What changed in this filing

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Item 1. Financial Statements

2022-05-06 compared with 2021-11-04 · 169 added, 183 removed, 376 unchanged (48% of the section changed)

4 unchanged sentences

(In thousands, unaudited)

September 30, December 31,

March 31, December 31,

2022 2021 2021

15 unchanged sentences

Accrued liabilities and other current liabilities 207,959 158,578 187,387

Long-term debt, current portion 22,500 — —

Total current liabilities 306,849 224,814 244,602

Operating lease liabilities 36,336 35,810 37,091

Long term debt, net of current portion — 75,000 —

Long term debt, net 670,733 — —

Deferred income tax and other long-term liabilities 34,621 19,594 18,434

14 unchanged sentences

(In thousands except per-share amounts, unaudited)

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

Three Months Ended

Net sales $ 493,570 $ 347,642

6 unchanged sentences

Total operating expenses 106,476 93,979

Acquisition related costs 6,951 —

Net gain on disposal of assets ( 1,083 ) ( 80 )

7 unchanged sentences

Unamortized pension adjustments ( 172 ) 492

Unrealized (losses) on derivative instruments

( 153 ) — ( 134 ) —

Cash flow hedge adjustment, net of tax ( 9,946 ) 26

Comprehensive net income $ 84,455 $ 41,641

11 unchanged sentences

(In thousands except per-share data, unaudited)

Three Months Ended September 30, 2021 and 2020

Common Stock Additional Paid-in Retained Accumulated Other Comprehensive Treasury

Shares Par Value Capital Earnings Income (Loss) Stock Total

Balance at June 30, 2021 43,437 $ 435 $ 289,261 $ 822,497 $ ( 11,778 ) $ ( 13,510 ) $ 1,086,905

Net income — — — 73,778 — — 73,778

Translation adjustment, net of tax — — — — ( 4,889 ) — ( 4,889 )

Pension adjustment and other,

net of tax — — — — ( 335 ) — ( 335 )

Stock-based compensation — — 2,606 — — — 2,606

Shares issued from release of Restricted Stock Units 2 — ( 134 ) — — — ( 134 )

Repurchase of common stock ( 222 ) — — — — ( 24,125 ) ( 24,125 )

Cash dividends declared on common stock, $0.25 per share — — — ( 10,803 ) — — ( 10,803 )

Balance at September 30, 2021 43,217 $ 435 $ 291,733 $ 885,472 $ ( 17,002 ) $ ( 37,635 ) $ 1,123,003

Balance at June 30, 2020 43,473 $ 444 $ 277,625 $ 716,038 $ ( 27,837 ) $ ( 72,058 ) $ 894,212

Net income — — — 67,057 — — 67,057

Translation adjustment and other,

net of tax — — — — 6,238 — 6,238

Pension adjustment and other,

net of tax — — — — 28 — 28

Stock-based compensation — — 3,651 — — — 3,651

Shares issued from release of Restricted Stock Units 3 — ( 162 ) — — — ( 162 )

Cash dividends declared on common stock, $0.23 per share — — — ( 10,244 ) — — ( 10,244 )

Common stock issued at $99.63 per share for stock bonus — — 20 — — — 20

Balance, at September 30, 2020 43,476 $ 444 $ 281,134 $ 772,851 $ ( 21,571 ) $ ( 72,058 ) $ 960,800

The accompanying notes are an integral part of these condensed consolidated financial statements

Simpson Manufacturing Co., Inc.

and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity

(In thousands except per-share data, unaudited)

Nine Months Ended September 30, 2021 and 2020

Three Months Ended March 31, 2022 and 2021

Common Stock Additional Paid-in Retained Accumulated Other Comprehensive Treasury

5 unchanged sentences

net of tax — — — — ( 171 ) — ( 171 )

Cash flow Hedges, net of tax — — — — ( 9,946 ) — ( 9,946 )

Stock-based compensation — — 4,007 — — — 4,007

3 unchanged sentences

Common stock issued at $139.07 per share for stock bonus 7 — 960 — — — 960

Balance at September 30, 2021 43,217 $ 435 $ 291,733 $ 885,472 $ ( 17,002 ) $ ( 37,635 ) $ 1,123,003

Balance at March 31, 2022 43,159 $ 433 $ 289,773 $ 990,611 $ ( 27,725 ) $ ( 21,281 ) $ 1,231,811

Balance at December 31, 2020 43,326 $ 433 $ 284,007 $ 720,441 $ ( 10,428 ) $ ( 13,510 ) $ 980,943

Net income — — — 50,387 — — 50,387

Translation adjustment, net of tax — — — — 3,170 — 3,170

Translation adjustment and other,

net of tax — — — — ( 9,264 ) — ( 9,264 )

Pension adjustment and other,

net of tax — — — — 492 — 492

Cash flow Hedges, net of tax 26 26

Stock-based compensation — — 6,462 — — — 6,462

Shares issued from release of Restricted Stock Units 97 1 ( 5,264 ) — — — ( 5,263 )

Repurchase of common stock ( 902 ) — — — — ( 62,679 ) ( 62,679 )

Cash dividends declared on common stock, $0.23 per share — — — ( 9,966 ) — — ( 9,966 )

Common stock issued at $93.45 per share for stock bonus 7 1 691 — — — 692

Balance, at September 30, 2020 43,476 $ 444 $ 281,134 $ 772,851 $ ( 21,571 ) $ ( 72,058 ) $ 960,800

Balance, at March 31, 2021 43,430 $ 435 $ 285,896 $ 760,862 $ ( 19,174 ) $ ( 13,510 ) $ 1,014,509

The accompanying notes are an integral part of these condensed consolidated financial statements

3 unchanged sentences

(In thousands, unaudited)

Nine Months Ended

September 30,

Three Months Ended

Cash flows from operating activities

17 unchanged sentences

Capital expenditures ( 17,823 ) ( 10,505 )

Asset acquisitions, net of cash acquired ( 218 ) ( 1,425 )

Asset acquisitions ( 488 ) —

Equity method investments ( 600 ) ( 5,329 )

3 unchanged sentences

Repurchase of common stock ( 21,281 ) —

Proceeds from lines of credit 8,530 164,330

Proceeds from lines of credit and term loan borrowing 700,038 —

Repayments of lines of credit and capital leases ( 1,024 ) ( 192 )

2 unchanged sentences

Cash paid on behalf of employees for shares withheld ( 9,523 ) ( 5,263 )

Net cash used in financing activities ( 61,258 ) ( 26,153 )

Net cash provided by (used in) financing activities 650,600 ( 15,422 )

Effect of exchange rate changes on cash and cash equivalents 5,019 ( 3,893 )

Net increase in cash and cash equivalents 19,541 81,255

Net increase (decrease) in cash and cash equivalents 683,217 ( 17,211 )

Cash and cash equivalents at beginning of period 301,155 274,639

13 unchanged sentences

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.

The Company assessed certain accounting matters that require the use of estimates and assumptions in context with the known and projected future impacts of the novel strain of coronavirus, COVID-19.

The preparation of the condensed 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 condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.

Management believes that these condensed consolidated financial statements include all normal and recurring adjustments necessary for a fair presentation under GAAP.

The Company 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.

9 unchanged sentences

Revenue Recognition

Generally, the Company’s revenue contract with a customer exists when goods are shipped, 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.

Generally, the Company's revenue contract with a customer exists when (1) the goods are shipped, services are rendered, and the related invoice is generated, (2) the duration of the contract does not extend beyond the promised goods or services already transferred and (3) the transaction price of each distinct promised product or service specified in the invoice is based on its relative stated standalone selling price.

The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product to a customer at a point in time.

The Company’s shipping terms provide the primary indicator of the transfer of control.

The Company’s general shipping terms are free on board (F.O.B.) shipping point, meaning that title and risk and rewards of ownership transfer at the point when the products leave the Company’s warehouse.

Our shipping terms provide the primary indicator of the transfer of control.

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).

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).

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 would 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.

Net Income Per Common Share

The Company calculates net income per common share based on the weighted-average number of shares of the Company's common stock outstanding during the period.

Potentially dilutive securities are included in the diluted per-share calculations using the treasury stock method for all periods when the effect is dilutive.

The Company calculates net income per common share based on the weighted-average number of shares of the Company's common stocks outstanding during the period.

Potentially dilutive securities are included in the diluted per-share calculations using the treasury stock method for all periods when the effect of their inclusion is dilutive.

Accounting for Leases

The Company has operating leases for certain facilities, equipment, and automobiles.

As an accounting policy for short-term leases, the Company elected to not recognize the right-of-use 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 the straight-line basis over the full lease term.

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

13 unchanged sentences

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 September 30, 2021.

Derivative Instruments - Foreign Currency Contracts

The fair value of the interest rate and foreign currency contracts are classified as Level 2 within the fair value hierarchy.

Derivative Instruments - Foreign Currency and Interest Rate 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.

Foreign currency and interest rate risk are the primary market risks the Company manages through the use of derivative instruments, which are accounted for as cash flow hedges or net investment hedges under the accounting standards and carried at fair value as other current or noncurrent assets or as other current or other long-term liabilities in the condensed consolidated balance sheets.

Net deferred gains and losses related to changes in fair value of cash flow hedges are included in accumulated other comprehensive income/loss ("OCI"), a component of shareholders' equity in the condensed consolidated balance sheets, and are reclassified into the line item in the condensed consolidated statement of earnings and comprehensive income in which the hedged items are recorded in the same period the hedged item affects earnings.

The effective portion of gains and losses attributable to net investment hedges is recorded net of tax to OCI to offset the change in the carrying value of the net investment being hedged.

Recognition in earnings of amounts previously recorded to OCI are limited to circumstances such as complete or substantially complete liquidation of the net investment in the hedged foreign operation.

Changes in fair value of any derivatives that are determined to be ineffective are immediately reclassified from OCI into earnings.

Cash and 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 September 30, 2021 and 2020, the value of these investments were $ 28.6 million and $ 46.5 million, respectively, consisting of United States Treasury securities and money market funds.

As of March 31, 2022 and 2021, the value of these investments were $ 32.6 million and $ 28.2 million, respectively, consisting of United States Treasury securities and money market funds.

The value of the investments is based on cost, which approximates fair value based on Level 1 inputs .

4 unchanged sentences

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.

The changes in the allowance for doubtful accounts receivable for the nine months ended September 30, 2021 are outlined in the table below:

The changes in the allowance for doubtful accounts receivable for the three months ended March 31, 2022 are outlined in the table below:

(in thousands)

December 31, 2021 Expense (Deductions), net

September 30, 2021

March 31, 2022

Allowance for Doubtful Accounts

$ 1,933 ( 211 ) 103 $ 1,619

1 Amount is net of recoveries and the effect of foreign currency fluctuations for the nine months ended September 30, 2021.

1 Amount is net of recoveries and the effect of foreign currency fluctuations for the three months ended March 31, 2022.

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.

The Company uses an estimated annual tax rate to measure the tax benefit or tax expense recognized in each interim period.

2 unchanged sentences

ASU 2020-04 provides optional guidance to ease the potential burden in accounting for reference rate reform on financial reporting in response to the risk of cessation of the London Interbank Offered Rate (“LIBOR”) on December 31, 2021.

This ASU allows the option to account for and present a modification that meets the scope of the standard as an event that does not require contract remeasurement at the modification date or reassessment of a previous accounting determination required under the relevant topic or subtopic.

Entities are permitted to apply the amendments to all contracts, cash flow and net investment hedge relationships that exist as of March 12, 2020.

The relief provided in this ASU is only available for a limited time, generally through December 31, 2022.

The Company's primary credit facility is the $ 300 million revolving line of credit (the "Credit Facility") with Wells Fargo Bank, which matures on July 12, 2026.

Borrowings under the Credit Facility bear interest using LIBOR plus an applicable margin.

The Credit Facility currently includes a provision for the determination of a successor LIBOR rate or an alternative rate of interest.

On March 5, 2021, ICE Benchmark Administration, the administrator of the LIBOR and the Financial Conduct Authority, announced that some United States Dollar LIBOR tenors (overnight, 1 month, 3 month, and 12 month) will continue to be published until June 30, 2023.

The Company does not expect a material impact to its consolidated operating results, financial position or cash flow from the transition from LIBOR to alternative reference interest rates, but the Company will continue to monitor the impact of the transition until it is completed.

All issued and effective accounting standards during the third quarter of 2021 were determined to be not relevant or material to the Company.

The Company's primary credit facility, which was amended and restated on March 30, 2022, is composed of $ 450.0 million revolving line of credit and a $ 450.0 million term loan (the "Amended and Restated Credit Facility"), which matures on March 30, 2027.

Borrowings under the Amended and Restated Credit Facility bear interest using Secured Overnight Financing Rate ("SOFR") plus an applicable margin.

All other newly issued and effective accounting standards during the first quarter of 2022 were determined to be not relevant or material to the Company.

Revenue from Contracts with Customers

Disaggregated Revenue

The Company disaggregates sales into the following major product groups as described in the footnote for segment information included in these interim financial statements under Note 14.

The Company disaggregates net sales into the following major product groups as described in its segment information included in these interim financial statements under Note 14.

Wood Construction Products Revenue .

Wood construction products represented 86 % of total sales for both the nine months ended September 30, 2021 and 2020.

Wood construction products represented 88 % and 87 % of total net sales for the three months ended March 31, 2022 and 2021.

Concrete Construction Products Revenue.

Concrete construction products represented 14 % of total sales for both the nine months ended September 30, 2021 and 2020.

Concrete construction products represented 12 % and 13 % of total net sales for both the three months ended March 31, 2022 and 2021.

Customer Acceptance Criteria.

1 unchanged sentence

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 between 30 to 60 days after the issue date.

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.

Other Revenue .

Service sales, representing after-market repair and maintenance, engineering activities and software license sales and services were less than 1.0 % of sales and recognized as the services are completed or by transferring control over a product to a customer at a point in time.

Service sales, representing after-market repair and maintenance, engineering activities and software license sales and services were less than 0.1 % 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.

1 unchanged sentence

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 the service 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 relative stand-alone selling prices.

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.

2 unchanged sentences

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 September 30, 2021, the Company had no contract assets or contract liabilities from contracts with customers .

As of March 31, 2022, the Company had no contract assets or contract liabilities from contracts with customers .

Net Income Per Share

The following table reconciles basic net income per share of the Company's common stock to diluted net income per share for the three and nine months ended September 30, 2021 and 2020, respectively:

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

Three Months Ended

September 30, Nine Months Ended

September 30,

(in thousands, except per share amounts) 2022 2021

8 unchanged sentences

Treasury Shares

As of September 30, 2021, the Company held 373,034 shares of its common stock as treasury shares.

During the nine months ended September 30, 2021, the Company repurchased 222,060 shares of the Company's common stock in the open market at an average of $ 108.64 per share, for a total of $ 24.1 million.

As of September 30, 2021, approximately $ 75.9 million remains available for repurchase under the previously announced $ 100 million share repurchase authorization (which expires at the end of 2021).

As of March 31, 2022, the Company held 194,745 shares of its common stock as treasury shares.

During the three months ended March 31, 2022, the Company repurchased 194,745 shares of the Company's common stock in the open market at an average of $ 109.28 per share, for a total of $ 21.3 million.

As of March 31, 2022, approximately $ 78.7 million remains available for repurchase under the previously announced $ 100.0 million share repurchase authorization (which expires at the end of 2022).

Stock-Based Compensation

The Company allocates stock-based compensation expense related to equity plans for employees and non-employee directors among the 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 or non-employee directors to whom the stock-based compensation is awarded.

The Company recognized stock-based compensation expense related to its equity plans for employees of $ 2.6 million and $ 4.0 million for the three months ended September 30, 2021 and 2020, respectively, and $ 12.4 million and $ 9.5 million for the nine months ended September 30, 2021 and 2020, respectively.

During the nine months ended September 30, 2021, the Company granted 133,717 restricted stock units ("RSUs") to the Company's employees, including officers at an estimated weighted average fair value of $ 100.93 per share based on the closing price (adjusted for the present value of dividends) of the Company's common stock on the grant date.

The RSUs granted to the Company's employees may be performance-based and/or time-based.

Certain performance-based RSUs are granted to officers and key employees, where the number of performance-based awards to be issued is based on the achievement of certain Company performance criteria established in the RSU agreement over a cumulative three-year period.

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 Company recognized stock-based compensation expense related to its equity plans for employees of $ 4.9 million and $ 6.5 million for the three months ended March 31, 2022 and 2021, respectively.

During the three months ended March 31, 2022, the Company granted 112,101 RSUs and PSUs to the Company's employees, including officers at an estimated weighted average fair value of $ 120.51 per share based on the closing price (adjusted for 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 .

1 unchanged sentence

Time-based RSUs that are granted to the Company's employees excluding officers and certain key employees, vest ratably over the four year vesting-term 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 the second quarter of each year.

In May and June 2021, the Company granted 6,601 shares of the Company's common stock to the non-employee directors, based on the average closing price of $ 114.60 per share and recognized a total expense of $ 756 thousand.

As of September 30, 2021, the Company's aggregate unamortized stock compensation expense was approximately $ 20.3 million, which is expected to be recognized in expense over a weighted-average period of 2.3 years.

As of March 31, 2022, the Company's aggregate unamortized stock compensation expense was approximately $ 31.0 million which is expected to be recognized in expense over a weighted-average period of 2.6 years.

Trade Accounts Receivable, Net

Trade accounts receivable at the dates indicated consisted of the following:

At September 30, At December 31,

Trade accounts receivable consisted of the following:

At March 31, At December 31,

(in thousands)

7 unchanged sentences

$ 320,428 $ 227,201 $ 231,021

Inventories at the dates indicated consisted of the following:

At September 30, At December 31,

The components of inventories are as follows:

At March 31, At December 31,

(in thousands)

8 unchanged sentences

Derivative Instruments

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 enters into derivative instrument agreements, including forward foreign currency exchange contracts, interest rate swaps, and cross currency swaps to manage risk in connection with changes in foreign currency and interest rates.

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 United States Dollar and the Chinese Yuan (CNY).

As of September 30, 2021, the aggregate notional amount of the Company's outstanding foreign currency derivative contracts was to buy CNY 14.1 million by selling $ 2.0 million throughout fiscal year 2021.

These forward contracts are accounted for as cash flow hedges under the accounting standards, and the fair value included in other current assets or other current liabilities, as applicable, in the consolidated balance sheet was $ 0.1 million.

Net deferred gains and losses on these contracts relating to changes in fair value are included in accumulated other comprehensive income or 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 which the hedged items are recorded in the same period the hedged item affects earnings.

For the nine months ended September 30, 2021, gains on these contracts of $ 0.4 million were recognized, as a reduction of cost of sales.

The Company only enters into derivative instrument agreements with counterparties who have highly rated credit.

The Company uses a forward foreign currency contract to hedge its exposure to adverse foreign currency exchange rate movements for its operations in Europe.

This contract matures in March 2029.

The Company has elected the spot method for designating this contract as a net investment hedge.

The Company has also converted a Euro-denominated ("EUR"), fixed rate obligation into a U.S.

Dollar fixed rate obligation using a receive fixed, pay fixed cross currency swap.

The cross-currency swap is designated as a cash flow hedge.

In addition, the Company has converted domestic U.S.

variable rate debt to fixed rate debt using a receive variable, pay fixed interest rate swap.

The interest rate swap contract is also designated as a cash flow hedge.

As of March 31, 2022, the aggregate notional amount of the Company's outstanding interest rate contracts, cross currency swap contracts and forward contract were $ 700.0 million, $ 500.0 million and $ 328.2 million, respectively.

As of March 31, 2021, the aggregate notional amount of the Company's outstanding forward contracts were $ 9.1 million.

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 nine months ended September 30, 2021.

There were no amounts recognized due to ineffectiveness during the three months ended March 31, 2022.

The effects of fair value and cash flow hedge accounting on the Condensed Consolidated Statement of Earnings and Comprehensive Income for the period ended March 31, 2022 was as follows:

(in thousands) Cost of Goods Sold Interest expense, net and other

Total amounts of income and expense line items presented in the Condensed Consolidated Statement of Earnings in which the effects of fair value or cash flow hedges are recorded $ 256,789 $ ( 428 )

The effects of fair value and cash flow hedging

Gain or (loss) on cash flow hedging relationships

Interest contracts:

Amount of gain or (loss) reclassified from OCI to earnings — ( 29 )

Cross currency swap contract

Amount of gain or (loss) reclassified from OCI to earnings — ( 2,946 )

Forward contract

Amount of gain or (loss) reclassified from OCI to earnings 163 —

Fair value and cash flow hedge accounting had no effect on the Condensed Consolidated Statement of Earnings and Comprehensive Income for the period ended March 31, 2021.

The effects of derivative instruments on the Condensed Consolidated Statement of Earnings and Comprehensive Income for the period ended March 31 were as follow:

Cash Flow Hedging Relationships Gain (Loss) Recognized in OCI Location of Gain (Loss) Reclassified from OCI into Earnings Gain (Loss) Reclassified from OCI into Earnings

(in thousands) 2022 2021 2022 2021

Interest rate contracts $ ( 1,805 ) $ — Interest expense $ ( 29 ) $ —

Cross currency contracts ( 7,548 ) — Interest expense 21 —

FX gain (loss) ( 2,967 ) —

Forward contracts $ — $ — Cost of goods sold 163 —

Total $ ( 9,353 ) $ — $ ( 2,812 ) $ —

For the three months ending March 31, 2022, losses on the net investment hedge of $ 6.8 million was included in OCI and no gains or losses were reclassified from OCI to earnings.

Property, Plant and Equipment, Net

Property, plant and equipment, net, at the dates indicated consisted of the following:

At September 30, At December 31,

Property, plant and equipment consisted of the following:

At March 31, At December 31,

(in thousands) 2022 2021 2021

$ 34,591 $ 28,280 $ 28,175

$ 28,232 $ 28,287 $ 28,553

Buildings and site improvements

11 unchanged sentences

Total $ 265,675 $ 255,684 $ 259,869

Goodwill and Intangible Assets, Net

Goodwill at the dates indicated was as follows:

At September 30, At December 31,

Goodwill and Intangible Assets

Goodwill consisted of the following:

At March 31, At December 31,

(in thousands) 2022 2021 2021

2021 2020 2020

North America $ 96,359 $ 96,340 $ 96,307

$ 96,306 $ 96,161 $ 96,311

35,816 36,215 38,059

1,373 1,358 1,474

$ 133,495 $ 133,734 $ 135,844

Intangible assets, net, at the dates indicated were as follows:

At September 30, 2021

Europe 35,864 35,684 36,331

Asia/Pacific 1,428 1,453 1,384

Total $ 133,651 $ 133,477 $ 134,022

Amortizable i ntangible assets, net, consisted of the following:

At March 31, 2022

Carrying Accumulated Carrying

5 unchanged sentences

$ 72,916 $ ( 47,895 ) $ 25,021

At September 30, 2020

At March 31, 2021

(in thousands)

15 unchanged sentences

Definite-lived intangible assets include customer relationships, patents, unpatented technology, and non-compete agreements.

Amortization expense of definite-lived intangible assets was $ 1.5 million and $ 1.7 million for the three months ended September 30, 2021 and 2020, respectively, and was $ 5.0 million and $ 4.5 million for the nine months ended September 30, 2021 and 2020, respectively.

Amortization expense of definite-lived intangible assets was $ 1.1 million and $ 1.7 million for the three months ended March 31, 2022 and 2021, respectively.

The weighted-average amortization period for all amortizable intangibles on a combined basis is 8.3 years.

The only indefinite-lived intangible asset, consisting of a trade name, totaled $ 0.6 million at September 30, 2021.

At September 30, 2021, the estimated future amortization of definite-lived intangible assets was as follows:

The only indefinite-lived intangible asset, consisting of a trade name, totaled $ 0.6 million at March 31, 2022.

At March 31, 2022, the estimated future amortization of definite-lived intangible assets was as follows:

(in thousands)

Remaining three months of 2021 $ 1,538

Remaining nine months of 2022 $ 3,553

Thereafter 8,250

The changes in the carrying amount of goodwill and intangible assets for the nine months ended September 30, 2021, were as follows:

The changes in the carrying amount of goodwill and intangible assets for the three months ended March 31, 2022, were as follows:

(in thousands) Goodwill Assets

Balance at December 31, 2021 $ 134,022 $ 26,269

Acquisitions — 218

Reclassifications ( 106 ) 348

Amortization — ( 1,149 )

Foreign exchange ( 371 ) ( 99 )

Balance at September 30, 2021 $ 133,495 $ 22,077

Operating Lease Obligations

Balance at March 31, 2022 $ 133,651 $ 25,021

The Company has operating leases for certain facilities, equipment and automobiles.

4 unchanged sentences

The ROU assets are amortized on a straight-line basis over the lease term.

The following table provides a summary of leases included on the condensed consolidated balance sheets as of September 30, 2021 and 2020 and December 31, 2020, condensed consolidated statements of earnings and comprehensive income, and condensed consolidated statements of cash flows as of three and nine months ended September 30, 2021 and 2020:

Condensed Consolidated Balance Sheets Line Item September 30, December 31,

The following table provides a summary of leases included on the condensed consolidated balance sheets as of March 31, 2022 and 2021 and December 31, 2021, condensed consolidated statements of earnings and comprehensive income, and condensed consolidated statements of cash flows for the three months ended March 31, 2022 and 2021, respectively:

Condensed Consolidated Balance Sheets Line Item March 31, December 31,

(in thousands) 2022 2021 2021

11 unchanged sentences

The components of lease expense were as follows:

Condensed Consolidated Statements of Earnings and Comprehensive Income Line Item Three Months Ended September 30, Nine Months Ended September 30,

Condensed Consolidated Statements of Earnings and Comprehensive Income Line Item Three Months Ended March 31,

(in thousands) 2022 2021

7 unchanged sentences

Other Information

Supplemental cash flow information related to leases as follows:

Three Months Ended September 30, Nine Months Ended September 30,

Supplemental cash flow information related to leases is as follows:

Three Months Ended March 31,

(in thousands) 2022 2021

4 unchanged sentences

obligations during the current period 2,196 786

The following is a schedule, by years, of maturities of lease liabilities as of September 30, 2021:

The following is a schedule, by years, of maturities of lease liabilities as of March 31, 2022:

(in thousands) Operating Leases

Remaining three months of 2021 $ 2,822

Remaining nine months of 2022 $ 8,438

Thereafter 16,279

2 unchanged sentences

Total lease liabilities $ 45,086

The following table summarizes the Company's lease terms and discount rates as of September 30, 2021 and 2020:

The following table summarizes the Company's lease terms and discount rates as of March 31, 2022 and 2021:

Weighted-average remaining lease terms (in years):

4 unchanged sentences

Finance leases — % 3.5 %

As previously disclosed, the Credit Facility is the $ 300.0 million revolving line of credit with Wells Fargo Bank and is the Company's primary credit facility.

I n 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, these credit facilities provide the Company with a total of $ 304.0 million in revolving credit lines and an irrevocable standby letter of credit in support of various insurance deductibles.

There was a $0.6 million outstanding balance as of September 30, 2021 and there were no outstanding balances as of September 30, 2020 and December 31, 2020, respectively.

The Company was in compliance with its financial covenants under the Credit Facility as of September 30, 2021.

On March 30, 2022, the Company entered into the Amended and Restated Credit Facility.

The Amended and Restated Credit Agreement amends and restates the Company's previous Credit Agreement, dated as of July 27, 2012.

The Amended and Restated Credit Facility provides for a 5-year revolving credit facility of $ 450.0 million revolving line of credit, which includes a letter of credit-sub-facility up to $ 50.0 million, and for a 5-year term loan facility of $ 450.0 million.

The Company borrowed $ 250.0 million, under the revolving credit facility and $ 450.0 million under the term loan facility to finance a portion of the purchase price of the Company’s acquisition of the ETANCO Group ("ETANCO").

In addition, the Company incurred $6.8M debt issuance costs reflected in long term debt, net that will be deferred and amortized over the 5-year terms of the Amended and Restated Credit Facility.

The Company is required to pay an annual revolving credit facility fee of 0.10% to 0.25% per annum on the available commitments under the terms of the Amended and Restated Revolving Credit Facility, regardless of usage, with the applicable fee determined on a quarterly basis based on the Company’s net leverage ratio.

The fee is included within other expense in the Company's condensed consolidated statement of operations.

Amounts borrowed under the Amended and Restated Credit Facility will bear interest from time to time at either Base Rate, Spread Adjusted Daily Simple SOFR, Spread Adjusted Term SOFR, Adjusted Eurocurrency Rate or Daily Simple RFR, in each case, as calculated under and as in effect from time to time under the Amended and Restated Credit Facility, plus the Applicable Margin, as defined in the Amended and Restated Credit Facility.

The Applicable Margin is determined based on the Company’s net leverage ratio, and ranges (i) from 0.00% to 0.75% per annum for amounts borrowed under the term loan facility that bear interest at Base Rate, (ii) from 0.75% to 1.75% per annum for amounts borrowed under the term loan facility that bear interest at Adjusted Eurocurrency Rate, Spread Adjusted Daily Simple SOFR or Spread Adjusted Term SOFR, (iii) from 0.00% to 0.50% per annum for amounts borrowed under the revolving credit facility that bear interest at Base Rate, (iv) from 0.6826% to 1.5326% per annum for amounts borrowed under the revolving credit facility that bear interest at Daily Simple RFR (solely to the extent denominated in pound sterling) and (v) from 0.65% to 1.50% per annum for amounts borrowed under the revolving credit facility that bear interest at Daily Simple RFR (other than loans denominated in pound sterling) or Adjusted Eurocurrency Rate.

Loans outstanding under the Amended and Restated Credit Facility may be prepaid at any time without penalty except for customary breakage costs and expenses.

As of March 31, 2022, in addition to the Amended and Restated 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 $ 204.3 million in revolving credit lines and an irrevocable standby letter of credit in support of various insurance deductibles.

The Company has a $ 700.0 million outstanding debt balance which we deem as the fair value as of March 31, 2022.

There were no outstanding balances as of March 31, 2021, and December 31, 2021.

The Company was in compliance with its financial covenants under the Credit Facility as of March 31, 2022.

Commitments and Contingencies

7 unchanged sentences

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.

Simpson Strong-Tie Company Inc., et al.

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.

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 the Ewa District of Honolulu, Hawaii by Gentry Homes, Ltd.

In the Gentry Case , Gentry alleges breach of warranty and negligent misrepresentation by the Company related to its “hurricane strap” and mudsill anchor products.

The Gentry Case was resolved pursuant to a written settlement agreement ("Settlement") without adjudication or any admission of liability by the Company.

The Settlement may not be used as evidence of liability against the party.

The case will be dismissed with prejudice by no later than January 4, 2022.

The Company incurred no uninsured liability to the plaintiff in connection with the Gentry Case , or the Settlement.

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 United States and Canada), the Europe segment and the Asia/Pacific segment (comprised of the Company’s operations in Asia, the South Pacific, and the Middle East).

The three reporting 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 following tables illustrate certain measurements used by management to assess the performance of its reportable segments as of or for the following periods:

Three Months Ended September 30, Nine Months Ended September 30,

The Administrative & All Other column primarily includes expenses such as self-insured workers compensation claims for employees, 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.

The following tables illustrate certain measurements used by management to assess the performance of its reportable segments as of or the following periods:

Three Months Ended March 31,

(in thousands) 2022 2021

15 unchanged sentences

* Sales to other segments are eliminated in consolidation.

At September 30, December 31,

** The Company changed its presentation of its North America and Administrative and all other segment statement of operations to account for allocated expenses and management fees as a separate item below income from operations.

Allocated expenses and management fees between the two segments were previously included in operating expenses and in income from operations.

At March 31, December 31,

(in thousands) 2022 2021 2021

4 unchanged sentences

Total $ 2,280,350 $ 1,294,727 $ 1,484,125

Cash collected by the Company’s United States subsidiaries is routinely transferred into the Company’s cash management accounts and, therefore, has been included in the total assets of “Administrative and all other.” Cash and cash equivalent balances in the “Administrative and all other” segment were $ 219.7 million, $ 244.5 million, and $ 199.8 million, as of September 30, 2021 and 2020, and December 31, 2020, respectively.

Total "Administrative and all other" assets are net of inter-segment due to and from accounts eliminated in consolidation.

While the Company manages its business by geographic segment, the following table illustrates the distribution of the Company’s sales by product group as additional information for the following periods:

Three Months Ended September 30, Nine Months Ended September 30,

Cash collected by the Company’s U.S.

subsidiaries is routinely transferred into the Company’s cash management accounts and, therefore is in the total assets of “Administrative and all other.” Cash and cash equivalent balances in the “Administrative and all other” segment were $ 96.1 million, $ 248.7 million, and $ 223.5 million, as of March 31, 2022 and 2021, and December 31, 2021, respectively.

On April 1, 2022, the Company used approximately $ 800 million of the funds held in our foreign operations to acquire ETANCO.

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 table below illustrates the distribution of the Company’s sales by product group as additional information for the following periods:

Three Months Ended March 31,

(in thousands) 2022 2021

3 unchanged sentences

Total $ 493,570 $ 347,642

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.

Concrete construction products include adhesives, chemicals, mechanical anchors, carbide drill bits, powder actuated tools and fiber reinforcing materials, and are used for restoration, protection or strengthening concrete, masonry and steel construction in residential, industrial, commercial and infrastructure construction.

Subsequent Events

Dividend Declared

On October 19, 2021, the Company’s Board of Directors (the "Board") declared a quarterly cash dividend of $ 0.25 per share, estimated to be $ 10.8 million in total.

The dividend will be payable on January 27, 2022, to the Company's stockholders of record on January 6, 2022.

On May 4, 2022, the Company’s Board of Directors (the "Board") declared a quarterly cash dividend of $ 0.26 per share, estimated to be $ 11.2 million in total.

The dividend will be payable on July 28, 2022, to the Company's stockholders of record on July 7, 2022.

ETANCO Acquisition

On April 1, 2022, the Company acquired ETANCO, a manufacturer of fastener and fixing products headquartered in France, for $ 800.0 million ( 725 million euros (1) ) net of cash.

Information regarding the ETANCO acquisition information is incorporated by reference to Form 8-K April 7, 2022 filing.

(1) Reflects EUR to USD exchange rate as of March 21, 2022.

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-Q

Item 1. Financial Statements