adjustment) was $7.5 million in cash, plus an additional earn-out of up to $2.25 million if certain future performance targets are met. In July 2008, Simpson Dura-Vent also purchased certain assets to produce the Ventinox stainless steel chimney liner product line from American BOA Inc. ProTech had been the distributor of Ventinox products. In July 2008, Simpson Strong-Tie purchased 100% of the equity of Ahorn-Gerate & Werkzeuge Vertriebs GmbH ("Ahorn"), a German company, and its subsidiaries in the Czech Republic and China. The acquisition will broaden Simpson Strong-Tie's collated fastener product line and add production capacity in both Europe and China. The purchase price (subject to post-closing adjustment) was $8.5 million in cash.
Investors, analysts and other interested parties are invited to join the Company's conference call on Wednesday, July 30, 2008, at 6:00 am Pacific Time. To participate, callers may dial 800-862-9098. The call will be webcast simultaneously as well as being available for one month through a link on the Company's website at http://www.simpsonmfg.com/.
This document contains forward-looking statements, based on numerous assumptions and subject to risks and uncertainties. Although the Company believes that the forward-looking statements are reasonable, it does not and cannot give any assurance that its beliefs and expectations will prove to be correct. Many factors could significantly affect the Company's operations and cause the Company's actual results to differ substantially from the Company's expectations. Those factors include, but are not limited to: (i) general economic and construction business conditions; (ii) customer acceptance of the Company's products; (iii) relationships with key customers; (iv) materials and manufacturing costs; (v) the financial condition of customers, competitors and suppliers; (vi) technological developments; (vii) increased competition; (viii) changes in capital market conditions; (ix) governmental and business conditions in countries where the Company's products are manufactured and sold; (x) changes in trade regulations; (xi) the effect of acquisition activity; (xii) changes in the Company's plans, strategies, objectives, expectations or intentions; and (xiii) other risks and uncertainties indicated from time to time in the Company's filings with the U.S. Securities and Exchange Commission. Actual results might differ materially from results suggested by any forward-looking statements in this report. The Company does not have an obligation to publicly update any forward-looking statements, whether as a result of the receipt of new information, the occurrence of future events or otherwise.
The Company's results of operations for the three and six months ended June 30, 2008 and 2007 (unaudited), are as follows:
Three Months Six Months (Amounts in thousands, Ended June 30, Ended June 30, except per share data) 2008 2007 2008 2007 Net sales $219,263 $231,288 $386,919 $424,442 Cost of sales 135,398 137,925 246,796 259,457 Gross profit 83,865 93,363 140,123 164,985 Research and development and engineering expenses 5,610 5,463 10,713 10,723 Selling expenses 22,134 20,053 41,942 38,207 General and administrative expenses 23,767 24,246 41,641 45,883 Income from operations 32,354 43,601 45,827 70,172 Income (loss) in equity method investment,
before tax -- 59 - - 26
Interest income, net 505 1,424 1,634 2,797 Income before taxes 32,859 45,084 47,461 72,995 Provision for income taxes 12,478 16,767 18,728 27,387 Net income $20,381 $28,317 $28,733 $45,608 Net income per share: Basic $0.42 $0.58 $0.59 $0.94 Diluted 0.42 0.58 0.59 0.93 Cash dividend declared per common share $0.10 $0.10 $0.20 $0.20 Weighted average shares outstanding: Basic 48,593 48,432 48,584 48,424 Diluted 48,936 48,902 48,933 48,894 Other data: Depreciation and amortization $7,587 $7,756 $15,007 $14,833 Pre-tax stock compensation expense 920 1,486 1,856 3,164
The Company's financial position as of June 30, 2008 and 2007, and December 31, 2007 (unaudited), is as follows:
June 30, December 31, (Amounts in thousands) 2008 2007 2007 Cash and short-term investments $162,098 $177,166 $186,142 Trade accounts receivable, net 139,162 145,388 88,340 Inventories 232,575 210,253 218,342 Assets held for sale 7,887 9,671 9,677 Other current assets 17,597 18,822 20,376 Total current assets 559,319 561,300 522,877 Property, plant and equipment, net 199,055 199,249 198,117 Goodwill 69,500 45,917 57,418 Other noncurrent assets 42,209 22,392 39,267 Total assets $870,083 $828,858 $817,679 Trade accounts payable $46,362 $47,791 $27,226 Line of credit and current portion of long-term debt 3,177 5,942 1,029 Other current liabilities 61,111 69,286 56,084 Total current liabilities 110,650 123,019 84,339 Long-term debt -- -- -- Other long-term liabilities 12,076 9,483 9,940 Stockholders' equity 747,357 696,356 723,400 Total liabilities and stockholders' equity $870,083 $828,858 $817,679
Simpson Manufacturing Co., Inc., headquartered in Pleasanton, California, through its subsidiary, Simpson Strong-Tie Company Inc., designs, engineers and is a leading manufacturer of wood-to-wood, wood-to-concrete and wood-to-masonry connectors and fastening systems, stainless steel fasteners and pre-fabricated shearwalls. Simpson Strong-Tie also offers a full line of adhesives, mechanical anchors and powder actuated tools for concrete, masonry and steel. The Company's other subsidiary, Simpson Dura-Vent Company, Inc., designs, engineers and manufactures venting systems for gas and wood burning appliances. The Company's common stock trades on the New York Stock Exchange under the symbol "SSD."
For further information, contact Barclay Simpson at (925) 560-9032.
