What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-02-28 compared with 2021-02-26 · 177 added, 200 removed, 153 unchanged (71% of the section changed)

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.

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.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes that appear in this Annual Report.

In addition to historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates and beliefs.

Our actual results could differ materially from those discussed in the forward-looking statements.

Factors that could cause or contribute to these differences include those discussed below and in this Annual Report, particularly in "Part I - Item 1A.

Risk Factors."

We design, manufacture and sell building construction products that are of high quality and performance, easy to use and cost-effective for customers.

We operate in three business segments determined by geographic region:

North America, Europe and Asia/Pacific.

Our 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

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.

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.

At our March 23, 2021 analyst and investor day, we unveiled several key growth initiatives that we believe will help us continue our track record of above market revenue growth through a combination of organic and inorganic opportunities.

Our organic opportunities are focused on expansion into new markets within our core competencies of wood and concrete products.

These key growth initiatives will focus on the original equipment manufacturers, repair and remodel or do-it-yourself, mass timber, concrete and structural steel markets.

In order to grow in these markets, we aspire to be among the leaders in engineered load-rated construction building products and systems and building technology while leveraging our engineering expertise, deep-rooted relationships with top builders, engineers, contractors, code officials and distributors, along with our ongoing commitment to testing, research and innovation.

Importantly, we currently have existing products, testing results, distribution and manufacturing capabilities for our key growth initiatives.

Although these initiatives are all currently in different stages of development, our successful growth in these areas will ultimately be a function of expanding our sales and/or marketing functions to promote our products to different end users and distribution channels, expanding our customer base, and potentially introducing new products in the future.

Also during the March analyst and investor day, we highlighted our five-year ambitions, which are as follows:

Strengthen our values-based culture;

Be the business partner of choice;

Strive to be an innovative leader in the markets we operate;

Continue above market growth relative to the United States housing starts;

Remain within the top quartile of our proxy peers for operating income margin;

Remain in the top quartile of our proxy peers for return on invested capital.

We will make periodic updates related to material developments to our key growth initiatives and with our five-year ambitions.

Acquisitions and Investments

The Company entered into an agreement to acquire the Etanco Group ("Etanco") for $818 million (1) (approximately €725 million) with an expected close date of April 1, 2022.

Etanco is a leading designer, manufacturer and distributor of fixing and fastening solutions for the building construction market throughout Europe, which includes innovative fasteners, connectors, anchors and safety solutions for roofing, cladding, façade, waterproofing and solar applications.

For the twelve months ended September 30, 2021, Etanco's net sales and operating income margin were approximately $291 million (2) (approximately €258 million) and 19.7% (2) , respectively.

Etanco's primary product applications directly align with the addressable markets in which the Company operates, estimated at over $5.0 billion.

Leveraging Etanco's leading market position in Europe, following the proposed acquisition, the Company would expand its portfolio of solutions, including mechanical anchors, fasteners and commercial building envelope solutions, as well as significantly increase its market presence across Europe.

The transaction would allow the Company to enter into new commercial building markets such as façades, waterproofing, safety and solar, as well as grow its share of direct business sales.

The Company expects to realize operating income synergies of approximately $30 million, on an annual run rate basis, within 36 months following the proposed acquisition.

These synergies would be achieved through expanding the Company's market share by selling its products into new markets and channels, incorporating Etanco's products into the Company's existing channels, as well as procurement optimization, manufacturing and operating expense efficiencies.

The Company would expect

to scale its European net sales and operating income margin performance, resulting in an approximate 500 basis point increase in Europe operating income margins by 2025.

Additionally, the Company also expects that its interest expense will increase as a result of the incurrence of debt to finance the acquisition of Etanco.

Also during 2021

• Invested in a venture capital fund focused on the home building industry and related new technologies.

• Entered into a joint indirect investment in the North America Hundegger equipment sales and service representative partner, Hundegger USA, LC to increase each parties' sales in the mass timber and component manufacturing markets by offering North America customers end-to-end solutions, including integrated software from a single source.

• Formed an strategic alliance with Structural Technologies that will allow both parties jointly deliver complete end-to-end strengthening solutions to engineering professionals, contractors and owners across multiple construction and repair markets, and

• Expanded its product line thru licensing products and purchasing or acquiring intellectual property.

COVID-19 surfaced in late 2019 and has spread around the world, including to the United States.

In March 2020, the World Health Organization declared COVID-19 a worldwide pandemic and the President of the United States declared the COVID-19 outbreak a national emergency.

As of December 31, 2021, the effects of and responses to the pandemic continue to have a significant impact on worldwide economic activity and on macroeconomic conditions.

Although vaccines are available in numerous countries the vaccination level varies by country and in the United States by state.

The duration and severity of the effects of the pandemic are still unknown and cannot be predicted with any certainty.

Despite this lessening impact throughout 2021, we continue to monitor the COVID-19 pandemic for potential impact on our business and take precautions to provide a safe environment for our employees and customers.

Notwithstanding the Company's continued efforts to promote the health and safety of our employees, suppliers and customers, as the COVID-19 pandemic continues, health concern risks remain.

It also remains unclear how various national, state, and local governments will react if new variants of the virus become more prevalent.

In response to the pandemic, government authorities in the countries and states where we operate issued various and differing shelter in place and stay at home orders, social distancing guidelines, mask mandates and other measures in response to the COVID-19 pandemic.

In many of those locations our operations are classified as an "essential business" and we continue to operate our business in compliance with applicable state and local laws and are observing recommended Centers for Disease Control and Prevention guidelines to minimize the risk of spreading the COVID-19 virus.

We have undertaken numerous steps and instituted additional precautions to comply with health and safety guidelines and to protect our employees, suppliers and customers, as their safety and well-being is one of our top priorities, and to comply with health and safety guidelines.

These steps and precautions include 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.

Although vaccines are available where we operate, health concern risks remain and it is possible the COVID-19 pandemic could further impact our operations and the operations of our suppliers and vendors, particularly in light of variant strains of COVID-19 that may cause a resumption of high levels of infection and hospitalization.

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.

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 and continued to meet our customers’ needs despite the challenges presented by the COVID-19 pandemic.

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

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.

In response to the COVID-19 pandemic the Company proactively took measures to maintain and preserve its strong financial position and flexibility.

The Company's 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.

The Company’s business, financial condition and results of operations depends significantly on the level of United States, housing starts and residential construction activity.

Though single-family housing starts increased significantly from prior-year's level, we believe there is uncertainty that demand will increase in the short-term due to supply-chain factors, inflation and possibly interest rate increases affecting new home starts and completions.

With recent sales price increases, we believe sales will likely increase in future periods even if demand does not decrease.

However, increased selling prices are expected to be offset by increasing material costs, sourcing logistics complications and a tight labor market, which could negatively affect operating margins for 2022.

Management continues to monitor the impact of rising material input and product logistics costs on the Company's financial condition, liquidity, operations, suppliers, industry, and workforce.

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.

Unlike lumber or other products that have a more direct correlation to United States housing starts, our products are used to a greater extent in areas that are subject to natural forces, such as seismic or wind events.

Our products are generally used in a sequential process that follows the construction process.

Residential and commercial construction begins with the foundation, followed by the wall and the roof systems, and then the installation of our products, which flow into a project or a house according to these schedules.

Our sales also tend to be seasonal, with operating results varying from quarter to quarter.

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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.

Political and 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 can also be affected by a volatile steel market and stressed product transportation systems.

Changes in raw material cost could negatively affect our gross profit and operating margins depending on the timing of raw material purchases or how much sales prices can be increased to offset higher raw material costs.

Delays in receiving products or shipping sales orders, as well as increased transportation costs, could negatively impact sales and operating profits.

Our operations also expose us to risks associated with pandemics, epidemics or other public health emergencies, such as the COVID-19 pandemic.

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.

North America sales increased 23.7% for the year ended December 31, 2021 compared to December 31, 2020.

Our wood construction product sales increased 25.2% for the year ended December 31, 2021 compared to December 31, 2020, primarily due to product price increases that took effect throughout 2021 as well as increased sales volumes.

Our concrete construction product sales increased 13.9% for the year ended December 31, 2021 compared to December 31, 2020, mostly due to product price increases that took effect throughout 2021.

North America net sales were positively affected by approximately $4.7 million in foreign currency translation mostly related to a strengthening Canadian dollar.

Each product price percentage increase ranged from mid-single digits to mid-teens depending on the product mix, for certain of our wood connector, fastener and concrete products in the United States.

In regards to the product price increases phased in during 2021 relative to 2022, full phased in product price increases for 2022 could result in $300 million in additional net sales compared to 2021.

We currently anticipate additional net sales to be offset by higher priced raw materials and rising average cost of steel on hand significantly compressing gross margin and operating margin in fiscal 2022.

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.

In local currency, Europe net sales decreased primarily due to lower sales volume.

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.

See “ Europe ” below.

Europe sales increased 25.7% for the year ended December 31, 2021 compared to December 31, 2020, due to product priced increases and higher sales volumes in local currency and were positively affected by approximately $8.5 million in foreign currency translation related to Europe's currencies strengthening against the United States Dollar.

Wood construction product sales increased 28.7% for the year ended December 31, 2021 compared to December 31, 2020.

Concrete construction product sales are mostly project based, and sales increased 13.9% for the year ended December 31, 2021 compared to December 31, 2020.

Gross margins decreased slightly, mostly due to higher material and labor costs, partly offset by lower warehouse and shipping costs and factory and tooling costs all as a percentage of sales.

Operating expenses increased, primarily due to increased professional fees and personnel costs.

For fiscal 2022, increased steel costs and product sourcing complications could offset increased sales and negatively affect operating margins.

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.

Since December 2020, inventory pounds in North America, which is the bulk of our inventory, decreased 2% while the weighted average cost per pound of total on hand increased approximately 63%.

Based on our current expectations, we are anticipating continued raw material cost pressure for fiscal 2022.

Our gross margins in 2021 reflect an average cost of steel

sourced prior to and during the increasing steel price market.

As we work through our on hand inventory and continue to buy raw material at these much higher prices, our anticipated costs of goods sold are expected to increase significantly for fiscal 2022, even if prices for raw material begin to decline, as the impact from averaging raw material costs typically lags our price increases.

We began to see this sequential margin deceleration occur during the fourth quarter 2021 with gross margin declining by roughly 250 basis points from the third quarter 2021.

As a result, and based on our fiscal 2022 operating margin outlook, we currently expect our operating margin for the full year of 2022 will decline by approximately 500 basis points year-over-year.

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.

Based on business trends and conditions, the Company's outlook (excluding Etanco) for the full fiscal year ending December 31, 2022 is as follows:

• Operating margin is estimated to be in the range of 17.5% to 19.0% .

• The effective tax rate is estimated to be in the range of 25.5% to 26.5%, including both federal and state income tax rates and assuming no tax law changes are enacted.

• Capital expenditures are estimated to be in the range of $65 million to $70 million.

While the magnitude and duration of the COVID-19 pandemic and its impact on general economic conditions remain uncertain, the Company continues to monitor the impact of the pandemic on its operations and financial condition, which was not significantly adversely impacted in fiscal 2021.

Please note that ongoing uncertainties surrounding the impact of the COVID-19 pandemic on the Company’s business, which may include the economic impact on its operations, raw material costs, consumers, suppliers, vendors, and other factors outside of its control, may have a material adverse impact on the Company’s financial outlook.

(1) Reflects EUR to USD exchange rate as of December 22, 2021.

(2) For the last twelve months ended September 30, 2021 in accordance with French GAAP.

Subject to change following conversion to IFRS or U.S.

GAAP accounting standards.

Results of Operations

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Net gain on disposal of assets — % — % (0.5) %

Impairment of goodwill — % — % 0.6 %

Income from operations 23.3 % 19.9 % 15.9 %

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Comparison of the Years Ended December 31, 2021 and 2020

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:

Unless otherwise stated, the results announced 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, 2021, against the results of operations for the year ended December 31, 2020.

Unless otherwise stated, the results

announced below, when referencing “both years,” refer to the year ended December 31, 2020 and the year ended December 31, 2021.

The following table shows the change in the Company’s operations from 2020 to 2021, and the increases or decreases from the prior year, for each category by segment:

Increase (Decrease) in Operating Segment

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Net income $ 187,000 $ 75,847 $ 2,801 $ 1,824 $ (1,025) $ 266,447

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

Net Sales increased 24.1% to $1,573.2 million from $1,267.9 million primarily due to product price increases that took effect throughout 2021 in an effort to offset rising material costs as well as higher sales volumes.

Wood construction product net sales, including sales of connectors, truss plates, fastening systems, fasteners and shearwalls, represented 87% and 85% of the Company’s total net sales for the years ended December 31, 2021 and 2020, respectively.

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Gross profit increased to $755.0 million from $576.4 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%.

Gross margins increased to 48.0% from 45.5%, primarily due to product price increases during 2021, lower labor and factory expenses, and offset partly by higher material costs as a percentage of net sales.

Gross margins, including some inter-segment expenses, which were eliminated in consolidation, and excluding certain expenses that are allocated according to product group, increased to 47.9% from 45.5% for wood construction products and increased to 44.4% from 41.6% for concrete construction products, respectively.

Research and development and other engineering expense increased 16.9% to $59.4 million from $50.8 million, primarily due to increases of $5.0 million in personnel costs, $1.3 million in patent and code approval costs, $1.1 million in professional fees, and $1.0 million in cash profit sharing expenses.

Selling expense increased 20.0% to $135.0 million from $112.5 million, primarily due to increases of $13.8 million in personnel costs and sales commissions, $4.6 million in professional fees, $1.3 million in stock-based compensation, $2.0 million cash profit sharing expense, and $1.4 million travel-related expenses, partly offset by decrease of $1.5 million in advertising and promotional expense.

General and administrative expense increased 20.0% to $193.2 million from $161.0 million, primarily due to increases of $10.2 million in professional fees, $9.7 million in personnel costs, $3.3 million in cash profit sharing expenses, $2.3 million in stock-based compensation, $2.0 million of computer and software related costs, and $1.9 million in depreciation and amortization expenses.

Our effective income tax rate increased to 25.7% from 25.1% primarily due to a decrease in tax benefits associated with stock-based compensation.

Net income was $266.4 million compared to $187.0 million.

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* The statistic is not meaningful or material.

The following table shows gross profit margins by segment for the years ended December 31, 2019 and 2020, respectively:

The following table shows gross margins by segment for the years ended December 31, 2020 and 2021, respectively:

America Europe Asia/

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All Other Total

2019 gross profit margin 44.8 % 34.7 % 31.5 % * 43.3 %

2020 gross profit margin 47.0 % 35.4 % 37.2 % * 45.5 %

2020 gross margin 47.0 % 35.4 % 37.2 % * 45.5 %

2021 gross margin 50.0 % 35.1 % 36.9 % * 48.0 %

* The statistic is not meaningful or material.

North America

• 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.

• 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.

• 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.

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.

• Net sales increased 23.7% primarily due to product price increases that took effect throughout 2021 in an effort to offset rising material costs as well as higher sales volumes.

Canada's sales increased primarily due to increases in sales volume and were positively affected by $4.7 million foreign currency translation in local currency.

• Gross margin increased to 50.0% from 47.0%, primarily due to product price increases implemented during 2021, and decreases in labor, factory, warehouse and freight costs, partly offset by higher material costs, each as a percentage of net sales.

• Research and development and engineering expense increased $7.9 million, primarily due to increases of $3.9 million in personnel costs, $0.9 million cash profit sharing expenses, $0.8 million in professional fees, $0.6 million in patent costs, $0.4 maintenance and supplies expenses and $0.2 million in depreciation.

• Selling expense increased $19.0 million, primarily due to increases of $11.4 million in personnel costs and sales commissions, $2.1 million in professional fees, $1.8 million in travel and trade show events, $1.7 million in cash profit sharing expense, $1.2 million in stock-based compensation, partly offset by decreases of $0.5 million in advertising and depreciation expense.

• General and administrative expense increased $27.0 million, primarily due to increases of $8.4 million in professional fees, including legal fees, $6.9 million in personnel costs, $2.9 million in depreciation and amortization expense, $2.4 million in computer software and hardware costs, and $1.5 million in cash profit sharing expense, as well as, $1.5 million in higher software development expense net of capitalization.

• Income from operations increased $109.9 million, mostly due to increased sales and gross profit, partly offset by higher operating expenses.

• Net sales increased 25.7%, primarily due to higher sales volumes compared to last year’s COVID-19 related slow-down.

Europe's sales were also benefited by positive $8.5 million foreign currency translations resulting from some Europe currencies strengthening against the United States Dollar.

• Gross margin decreased to 35.1% from 35.4%, primarily due to increases in material and labor costs, partly offset by decreases in factory & tooling costs, warehouse and shipping costs, each as a percentage of net sales.

• Selling expense increased $3.0 million primarily due to increases of $2.1 million in personnel costs, $0.5million in professional fees, and $0.3 million in cash profit sharing expenses.

• General and administrative expenses increased $4.2 million primarily due to increases of $2.7 million in professional fees, $1.3 million in personnel costs.

• Income from operations increased $5.8 million, primarily due to higher sales and gross profit, partly offset by higher operating expenses.

• 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, 2021 and 2020.

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

• General and administrative expense increased $0.9 million, primarily due to increases of $2.3 million in stock-based compensation, $2.0 million in personnel costs, $1.6 million in cash profit sharing expense offset by decreases of $4.5 million in professional fees and $0.5 million in depreciation and amortizations costs.

Comparison of the years ended December 31, 2020 and 2019 are incorporated by reference to For m 10-K 2020 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.

If the Company’s business conditions change or if it uses different assumptions or estimates in the application of these and other accounting policies, as well as uncertainty in the current economic environment due to the ongoing COVID-19 pandemic, the Company’s future results of operations could be adversely affected.

Inventory Valuation

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The Company revalues obsolete inventory to its net realizable value and has consistently applied this methodology.

Company believes that this approach is suitable for impairments of slow-moving and obsolete inventory.

The 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.

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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.

Our goodwill balance is not amortized to expense, and we may assess quantitative or 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.

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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.

The Company tests goodwill for impairment at the reporting unit level on an annual basis (in the fourth quarter for the Company).

The Company also reviews goodwill for impairment whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable.

These events or circumstances could include a significant change in the business climate, legal factors, operating performance indicators, competition, or disposition or relocation of a significant portion of a reporting unit.

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

The 2021and 2020 annual testing of goodwill and intangible assets for impairment did not result in impairment charges.

The S&P reporting unit passed Step 1 of the annual 2021 impairment test by a 7.8% margin indicating an estimated fair value greater than its net book value and was the only reporting unit with a fair value greater than net book value margin of less than 10%.

The S&P reporting unit is sensitive to management’s plans for increasing sales and operating margins.

The S&P reporting unit’s failure to meet management’s objectives could result in future impairment of some or all of the S&P reporting unit’s goodwill, which was $23.1 million at December 31, 2021.

Key assumptions used in Step 1 of the Company's annual goodwill impairment test included discount rates, multiple rates, average annual sales growth rates and average annual pre-tax income before interest, depreciation and amortization expenses during the forecast period starting with fiscal year 2021.

A sensitivity assessment for the key assumptions included in the 2021 goodwill impairment test on the S&P reporting unit is as follows:

• A 90 basis point hypothetical increase in the discount rate, holding all other assumptions constant, would not have decreased the fair value of the reporting unit below its carrying value, and thus it would not result in the reporting unit failing Step 1 of the goodwill impairment test;

• A 150 basis point hypothetical decrease in the multiple rate applied to forecasted 2022 pre-tax income before interest, depreciation and amortization, holding all other assumptions constant, would not have decreased the fair value of the

reporting unit below its carrying value, and thus it would not result in the reporting unit failing Step 1 of the goodwill impairment test;

• A 5% hypothetical decrease in average annual sales growth rates, holding all other assumptions constant, would not have decreased the fair value of the reporting unit below its carrying value and

• A 10% hypothetical decrease in average annual pre-tax income before interest, depreciation and amortization expenses, holding all other assumptions constant, would not have decreased the fair value of the reporting unit below its carrying value.

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's general shipping terms are Incoterm C.P.T.

shipping point), where the title, and risk and rewards of ownership transfer at the point when the products are no longer on the Company's premises.

Other Incoterms are allowed as exceptions depending on the product or service being sold and the nature of the sale.

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).

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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.

Liquidity and Capital Resources

In July 2021, the Company entered into a fourth 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 (the “Credit Facility”).

The amendment extends the term of the Credit Facility from July 23, 2022, to July 12, 2026 and modified certain covenants to provide us with additional flexibility.

As of December 31, 2021, the full $300.0 million under the Credit Facility was available for borrowing and we remain debt free.

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 the Company's common stock, paying cash dividends, and financing other investment opportunities over the next twelve months.

The Company has certain contractual obligations, primarily operating leases, purchase obligations and debt interest obligations which include annual facility fees.

Refer to "Note 11 - Leases" (Part II, Item 8) and "Note 14 - Commitment and Contingencies" for details related to the Company's purchase obligations and debt annual facility fees.

The Company did not have any significant off-balance sheet commitments as of December 31, 2021.

As previously disclosed, the Company is acquiring Etanco.

The acquisition is expected to be funded via a combination of $100 million of existing cash, a $450 million unsecured term loan with committed financing from Wells Fargo Bank and MUFG Union Band and the remainder from borrowings under the Company’s existing Revolving Credit Facility, which will be increased from $300 million to $450 million.

Interest expense will increase from the additional debt incurred to finance the acquisition of Etanco but the Company expects its net debt-to-EBITDA ratio to be below 1.5 times on the closing of the acquisition, maintaining the Company’s conservative leverage profile.

As of December 31, 2021, our cash and cash equivalents consisted of deposits and money market funds held with established national financial institutions, and includes $75.8 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.

The Company is maintaining a permanent reinvestment assertion on its foreign earnings relative to remaining cash held outside the United States.

The following table presents selected financial information as of December 31, 2021, 2020 and 2019, respectively:

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Financing activities (71,616) (126,777) (108,154)

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 result primarily from our earnings, and are also affected by changes in operating assets and liabilities which consist primarily of working capital balances.

Our revenues are derived from manufacturing and sales of building construction materials.

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 is generally at its lowest at the end of the fourth quarter and increases during the first, second and third quarters.

In 2021, operating activities provided $151.3 million in cash and cash equivalents, as a result of $266.4 million from net income and $71.3 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 $186.5 million for the net change in operating assets and liabilities primarily from increases of $164.2 million in inventory and $68.0 million in trade accounts receivables, partly offset by an increase of $50.5 million in accrued liabilities and other current liabilities.

Cash used in investing activities of $58.8 million during the year ended December 31, 2021 was mainly for capital expenditures and investments, including a venture capital fund.

Our capital spending for the fiscal years 2019, 2020 and 2021 was $32.7 million, $32.6 million and $43.7 million, respectively, which was primarily used for machinery and equipment purchases and software in development.

Based on current information and subject to future events and circumstances, total approved capital spending for 2022 will be in the $65 million to $70 million range.

Capital expenditures outlook, we estimate roughly 20% will be dedicated to maintenance capital expenditures.

Our growth investments will be primarily focused on purchases of new equipment to support increased productivity and efficiencies, enhancements to our existing facilities to expand our manufacturing footprint in-line with increasing customer needs, as well as investments for adjacencies and key growth initiatives .

Cash used in financing activities of $71.6 million during the year ended December 31, 2021, consisted primarily of $41.6 million used to pay cash dividends and $24.1 million for the repurchase of the Company’s common stock.

For the fiscal year ended December 31, 2021, the Company returned $65.7 million to the Company's stockholders, which represents 61.1% of our free cash flow from operations during the same period.

On January 20, 2022, the Company's Board of Directors (the "Board") declared a quarterly cash dividend of $0.25 per share payable on April 28, 2022, to stockholders of record on April 7, 2022 and estimated to be $10.8 million in total.

During 2021, the Board also approved changing our capital return threshold from 50% of our cash flow from operations to 50% of our free cash flow, which is calculated by subtracting capital expenditures from cash flow from operations.

Since the beginning of 2019 to the fiscal year ended December 31, 2021, we have returned $283.3 million to stockholders, which represents 62.2% of our free cash flow and over the same period the Company has repurchased over 2.2 million shares of

the Company's common stock, which represents approximately 5.2% of the outstanding shares of the Company's common stock.

Cash flows from operating activities years ended December 31, 2020 and 2019 are incorporated by reference to Form 10-K 2020 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.

• For 2021, we purchased and received 222,060 shares of the Company’s common stock on the open market at an average price of $108.64 per share, for a total of $24.1 million under a previously announced $100.0 million share repurchase authorization (which expired at the end of 2021).

• 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) Number of Shares Repurchased Cash Paid for Repurchases Cash Paid for Dividends Total

January 1 - December 31, 2020 1,053 $ 76,189 40,400 $ 116,589

January 1 - December 31, 2019 972 60,816 40,258 101,074

January 1 - December 31, 2018 1,955 110,540 39,891 150,431

January 1 - December 31, 2017 1,138 70,000 36,981 106,981

January 1 - December 31, 2016 1,244 53,502 32,711 86,213

January 1 - December 31, 2015 1,339 47,144 29,352 76,496

Total 7,701 $ 418,191 $ 219,593 $ 637,784

Contractual Obligations

The following table summarizes our known material contractual obligations and commitments as of December 31, 2020:

Payments Due by Period

Contractual Obligation (in thousands)

Primary line-of credit annual facility fees (1)

$ 900 $ 600 $ 300 $ — $ —

Operating lease obligations, including imputed interest (2)

46,342 10,696 15,613 10,348 9,685

Purchase obligations (3)

38,119 37,536 583 —

Total $ 85,361 $ 48,832 $ 16,496 $ 10,348 $ 9,685

(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.

Off-Balance Sheet Arrangements

The Company did not have any off-balance sheet arrangements as of December 31, 2020.

• On November 18, 2021, the Board authorized the Company to repurchase up to $100.0 million of the Company's common stock, from January 1, 2022 through December 31, 2022.

Contingencies

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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

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.

Inflation rates increased significantly during fiscal year 2021, which may negatively effect material costs as well as labor costs and other costs of doing business, and as such may adversely affect our operating profits if we cannot recover the higher costs through price increases.

Our main raw material is steel, and as such, increases in steel prices may adversely affect our gross margin if we cannot recover the higher costs through price increases.

See “Item 1 — Raw Materials” and “Item 1A — Risk Factors.”

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis