Simpson Manufacturing Co., Inc. — FY2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. This filing reports annual results, not standalone fourth-quarter results.
Business context
Simpson designs and manufactures wood- and concrete-construction products, including connectors, anchors, fasteners and related systems, and provides engineering and software services. It reports North America, Europe and Asia/Pacific segments. On April 1, 2022, it acquired European fastener and fixing-products company ETANCO for $805.4 million net of cash acquired; ETANCO’s results are included for nine months.
Key financial metrics
| Metric | FY2022 | FY2021 |
|---|---|---|
| Net sales | $2,116.1 million | $1,573.2 million |
| Gross profit / margin | $941.3 million / 44.5% | $755.0 million / 48.0% |
| Income from operations / margin | $459.1 million / 21.8% | $367.8 million / 23.3% |
| Net income | $334.0 million | $266.4 million |
| Diluted EPS | $7.76 | $6.12 |
| Operating cash flow | $399.8 million | $151.3 million |
| Capital expenditures | $62.4 million | $43.7 million |
Revenue increased 34.5%; net income rose about 25%. Gross margin fell 3.5 percentage points, principally reflecting higher material costs and $13.6 million of acquired-inventory fair-value expense. The effective tax rate was 25.5%, versus 25.7%.
North America sales rose 24.8% to $1,701.0 million; Europe sales rose 103.2% to $400.3 million, including $212.6 million from ETANCO; Asia/Pacific sales increased 11.0% to $14.7 million. Wood products generated 87% of consolidated sales and concrete products 13%.
At year-end, cash and cash equivalents were $300.7 million, working capital was reported as $529.9 million, and total assets were $2,504.0 million. Debt under the main credit facility was $583.2 million before issuance costs, comprising $150.0 million drawn on the revolver and $433.1 million on term loans. The company reported $304.4 million of available revolving credit across its facilities and compliance with credit covenants. Dividends paid were $43.9 million; share repurchases under the prior authorization totaled $78.6 million.
Outlook, commentary and risks
- For FY2023, management estimated operating margin of 18%–20%, interest expense of approximately $9.7 million, an effective tax rate of 25%–26%, and capital expenditures of $90–$95 million.
- Management expects some pressure from announced wood-product price decreases, higher average steel costs in cost of sales, and increased operating expenses. It also noted recent demand declines associated with supply-chain factors, inflation and rising interest rates.
- Management expects approximately $30 million in annual run-rate operating-income synergies from ETANCO following integration, but said some synergies may be delayed by European conditions. Estimated FY2023 integration costs were $6–$8 million.
- Key risks include housing and construction cyclicality, inflation and steel-price volatility, supply-chain and transport constraints, foreign-currency movements, weather and seasonality, product-liability exposure, and successful ETANCO integration. The company does not hedge steel-price risk.
- The company reported no legal proceedings expected to have a material adverse effect, while noting ordinary-course claims and uncertainty in their resolution. The financial-statement auditor issued an unqualified opinion; ETANCO was excluded from management’s and the auditor’s internal-control assessment for 2022 while integration proceeds.
Important facts for investors to verify
- How much FY2022 growth reflects pricing and ETANCO versus underlying volume, and how results compare on a full-year pro forma basis.
- Whether margins stabilize as material costs and pricing change, and whether the FY2023 operating-margin outlook is achieved.
- ETANCO’s integration progress, expected synergies, remaining costs and acquired-asset valuation assumptions.
- Debt repayment, interest-rate exposure and liquidity alongside the planned $90–$95 million of FY2023 capital expenditures and shareholder returns.
- Exposure to housing-market weakness, customer concentration, product claims, and steel and supply-chain disruptions.