Simpson Manufacturing Co., Inc. 10-Q

Item 1. Financial Statements. Simpson Manufacturing Co., Inc. and Subsidiaries Condensed Consolidated Balance Sheets (In thousands, unaudited) March 31, December 31, 2022 2021 2021 ASSETS Current assets Cash and cash equivalents $ 984,372 $ 257,428 $ 301,155 Trade accounts receivable, net 320,428 227,201 231,021 Inventories 443,448 296,640 443,756 Other current assets 39,632 37,732 22,903 Total current assets 1,787,880 819,001 998,835 Property, plant and equipment, net 265,675 255,684 259,869 Operating lease right-of-use assets 44,651 44,236 45,438 Goodwill 133,651 133,477 134,022 Intangible assets, net 25,021 25,059 26,269 Other noncurrent assets 23,472 17,270 19,692 Total assets $ 2,280,350 $ 1,294,727 $ 1,484,125 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities Trade accounts payable $ 76,390 $ 66,236 $ 57,215 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 670,733 — — Deferred income tax and other long-term liabilities 34,621 19,594 18,434 Total liabilities 1,048,539 280,218 300,127 Commitments and contingencies (see Note 13) Stockholders’ equity Common stock, at par value 433 435 432 Additional paid-in capital 289,773 285,896 294,330 Retained earnings 990,611 760,862 906,841 Treasury stock ( 21,281 ) ( 13,510 ) — Accumulated other comprehensive loss ( 27,725 ) ( 19,174 ) ( 17,605 ) Total stockholders’ equity 1,231,811 1,014,509 1,183,998 Total liabilities and stockholders’ equity $ 2,280,350 $ 1,294,727 $ 1,484,125 The accompanying notes are an integral part of these condensed consolidated financial statements 4 Simpson Manufacturing Co., Inc. and Subsidiaries Condensed Consolidated Statements of Earnings and Comprehensive Income (In thousands except per-share amounts, unaudited) Three Months Ended March 31, 2022 2021 Net sales $ 493,570 $ 347,642 Cost of sales 256,789 185,360 Gross profit 236,781 162,282 Operating expenses: Research and development and other engineering 15,866 14,591 Selling 36,836 30,823 General and administrative 53,774 48,565 Total operating expenses 106,476 93,979 Acquisition related costs 6,951 — Net gain on disposal of assets ( 1,083 ) ( 80 ) Income from operations 124,437 68,383 Interest expense, net and other ( 428 ) ( 1,778 ) Income before taxes 124,009 66,605 Provision for income taxes 29,433 16,218 Net income $ 94,576 $ 50,387 Other comprehensive income Translation adjustment ( 3 ) ( 9,264 ) Unamortized pension adjustments ( 172 ) 492 Cash flow hedge adjustment, net of tax ( 9,946 ) 26 Comprehensive net income $ 84,455 $ 41,641 Net income per common share: Basic $ 2.19 $ 1.16 Diluted $ 2.18 $ 1.16 Number of shares outstanding Basic 43,179 43,379 Diluted 43,376 43,612 Cash dividends declared per common share $ 0.25 $ 0.23 The accompanying notes are an integral part of these condensed consolidated financial statements 5 Simpson Manufacturing Co., Inc. and Subsidiaries Condensed Consolidated Statements of Stockholders’ Equity (In thousands except per-share data, unaudited) Three Months Ended March 31, 2022 and 2021 Common Stock Additional Paid-in Retained Accumulated Other Comprehensive Treasury Shares Par Value Capital Earnings Income (Loss) Stock Total Balance at December 31, 2021 43,217 $ 432 $ 294,330 $ 906,841 $ ( 17,605 ) $ — $ 1,183,998 Net income — — — 94,576 — — 94,576 Translation adjustment, net of tax — — — — ( 3 ) — ( 3 ) Pension adjustment and other, net of tax — — — — ( 171 ) — ( 171 ) Cash flow Hedges, net of tax — — — — ( 9,946 ) — ( 9,946 ) Stock-based compensation — — 4,007 — — — 4,007 Shares issued from release of Restricted Stock Units 130 1 ( 9,524 ) — — — ( 9,523 ) Repurchase of common stock ( 195 ) — — — — ( 21,281 ) ( 21,281 ) Cash dividends declared on common stock, $0.25 per share — — — ( 10,806 ) — — ( 10,806 ) Common stock issued at $139.07 per share for stock bonus 7 — 960 — — — 960 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 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 ) 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 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 6 Simpson Manufacturing Co., Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows (In thousands, unaudited) Three Months Ended March 31, 2022 2021 Cash flows from operating activities Net income $ 94,576 $ 50,387 Adjustments to reconcile net income to net cash provided by operating activities: Loss/(gain) on sale of assets and other ( 1,267 ) 333 Depreciation and amortization 10,795 11,225 Noncash lease expense 2,477 2,393 Deferred income taxes ( 1,810 ) 314 Noncash compensation related to stock plans 4,872 6,542 Provision of doubtful accounts ( 211 ) ( 215 ) Changes in operating assets and liabilities: Trade accounts receivable ( 89,799 ) ( 62,660 ) Inventories ( 381 ) ( 14,750 ) Trade accounts payable 17,929 17,301 Other current assets ( 16,479 ) ( 14,109 ) Accrued liabilities and other current liabilities 21,707 22,126 Other noncurrent assets and liabilities 2,270 ( 1,054 ) Net cash provided by operating activities 44,679 17,833 Cash flows from investing activities Capital expenditures ( 17,823 ) ( 10,505 ) Asset acquisitions ( 488 ) — Equity method investments ( 600 ) ( 5,329 ) Proceeds from sale of property and equipment 1,830 105 Net cash used in investing activities ( 17,081 ) ( 15,729 ) Cash flows from financing activities Repurchase of common stock ( 21,281 ) — Proceeds from lines of credit and term loan borrowing 700,038 — Repayments of lines of credit and capital leases ( 1,024 ) ( 192 ) Debt issuance costs ( 6,804 ) — Dividends paid ( 10,806 ) ( 9,967 ) Cash paid on behalf of employees for shares withheld ( 9,523 ) ( 5,263 ) 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 (decrease) in cash and cash equivalents 683,217 ( 17,211 ) Cash and cash equivalents at beginning of period 301,155 274,639 Cash and cash equivalents at end of period $ 984,372 $ 257,428 Noncash activity during the period Noncash capital expenditures $ 761 $ 1,526 Dividends declared but not paid 10,847 9,967 Issuance of Company’s common stock for compensation $ 960 $ 692 The accompanying notes are an integral part of these condensed consolidated financial statements 7 Notes to Condensed Consolidated Financial Statements (Unaudited) 1. Basis of Presentation Principles of Consolidation The accompanying condensed consolidated financial statements include the accounts of Simpson Manufacturing Co., Inc. and its subsidiaries (collectively, the “Company”). Investments in 50% or less owned entities are accounted for using either cost or the equity method. All significant intercompany transactions have been eliminated. Use of Estimates The preparation of the 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. Interim Reporting Period The accompanying unaudited quarterly condensed consolidated financial statements have been prepared in accordance with GAAP pursuant to the rules and regulations for reporting interim financial information and instructions on Form 10-Q. Accordingly, certain information and footnotes required by GAAP have been condensed or omitted. These interim statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 (the “2021 Form 10-K”). The unaudited quarterly condensed consolidated financial statements have been prepared on the same basis as the audited annual consolidated financial statements and, in the opinion of management, contain all adjustments (consisting of only normal recurring adjustments) necessary to state fairly the financial information set forth therein in accordance with GAAP. Certain prior period amounts in the condensed consolidated financial statements and the accompanying notes have been reclassified to conform to the current period’s presentation. The year-end condensed consolidated balance sheet data provided herein were derived from audited financial statements included in the 2021 Form 10-K, but do not include all disclosures required by GAAP. The Company’s quarterly results fluctuate. As a result, the Company believes the results of operations for this interim period presented are not indicative of the results to be expected for any future periods. Revenue Recognition 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. Our shipping terms provide the primary indicator of the transfer of control. The Company's general shipping terms are Incoterm C.P.T. (F.O.B. 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 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. 8 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 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 and finance leases for certain facilities, equipment, autos and data centers. As an accounting policy for short-term leases, the Company elected to not recognize a right-of-use asset ("ROU asset") and liability if, at the commencement date, the lease (1) has a term of 12 months or less and (2) does not include renewal and purchase options that the Company is reasonably certain to exercise. Monthly payments on short-term leases are recognized on a straight-line basis over the full lease term. Accounting for Stock-Based Compensation The Company recognizes stock-based compensation expense related to the estimated fair value of restricted stock awards on a straight-line basis, net of estimated forfeitures, over the requisite service period of the awards, which is generally the vesting term of four years . Stock-based expense related to performance share grants are measured based on grant date fair value and expensed on a graded basis over the service period of the awards, which is generally a performance period of three years . The performance conditions are based on the Company's achievement of revenue growth and return on invested capital over the performance period, and are evaluated for the probability of vesting at the end of each reporting period with changes in expected results recognized as an adjustment to expense. The assumptions used to calculate the fair value of restricted stock grants are evaluated and revised, as necessary, to reflect market conditions and the Company’s experience. Fair Value of Financial Instruments Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or a liability. Assets and liabilities recorded at fair value are measured and classified under a three-tier fair valuation hierarchy based on the observability of the inputs available in the market: Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument; and Level 3 inputs are unobservable inputs based on the Company’s assumptions used to measure assets and liabilities at fair value. The fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The carrying amounts of trade accounts receivable, accounts payable, accrued liabilities and other current liabilities approximate fair value due to the short-term nature of these instruments. The fair value of the Company’s contingent consideration related to acquisitions and equity investment are classified as Level 3 within the fair value hierarchy as it is based on unobserved inputs such as management estimates and entity-specific assumptions and is evaluated on an ongoing basis. The fair value of 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 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. 9 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 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 . Current Estimated Credit Loss - Allowance for Doubtful Accounts The Company maintains an allowance for doubtful accounts receivable for estimated future expected credit losses resulting from customers' failure to make payments on its accounts receivable. The Company determines the estimate of the allowance for doubtful accounts receivable by considering several factors, including (1) specific information on the financial condition and the current creditworthiness of customers, (2) credit rating, (3) payment history and historical experience, (4) aging of the accounts receivable, and (5) reasonable and supportable forecasts about collectability. The Company also reserves 100 % of the amounts deemed uncollectible due to a customer's deteriorating financial condition or bankruptcy. Every quarter, the Company evaluates the customer group using the accounts receivable aging report and its best judgment when considering changes in customers' credit ratings, level of delinquency, customers' historical payments and loss experience, current market and economic conditions, and expectations of future market and economic conditions. The changes in the allowance for doubtful accounts receivable for the three months ended March 31, 2022 are outlined in the table below: Balance at Balance at (in thousands) December 31, 2021 Expense (Deductions), net Write-Offs 1 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 three months ended March 31, 2022. Income Taxes Income taxes are calculated using an asset and liability approach. The provision for income taxes includes federal, state and foreign taxes currently payable and deferred taxes, due to temporary differences between the financial statement and tax bases of assets and liabilities. In addition, future tax benefits are recognized to the extent that realization of such benefits is more likely than not. This method gives consideration to the future tax consequences of the deferred income tax items and immediately recognizes changes in income tax laws in the year of enactment. The Company uses an estimated annual tax rate to measure the tax benefit or tax expense recognized in each interim period. Accounting Standards Not Yet Adopted In March 2020, the Financial Accounting Standards Board issued Accounting Standards Update ("ASU") 2020-04, Reference Rate Reform (Topic 848). 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. 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. 2. Revenue from Contracts with Customers Disaggregated Revenue The Company disaggregates net sales into the following major product groups as described in its segment information included in these interim financial statements under Note 14. 10 Wood Construction Products Revenue . 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 12 % and 13 % of total net sales for both the three months ended March 31, 2022 and 2021. Customer Acceptance Criteria. Generally, there are no customer acceptance criteria included in the Company's standard sales agreement with customers. When an arrangement with the customer does not meet the criteria to be accounted for as a revenue contract under the standard, the Company recognizes revenue in the amount of nonrefundable consideration received when the Company has transferred control of the goods or services and has stopped transferring (and has no obligation to transfer) additional goods or services. The Company offers certain customers discounts for paying invoices ahead of the due date, which are generally 30 to 60 days after the issue date. Other Revenue . 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. The typical contract length for a service is generally less than one year. For bundled packages, the Company accounts for individual services separately when they are distinct within the context of the contract. A distinct service is separately identifiable from other items in the bundled package if a customer can benefit from it on its own or with other resources that are readily available to the customer. The consideration (including any discounts) is allocated between separate services in a bundle based on their stand-alone selling prices. The stand-alone selling prices are determined based on the prices at which the Company separately sells the services. Reconciliation of Contract Balances Contract assets are the rights to consideration in exchange for goods or services that the Company has transferred to a customer when that right is conditional on something other than the passage of time. Contract liabilities are recorded for any services billed to customers and not yet recognizable if the contract period has commenced or for the amount collected from customers in advance of the contract period commencing. As of March 31, 2022, the Company had no contract assets or contract liabilities from contracts with customers . 3. Net Income Per Share The following shows a reconciliation of basic net earnings ("EPS") per share to diluted EPS: Three Months Ended March 31, (in thousands, except per share amounts) 2022 2021 Net income available to common stockholders $ 94,576 $ 50,387 Basic weighted-average shares outstanding 43,179 43,379 Dilutive effect of potential common stock equivalents — restricted stock units 197 233 Diluted weighted-average shares outstanding 43,376 43,612 Net income per common share: Basic $ 2.19 $ 1.16 Diluted $ 2.18 $ 1.16 4. Stockholders' Equity Treasury Shares As of March 31, 2022, the Company held 194,745 shares of its common stock as treasury shares. 11 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). 5. Stock-Based Compensation 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 . In addition, these same officers and key employees also receive time-based RSUs, which vest pursuant to a three-year graded vesting schedule. 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. 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. 6. Trade Accounts Receivable, Net Trade accounts receivable consisted of the following: At March 31, At December 31, (in thousands) 2022 2021 2021 Trade accounts receivable $ 327,054 $ 232,646 $ 237,312 Allowance for doubtful accounts ( 1,618 ) ( 1,776 ) ( 1,932 ) Allowance for sales discounts and returns ( 5,008 ) ( 3,669 ) ( 4,359 ) $ 320,428 $ 227,201 $ 231,021 7. Inventories The components of inventories are as follows: At March 31, At December 31, (in thousands) 2022 2021 2021 Raw materials $ 180,431 $ 94,340 $ 191,174 In-process products 36,029 22,678 30,309 Finished products 226,988 179,622 222,273 $ 443,448 $ 296,640 $ 443,756 8. Derivative Instruments 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 Company only enters into derivative instrument agreements with counterparties who have highly rated credit. 12 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. 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. 9. Property, Plant and Equipment, Net Property, plant and equipment consisted of the following: 13 At March 31, At December 31, (in thousands) 2022 2021 2021 Land $ 34,591 $ 28,280 $ 28,175 Buildings and site improvements 197,180 201,283 202,393 Leasehold improvements 6,153 7,023 5,995 Machinery, equipment, and software 407,808 385,195 399,079 645,732 621,781 635,642 Less accumulated depreciation and amortization ( 406,835 ) ( 382,907 ) ( 402,246 ) 238,897 238,874 233,396 Capital projects in progress 26,778 16,810 26,473 Total $ 265,675 $ 255,684 $ 259,869 10. Goodwill and Intangible Assets Goodwill consisted of the following: At March 31, At December 31, (in thousands) 2022 2021 2021 North America $ 96,359 $ 96,340 $ 96,307 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 Gross Net Carrying Accumulated Carrying (in thousands) Amount Amortization Amount North America $ 46,642 $ ( 27,205 ) $ 19,437 Europe 26,274 ( 20,690 ) 5,584 Total $ 72,916 $ ( 47,895 ) $ 25,021 At March 31, 2021 Gross Net (in thousands) Carrying Amount Accumulated Amortization Carrying Amount North America $ 40,785 $ ( 23,724 ) $ 17,061 Europe 26,347 ( 18,349 ) 7,998 Total $ 67,132 $ ( 42,073 ) $ 25,059 At December 31, 2021 Gross Net (in thousands) Carrying Amount Accumulated Amortization Carrying Amount North America $ 46,643 $ ( 26,346 ) $ 20,297 Europe 26,371 ( 20,399 ) 5,972 Total $ 73,014 $ ( 46,745 ) $ 26,269 14 Intangible assets consist of definite-lived and indefinite-lived assets. Definite-lived intangible assets include customer relationships, patents, unpatented technology, and non-compete agreements. 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 March 31, 2022. At March 31, 2022, the estimated future amortization of definite-lived intangible assets was as follows: (in thousands) Remaining nine months of 2022 $ 3,553 2023 3,740 2024 2,809 2025 2,523 2026 1,840 2027 1,690 Thereafter 8,250 $ 24,405 The changes in the carrying amount of goodwill and intangible assets for the three months ended March 31, 2022, were as follows: Intangible (in thousands) Goodwill Assets Balance at December 31, 2021 $ 134,022 $ 26,269 Amortization — ( 1,149 ) Foreign exchange ( 371 ) ( 99 ) Balance at March 31, 2022 $ 133,651 $ 25,021 15 11. Leases The Company has operating leases for certain facilities, equipment and automobiles. The existing operating leases expire at various dates through 2026, some of which include options to extend the leases for up to 5 years. The Company measured the lease liability at the present value of the lease payments to be made over the lease term. The lease payments are discounted using the Company's incremental borrowing rate. The Company measured the right-of-use ("ROU") assets at the amount at which the lease liability is recognized plus initial direct costs incurred or prepayment amounts. The ROU assets are amortized on a straight-line basis over the lease term. 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 Operating leases Assets Operating leases Operating lease right-of-use assets $ 44,651 $ 44,236 $ 45,438 Liabilities Operating - current Accrued expenses and other current liabilities 8,750 $ 8,941 $ 8,769 Operating - noncurrent Operating lease liabilities 36,336 35,810 37,091 Total operating lease liabilities $ 45,086 $ 44,751 $ 45,860 Finance leases Assets Property and equipment, gross Property, plant and equipment, net $ — $ 3,569 $ 3,569 Accumulated amortization Property, plant and equipment, net — ( 3,188 ) ( 3,416 ) Property and equipment, net Property, plant and equipment, net $ — $ 381 $ 153 Liabilities Other current liabilities Accrued expenses and other current liabilities $ — $ 193 $ — Total finance lease liabilities $ — $ 193 $ — 16 The components of lease expense were as follows: Condensed Consolidated Statements of Earnings and Comprehensive Income Line Item Three Months Ended March 31, (in thousands) 2022 2021 Operating lease cost General administrative expenses and cost of sales $ 3,128 $ 2,859 Finance lease cost: Amortization of right-of-use assets General administrative expenses $ — $ 216 Interest on lease liabilities Interest expense, net — 2 Total finance lease $ — $ 218 Other Information Supplemental cash flow information related to leases is as follows: Three Months Ended March 31, (in thousands) 2022 2021 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows for operating leases $ 3,097 $ 2,805 Finance cash flows for finance leases — 290 Operating right-of-use assets obtained in exchange for lease obligations during the current period 2,196 786 The following is a schedule, by years, of maturities of lease liabilities as of March 31, 2022: (in thousands) Operating Leases Remaining nine months of 2022 $ 8,438 2023 9,327 2024 7,550 2025 6,005 2026 4,997 Thereafter 16,279 Total lease payments 52,596 Less: Present value discount ( 7,510 ) Total lease liabilities $ 45,086 17 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): 2022 2021 Operating leases 6.64 7.13 Finance leases 0.0 0.25 Weighted-average discount rate: Operating leases 5.17 % 5.28 % Finance leases — % 3.5 % 12. Debt 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. 13. Commitments and Contingencies Environmental 18 The Company’s policy with regard to environmental liabilities is to accrue for future environmental assessments and remediation costs when information becomes available that indicates that it is probable that the Company is liable for any related claims and assessments and the amount of the liability is reasonably estimable. The Company does not believe that any such matters will have a material adverse effect on the Company’s financial condition, cash flows or results of operations. Litigation and Potential Claims From time to time, the Company is involved in various legal proceedings and other matters arising in the normal course of business. Corrosion, hydrogen embrittlement, cracking, material hardness, wood pressure-treating chemicals, misinstallations, misuse, design and assembly flaws, manufacturing defects, labeling defects, product formula defects, inaccurate chemical mixes, adulteration, environmental conditions, or other factors can contribute to failure of fasteners, connectors, anchors, adhesives, specialty chemicals, such as fiber reinforced polymers, and tool products. In addition, inaccuracies may occur in product information, descriptions and instructions found in catalogs, packaging, data sheets, and the Company’s website. The resolution of any claim or litigation is subject to inherent uncertainty and could have a material adverse effect on the Company’s financial condition, cash flows or results of operations. 14. 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 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 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 Net Sales North America $ 438,731 $ 300,564 Europe 51,451 44,296 Asia/Pacific 3,388 2,782 Total $ 493,570 $ 347,642 Sales to Other Segments* North America $ 1,134 $ 696 Europe 1,684 1,609 Asia/Pacific 8,567 8,527 Total $ 11,385 $ 10,832 Income (Loss) from Operations ** North America $ 135,727 $ 73,025 Europe ( 1,370 ) 2,291 Asia/Pacific 564 425 Administrative and all other ( 10,484 ) ( 7,358 ) Total $ 124,437 $ 68,383 * Sales to other segments are eliminated in consolidation. 19 ** 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 At March 31, December 31, (in thousands) 2022 2021 2021 Total Assets North America $ 1,120,027 $ 1,125,887 $ 1,352,988 Europe 1,034,323 198,363 202,631 Asia/Pacific 32,847 31,831 31,832 Administrative and all other 93,153 ( 61,354 ) ( 103,326 ) Total $ 2,280,350 $ 1,294,727 $ 1,484,125 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 Wood construction products $ 435,438 $ 301,578 Concrete construction products 57,976 45,523 Other 156 541 Total $ 493,570 $ 347,642 15. Subsequent Events Dividend Declared 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. Footnotes (1) Reflects EUR to USD exchange rate as of March 21, 2022. 20