What changed in this filing

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Item 1. Financial Statements

2022-08-10 compared with 2022-05-06 · 244 added, 103 removed, 442 unchanged (44% of the section changed)

4 unchanged sentences

(In thousands, unaudited)

March 31, December 31,

June 30, December 31,

2022 2021 2021

18 unchanged sentences

Operating lease liabilities 39,654 34,087 37,091

Long term debt, net 670,733 — —

Long term debt, net of issuance costs 665,449 — —

Deferred income tax and other long-term liabilities 134,331 20,528 18,434

14 unchanged sentences

(In thousands except per-share amounts, unaudited)

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

2022 2021 2022 2021

Net sales $ 593,232 $ 410,281 $ 1,086,802 $ 757,922

6 unchanged sentences

Total operating expenses 120,436 94,746 226,911 188,723

Acquisition related costs 6,951 —

Acquisition and integration related costs 5,864 — 12,815 —

Net gain on disposal of assets ( 43 ) ( 28 ) ( 1,126 ) ( 108 )

Income from operations 133,076 101,728 257,514 170,112

Interest expense, net and other ( 428 ) ( 1,778 )

Interest expense, net and other finance costs ( 3,372 ) ( 420 ) ( 3,585 ) ( 765 )

Other & foreign exchange loss, net

( 1,890 ) ( 2,216 ) ( 2,107 ) ( 3,648 )

Income before taxes 127,814 99,092 251,822 165,699

18 unchanged sentences

(In thousands except per-share data, unaudited)

Three Months Ended March 31, 2022 and 2021

Three Months Ended June 30, 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

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

Net income — — — 93,570 — — 93,570

7 unchanged sentences

Cash dividends declared on common stock, $0.26 per share — — — ( 11,222 ) — — ( 11,222 )

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

Balance at June 30, 2022 42,906 $ 433 $ 293,720 $ 1,072,959 $ ( 36,193 ) $ ( 46,281 ) $ 1,284,638

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

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

Net income — — — 72,483 — — 72,483

3 unchanged sentences

net of tax — — — — ( 109 ) — ( 109 )

Stock-based compensation — — 3,365 — — — 3,365

Cash dividends declared on common stock, $0.25 per share — — — ( 10,848 ) — — ( 10,848 )

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

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)

Six Months Ended June 30, 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 — — 188,145 — — 188,145

Translation adjustment, net of tax — — — — ( 27,819 ) — ( 27,819 )

Pension adjustment and other,

net of tax — — — — 689 — 689

Cash flow hedges, net of tax — — — — 8,542 — 8,542

1 unchanged sentence

Shares issued from release of Restricted Stock Units 137 1 ( 9,524 ) — — — ( 9,523 )

Repurchase of common stock ( 455 ) — — — — ( 46,281 ) ( 46,281 )

Cash dividends declared on common stock, $0.51 per share — — — ( 22,027 ) — — ( 22,027 )

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

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

Balance at June 30, 2022 42,906 $ 433 $ 293,720 $ 1,072,959 $ ( 36,193 ) $ ( 46,281 ) $ 1,284,638

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

Net income — — — 122,872 — — 122,872

Translation adjustment, net of tax — — — — ( 1,759 ) — ( 1,759 )

Pension adjustment and other,

net of tax — — — — 409 — 409

Stock-based compensation — — 9,826 — — — 9,826

Shares issued from release of Restricted Stock Units 104 1 ( 5,263 ) — — — ( 5,262 )

Cash dividends declared on common stock, $0.48 per share — — — ( 20,816 ) — — ( 20,816 )

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

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

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

3 unchanged sentences

(In thousands, unaudited)

Three Months Ended

Six Months Ended

Cash flows from operating activities

4 unchanged sentences

Noncash lease expense 5,430 4,914

Inventory step-up expense 9,236 —

Loss/(gain) in equity method investment, before tax ( 229 ) 2,653

Deferred income taxes ( 4,557 ) 1,144

1 unchanged sentence

Provision of doubtful accounts 223 ( 377 )

Changes in operating assets and liabilities:

Deferred hedge gain ( 693 ) —

Changes in operating assets and liabilities (net of amounts acquired from ETANCO.

Trade accounts receivable ( 88,635 ) ( 84,702 )

7 unchanged sentences

Capital expenditures ( 31,829 ) ( 19,296 )

Asset acquisitions ( 488 ) —

Acquisitions, net of cash (see Note 3) ( 805,904 ) ( 218 )

Equity method investments ( 1,170 ) ( 6,829 )

Proceeds from sale of property and equipment 1,816 129

Terminated forward contract 3,535 —

Net cash used in investing activities ( 833,552 ) ( 26,214 )

Cash flows from financing activities

Termination of cash flow hedge 21,252 —

Repurchase of common stock ( 46,281 ) —

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

Proceeds from borrowing under lines of credit and term loan 701,083 —

Repayments of lines of credit and capital leases ( 6,600 ) ( 384 )

35 unchanged sentences

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

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

6 unchanged sentences

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.

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 of their inclusion is dilutive.

17 unchanged sentences

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

The fair values of the Company’s contingent consideration related to acquisitions and equity investments are classified as Level 3 within the fair value hierarchy, as these amounts are based on unobserved inputs such as management estimates and entity-specific assumptions and are evaluated on an ongoing basis.

Derivative Instruments

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.

Assets and liabilities with the legal right of offset are not offset 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 stockholders' 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.

3 unchanged sentences

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.

As of June 30, 2022 and 2021, the value of these investments were $ 42.4 million and $ 57.1 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 three months ended March 31, 2022 are outlined in the table below:

The changes in the allowance for doubtful accounts receivable for the six months ended June 30, 2022 are outlined in the table below:

(in thousands)

December 31, 2021 Expense (Deductions), net

March 31, 2022

June 30, 2022

Allowance for Doubtful Accounts

$ 1,932 223 ( 56 ) $ 2,211

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

1 Amount is net of recoveries and the effect of foreign currency fluctuations.

Income taxes are calculated using an asset and liability approach.

5 unchanged sentences

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.

ASU 2020-04 provides optional guidance to ease the potential burden in accounting for reference rate reform on financial reporting in response to the market transition from the London Interbank Offered Rate (“LIBOR”).

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.

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

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

Revenue from Contracts with Customers

2 unchanged sentences

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.

Wood construction products represented 87 %, respectively, of total net sales for the six months ended June 30, 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.

Concrete construction products represented 13 %, respectively, of total net sales for both the six months ended June 30, 2022 and 2021.

Customer Acceptance Criteria.

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

As of June 30, 2022, the Company had no contract assets or contract liabilities from contracts with customers .

On April 1, 2022, the Company completed its acquisition of 100 % of the outstanding equity interest of FIXCO Invest S.A.S.

(together with its subsidiaries, "ETANCO") for total purchase consideration of $ 805.4 million, net of cash acquired (the "Acquisition").

The Acquisition was completed pursuant to the securities purchase agreement dated January 26, 2022, as amended (the “SPA”), by and among the Company, Fastco Investment, Fastco Financing, LRLUX and certain other security holders.

The purchase price for the Acquisition was paid using cash on hand and borrowings in the amount of $ 250.0 million under the revolving credit facility and $ 450.0 million under the term loan facility.

See Note 13 for further information on the Amended and Restated Credit Facility.

ETANCO is a manufacturer and distributor of fastener and fixing products headquartered in France and its primary product applications directly align with the addressable markets in which the Company operates.

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

ETANCO’s results of operations were included in the Company's consolidated financial statements from the date of acquisition.

For the period subsequent to the acquisition that is included in both the three months and six months ended June 30, 2022, ETANCO had net sales of $ 80.3 million and a net loss of $ 2.0 million, which includes costs related to fair-value adjustments for acquired inventory, amortization of acquired intangible assets, and expenses incurred for integration.

The allocation of the

purchase price is preliminary and subject to change, including any costs and expenses already recognized, as the Company refines its estimates over the measurement period, which is expected to be finalized by the end of the 2022 fiscal year.

Purchase price allocation

The Acquisition was accounted for using the acquisition method of accounting in accordance with Accounting Standards Codification 805, Business Combinations (“ASC 805”) which requires, among other things, that assets acquired and liabilities assumed in a business combination be recorded at fair value as of the acquisition date with limited exceptions.

Preliminary fair value estimates of the net assets acquired are based upon preliminary calculations and valuations as of April 1, 2022.

Due to the timing and significance of the Acquisition, the estimates and assumptions regarding certain tangible assets acquired and liabilities assumed, the valuation of intangible assets acquired, income taxes, contingent liabilities, goodwill and useful lives of intangible assets are subject to change as the Company obtains additional information during the measurement period of up to 12 months from the acquisition date.

The preliminary allocation of the $ 824.4 million purchase price to the estimated fair values of the tangible and intangible assets acquired and liabilities assumed is as follows:

(in thousands) Amount

Cash and cash equivalents $ 19,010

Trade accounts receivable, net 63,607

Inventory 102,608

Other current assets 4,491

Property and equipment, net 87,156

Operating lease right-of-use assets 6,219

Goodwill 376,908

Intangible assets, net 358,761

Other noncurrent assets 1,428

Total assets 1,020,188

Trade accounts payable 46,467

Accrued liabilities and other current liabilities 21,922

Operating lease liabilities 6,034

Deferred income tax and other long-term liabilities 121,360

Total purchase price $ 824,405

Trade accounts receivable, net

The gross amount of trade receivables acquired was approximately $ 67.4 million, of which $ 63.6 million is estimated to be recoverable based on ETANCO's historical trend for collections.

Acquired inventory primarily consists of raw materials and finished goods consisting of building and construction materials products.

The Company adjusted acquired finished goods higher by $ 10.9 million to estimated fair value based on expected selling prices less a reasonable amount for selling efforts.

The fair value adjustment is recognized as a component of cost of sales over the inventory’s expected turnover period, and as a result, $ 9.2 million of the adjustment was recognized during the three months ended June 30, 2022.

The balance of the adjustment will be recognized in the quarter ended September 30, 2022.

Property and equipment, net

Acquired property and equipment includes land of $ 22.3 million, buildings and site improvements of $ 29.4 million, and machinery, equipment, and software of $ 35.5 million.

The estimated fair value of property and equipment was determined primarily using market and/or or cost approach methodologies.

The acquired fair value for buildings and site improvements will depreciate on a straight-line basis over the estimated useful lives of the assets for a period of up to thirty years , Machinery, equipment and software will depreciate on an accelerated basis over an estimated useful life of three to ten years .

Depreciation expense associated with the acquired property and equipment amounted to $ 1.4 million for three months ended June 30, 2022.

The excess of purchase price over the net assets acquired is recognized as goodwill and relates to the value that is expected from the acquired assembled workforce as well as the increased scale and synergies resulting from the integration of both businesses.

The goodwill recognized from the Acquisition is not deductible for local income tax purposes.

Goodwill will be allocated to reporting units within the European reporting segment when the purchase price allocation is finalized during the measurement period.

Intangible assets, net

The estimated fair value of intangible assets acquired was determined primarily using income approach methodologies.

The preliminary values allocated to intangible assets and the useful lives are as follows:

(in thousands except useful lives) Weighted-average useful life (in years) Amount

Customer relationships 16 $ 220,810

Trade names Indefinite 93,811

Developed technology 12.5 44,140

The acquired definite-lived intangible assets will be amortized on a straight-line basis over estimated useful lives, which approximates the pattern in which these assets are utilized.

The Company recognized $ 4.2 million of amortization expense on these assets during the three months ended June 30, 2022.

Deferred taxes

As a result of the increase in fair value of inventory, property and equipment, and intangible assets, deferred tax liabilities of $ 104.5 million were recognized, primarily due to intangible assets.

Acquisition and integration related costs

During the three and six months ended June 30, 2022 and the year ended December 31, 2021, the Company incurred acquisition and integration related expenses of $ 5.9 million, $ 12.8 million and $ 2.3 million, respectively.

The fiscal 2022 amounts have been included in Acquisition and integration related costs in the Company’s income from operations, while the 2021 amounts were included in Interest expense, net and other.

These acquisition and integration related costs consisted of investment banking, legal, accounting, advisory, and consulting fees.

Unaudited pro forma results

The following unaudited pro forma combined financial information presents estimated results as if the Company acquired ETANCO on January 1, 2021.

The unaudited pro forma financial information as presented below is for informational purposes only and does not purport to actually represent what the Company’s combined results of operations would have been had the Acquisition occurred on January 1, 2021, or what those results will be for any future periods.

The following unaudited pro forma consolidated financial information has been prepared using the acquisition method of accounting in accordance with U.S.

Three Months Ended

June 30, Six Months Ended

(in thousands) 2022 2021 2022 2021

Net sales $ 593,232 $ 498,805 $ 1,165,986 $ 923,579

Net income $ 104,823 $ 79,535 $ 210,772 $ 114,884

Pro forma earnings per common share:

Basic $ 2.43 $ 1.83 $ 4.88 $ 2.65

Diluted $ 2.42 $ 1.82 $ 4.87 $ 2.63

Weighted average shares outstanding:

Basic 43,145 43,434 43,162 43,406

Diluted 43,240 43,641 43,306 43,620

The unaudited pro forma results above includes the following non-recurring charges to net income:

1) Acquisition and integration related costs of $ 5.9 million, $ 6.9 million, and $ 2.3 million, which were incurred during the three months ended June 30, 2022, March 31, 2022, and December 31, 2021, respectively, were adjusted as if such costs were incurred during the three months ended March 31, 2021.

2) The $ 9.2 million of amortization related to the fair value adjustment for inventory and recognized during the three months ended June 30, 2022 was adjusted as if incurred during the three months ended March 31, 2021.

The unamortized balance is included as an adjustment recognized during the three months ended June 30, 2021.

3) Net income for ETANCO includes adjustments of $ 0.5 million and $ 1.8 million to conform ETANCO’s historical financial results prepared under French GAAP to U.S.

GAAP for the three and six months ended June 30, 2021, respectively.

In addition, $ 0.4 million in French to U.S.

GAAP adjustments were made for the three and six months ended June 30, 2022.

GAAP adjustments are primarily related to share-based payments expense on awards that were settled prior to the Acquisition, and costs incurred and capitalized by ETANCO on its historical acquisitions.

Net Income Per Share

1 unchanged sentence

Three Months Ended

June 30, Six Months Ended

(in thousands, except per share amounts) 2022 2021 2022 2021

8 unchanged sentences

Treasury Shares

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).

As of June 30, 2022, the Company held 455,030 shares of its common stock as treasury shares.

During the six months ended June 30, 2022, the Company repurchased 455,030 shares of the Company's common stock in the open market at an average price of $ 101.71 per share, for a total of $ 46.3 million.

As of June 30, 2022, approximately $ 53.7 million remains available for repurchase of shares of the Company's common stock under the previously announced $ 100.0 million share repurchase authorization (which expires at the end of 2022).

Stock-Based Compensation

1 unchanged sentence

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 Company recognized stock-based compensation expense related to its equity plans for employees of $ 4.7 million and $ 3.3 million for the three months ended June 30, 2022 and 2021, respectively, and $ 9.5 million and $ 9.8 million for the six months ended June 30, 2022 and 2021, respectively.

During the six months ended June 30, 2022, the Company granted 112,963 RSUs and PSUs to the Company's employees, including officers at an estimated weighted average fair value of $ 119.60 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.

3 unchanged sentences

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.

The Company’s seven non-employee directors are entitled to receive approximately $ 704 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 2022, the Company granted 6,206 shares of the Company's common stock to the non-employee directors, based on the average closing price of $ 105.50 per share and recognized $ 655 thousand of expense.

As of June 30, 2022, the Company's aggregate unamortized stock compensation expense was approximately $ 27.6 million which is expected to be recognized in expense over a weighted-average period of 2.4 years.

Trade Accounts Receivable, Net

Trade accounts receivable consisted of the following:

At March 31, At December 31,

At June 30, At December 31,

(in thousands)

8 unchanged sentences

The components of inventories are as follows:

At March 31, At December 31,

At June 30, At December 31,

(in thousands)

11 unchanged sentences

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.

Beginning in March 2022, the Company entered into a forward foreign currency contract expiring in March 2029 to hedge its exposure to adverse foreign currency exchange rate movements for its operations in Europe and elected the spot method for designating this contract as a net investment hedge with the excluded forward point amortized to interest expense.

During May 2022, the Company settled the March 2022 forward foreign currency contract for $ 3.9 million in cash, which included $ 0.4 million in recognized forward points, terminated the hedge accounting treatment and simultaneously entered into a new forward foreign currency contract expiring in March 2029 with the same notional amount at a new forward rate.

The Company also elected the spot method for designating the May 2022 contract as a net investment hedge.

The $ 3.5 million gain recognized on the March 2022 contract excluding recognized forward points is deferred in OCI and will remain in OCI until either the sale or substantially complete liquidation of the hedged subsidiaries.

Beginning in March 2022, the Company 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, which was designated as a cash flow hedge.

During May 2022, the Company settled the March 2022 cross currency swap for $ 22.4 million in cash, which was comprised of $ 21.3 million gain on the swap excluding accrued interest and $ 1.1 million of net interest income accrued according to the terms of the swap.

The Company terminated the hedge accounting treatment and simultaneously entered into a new cross currency swap expiring in March 2029 with a lower notional amount for the US dollar denominated leg at a new US dollar interest rate.

An amount of $ 28.3 million was reclassified out of OCI into earnings to offset the currency loss on the underlying security being hedged resulting in a net $ 7.0 million hedge accounting reserve balance within OCI, which is being amortized to interest expense in the Condensed Consolidated Statement of Earnings and Comprehensive Income through the termination of the underlying hedged intercompany debt in March 2029.

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

variable rate debt to fixed rate debt using a receive variable, pay fixed interest rate swap expiring March 2027.

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.

As of June 30, 2022, the aggregate notional amount of the Company's outstanding interest rate contracts, cross currency swap contracts and forward contract were $ 694.4 million, $ 465.9 million and $ 271.9 million, respectively.

As of June 30, 2021, the aggregate notional amount of the Company's outstanding forward contracts used to hedge variability in cash flows on its Chinese Yuan denominated purchases were $ 5.4 million, all of which expired by December 31, 2021.

As of June 30, 2022 there were no outstanding forward contracts on its Chinese Yuan denominated purchases.

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

There were no amounts recognized due to ineffectiveness during the six-months ended June 30, 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 June 30, 2022 was as follows:

(in thousands) Cost of sales Interest expense, net Other & foreign exchange loss, net Cost of sales

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 $ 590,688 $ ( 3,585 ) $ ( 2,107 ) $ 399,195

7 unchanged sentences

Amount of gain or (loss) reclassified from OCI to earnings 163 200

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:

The effects of derivative instruments on the Condensed Consolidated Statement of Earnings and Comprehensive Income for the three months ended June 30 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

5 unchanged sentences

Total $ 38,944 $ 228 $ 31,080 $ 200

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.

The effects of derivative instruments on the Condensed Consolidated Statement of Earnings and Comprehensive Income for the six months ended June 30 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

2022 2021 2022 2021

Interest rate contracts $ 6,876 $ — Interest expense $ ( 2,978 ) $ —

Cross currency contracts 22,715 — Interest expense 1,959

FX gain (loss) 29,124

Forward contracts — 428 Cost of goods sold 163 200

Total $ 29,591 $ 428 $ 28,268 $ 200

For the three and six months ending June 30, 2022, gains on the net investment hedge of $ 18.1 million and $ 11.3 million were included in OCI, respectively.

For both the three and six months ending June 30, 2022, excluded gains of $ 1.1 million were reclassified from OCI to interest expense.

As of June 30, 2022, the aggregate fair values of the Company’s derivative instruments were comprised of an asset of $ 24.5 million, of which $ 10.8 million is included in Other current assets on the condensed consolidated balance sheet, and the balance, or $ 13.7 million as an Other non-current assets on the condensed consolidated balance sheet, and a liability of $ 7.9 million, which is included in Other non-current liabilities on the condensed consolidated balance sheet.

Property, Plant and Equipment, Net

Property, plant and equipment consisted of the following:

At March 31, At December 31,

At June 30, At December 31,

(in thousands) 2022 2021 2021

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Goodwill consisted of the following:

At March 31, At December 31,

At June 30, At December 31,

(in thousands) 2022 2021 2021

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Total $ 492,338 $ 134,121 $ 134,022

Goodwill totaled $ 492.3 million as of June 30, 2022, including $ 360.3 million attributable to the ETANCO acquisition.

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

At March 31, 2022

Carrying Accumulated Carrying

At June 30, 2022

Gross Accumulated Net

Carrying Amortization Carrying

(in thousands)

Amount Amortization Amount

Amount & FX change Amount

North America

2 unchanged sentences

$ 410,883 $ ( 53,185 ) $ 357,698

At March 31, 2021

At June 30, 2021

(in thousands)

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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.

Amortization expense of definite-lived intangible assets was $ 5.3 million and $ 1.7 million for the three months ended June 30, 2022 and 2021, respectively and was $ 6.4 million and $ 3.4 million for the six months ended June 30, 2022 and 2021, respectively.

The weighted-average amortization period for all amortizable intangibles on a combined basis is 9.5 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:

Indefinite-lived intangible assets totaled $ 88.9 million as of June 30, 2022, including $ 88.3 million attributable to trade names acquired in the ETANCO acquisition.

At June 30, 2022, the estimated future amortization of definite-lived intangible assets was as follows:

(in thousands)

Remaining nine months of 2022 $ 3,553

Remaining six months of 2022 $ 10,674

Thereafter 162,307

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

The changes in the carrying amount of goodwill and intangible assets for the six months ended June 30, 2022, were as follows:

(in thousands) Goodwill Assets

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

Acquisition of ETANCO 376,908 358,761

Amortization — ( 6,440 )

Foreign exchange ( 18,592 ) ( 20,892 )

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

Balance at June 30, 2022 $ 492,338 $ 357,698

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

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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,

The following table provides a summary of leases included on the condensed consolidated balance sheets as of June 30, 2022 and 2021 and December 31, 2021, condensed consolidated statements of earnings and comprehensive income, and condensed consolidated statements of cash flows for the six months ended June 30, 2022 and 2021, respectively:

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

(in thousands) 2022 2021 2021

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The components of lease expense were as follows:

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

Condensed Consolidated Statements of Earnings and Comprehensive Income Line Item Three Months Ended June 30, Six Months Ended June 30,

(in thousands) 2022 2021 2022 2021

8 unchanged sentences

Supplemental cash flow information related to leases is as follows:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(in thousands) 2022 2021 2022 2021

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obligations during the current period 2,936 3,307 5,132 4,093

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

The following is a schedule, by years, of maturities of lease liabilities as of June 30, 2022:

(in thousands) Operating Leases

Remaining nine months of 2022 $ 8,438

Remaining six months of 2022 $ 6,380

Thereafter 17,963

2 unchanged sentences

Total lease liabilities $ 49,485

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

The following table summarizes the Company's lease terms and discount rates as of June 30, 2022 and 2021:

Weighted-average remaining lease terms (in years):

Operating leases 6.4 6.9

Finance leases 0.0 0.25

Weighted-average discount rate:

Operating leases 4.8 % 5.3 %

Finance leases — % 3.5 %

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.

On March 30, 2022, the Company entered into the Amended and Restated Credit Facility, which amends and restates the Company's previous Credit Agreement, dated as of July 27, 2012.

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 Acquisition.

In addition, the Company incurred $ 6.8 million of debt issuance costs, which are classified in long-term debt on the condensed consolidating balance sheet, that have been deferred and will amortize 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 fee is included within Interest expense, net and other 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 the 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 0.68 % to 1.53 % 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.

Based on current principle payment expectations, the annual interest rate on the outstanding debt will be approximately 2.00 % over the life of the debt including the effects of the interest rate swap and other derivatives noted above.

As of June 30, 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 $ 203.1 million in available revolving credit lines and an irrevocable standby letter of credit in support of various insurance deductibles.

The Company has $ 694.4 million, excluding deferred financing costs, outstanding under the Amended and Restated Credit Facility, which is the estimated the fair value as of June 30, 2022.

There were no outstanding balances under the Amended and Restated Credit Facility as of June 30, 2021, and December 31, 2021.

The following is a schedule, by years, of maturities for the remaining term loan facility as of June 30, 2022:

(in thousands) 5-Year Term Loan

Remaining six months of 2022 $ 11,250

Total loan outstanding $ 444,375

The $ 250.0 million borrowed under the revolving credit facility is due on March 31, 2027.

The Company was in compliance with its financial covenants under the Amended and Restated Credit Facility as of June 30, 2022.

Commitments and Contingencies

4 unchanged sentences

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.

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.

3 unchanged sentences

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).

and Canada), the Europe segment, which includes ETANCO, 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.

1 unchanged sentence

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,

Three Months Ended June 30, Six Months Ended June 30,

(in thousands) 2022 2021 2022 2021

15 unchanged sentences

* Sales to other segments are eliminated in consolidation.

** 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,

** Beginning in 2022, the Company changed its presentation of its North America and Administrative and all other segment's statement of operations to display allocated expenses and management fees as a separate item below income from operations.

During 2021, allocated expenses and management fees between the two segments were previously included in gross profit, operating expenses and in income from operations and been adjusted herein to conform to 2022 presentation.

Consolidated income of operations, income before tax and net income for all periods presented below are not affected by the change of operations.

At June 30, December 31,

(in thousands) 2022 2021 2021

5 unchanged sentences

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.

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 $ 167.4 million, $ 238.3 million, and $ 223.5 million, as of June 30, 2022 and 2021, and December 31, 2021, respectively.

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,

Three Months Ended June 30, Six Months Ended June 30,

(in thousands) 2022 2021 2022 2021

5 unchanged sentences

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.

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

On July 27, 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 October 27, 2022, to the Company's stockholders of record on October 6, 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