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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K

(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

for the fiscal year ended December 31, 1999

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

for the transition period from __________ to __________.

COMMISSION FILE NUMBER: 0-23804
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SIMPSON MANUFACTURING CO., INC.
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(Exact name of registrant as specified in its charter)

DELAWARE 94-3196943
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

4637 CHABOT DRIVE, SUITE 200, PLEASANTON, CA 94588
(Address of principal executive offices)

Registrant's telephone number, including area code: (925)460-9912

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Securities registered pursuant to Section 12(b) of the Act:

COMMON STOCK, PAR VALUE $0.01 NEW YORK STOCK EXCHANGE, INC.
(Title of each class) (Name of each exchange on
which registered)

Securities registered pursuant to Section 12(g) of the Act:

NONE
(Title of class)

Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
----- -----

Indicate by check if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [X]

As of March 1, 2000, there were outstanding 12,019,498 shares of the
registrant's common stock, par value $0.01, which is the only outstanding
class of common or voting stock of the registrant. The aggregate market
value of the shares of common stock held by nonaffiliates of the registrant
(based on the closing price for the common stock on the New York Stock
Exchange on March 1, 2000) was approximately $335,199,437.

DOCUMENTS INCORPORATED BY REFERENCE

The information called for by Part III is incorporated by reference
to the definitive Proxy Statement for the Annual Meeting of Stockholders
of the Company to be held May 16, 2000, which will be filed with the
Securities and Exchange Commission not later than 120 days after December
31, 1999.

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Certain matters discussed below are forward-looking statements that
involve risks and uncertainties, certain of which are discussed in this
and in other reports filed by the Company with the Securities and Exchange
Commission. Actual results might differ materially from results suggested
by any forward-looking statements in this report.

PART I

ITEM 1. BUSINESS.

BACKGROUND

Simpson Manufacturing Co., Inc. (the "Company"), through its subsidiary,
Simpson Strong-Tie Company Inc. ("Simpson Strong-Tie" or "SST"), designs,
engineers and is a leading manufacturer of wood-to-wood, wood-to-concrete
and wood-to-masonry connectors, and through its subsidiary, Simpson Dura-
Vent Company, Inc. ("Simpson Dura-Vent" or "SDV"), designs, engineers and
manufactures venting systems for gas and wood burning appliances. The
Company markets its products to the residential construction, light
industrial and commercial construction, remodeling and do-it-yourself
("DIY") markets. The Company believes that SST benefits from strong brand
name recognition among architects and engineers who frequently specify in
building plans the use of SST products, and that SDV benefits from strong
brand name recognition among contractors, dealers, distributors and
original equipment manufacturers ("OEMs") to which SDV markets its
products. The Company has continuously manufactured structural connectors
since 1956. See Note 14 to the Company's consolidated financial statements
for information regarding the net sales, income from operations,
depreciation and amortization, capital expenditures and acquisitions and
total assets for the Company's two primary segments.

Connectors produced by Simpson Strong-Tie typically are steel devices that
are used to strengthen, support and connect joints in residential and
commercial construction and DIY projects. SST's Anchoring Systems product
line is included in the connector product segment. These products enhance
the safety and durability of the structures in which they are installed and
can save time and labor costs for the contractor. SST's connector products
increase structural integrity and improve structural resistance to seismic,
wind and other forces. Applications range from building framing to deck
construction to DIY projects. SST produces and markets over 5,000 standard
and custom products.

Simpson Dura-Vent's venting systems are used to vent gas furnaces and water
heaters, gas fireplaces and stoves, wood burning stoves and pellet stoves.
SDV's metal vents, chimneys and chimney liner systems exhaust the products
of combustion to the exterior of the building, and some products introduce
outside air into the appliance. SDV designs its products for ease of
assembly and safe operation and to achieve a high level of performance. SDV
produces and markets approximately 2,000 different venting products and
systems.

The Company emphasizes continuous new product development and often obtains
patent protection for its new products. The Company's products are marketed
in all 50 states of the United States and in England, France, Germany,
Canada, Japan, Australia, New Zealand and several countries in Central and
South America. Both Simpson Strong-Tie and Simpson Dura-Vent products are
distributed through a contractor and dealer distributor network, home
centers and OEMs.

The Company has developed and uses automated manufacturing processes. Its
innovative manufacturing systems and techniques have allowed it to control
manufacturing costs, even while developing both new products and products
that meet customized requirements and specifications. The Company's
development of specialized manufacturing processes has also permitted
increased operating flexibility and enhanced product design innovation. The
Company has developed a quality management system that employs numerous
quality-control procedures. Since 1996, SST's quality management system has
been registered under ISO 9001. The Company has 12 manufacturing locations
in the United States, Canada, France and the United Kingdom.

The Company is a Delaware corporation organized and merged with its
predecessor company in 1999. The Company serves as a holding company for
Simpson Strong-Tie, and its subsidiaries, and for Simpson Dura-Vent.


INDUSTRY AND MARKET TRENDS

Based on trade periodicals, participation in trade and professional
associations and communications with governmental and quasi-governmental
organizations and customers and suppliers, the Company believes that a
variety of events and trends have resulted in significant developments in
the markets that the Company serves. Some of these events and trends are
discussed below.

Natural disasters throughout the world have focused attention on safety
concerns relating to the structural integrity of homes and other buildings.
The 1995 earthquake in Kobe, Japan, the 1994 earthquake in Northridge,
California, the 1989 Loma Prieta earthquake in Northern California,
Hurricanes Hugo in 1989 and Andrew in 1992 in the Southeast, and other less
cataclysmic natural disasters damaged and destroyed innumerable homes and
other buildings, resulting in heightened consciousness of the fragility of
some of those structures.

In recent years, architects, engineers, model code agencies, contractors,
building inspectors and legislators have continued efforts to improve
structural integrity and safety of homes and other buildings in the face of
disasters of various types, including seismic events, storms and fires.
Based on ongoing participation in trade and professional associations and
communications with governmental and quasi-governmental regulatory
agencies, the Company believes that building codes, such as the recently
adopted 1997 Uniform Building Code, have been strengthened and that their
enforcement is becoming more rigorous. The Company's products are designed
to respond to increasing demand resulting from these trends.

The requirements of the Endangered Species Act, the Federal Lands Policy
Management Act and the National Forest Management Act have resulted in
increasingly limited amounts of timber available for harvest from public
lands. This has contributed to an increase in lumber prices and a
concomitant increase in the use of engineered wood products. Engineered
wood products, which substitute for strong, clear-grained lumber
historically obtained from logging older, large-diameter trees, have been
developed to conserve lumber. Engineered wood products frequently require
specialized connectors. Sales of Simpson Strong-Tie's engineered wood
connector products increased significantly in 1998 and 1999.

Concerns about energy conservation and air quality have led to increasing
recognition of the advantages of natural gas as a heating fuel, including
its abundance and clean burning characteristics. Use of natural gas for
home heating has been increasing in the United States. According to the
U.S. Census Bureau, the share of residential space heating in 1997 heated
with natural gas was 70%, an increase from 61% in 1978. In the hearth
appliance market, sales of gas stoves and gas fireplaces have increased in
recent years relative to those of traditional wood burning appliances.
According to the Hearth & Home Magazine (April 1999), the share of hearth
appliances fired with natural gas in 1998 was 58%, an increase from 43% in
1994. Traditional wood burning fireplaces negatively affect both indoor and
outdoor air quality. In contrast, direct vent gas fireplaces draw air for
combustion from outdoors (through the double wall venting system) and
feature sealed glass doors that reduce indoor air contamination. In the
past, Simpson Dura-Vent products have not been sold into the traditional
masonry and manufactured fireplace market. The recent trend from wood to
gas fireplaces is viewed as a significant opportunity for SDV's gas venting
products.

The Company has developed its distribution through home centers throughout
the United States. The Company's sales to home centers increased
significantly in 1998 and 1999. See "Item 7 - Management's Discussion and
Analysis of Financial Condition and Results of Operations."

BUSINESS STRATEGY

The Company designs, manufactures and sells products that are of high
quality and performance, easy to use and cost-effective for customers. The
Company provides rapid delivery of its products and prompt engineering and
sales support. Based on its communications with customers, engineers,
architects, contractors and other industry participants, the Company
believes that its products have strong brand name recognition, and the
Company seeks to continue to develop the value of its brand names through a
variety of customer-driven strategies. Information provided by customers
has led to the development of many of the Company's products, and the
Company expects that customer needs will continue to shape the Company's
product development, marketing and services.


Specification in architects' and engineers' plans and drawings influences
which products will be used for particular purposes and therefore is key to
the use of the Company's products in construction projects. The Company
encourages architects and engineers to specify the installation of the
Company's products in projects they design and supervise, and encourages
acceptance of the Company's products by construction contractors. The
Company maintains frequent contacts with architects, engineers and
contractors, as well as private organizations that provide information to
building code officials, both to inform them regarding the quality, proper
installation, capabilities and value of the Company's products and to
update them about product modifications and new products that may be useful
or needed. The Company sponsors seminars to inform architects, engineers
and building officials on appropriate use and proper installation of the
Company's products.

The Company seeks to expand its product and distribution coverage through
several channels:

Distributors. The Company regularly evaluates its distribution coverage and
service levels provided by its distributors and from time to time modifies
its distribution strategy and implements changes to address weaknesses and
opportunities. The Company has various programs to evaluate distributor
product mix and conducts promotions to encourage distributors to add
Company products that complement their mix of product offerings in their
markets.

Through its efforts to increase specifications by architects and engineers,
and through increasing the number of products sold to particular
contractors, the Company seeks to increase sales to distributors that serve
building contractors. The Company continuously seeks to expand the number
of contractors served by each distributor through such sales efforts as
demonstrations of product cost-effectiveness and information programs.

Home Centers. The Company intends to continue to increase penetration of
the DIY markets by solicitation of home centers. The Company's Sales
Representatives and Retail Specialists maintain on-going contact with home
centers to provide timely product availability and product knowledge
training. To satisfy specialized requirements of the home center market,
the Company has developed extensive bar coding and merchandising aids and
has concentrated a portion of its research efforts into the development of
DIY products.

OEM Relationships. The Company works closely with manufacturers of
engineered wood products and OEMs in developing and expanding the
application and sales of Simpson Strong-Tie's engineered wood connector
products and Simpson Dura-Vent's gas, wood and pellet stove venting
products. SST has relationships with several of the largest manufacturers
of engineered wood products, and SDV has OEM relationships with several
major gas fireplace and gas stove manufacturers.

The Company is expanding its established facilities outside California to
increase its presence and sales in markets east of the Rocky Mountains.
During the last five years, the Company has expanded or has planned to
expand nearly all of its manufacturing and warehouse facilities. Sales in
the 37 states east of the Rocky Mountains represented approximately 47% of
the Company's 1999 domestic sales. Since 1993, the Company commenced
manufacturing in England, opened warehouse and distribution facilities in
Western Canada and the Northeastern United States, purchased anchoring
products manufacturers in Illinois and Eastern Canada and a connector
product manufacturer in France, established a distribution operation in
Chile, made an equity investment in a product design and distribution
company in Germany and entered into distribution arrangements in Japan and
Australia. The European investments are intended to establish a presence in
the European Community through companies with existing customer bases and
through servicing U.S.-based customers operating there. The Company intends
to continue to pursue and expand operations outside the United States.

The Company's goal is to manufacture and warehouse its products in
geographic proximity to its markets to provide availability and rapid
delivery of products to customers and prompt response to customer requests
for specially designed products and services. With respect to the DIY and
dealer markets, the Company's strategy is to keep the customer's retail
stores continuously stocked with adequate supplies of the full line of the
Company's products that those stores carry. The Company manages its
inventory to assure continuous product availability. Most customer orders
are filled within a few days. High levels of manufacturing automation and
flexibility allow the Company to maintain its quality standards while
continuing to provide prompt delivery.

The Company's product research and development is based largely on needs
that customers communicate to the Company. The Company typically has
developed 10 to 15 new products annually (some of which may be produced in
a range of sizes). The Company's strategy is to develop new products on a


proprietary basis where possible. Of 100 patents that the Company owns, 81
cover products that the Company currently manufactures and markets. The
Company has filed 60 patent applications that are pending.

The Company's long-term strategy is to develop, acquire or invest in
product lines or businesses that (a) complement the Company's existing
product lines, (b) can be marketed through its existing distribution
channels, (c) might benefit from use of the Simpson Strong-Tie and Simpson
Dura-Vent brand names, and (d) are responsive to needs of the Company's
customers.

SIMPSON STRONG-TIE

Overview

Connectors produced by Simpson Strong-Tie typically are steel devices that
are used to strengthen, support and connect joints in residential and
commercial construction and DIY projects. These products enhance the safety
and durability of the structures in which they are installed and can save
time and labor costs for the contractor. SST's connector products increase
structural integrity and improve structural resistance to seismic, wind and
other forces. Applications range from building framing to deck construction
to DIY projects. SST produces and markets over 5,000 standard and custom
products.

In the United States, connector usage developed faster in the West than
elsewhere due to the low cost and abundance of timber and to local
construction practices. Increasingly, the market has been influenced both
by a growing awareness that the devastation caused by seismic, wind and
other disasters can be reduced through improved building codes and
construction practices and by environmental concerns that contribute to the
increasing cost and reduced availability of wood. Most Simpson Strong-Tie
products are listed by recognized building standards agencies as complying
with model building codes and are specified by architects and engineers for
use in projects they are designing or supervising. The engineered wood
products industry is developing in response to concerns about the
availability of wood, and the Company believes that SST is the leading
supplier of connectors for use with engineered wood products.

Products

Simpson Strong-Tie is a recognized brand name in the markets it serves. SST
manufactures and markets three primary categories of connector products:
wood-to-wood, wood-to-concrete and wood-to-masonry. SST also markets
specialty screws and nails for proper installation of certain of its
connector products. For tying wood members to the foundation, SST has
designed and currently markets a line of anchor bolts and the associated
parts for aligning the anchor bolts, as well as threaded rod, epoxy and
mechanical anchors, which have seismic, retrofit and remodeling
applications for both new construction and DIY markets.

Almost all of Simpson Strong-Tie's products are listed by recognized model
building code agencies. To achieve such listings, SST conducts extensive
product testing, which is witnessed and certified by independent testing
engineers. The tests also provide the basis for publication of load ratings
for SST structural connectors, and this information is used by architects,
engineers, contractors and homeowners. The information is useful across the
range of applications of SST's products, from the deck constructed by a
homeowner to a multi-story structure designed by an architect or engineer
in an earthquake zone.

Simpson Strong-Tie also manufactures connector products specifically
designed for use with engineered wood products, such as wood I-joists. With
increased timber costs and reduced availability of trees suitable for
making traditional solid sawn lumber, construction with engineered wood
products has increased substantially in the last three years. Over the same
period, SST's net sales of engineered wood connectors through dealer and
contractor distributors and engineered wood product manufacturers have also
increased significantly.

New Product Development

Simpson Strong-Tie commits substantial resources to engineering and new
product development. The majority of SST's products have been developed
through SST's internal research and development program. Of the 70 U.S. and
27 foreign patents that SST owns, 78 cover products that SST currently
manufactures and markets. Over a quarter of SST's 1999 revenues were
derived from products that are protected by patents. SST typically has
developed 10 to 15 new products each year. SST's research and development


expense for the three years ended December 31, 1999, 1998 and 1997, was
$1,376,000, $1,087,000 and $957,000, respectively. As part of the new
product development process, SST engineers, in cooperation with sales and
marketing staff, meet regularly with architects, engineers, building
inspectors, code officials and customers. Several new products derived from
existing product lines are developed annually. SST recently developed and
introduced a pre-fabricated shear-wall product for the new construction
market and has expanded its line of chemical and mechanical anchoring
products. The Company believes that existing distribution channels are
receptive to product line extensions, thereby enhancing SST's ability to
enter new markets.

Sales and Marketing

Simpson Strong-Tie's sales and marketing programs are implemented through
SST's branch system. SST currently maintains branches in Northern and
Southern California, Texas, Ohio, England and France. Each branch is served
by its own sales force, as well as manufacturing, warehouse and office
facilities. Each branch is responsible for a broad geographic area. Branch
managers have significant autonomy, which includes setting sales and
marketing strategies. Each domestic branch is an independent profit center
with a cash profit sharing bonus program based on its own performance. At
the same time, the domestic branches closely integrate their manufacturing
activities to enhance product availability. Branch sales forces in the U.S.
are supported by marketing managers in the home office in Pleasanton,
California. The sales force maintains close working relationships with
customers, develops new business, calls on architects, engineers and
building officials and participates in a range of educational seminars.

Simpson Strong-Tie sells its products through an extensive distribution
system comprising dealer distributors supplying thousands of retail
locations nationwide, contractor distributors, home centers, manufacturers
of engineered wood products, and specialized contractors such as roof
framers. In 1999, sales to The Home Depot were more than 10% of the
Company's consolidated net sales (see Note 14 to the Company's consolidated
financial statements). SST's DIY and dealer products are used to build
projects such as decks, patio covers and shelf and bench systems. SST
received C-Mark equivalency clearance from the Japanese building code
authorities, which is expected to facilitate acceptance of its products
into the Japanese market, and has increased the distribution of its
products in Australia and Chile. The Company believes that SST's increasing
diversification into new and growing markets has reduced its vulnerability
to construction industry cycles.

Simpson Strong-Tie dedicates substantial resources to customer service.
Every year, SST produces numerous publications and point-of-sale marketing
aids to serve specifiers, distributors, retailers and users. These
publications include SST's general catalog, as well as various specific
catalogs, such as those for its epoxy products and the engineered wood and
plated truss industries. The catalogs and publications describe the
products and provide load and installation information. SST publishes a
newsletter, Connector Update, providing technical, installation and other
information, as well as publications addressing seismic and hurricane
conditions and the DIY market. SST also maintains a website
(www.strongtie.com) that includes catalogs, product and technical
information, code reports and other general information. To serve users in
the U.S. and elsewhere who do not speak English, SST employs bilingual
sales people and prints some of its publications in other languages.

Simpson Strong-Tie's engineers not only design and test products, but also
provide engineering support for customers. This support might range from
the discussion of a load value in a catalog to testing a unique application
for an existing product. SST's sales force communicates with customers in
each of its marketing channels, through its publications, seminars and
frequent calls.

Based on its communications with customers, Simpson Strong-Tie believes
that its products are essential to its customers' businesses, and it is
SST's policy to ship products ordered within a few days of receiving the
order. Many of SST's customers are contractors that require rapid delivery
of needed products. Home centers and dealers also require superior service,
because of fluctuating demand. To satisfy these requirements, SST maintains
high inventory levels, has redundant manufacturing capability and some
multiple dies to produce the same parts, and maintains computer sales and
inventory control and forecasting capability throughout its nationwide
network of factories and warehouses. The Company also has special programs
for contractors intended to ensure the prompt and reliable manufacture and
delivery of custom products.

Simpson Strong-Tie believes that dealer and home center sales of SST
products are significantly greater when the bins and racks at large dealer
and home center locations are adequately stocked with appropriate products.
Various retailers carry varying numbers of different SST products and SST's


Retail Specialists are engaged in ongoing efforts to inform retailers about
other SST products that can be used in their specific markets and to
encourage them to add these products to better meet their customers' needs.
Achieving these objectives requires teamwork and significant inventory
commitments between SST and the distributors and retailers. Retail
Specialists are playing a significant role in keeping the racks full and
extending the product lines at the large dealer and home center level. They
help retailers order product, set up merchandising systems, stock shelves,
hold product seminars and provide SST with daily information that is used
to improve service and product mix.

SIMPSON DURA-VENT

Overview

Simpson Dura-Vent's venting systems are used to vent gas furnaces and water
heaters, gas fireplaces and stoves, wood burning stoves and pellet stoves.
SDV's metal vents, chimneys and chimney liner systems exhaust the products
of combustion to the exterior of the building and have been designed for
ease of assembly and safe operation and to achieve a high level of
performance. SDV produces and markets several hundred different venting
products and systems.

In recent years, the abundant supply and clean burning characteristics of
natural gas have gained public recognition, resulting in increased market
share for gas appliances in the new construction and the appliance
replacement markets. In addition, concern over energy conservation and
environmental air quality has resulted in increased use of gas stoves and
fireplaces rather than the traditional wood burning stoves and fireplaces.
As a result, new venting systems, such as Direct-Vent, have been developed
to address changes in appliance technology.

Simpson Dura-Vent manufactures chimney systems for use on wood burning
stoves. Historically, sales of wood burning stoves (considered an
alternative energy source) have increased during periods of high oil prices
and energy shortages.

Simpson Dura-Vent's objective is to expand market share in all of its
distribution channels, by entering expanding markets that address energy
and environmental concerns. SDV's strategy is to capitalize on its
strengths in new product development and its established distribution
network and to continue its commitment to high quality and service. SDV
operates manufacturing and warehouse facilities in California and
Mississippi.

Products

Simpson Dura-Vent is a leading supplier of double-wall Type B Gas Vent
systems, used for venting gas furnaces, water heaters, boilers and
decorative gas fireplaces. SDV believes that there is significant potential
in the gas fireplace market, because of the large number of fireplaces sold
in the new construction market, the relative ease of installing side-wall
vented gas fireplaces for the remodeling market and the trend from wood to
gas as a result of environmental concerns and ease of operation.

Simpson Dura-Vent's Type B Gas Vent product line features heavy-duty
quality construction and a twist-lock design that provides for fast and
easy job-site assembly compared to conventional snap together designs. The
twist-lock design has broader applications and has been incorporated into
SDV's gas, pellet and direct vent product lines. Simpson Dura-Vent also
markets a patented flexible vent connector, Dura/Connect, for use between
the gas appliance flue outlet and the connection to the Type B Gas Vent
installed in the ceiling. Dura/Connect eliminates the difficult and time
consuming process of cutting, crimping and fitting galvanized steel vent
connectors. Marketed to home centers and hardware stores, Dura/Connect
offers a simple twist, bend and connect installation for water heaters and
gas furnaces.

The wood stove industry has responded to air quality concerns with
substantial reductions in wood stove particulate emissions. Simpson Dura-
Vent's Dura-Plus safety valve design, a patented chimney system for use
with wood burning stoves, provides enhanced fire safety in the event of a
creosote chimney fire.

The growing gas fireplace market has evolved into two basic types of
fireplace: top-vent fireplaces that are vented with the standard Type B Gas
Vent and direct-vent fireplaces that use a special double-wall venting
system. SDV's direct-vent system is designed not only to exhaust the flue
products, but also to draw in outside air for combustion, an important
feature in modern energy-efficient home construction. The direct-vent gas
fireplace systems provide ease of installation, permitting horizontal
through-the-wall venting or standard vertical through-the-roof venting.


Simpson Dura-Vent has established OEM and distribution relationships with
several large manufacturers of gas stoves and gas fireplaces to supply
direct-vent venting products. Sales of Direct-Vent have been robust. In
1996, SDV expanded its direct-vent product line to include both co-axial
and co-linear direct vent systems for venting gas stoves and gas inserts
into existing masonry chimneys or existing factory-built metal chimneys.
The trend from wood to gas stoves, while increasing competition for wood
and pellet appliance venting products, is viewed as a significant
opportunity for SDV's gas venting products.

New Product Development

Simpson Dura-Vent has gained industry recognition by offering innovative
new products that meet changing needs of customers. SDV representatives
serve on industry committees concerned with issues such as new appliance
standards and government regulations. SDV's research and development
expense for the three years ended December 31, 1999, 1998 and 1997, was
$433,000, $431,000 and $323,000, respectively. SDV also maintains working
relationships with research and development departments of major appliance
manufacturers, providing prototypes for field testing and conducting tests
in SDV's testing laboratory. SDV believes that such relationships provide
competitive advantages. For example, SDV introduced the first direct vent
system for the increasingly popular direct vent gas appliances. In 1999,
SDV introduced DuraTech, a twin-walled insulated chimney system for use on
wood burning stoves, fireplaces and oil fired appliances. This product line
has been designed and manufactured to a new standard of excellence. It is
constructed from stainless steel and incorporates blanket insulation for
enhanced safety and efficiency.

Sales and Marketing

Simpson Dura-Vent's sales organization consists of a director of sales and
marketing, a marketing communications manager, regional sales managers, and
independent representative agencies. SDV markets venting systems for both
gas and wood burning appliances through wholesale distributors in the
United States, Canada and Australia to the HVAC (heating, ventilating and
air conditioning) and PHC (plumbing, heating and cooling) contractor
markets, and to fireplace specialty shop distributors. These customers sell
to contractor and DIY markets. SDV also markets venting products to home
center and hardware store chains. SDV has established OEM relationships
with several major gas fireplace and gas stove manufacturers, which SDV
believes are leaders in the direct-vent gas appliance market.

Simpson Dura-Vent responds to technological changes occurring in the
industry through new product development and has developed a reputation for
quality and service to its customers. To reinforce the image of quality,
SDV produces extensive sales support literature and advertising materials.
Recognizing the difficulty that customers and users may have in
understanding new, complex venting requirements, SDV publishes a venting
handbook to assist contractors, building officials and retail outlets with
the science of proper venting. Advertising and promotional literature has
been designed to be used by distributors and their customers, as well as
home centers and hardware chains.

To enhance its marketing effort, SDV has developed a website
(www.duravent.com) that includes product descriptions, catalogs and
installation instructions, as well as a direct link to SDV's customer
service and engineering departments.

MANUFACTURING PROCESS

The Company has concentrated on making its manufacturing processes as
efficient as possible without compromising quality or flexibility necessary
to serve the needs of its customers. The Company has developed and uses
automated manufacturing processes. The Company's innovative manufacturing
systems and techniques have allowed it to control manufacturing costs, even
while developing both new products and products that meet customized
requirements and specifications. The Company's development of specialized
manufacturing processes also has permitted increased operating flexibility
and enhanced product design innovation.

The Company is committed to helping people build safer structures
economically through the design, engineering and manufacturing of
structural connector and related products. To this end, the Company has
developed a quality management system that employs numerous quality-control
procedures, such as computer-generated work orders, constant review of
parts as they are produced and frequent quality testing. Since 1996,
Simpson Strong-Tie's quality management system has been registered under
ISO 9001, an internationally recognized set of quality-assurance standards.


The Company believes that ISO registration is a significant asset in doing
business with European companies and is becoming increasingly important to
U.S. companies.

Simpson Strong-Tie operates manufacturing and warehouse facilities in
California, Texas, Ohio, Florida, Connecticut, Illinois, Washington,
British Columbia, Ontario, England, France and Chile. Most of SST's
products are produced with a high level of automation, using progressive
dies run in automatic presses making parts from coiled sheet steel often in
excess of 100 strokes per minute. SST produces over 500 million product
pieces per year. Over half of SST's products (SKUs) are bar coded with a
UPC number for easy identification, and nearly all of the products sold to
home centers are labeled with bar codes. SST has significant press capacity
and has some multiple dies for its high volume products because of the need
to produce the product close to the customer and to provide backup
capacity. The balance of production is accomplished through a combination
of manual, blanking and numerically controlled (NC) processes which include
robotic welders, lasers and turret punches. This capability allows SST to
produce products with little redesign or set-up time, facilitating rapid
turnaround for customers. New tooling is also highly automated. Dies are
designed and produced using computer aided design (CAD) and computer aided
machining (CAM) systems. CAD/CAM capability enables SST to create multiple
dies rapidly and design them to high standards. The Company is constantly
reviewing its product line to reduce manufacturing costs, increase
automation, and take advantage of new types of materials. For example, in
1999, Simpson Strong-Tie introduced two new products made from an
engineered composite plastic, the AnchorMate and the StrapMate.

Simpson Dura-Vent operates manufacturing and warehouse facilities in
California and Mississippi where it produces component parts for venting
systems using NC-controlled punch presses equipped with high-speed
progressive and compound tooling. SDV's vent pipe and elbow assembly lines
are automated, to produce finished products efficiently from large coils of
steel and aluminum. UPC bar coding and computer tracking systems provide
SDV's industrial engineers and production supervisors with real-time
productivity tools to measure and evaluate current production rates,
methods and equipment.

Most of the Company's current and planned manufacturing facilities are
located in a geographic region that has experienced major natural
disasters, such as earthquakes, floods and hurricanes. For example, the
1989 Loma Prieta earthquake in Northern California destroyed a freeway and
caused other major damage within a few miles of the Company's facilities in
San Leandro, California, and the earthquakes in Northridge, California, in
January 1994, destroyed several freeways and numerous buildings in the
region in which the Company's facilities in Brea are located. The Company
has developed a disaster recovery plan, but it does not carry earthquake
insurance. Other insurance that it carries is limited and not likely to be
adequate to cover all of the Company's resulting costs, business
interruption and lost profits in the event of a major natural disaster in
the future. If a natural disaster were to render one or more of the
Company's manufacturing facilities totally or partially unusable, whether
or not covered by insurance, the Company's business and financial condition
could be materially and adversely affected.

REGULATION

The design, capacity and quality of most of the Company's products and
manufacturing processes are subject to numerous and extensive regulations
and standards promulgated by governmental, quasi-governmental and industry
organizations. Such regulations and standards are highly technical and
complex and are subject to frequent revision. The failure of the Company's
products or manufacturing processes to comply with any of such regulations
and standards could impair the Company's ability to manufacture and market
its products profitably and could materially and adversely affect the
Company's business and financial condition.

Simpson Strong-Tie's product lines are subject to Federal, state, county,
municipal and other governmental and quasi-governmental regulations that
affect product design, development, testing, applications, marketing,
sales, installation and use. Most SST products are recognized by building
code and standards agencies. Agencies that recognize Company products
include the International Conference of Building Officials ("ICBO"),
Building Officials and Code Administrators International ("BOCA"), Southern
Building Code Congress International ("SBCCI"), The National Evaluation
Service, the City of Los Angeles, Dade County, Florida, and the California
Division of Architecture. These and other code agencies adopt various
testing and design standards and incorporate them into their related
building codes. For example, ICBO requirements are codified in the Uniform
Building Code. The Uniform Building Code generally applies to construction
in the Western United States. To be recognized by ICBO, SST products must
conform to Uniform Building Code requirements. SST considers this
recognition to be a significant marketing tool and devotes considerable
effort to obtaining and maintaining appropriate approvals for its products.
SST believes that architects, engineers, contractors and other customers


are less likely to purchase structural products that lack the appropriate
code approval or acceptance, at least if code-accepted competitive products
are available. SST's management actively participates in industry related
professional associations to keep abreast of regulatory changes and to
provide information to regulatory agencies.

Simpson Dura-Vent operates under a complex regulatory environment that
includes appliance and venting performance standards related to safety,
energy efficiency and air quality. Gas venting regulations are contained in
the National Fuel Gas Code ("NFGC"), while safety and performance
regulations for wood burning appliances and chimney systems are contained
in a National Fire Protection Association standard ("NFPA 211"). Standards
for testing gas vents and chimneys are developed by testing laboratories
such as Underwriter's Laboratories ("UL") in compliance with the American
National Standards Institute. Clean air standards for both gas and wood
burning appliances are regulated by the EPA. Energy efficiency standards
are regulated by the Department of Energy ("DOE") under the authority of
the National Appliance Energy Conservation Act. Under this act, the DOE
periodically reviews the necessity for increased efficiency standards with
respect to gas furnaces. A substantial percentage of Simpson Dura-Vent's
Type B Gas Vent sales are for gas furnace applications. Minimum appliance
efficiency standards might be adopted that could negatively affect sales of
Type B Gas Vents, which could materially and adversely affect the Company's
operating results and financial condition. The standards and regulations
contained in the NFGC and NFPA 211 are ultimately adopted by national
building code organizations such as ICBO, BOCA and SBCCI. In turn, the
various building codes are adopted by local municipalities, resulting in
enforcement through the building permit process. Safety, air quality and
energy efficiency requirements are enforced by local air quality districts
and municipalities by requiring proper UL, EPA and DOE labels on appliances
and venting systems.

COMPETITION

The Company faces a variety of competition in all of the markets in which
it participates. This competition ranges from subsidiaries of large
national or international corporations to small regional manufacturers.
While price is an important factor, the Company competes primarily on the
basis of quality, breadth of product line, technical support, service,
field support and product innovation. As a result of differences in
structural design and building practices and codes, SST's markets tend to
differ by region. Within these regions, Simpson Strong-Tie competes with
companies of varying size, several of which also distribute their products
nationally.

The venting industry is highly competitive. Many of Simpson Dura-Vent's
competitors have greater financial and other resources than SDV. SDV's
principal competitors include the Selkirk Metalbestos Division of Eljer
Industries Inc. (a subsidiary of U.S. Industries, Inc.), American Metal
Products Co. (a subsidiary of Masco Corp.), Metal-Fab, Inc., Hart & Cooley,
Inc. and the Air Jet Division of General Products Co. The Company believes
that Metal-Fab, Inc., Hart & Cooley, Inc. and Air Jet tend to be more
regional than SDV, and that they have smaller shares of the national market
than SDV.

RAW MATERIALS

The principal raw material used by the Company is steel, including
stainless steel, and is generally ordered to specific American Society of
Testing and Materials ("ASTM") standards. Other raw materials include
aluminum, aluminum alloys and ceramic and other insulation materials, which
are used by Simpson Dura-Vent, and cartons, which are used by both SST and
SDV. The Company purchases raw materials from a variety of commercial
sources. The Company's practice is to seek cost savings and enhanced
quality by purchasing from a limited number of suppliers.

The steel industry is highly cyclical and prices for the Company's raw
materials are influenced by numerous factors beyond the Company's control,
including general economic conditions, competition, labor costs, import
duties and other trade restrictions. The Company historically has not
attempted to hedge against changes in prices of steel or other raw
materials. The Company might not be able to increase its product prices in
amounts that correspond to increases in raw materials prices without
materially and adversely affecting its sales and profits. See "Item 7 -
Management's Discussion and Analysis of Financial Condition and Results of
Operations."

PATENTS AND PROPRIETARY RIGHTS

The Company's subsidiaries own 100 U.S. and foreign patents, of which 81
cover products that they currently manufacture and market. Its subsidiaries
have filed 19 U.S. and 41 foreign patent applications that are currently


pending. These patents and patent applications cover various design aspects
of the subsidiaries' products, as well as processes used in their
manufacture. The Company's subsidiaries are continuing to develop new
potentially patentable products, product enhancements and product designs.
Although the Company's subsidiaries do not intend to apply for additional
foreign patents covering existing products, the Company has developed an
international patent program to protect new products that its subsidiaries
may develop.

The Company's subsidiaries hold 151 trademark registrations in the U.S. and
foreign countries covering 61 trademarks, have 23 trademark registration
applications pending in the U.S. and foreign countries covering 12
trademarks, and use several other trademarks that they have not yet
attempted to register.

The Company's ability to compete effectively with other companies depends
in part on its ability to maintain the proprietary nature of its
technology. There can be no assurance, however, as to the degree of
protection afforded by these patents or the likelihood that patents will
issue pursuant to pending patent applications. Furthermore, there can be no
assurance that others will not independently develop the same or similar
technology, develop around the patented aspects of any of the Company's
products or proposed products, or otherwise obtain access to the Company's
proprietary technology.

In addition to seeking patent protection, the Company also relies on
unpatented proprietary technology to maintain its competitive position.
Nevertheless, there can be no assurance that the Company will be able to
protect its know-how or other proprietary information.

In attempting to protect its proprietary information, the Company expects
that it may sometimes be necessary to prosecute lawsuits against
competitors and others that the Company believes have infringed or are
infringing the Company's rights. In such an event, the defendant may assert
counterclaims to complicate or delay the litigation or for other reasons.
If the Company were to be unable to maintain the proprietary nature of its
significant products, the Company's business and financial condition could
be materially and adversely affected.

ACQUISITIONS AND EXPANSION INTO NEW MARKETS

The Company's future growth, if any, may depend to some extent on its
ability to penetrate new markets, both domestically and internationally.
See "Industry and Market Trends" and "Business Strategy." Therefore, the
Company may in the future pursue acquisitions of product lines or
businesses. Acquisitions involve numerous risks, including difficulties in
the assimilation of the operations and products of the acquired companies,
the diversion of management's attention from other business concerns, risks
of entering markets in which the Company has little or no direct prior
experience, and the potential loss of key employees of the acquired
company. In addition, future acquisitions by the Company may result in
potentially dilutive issuances of equity securities, the incurring of
additional debt, and amortization expenses related to goodwill and
intangible assets, all of which could adversely affect the Company's
profitability. If an acquisition occurs, no assurance can be given as to
its effect on the Company's business or operating results. See "Item 7 -
Management's Discussion and Analysis of Financial Condition and Results of
Operations."

Construction customs, standards, techniques and methods in international
markets differ from those in the United States. Laws and regulations
applicable in new markets for the Company are likely to be unfamiliar to
the Company and compliance may be substantially more costly than the
Company anticipates. As a result, it may become necessary for the Company
to redesign products or to invent or design new products in order to
compete effectively and profitably outside the United States or in markets
that are new to the Company in the United States. The Company expects that
significant time will be required for it to generate substantial sales or
profits in new markets.

Other significant challenges to conducting business in foreign countries
include, among other factors, local acceptance of the Company's products,
political instability, currency controls, changes in import and export
regulations, changes in tariff and freight rates, and fluctuations in
foreign exchange rates. There can be no assurance that the Company will be
able to penetrate these markets or that any such market penetration can be
achieved on a timely basis or profitably. If the Company is not successful
in penetrating these markets within a reasonable time, it will be unable to
recoup part or all of the significant investments it will have made in
attempting to do so. See "Business Strategy" and "Industry and Market
Trends."

In the third quarter of 1999, Simpson Strong-Tie International, Inc.
("SSTI"), a subsidiary of the Company, purchased the assets of Furfix
Products Limited and Easy Arches Limited (together, "Furfix"), which


manufacture a line of structural connectors for the wood and masonry
construction markets in the United Kingdom and Europe. The purchase price
was approximately $7.8 million in cash plus an earnout based on future
operating performance. Included in the purchase price were costs associated
with the closure of Furfix's existing facility and integration into SSTI's
facility in Tamworth, England. During the first quarter of 1997, the
Company purchased three Canadian companies and a related U.S. company, the
Isometric Group, which manufacture and distribute a line of mechanical
anchors and related products, for approximately $7.7 million plus an
earnout based on future sales increases through December 2000. Also during
the first quarter of 1997, the Company purchased, for approximately $1.7
million, the remaining 66% equity in Patrick Bellion, S.A., a French
manufacturer of connector products. See "Item 7 - Management's Discussion
and Analysis of Financial Condition and Results of Operations - Liquidity
and Sources of Capital."

SEASONALITY AND CYCLICALITY

The Company's sales are seasonal, with operating results varying from
quarter to quarter. With some exceptions, the Company's sales and income
have historically been lower in the first and fourth quarters and higher in
the second and third quarters of the year, as retailers and contractors
purchase construction materials in the late spring and summer months for
the construction season. In addition, demand for the Company's products and
the Company's results of operations are significantly affected by weather
conditions, such as unseasonably warm, cold or wet weather, which affect,
and sometimes delay or accelerate, installation of certain of the Company's
products. Political and economic events can also affect the Company's
revenues. The Company has little control over the timing of customer
purchases, and sales anticipated in one quarter may occur in another
quarter, thereby affecting both quarters' results. In addition, the Company
incurs significant expenses as it develops, produces and markets its
products in anticipation of future orders. Products typically are shipped
as orders are received, and accordingly the Company operates with little
backlog. As a result, net sales in any quarter generally depend on orders
booked and shipped in that quarter. A significant portion of the Company's
operating expenses are fixed, and planned expenditures are based primarily
on sales forecasts. If sales fall below the Company's expectations,
operating results would be adversely affected for the relevant quarters, as
expenses based on those expectations will already have been incurred. See
"Item 7 - Management's Discussion and Analysis of Financial Condition and
Results of Operations."

The Company's principal markets are in the building construction industry.
That industry is subject to significant volatility as a result of
fluctuations in interest rates, the availability of credit to builders and
developers, inflation rates and other economic factors and trends, none of
which is within the Company's control. Declines in commercial and
residential construction may be expected to reduce the demand for the
Company's products. The Company cannot provide any assurance that its
business will not be adversely affected by future negative economic or
construction industry performance or that future declines in construction
activity or the demand for the Company's products will not have material
adverse effects on the Company and its business and financial condition.
See "Item 7 - Management's Discussion and Analysis of Financial Condition
and Results of Operations."

PRODUCT LIABILITY

The Company designs and manufactures most of its standard products and
expects that it will continue to do so. The Company employs engineers and
designers to design and test its products under development. In addition,
the Company maintains a quality control system. The Company has on occasion
found manufacturing flaws in its products. In addition, the Company
purchases from third party suppliers raw materials, principally steel, and
finished goods that are produced and processed by other manufacturers. The
Company also has on occasion found flaws in raw materials and finished
goods produced by others, some of which flaws have not been apparent until
after the products were installed by customers. Many of the Company's
products are integral to the structural soundness or fire safety of the
buildings in which they are used. As a result, if any flaws exist in the
Company's products (as a result of design, raw material or manufacturing
flaws) and such flaws are not discovered and corrected before the Company's
products are incorporated into structures, the structures could suffer
severe damage (such as collapse or fire) and personal injury could result.
To the extent that such damage or injury is not covered by the Company's
product liability insurance, and if the Company were to be found to have
been negligent or otherwise culpable, the Company and its business and
financial condition could be materially and adversely affected by the
necessity to correct such damage and to compensate persons who might have
suffered injury.

Furthermore, in the event that a flaw is discovered after installation but
before any damage or injury occurs, it may be necessary for the Company to
recall products, and the Company may be liable for any costs necessary to


retrofit the affected structures. Any such recall or retrofit could entail
substantial costs and adversely affect the Company's reputation, sales and
financial condition. The Company does not carry insurance against recall
costs, and its product liability insurance may not cover retrofit costs.

No assurance can be given that claims will not be made against the Company
with regard to damage or destruction of structures incorporating Company
products resulting from a natural disaster. Any such claims, if asserted,
could materially and adversely affect the Company.

ENVIRONMENTAL, HEALTH AND SAFETY MATTERS

The Company is subject to environmental laws and regulations governing
emissions into the air, discharges into water, and generation, handling,
storage, transportation, treatment and disposal of waste materials. The
Company is also subject to other Federal and state laws and regulations
regarding health and safety matters. The Company's manufacturing operations
involve the use of solvents, chemicals, oils and other materials that are
regarded as hazardous or toxic and the use of complex and heavy machinery
and equipment that can pose severe safety hazards (especially if not
properly and carefully used). Some of the Company's products also
incorporate materials that are hazardous or toxic in some forms (such as
zinc and lead, which are used in some steel galvanizing processes). The
Company believes that it has obtained all material licenses and permits
required by environmental, health and safety laws and regulations in
connection with the Company's operations and that its policies and
procedures comply in all material respects with existing environmental,
health and safety laws and regulations. It is possible that additional
licenses or permits may be required, that the Company's policies and
procedures might not comply in all respects with all such laws and
regulations or, even if they do, that employees might fail or neglect to
follow them in all respects, and that the Company's generation, handling,
use, storage, transportation, treatment or disposal of hazardous or toxic
materials, machinery and equipment might cause injury to persons or to the
environment. In addition, properties occupied by the Company may be
contaminated by hazardous or toxic substances and remedial action may be
required at some time in the future. It is also possible that materials in
certain of the Company's products could cause injury or sickness. Relevant
laws and regulations could also be changed or new ones could be adopted
that require the Company to obtain additional licenses and permits and
cause the Company to incur substantial expense. Any such event or
contamination could have a material adverse effect on the Company and its
liquidity, results of operations and financial condition. See "Regulation."

EMPLOYEES AND LABOR RELATIONS

As of March 1, 2000, the Company had 1,556 full-time employees, of whom
1,068 were hourly employees and 488 were salaried employees. The Company
believes that its overall compensation and benefits for the most part
exceed industry averages and that its relations with its employees are
good.

The Company is dependent on certain key management and technical personnel,
including Thomas J Fitzmyers, Stephen B. Lamson, Barclay Simpson and Donald
M. Townsend. The loss of one or more key employees could have a material
adverse effect on the Company. The Company's success will also depend on
its ability to attract and retain additional highly qualified technical,
marketing and management personnel necessary for the maintenance and
expansion of the Company's activities. The Company faces strong competition
for such personnel and there can be no assurance that the Company will be
able to attract or retain such personnel.

A significant number of the Company's employees at two of the Company's
major manufacturing facilities are represented by labor unions and are
covered by collective bargaining agreements. Two of the Company's
collective bargaining agreements cover the Company's sheetmetal workers and
its tool and die craftsmen in Brea. These two contracts expire in June 2001
and February 2002, respectively. Two other contracts, covering sheetmetal
workers and tool and die personnel in San Leandro, expire in July 2000 and
June 2003, respectively. A work stoppage or interruption by a significant
number of the Company's employees could have a material and adverse effect
on the Company and its business and financial condition.


ITEM 2. PROPERTIES.

PROPERTIES

The Company maintains its home office in Pleasanton, California, and other
offices, manufacturing and warehouse facilities elsewhere in California and
in Texas, Ohio, Florida, Mississippi, Illinois, Connecticut, Washington,
British Columbia, Ontario, England and France. As of March 15, 2000, the
Company's facilities were as follows:





Approximate
Square Owned or Lease
Location Footage Leased Lessee Expires Function
- --------------------------- ----------- ---------- -------- ------- --------------------------


Pleasanton, California 22,200 Leased Company 2000 Office
San Leandro, California 47,100 Leased(1) SST 2001 Office, Manufacturing and
Warehouse
San Leandro, California 71,000 Owned Office, Manufacturing and
Warehouse
San Leandro, California 57,000 Leased(2) SST 2001 Manufacturing and Warehouse
San Leandro, California 48,000 Owned Office and Warehouse
San Leandro, California 27,000 Owned Manufacturing and Warehouse
San Leandro, California 61,800 Leased SST 2002 Warehouse
Brea, California 50,700 Owned Office, Manufacturing and
Warehouse
Brea, California 78,000 Owned Office and Warehouse
Brea, California 30,500 Owned Office, Manufacturing and
Warehouse
Brea, California 42,900 Owned Warehouse
Brea, California 19,200 Owned Warehouse
McKinney, Texas 84,300 Owned Office, Manufacturing and
Warehouse
McKinney, Texas 117,100 Owned Office and Warehouse
Columbus, Ohio 153,500 Leased(3) SST 2005 Office, Manufacturing and
Warehouse
Jacksonville, Florida 74,600 Leased SST 2001 Office and Warehouse
Addison, Illinois 52,400 Leased SST 2003 Office, Manufacturing and
Warehouse
Enfield, Connecticut 55,100 Leased SST 2003 Office and Warehouse
Kent, Washington 24,000 Leased SST 2004 Office, Manufacturing and
Warehouse
Visalia, California 20,000 Leased SST 2000 Warehouse
Tamworth, England 78,100 Leased SST(4) 2012 Office, Manufacturing and
Warehouse
Cannock, Staffordshire, 26,900 Leased SST(4) 2000 (5)
England
Vacaville, California 125,000 Leased(6) SDV 2007 Office, Manufacturing and
Warehouse
Vacaville, California 120,300 Owned Office, Manufacturing and
Warehouse
Vacaville, California 40,200 Leased SDV 2001 Warehouse
Fontana, California 17,900 Leased SDV 2001 Warehouse
Vicksburg, Mississippi 172,000 Leased(7) SDV 2003 (8)
Vicksburg, Mississippi 302,000 Owned Office, Manufacturing and
Warehouse
Vancouver, British Columbia 7,000 Leased SST 2004 Warehouse
Toronto, Ontario 104,000 Leased SST(9) 2009 Office, Manufacturing and
Warehouse


St. Hermine, France 11,300 Leased SST(10) 2002 Office, Manufacturing and
Warehouse
St. Hermine, France 20,900 Leased SST(10) 2001 Office, Manufacturing and
Warehouse
St. Hermine, France 15,900 Owned Office, Manufacturing and
Warehouse
- --------------------



(1) Lessor is Simpson Investment Company, a related party. See Note 9 to
the Consolidated Financial Statements contained elsewhere herein.

(2) Lessor is Doolittle Investors, a related party. See Note 9 to the
Consolidated Financial Statements contained elsewhere herein.

(3) Lessor is Columbus Westbelt Investment Company, a related party. See
Note 9 to the Consolidated Financial Statements contained elsewhere
herein.

(4) Lessee is Simpson Strong-Tie International, Inc., a wholly-owned
subsidiary of SST.

(5) The Company no longer occupies this property and it is currently being
subleased to an unrelated tenant.

(6) Lessor is Vacaville Investors, a related party. See Note 9 to the
Consolidated Financial Statements contained elsewhere herein.

(7) Lessor is Vicksburg Investors, a related party. See Note 9 to the
Consolidated Financial Statements contained elsewhere herein.

(8) The Company no longer occupies this property and is attempting to
sublease the property.

(9) Lessee is Simpson Strong-Tie Canada, Ltd., a wholly-owned subsidiary
of SST.

(10) Lessee is Simpson Strong-Tie, S.A., a wholly-owned subsidiary of SST.

The Company's manufacturing facilities are equipped with specialized
equipment and use extensive automation. The Company considers its existing
and planned facilities to be suitable and adequate for its operations as
currently conducted and as planned through 2000. The manufacturing
facilities currently are being operated with one full shift and at most
plants with at least a partial second or third shift. The Company
anticipates that it may require additional facilities to accommodate
possible future growth.


ITEM 3. LEGAL PROCEEDINGS.

From time to time, the Company is involved in litigation that it considers
to be in the normal course of its business. No such litigation within the
last five years resulted in any material loss. The Company is not engaged
in any legal proceedings as of the date hereof, which the Company expects
individually or in the aggregate to have a material adverse effect on the
Company's financial condition or results of operations.


ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.


PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.

The Company's Common Stock is listed on the New York Stock Exchange
("NYSE") under the symbol "SSD." The following table shows the range of
high and low closing sale prices per share of the Common Stock as reported
by the NYSE, as applicable, for the calendar quarters indicated:



Market Price
Quarter High Low
--------- ---------


1999
Fourth $46 13/16 $39 3/16
Third 54 3/8 45 5/16
Second 49 3/16 39 3/16
First 40 1/4 32 7/8

1998
Fourth $38 11/16 $25 15/16
Third 40 5/16 29 1/8
Second 42 1/16 37 7/16
First 42 1/2 32 3/4



The Company estimates that as of March 1, 2000, 2,937 persons owned shares
of the Company's Common Stock either directly or through nominees.

The Company currently intends to retain its future earnings, if any, to
finance operations and fund internal growth and does not anticipate paying
cash dividends on the Company's Common Stock for the foreseeable future.
Future dividends, if any, will be determined by the Company's Board of
Directors, based on the Company's earnings, cash flow, financial condition
and other factors deemed relevant by the Board of Directors. In addition,
existing loan agreements require the Company to maintain Tangible Net Worth
of $100.0 million plus 50% of net profit after taxes for each fiscal year
ending after December 31, 1997. This requirement may limit the amount that
the Company may pay out as dividends on the common stock. As of December
31, 1999, the Company had a Tangible Net Worth of $204.0 million.


Item 6. Selected Financial Data.

The following table sets forth selected consolidated financial information
with respect to the Company for each of the five years ended December 31,
1999, 1998, 1997, 1996 and 1995, derived from the audited Consolidated
Financial Statements of the Company, the most recent three years of which
appear elsewhere herein. The data presented below should be read in
conjunction with the Consolidated Financial Statements and related Notes
thereto and "Item 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations" included elsewhere herein.






Year Ended December 31,
(Dollars in thousands, except --------------------------------------------------------
per share data) 1999 1998 1997 1996 1995
-------- -------- -------- -------- --------

STATEMENT OF OPERATIONS DATA:

Net sales $328,440 $279,081 $246,074 $202,409 $167,958
Cost of sales 195,839 170,045 149,279 124,394 109,368
-------- -------- -------- -------- --------
Gross profit 132,601 109,036 96,795 78,015 58,590

Selling expense 32,204 24,706 23,113 20,104 17,110
General and administrative expense 37,846 33,100 30,358 25,216 18,573
-------- -------- -------- -------- --------
Income from operations 62,551 51,230 43,324 32,695 22,907

Interest income, net 1,669 940 429 595 142
-------- -------- -------- -------- --------
Income before income taxes 64,220 52,170 43,753 33,290 23,049

Provision for income taxes 25,753 21,028 17,767 13,569 8,927
-------- -------- -------- -------- --------
Net income $ 38,467 $ 31,142 $ 25,986 $ 19,721 $ 14,122
======== ======== ======== ======== ========

Diluted net income per share
of common stock $ 3.14 $ 2.58 $ 2.17 $ 1.68 $ 1.23
======== ======== ======== ======== ========





As of December 31,
--------------------------------------------------------
(Dollars in thousands) 1999 1998 1997 1996 1995
-------- -------- -------- -------- --------

BALANCE SHEET DATA:

Working capital $142,056 $105,643 $ 83,297 $ 70,676 $ 51,984

Property, plant and equipment, net 61,144 54,965 42,925 28,688 26,420

Total assets 247,254 191,600 150,765 122,521 96,642

Total debt 2,764 2,896 30 - 20

Total liabilities 36,665 30,317 21,814 20,224 15,089

Total stockholders' equity 210,589 161,282 128,951 102,297 81,553







SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

1999 1998
-------------------------------------------- --------------------------------------------
(Dollars in thousands, Fourth Third Second First Fourth Third Second First
except per share data) Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
-------- -------- -------- -------- -------- -------- -------- --------


Net sales $ 81,218 $ 88,808 $ 83,753 $ 74,661 $ 71,832 $ 77,208 $ 70,786 $ 59,254
Cost of sales 48,179 52,359 49,089 46,212 43,930 47,025 41,708 37,381
-------- -------- -------- -------- -------- -------- -------- --------
Gross profit 33,039 36,449 34,664 28,449 27,902 30,183 29,078 21,873

Selling expense 8,141 8,123 8,042 7,898 6,401 6,551 6,130 5,625
General and
administrative expense 9,446 10,278 9,999 8,122 8,615 8,603 8,961 6,921
-------- -------- -------- -------- -------- -------- -------- --------
Income from operations 15,452 18,048 16,623 12,429 12,886 15,029 13,987 9,327

Interest income, net 589 477 255 348 386 233 114 207
-------- -------- -------- -------- -------- -------- -------- --------
Income before income taxes 16,041 18,525 16,878 12,777 13,272 15,262 14,101 9,534

Provision for income taxes 6,411 7,408 6,805 5,129 5,400 6,027 5,728 3,873
-------- -------- -------- -------- -------- -------- -------- --------
Net income $ 9,630 $ 11,117 $ 10,073 $ 7,648 $ 7,872 $ 9,235 $ 8,373 $ 5,661
======== ======== ======== ======== ======== ======== ======== ========

Diluted net income per share
of common stock $ 0.78 $ 0.90 $ 0.82 $ 0.63 $ 0.65 $ 0.77 $ 0.69 $ 0.47
======== ======== ======== ======== ======== ======== ======== ========



The Company's results of operations fluctuate from quarter to quarter. The
fluctuations are caused by various factors, primarily the increase in
construction activity during warmer months of the year.


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.

Certain matters discussed below are forward-looking statements that involve
risks and uncertainties, certain of which are discussed in this and in
other reports filed by the Company with the Securities and Exchange
Commission. Actual results might differ materially from results suggested
by any forward-looking statements in this report.

The following is a discussion and analysis of the consolidated financial
condition and results of operations for the Company for the years ended
December 31, 1999, 1998 and 1997, and of certain factors that may affect
the Company's prospective financial condition and results of operations.
The following should be read in conjunction with the Consolidated Financial
Statements and related Notes appearing elsewhere herein.

OVERVIEW

Annual net sales of the Company increased 33.5% to $328.4 million in 1999
from $246.1 million in 1997. The increase in net sales resulted primarily
from increased geographic distribution and a broadening of the Company's
customer base and product lines, both internally and through acquisitions.
Net sales increased from 1997 to 1999 in all regions of the United States,
with above average rates of growth in the California and Southeastern
markets. Expansion into overseas markets also contributed to the net sales
growth over the last three years. For the year ended December 31, 1999,
gross profit margin increased to 40.4%, from 39.3% in 1997. The increase
since 1997 was due primarily to lower product costs as a percentage of net
sales, LIFO gains and lower overhead costs as a percentage of net sales.
Income from operations as a percentage of net sales, increased to 19.1% in
1999 from 17.6% in 1997.


RESULTS OF OPERATIONS

The following table sets forth, for the years indicated, the percentage of
net sales of certain items in the Company's consolidated statements of
operations.



Years Ended December 31,
--------------------------------
1999 1998 1997
-------- -------- --------


Net sales 100.0% 100.0% 100.0%
Cost of sales 59.6% 60.9% 60.7%
-------- -------- --------
Gross profit 40.4% 39.1% 39.3%
Selling expense 9.8% 8.9% 9.4%
General and administrative expense 11.5% 11.9% 12.3%
-------- -------- --------
Income from operations 19.1% 18.4% 17.6%
Interest income, net 0.5% 0.3% 0.2%
-------- -------- --------
Income before income taxes 19.6% 18.7% 17.8%
Provision for income taxes 7.9% 7.5% 7.2%
-------- -------- --------
Net income 11.7% 11.2% 10.6%
======== ======== ========



COMPARISON OF THE YEARS ENDED DECEMBER 31, 1999 AND 1998

Net Sales

Net sales increased 17.7% to $328.4 million in 1999 from $279.1 million in
1998. Net sales of Simpson Strong-Tie's products increased 18.4% to $260.9
million in 1999 from $220.3 million in 1998, while net sales of Simpson
Dura-Vent's products increased by 14.9% to $67.5 million in 1999 from $58.8
million in 1998. SDV accounted for approximately 20.6% of the Company's
total net sales in 1999, a decrease from 21.1% in 1998. The increases in
net sales at both SST and SDV resulted from increases in sales volume, with
an overall decrease in average prices. Most of the sales growth occurred
domestically, particularly in California and the midwestern and
southeastern regions of the country. International sales grew at
approximately the same rate as the rest of the Company, partially due to
the acquisition of Furfix Products Limited and Easy Arches Limited
(together, "Furfix"), in the third quarter of 1999. See "Item 1. Business.
Acquisitions and Expansion into New Markets." Home centers were the fastest
growing connector sales channel. The sales increase was broad based across
most of Simpson Strong-Tie's major product lines. Anchoring Systems
products had the highest growth rate in sales and Simpson Strong-Tie's new
Strong-Wall product line also experienced strong sales growth. Sales of
most of Simpson Dura-Vent's major product lines increased in 1999 compared
to 1998, led by above average growth rates for its chimney products and
Direct-Vent product lines.

Gross Profit

Gross profit increased 21.6% to $132.6 million in 1999 from $109.0 million
in 1998. As a percentage of net sales, gross profit increased to 40.4% in
1999 from 39.1% in 1998. This increase resulted from an increase in the
LIFO gain to $1.9 in 1999 from $0.5 million in 1998, as well as lower
overall product costs.

Selling Expense

Selling expense increased 30.3% to $32.2 million in 1999 from $24.7 million
in 1998. The increase was primarily due to higher promotional expenses, as
well as to higher personnel costs, including those associated with the
increase in the number of sales and merchandising personnel.

General and Administrative Expense

General and administrative expenses increased 14.0% to $37.8 million in
1999 from $33.1 million in 1998, but decreased as a percentage of net sales
to 11.5% in 1999 from 11.9% in 1998. The increase in these expenses was
primarily due to increased cash profit sharing, which resulted from higher
operating profit, and other administrative overhead costs.


European Operations

In August 1999, Simpson Strong-Tie International, Inc. ("SSTI"), a
subsidiary of the Company, purchased the assets of Furfix which
manufactures a line of structural connectors for the wood and masonry
construction markets in the United Kingdom and Europe. The purchase price
was approximately $7.8 million in cash plus an earnout based on future
operating performance. Included in the purchase price were costs associated
with the closure of Furfix's existing facility and integration into SSTI's
facility in Tamworth, England.

For its combined European operations, including the operations of Furfix,
the Company recorded an after-tax net loss of $2.4 million in 1999,
including $1.9 million in intercompany interest charges, compared to after-
tax net losses of $2.3 million in 1998. These losses are primarily
associated with the Company's UK operations. Depreciation on purchased
capital equipment and administrative and other overhead costs incurred
related to the growing operations contributed significantly to the losses.
The Company expects the losses in the UK to continue through at least 2000.

Other Information

In the first quarter of 2000, Simpson Strong-Tie entered into a joint
venture with Keymark Enterprises, Inc., a developer of software for the
wood and light gauge steel construction industry, to explore the
feasibility of using computer systems to link designers, engineers and
building materials suppliers to enhance the construction process.


COMPARISON OF THE YEARS ENDED DECEMBER 31, 1998 AND 1997

Net Sales

Net sales increased 13.4% to $279.1 million in 1998 from $246.1 million in
1997. Net sales of Simpson Strong-Tie's products increased 15.6% to $220.3
million in 1998 from $190.6 million in 1997, while net sales of Simpson
Dura-Vent's products increased by 5.8% to $58.8 million in 1998 from $55.5
million in 1997. SDV accounted for approximately 21.1% of the Company's
total net sales in 1998, a decrease from 22.6% in 1997. The increases in
net sales at both SST and SDV resulted from increases in sales volume, with
an overall decrease in average prices. The increase in net sales reflected
sales growth throughout the United States, particularly in the Southeastern
region of the country and in California. International sales also increased
at an above average rate, a portion of which was related to the businesses
purchased in March 1997. See "Item 1. Business. Acquisitions and Expansion
into New Markets." Home centers and contractor distributors were the
fastest growing connector sales channels. The growth rate of Simpson
Strong-Tie's seismic and high wind and engineered wood product sales was
strong. Anchoring Systems products also contributed significantly to the
increase in net sales. Direct-Vent products led Simpson Dura-Vent's net
sales with a strong growth rate as compared to the prior year, while sales
of chimney and pellet stove products declined.

Gross Profit

Gross profit increased 12.6% to $109.0 million in 1998 from $96.8 million
in 1997. As a percentage of net sales, gross profit decreased to 39.1% in
1998 from 39.3% in 1997. The small decrease was primarily due to increased
labor costs, depreciation on factory equipment and other production costs,
offset somewhat by a slightly larger LIFO gain recorded in 1998 as compared
to 1997.

Selling Expense

Selling expense increased 6.9% to $24.7 million in 1998 from $23.1 million
in 1997, but decreased as a percentage of net sales to 8.9% in 1998 from
9.4% in 1997. The increase in selling expense was primarily due to higher
promotional expenses, as well as higher costs related to the increase in
the number of sales and marketing personnel, due in part to expenses
associated with the expansion of the Anchoring Systems product line and
introduction of the Strong-Wall product line.


General and Administrative Expense

General and administrative expenses increased 9.5% to $32.9 million in 1998
from $30.1 million in 1997, but decreased as a percentage of net sales to
11.8% in 1998 from 12.2% in 1997. The increase in these expenses was
primarily due to increased cash profit sharing, which resulted from higher
operating profit.

European Operations

The Company recorded an after-tax net loss in its combined European
operations of $2.3 million in 1998, including $1.2 million in intercompany
interest charges, compared to after-tax net losses of $2.4 million in 1997.
These losses were primarily associated with the Company's UK operations.
Depreciation on purchased capital equipment and administrative and other
overhead costs incurred related to the growing operations contributed
significantly to the losses.

Other Information

In 1999, in order to concentrate on more profitable product lines, the
Company sold its metal shapes business, acquired in 1994, to an unrelated
buyer. The Company recorded a small loss on the sale of this product line.


LIQUIDITY AND SOURCES OF CAPITAL

The Company's liquidity needs arise principally from working capital
requirements, capital expenditures and asset acquisitions. During the three
years ended December 31, 1999, the Company has relied primarily on
internally generated funds to finance these needs. The Company's working
capital requirements are seasonal with the highest working capital needs
typically occurring in the second and third quarters of the year. Cash and
cash equivalents were $54.5 million and $37.4 million at December 31, 1999
and 1998, respectively. Working capital was $142.1 million and $105.6
million at December 31, 1999 and 1998, respectively. As of December 31,
1999, the Company had approximately $2.8 million in debt outstanding and
had available to it unused credit facilities of approximately $21.6
million.

The Company had cash flows from operating activities of $36.0 million,
$34.5 million and $21.1 million for 1999, 1998 and 1997, respectively. In
1999, cash was provided by net income of $38.5 million and noncash
expenses, such as depreciation and amortization, of $10.9 million, and the
tax benefit of stock options exercised during the year, a reduction of the
Company's income tax liability, of $6.3 million. Operating cash flows were
also increased by increases in income taxes payable, trade accounts payable
and accrued liabilities, totaling approximately $5.1. The Company's primary
operating cash flow requirements resulted from increased levels of
inventory and accounts receivable that were required as the Company's sales
increased. In 1999, 1998 and 1997, the Company used cash of $24.0 million,
$11.0 million and $9.1 million, respectively, to fund inventory and
accounts receivable requirements. In addition, cash in the amount of
approximately $1.3 million was used to pay costs associated with the
integration of Furfix's operations in the UK. The balance of the cash used
in 1999 resulted from changes in the other current asset and liability
accounts.

Cash used in investing activities was $23.3 million, $20.0 million and
$21.8 million for 1999, 1998 and 1997, respectively. Asset acquisitions,
primarily related to the Furfix purchase, and capital expenditures related
primarily to expanding capacity, increased to $23.6 million in 1999 from
$20.1 million in 1998. In 1999, $2.5 million of such capital expenditures
was used for real estate and related purchases.

Financing activities provided net cash of $4.4 million, $3.4 million and
$0.3 million in 1999, 1998 and 1997, respectively. In 1999, cash was
provided primarily by the issuance the Company's Common Stock through the
exercise of stock options employees of the Company.

The Company believes that cash generated by operations, borrowings
available under its existing credit agreements, the majority of which have
been renewed through June 2000, and other available financing will be
sufficient for the Company's working capital needs and planned capital
expenditures through at least 2000.


Inflation

The Company believes that the effect of inflation on the Company has not
been material in recent years, as inflation rates have remained low.


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

SIMPSON MANUFACTURING CO., INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


Financial Statements
Report of Independent Accountants....................................24
Consolidated Balance Sheets at December 31, 1999 and 1998............25
Consolidated Statements of Operations for the years ended
December 31, 1999, 1998 and 1997...................................26
Consolidated Statements of Stockholders' Equity for the
years ended December 31, 1997, 1998 and 1999.......................27
Consolidated Statements of Cash Flows for the years ended
December 31, 1999, 1998 and 1997...................................28
Notes to the Consolidated Financial Statements.......................29

Financial Statement Schedule
Schedule II - Valuation and Qualifying Accounts......................41



REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of Simpson Manufacturing Co.,
Inc.:

In our opinion, the accompanying consolidated financial statements listed
in the index on page 23 of this Form 10-K present fairly, in all material
respects, the financial position of Simpson Manufacturing Co., Inc. and its
subsidiaries as of December 31, 1999 and 1998, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1999, in conformity with accounting principles generally
accepted in the United States. In addition, in our opinion, the financial
statement schedule listed in the accompanying index presents fairly, in all
material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements. These
financial statements and the financial statement schedule are the
responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements and the financial
statement schedule based on our audits. We conducted our audits of these
financial statements in accordance with auditing standards generally
accepted in the United States which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable
basis for the opinion expressed above.




PricewaterhouseCoopers LLP

San Francisco, California
February 2, 2000


Simpson Manufacturing Co., Inc. and Subsidiaries
Consolidated Balance Sheets

SIMPSON MANUFACTURING CO., INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS



December 31,
----------------------------
1999 1998
------------ ------------


ASSETS
Current assets
Cash and cash equivalents $ 54,509,610 $ 37,402,450
Trade accounts receivable, net 42,420,223 34,089,122
Inventories 72,751,245 56,340,053
Deferred income taxes 4,745,534 3,749,599
Other current assets 1,323,215 1,282,814
------------ ------------
Total current assets 175,749,827 132,864,038

Property, plant and equipment, net 61,143,524 54,964,704
Investments 374,455 524,964
Other noncurrent assets 9,986,187 3,246,045
------------ ------------
Total assets $247,253,993 $191,599,751
============ ============


LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Notes payable and current portion of
long-term debt $ 349,541 $ 330,704
Trade accounts payable 12,780,621 11,761,237
Accrued liabilities 7,819,155 5,591,292
Accrued profit sharing trust contributions 3,504,286 3,173,362
Accrued cash profit sharing and commissions 4,531,861 4,019,806
Accrued workers' compensation 1,345,764 879,272
Income taxes payable 3,362,254 1,465,384
------------ ------------
Total current liabilities 33,693,482 27,221,057

Long-term debt 2,414,562 2,565,182
Long-term liabilities 556,783 531,149
------------ ------------
Total liabilities 36,664,827 30,317,388
------------ ------------

Commitments and contingencies (Note 9)

Stockholders' equity
Preferred Stock, par value $0.01;
authorized shares, 5,000,000;
issued and outstanding shares, none
- -
Common Stock, par value $0.01;
authorized shares, 20,000,000;
issued and outstanding shares,
12,018,839 and 11,579,360 at
December 31, 1999 and 1998,
respectively 44,716,488 33,723,845
Retained earnings 166,457,600 127,990,208
Accumulated other comprehensive income (584,922) (431,690)
------------ ------------
Total stockholders' equity 210,589,166 161,282,363
------------ ------------
Total liabilities and stockholders'
equity $247,253,993 $191,599,751
============ ============


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


SIMPSON MANUFACTURING CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS




Years Ended December 31,
--------------------------------------------
1999 1998 1997
------------ ------------ ------------


Net sales $328,439,897 $279,081,489 $246,074,446
Cost of sales 195,839,260 170,044,933 149,279,718
------------ ------------ ------------
Gross profit 132,600,637 109,036,556 96,794,728
------------ ------------ ------------

Operating expenses
Selling 32,204,008 24,706,371 23,113,344
General and administrative 37,845,480 33,100,454 30,357,707
------------ ------------ ------------
70,049,488 57,806,825 53,471,051
------------ ------------ ------------

Income from operations 62,551,149 51,229,731 43,323,677

Interest income, net 1,669,243 939,792 429,102
------------ ------------ ------------

Income before income taxes 64,220,392 52,169,523 43,752,779

Provision for income taxes 25,753,000 21,028,000 17,767,000
------------ ------------ ------------

Net income $ 38,467,392 $ 31,141,523 $ 25,985,779
============ ============ ============


Net income per common share
Basic $ 3.25 $ 2.69 $ 2.26
Diluted $ 3.14 $ 2.58 $ 2.17

Number of shares outstanding
Basic 11,837,315 11,560,454 11,474,592
Diluted 12,233,865 12,048,197 11,965,950




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


SIMPSON MANUFACTURING CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999





Accumulated
Common Stock Other Comp-
---------------------------- Retained rehensive
Shares Amount Earnings Income Total
------------ ------------ ------------ ------------ ------------


Balance, January 1, 1997 11,451,018 $ 31,233,648 $ 70,862,906 $ 200,454 $102,297,008
Comprehensive income:
Net income - - 25,985,779 - 25,985,779
Other comprehensive income:
Translation adjustment - - - (476,179) (476,179)
------------
Comprehensive income 25,509,600

Options exercised 61,595 451,282 - - 451,282
Tax benefit of options exercised - 589,133 - - 589,133
Common stock issued at
$23.00 per share 4,500 103,500 - - 103,500
------------ ------------ ------------ ------------ ------------
Balance, December 31, 1997 11,517,113 32,377,563 96,848,685 (275,725) 128,950,523
Comprehensive income:
Net income - - 31,141,523 - 31,141,523
Other comprehensive income:
Translation adjustment - - - (155,965) (155,965)
------------
Comprehensive income 30,985,558

Options exercised 57,147 576,343 - - 576,343
Tax benefit of options exercised - 600,045 - - 600,045
Common stock issued at
$33.3125 per share 5,100 169,894 - - 169,894
------------ ------------ ------------ ------------ ------------
Balance, December 31, 1998 11,579,360 33,723,845 127,990,208 (431,690) 161,282,363
Comprehensive income:
Net income - - 38,467,392 - 38,467,392
Other comprehensive income:
Translation adjustment - - - (153,232) (153,232)
------------
Comprehensive income 38,314,160

Options exercised 436,279 4,568,970 - - 4,568,970
Tax benefit of options exercised - 6,303,873 - - 6,303,873
Common stock issued at
$37.4375 per share 3,200 119,800 - - 119,800
------------ ------------ ------------ ------------ ------------
Balance, December 31, 1999 12,018,839 $ 44,716,488 $166,457,600 $ (584,922) $210,589,166
============ ============ ============ ============ ============




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


SIMPSON MANUFACTURING CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS




Year Ended December 31,
--------------------------------------------
1999 1998 1997
------------ ------------ ------------


CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 38,467,392 $ 31,141,523 $ 25,985,779
------------ ------------ ------------
Adjustments to reconcile net
income to net cash
provided by operating activities:
Loss (gain) on sale of capital equipment (44,649) 24,226 (11,194)
Depreciation and amortization 10,861,925 8,257,937 6,712,157
Deferred income taxes and other
long-term liabilities (970,301) (505,434) (946,542)
Equity in loss (income) of affiliates 107,273 (9,000) (142,500)
Noncash compensation related to stock plans 119,800 169,894 103,500
Changes in operating assets and liabilities,
net of effects of acquisitions:
Trade accounts receivable, net (8,352,836) (9,619,171) (2,277,797)
Inventories (15,604,370) (1,379,424) (6,867,089)
Other current assets (40,401) 440,773 (700,537)
Other noncurrent assets (1,322,851) (509,138) (14,450)
Trade accounts payable 1,019,384 2,948,041 (2,429,650)
Accrued liabilities 2,227,864 84,388 379,910
Accrued profit sharing trust
contributions 330,924 286,487 440,874
Accrued cash profit sharing
and commissions 512,055 924,972 802,777
Accrued workers' compensation 466,492 220,000 (150,000)
Income taxes payable 8,200,744 2,065,429 247,507
------------ ------------ ------------
Total adjustments (2,488,947) 3,399,980 (4,853,034)
------------ ------------ ------------
Net cash provided by operating
activities 35,978,445 34,541,503 21,132,745
------------ ------------ ------------

CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (15,305,226) (20,057,435) (16,548,350)
Proceeds from sale of capital equipment 263,158 57,069 65,327
Asset acquisitions, net of cash acquired
and equity interest already owned (8,266,403) - (9,336,142)
Proceeds from sale of short-term investments - - 3,995,333
------------ ------------ ------------
Net cash used in investing activities (23,308,471) (20,000,366) (21,823,832)
------------ ------------ ------------

CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of debt 266,700 3,019,247 -
Repayment of debt (398,484) (152,966) (260,304)
Issuance of Company's common stock 4,568,970 576,343 554,783
------------ ------------ ------------
Net cash provided by
financing activities 4,437,186 3,442,624 294,479
------------ ------------ ------------

Net increase (decrease) in cash
and cash equivalents 17,107,160 17,983,761 (396,608)
Cash and cash equivalents at
beginning of period 37,402,450 19,418,689 19,815,297
------------ ------------ ------------
Cash and cash equivalents at end of period $ 54,509,610 $ 37,402,450 $ 19,418,689
============ ============ ============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

CASH PAID DURING THE YEAR FOR
Interest $ 268,184 $ 180,607 $ 80,071
============ ============ ============
Income taxes $ 18,964,736 $ 18,660,244 $ 19,564,663
============ ============ ============





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


SIMPSON MANUFACTURING CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1. Operations and Summary of Significant Accounting Policies

Nature of Operations

Simpson Manufacturing Co., Inc., through its subsidiaries Simpson Strong-
Tie Company Inc. and Simpson Dura-Vent Company, Inc. and its other
subsidiaries (collectively, the "Company"), designs, engineers and
manufactures wood-to-wood, wood-to-concrete and wood-to-masonry connectors
and venting systems for gas and wood burning appliances and markets its
products to the residential construction, light industrial and commercial
construction, remodeling and do-it-yourself markets.

The Company operates exclusively in the building products industry segment.
The Company's products are sold primarily throughout the United States of
America. Revenues have some geographic market concentration on the west
coast. A portion of the Company's business is therefore dependent upon
economic activity within this region and market.

Use of Estimates

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States 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 financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.

Principles of Consolidation

The consolidated financial statements include the accounts of Simpson
Manufacturing Co., Inc. and its subsidiaries. Investments in less than 50%
owned affiliates are accounted for using the equity method. All significant
intercompany transactions have been eliminated.

Cash Equivalents

The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents.

Short-term Investments

The Company considers investments with an original maturity of more than
three months but less than one year to be short-term investments, which are
categorized as "held-to-maturity" and carried at amortized cost, which
approximates market value.

Inventory Valuation

Inventories are valued at the lower of cost or market, with cost determined
under the last-in, first-out (LIFO) method, except in Europe and Canada,
where inventories of approximately $9,269,000 and $5,553,000 at December
31, 1999 and 1998, respectively, are valued using the first-in, first-out
(FIFO) method.

Property, Plant and Equipment

Property, plant and equipment is carried at cost. Major renewals and
betterments are capitalized; maintenance and repairs are expensed on a
current basis. When assets are sold or retired, their costs and accumulated
depreciation are removed from the accounts; the resulting gains or losses
are reflected in the consolidated statements of operations.


Depreciation and Amortization

Depreciation of property, plant and equipment is provided for using
accelerated methods over the following estimated useful lives:

Factory machinery and equipment 5 to 10 years
Automobiles, trucks and other equipment 3 to 10 years
Office equipment 3 to 8 years
Buildings and site improvements 20 to 45 years

Leasehold improvements are amortized using the straight-line method over
the remaining term of the lease.

Product Research and Development Costs

Product research and development costs, which are included in cost of
sales, were charged against income as incurred and approximated $1,809,000,
$1,518,000 and $1,280,000 in 1999, 1998 and 1997, respectively.

Tooling Costs

Tool and die costs are included in product costs in the year incurred.

Income Taxes

Income taxes are calculated using an asset and liability approach. The
provision for income taxes includes federal and state taxes currently
payable and deferred taxes, due to temporary differences between the
financial statement and tax bases of assets and liabilities. In addition,
the future tax benefits are recognized to the extent that realization of
such benefits is more likely than not.

Foreign Currency Translation

The local currency is the functional currency of the Company's operating
branches in Europe and Canada. Assets and liabilities denominated in
foreign currencies are translated using the exchange rate on the balance
sheet date. Revenues and expenses are translated using average exchange
rates prevailing during the year. The translation adjustment resulting from
this process is shown separately as a component of stockholders' equity.
Foreign currency transaction gains or losses are included in the
determination of net income.

Common Stock

Subject to the rights of holders of any Preferred Stock that may be issued
in the future, holders of Common Stock are entitled to receive such
dividends, if any, as may be declared from time to time by the Board of
Directors (the "Board") out of funds legally available therefore and in the
event of liquidation, dissolution or winding-up of the Company, to share
ratably in all assets available for distribution. The holders of Common
Stock have no preemptive or conversion rights. Subject to the rights of any
Preferred Stock that may be issued in the future, the holders of Common
Stock are entitled to one vote per share on any matter submitted to a vote
of the stockholders, except that, on giving notice as required by law and
subject to compliance with other statutory conditions, stockholders may
cumulate their votes in an election of directors, and each stockholder may
give one candidate a number of votes equal to the number of directors to be
elected multiplied by the number of shares held by such stockholder or may
distribute such stockholder's votes on the same principle among as many
candidates as such stockholder thinks fit. There are no redemption or
sinking fund provisions applicable to the Common Stock.


In 1999, the Company declared a dividend distribution of one Right to
purchase Series A Participating Preferred Stock per share of Common Stock.
The Rights will be exercisable, unless redeemed earlier by the Company, if
a person or group acquires, or obtains the right to acquire, 15% or more of
the outstanding shares of Common Stock or commences a tender or exchange
offer that would result in it acquiring 15% or more of the outstanding
shares of Common Stock, either event occurring without the prior consent of
the Company. The amount of Series A Participating Preferred Stock that the
holder of a Right is entitled to receive and the purchase price payable on
exercise of a Right are both subject to adjustment. Any person or group
that acquires 15% or more of the outstanding shares of Common Stock without
the prior consent of the Company would not be entitled to this purchase.
Any stockholder who holds 25% or more of the Company's Common Stock on the
date of the Rights distribution would not be treated as having acquired 15%
or more of the outstanding shares unless such stockholder's ownership is
increased to more than 40% of the outstanding shares.

The Rights will expire on July 29, 2009, or they may be redeemed by the
Company at one cent per Right prior to that date. The Rights do not have
voting or dividend rights and, until they become exercisable, have no
dilutive effect on the earnings of the Company. One million shares of the
Company's Preferred Stock have been designated Series A Participating
Preferred Stock and reserved for issuance on exercise of the Rights. No
event during 1999 made the Rights exercisable.

Preferred Stock

The Board has the authority to issue the authorized and unissued Preferred
Stock in one or more series with such designations, rights and preferences
as may be determined from time to time by the Board. Accordingly, the Board
is empowered, without stockholder approval, to issue Preferred Stock with
dividend, liquidation, conversion, voting or other rights that could
adversely affect the voting power or other rights of the holders of the
Company's Common Stock.

Net Income per Common Share

Basic net income per common share is computed based upon the weighted
average number of common shares outstanding. Common equivalent shares,
using the treasury stock method, are included in the diluted per-share
calculations for all periods when the effect of their inclusion is
dilutive.

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




1999 1998 1997
----------------------------------- ----------------------------------- -----------------------------------
Per Per Per
Income Shares Share Income Shares Share Income Shares Share
------------ ------------ ------- ------------ ------------ ------- ------------ ------------ -------


BASIC EPS
Income available
to common
stockholders $ 38,467,392 11,837,315 $ 3.25 $ 31,141,523 11,560,454 $ 2.69 $ 25,985,779 11,474,592 $ 2.26

EFFECT OF DILUTIVE SECURITIES
Stock options - 396,550 (0.11) - 487,743 (0.11) - 491,358 (0.09)
------------ ------------ ------- ------------ ------------ ------- ------------ ------------ -------

DILUTED EPS
Income available
to common
stockholders $ 38,467,392 12,233,865 $ 3.14 $ 31,141,523 12,048,197 $ 2.58 $ 25,985,779 11,965,950 $ 2.17
============ ============ ======= ============ ============ ======= ============ ============ =======




Comprehensive Income

Comprehensive income, which is included in the consolidated statement of
stockholders' equity, is defined as net income and other comprehensive
income. Other comprehensive income includes changes in foreign currency
translation adjustments recorded directly into stockholders' equity.


Concentration of Credit Risk

Financial instruments which potentially subject the Company to
concentrations of credit risk consist of cash in banks, short-term
investments in U.S. Treasury instruments and trade accounts receivable. The
Company maintains its cash in demand deposit and money market accounts held
primarily by two banks.

Adoption of Statements of Financial Accounting Standards

In June 1998, Accounting Standard No. 133, "Accounting for Derivative
Instruments and Hedging Activities" was issued. This standard was amended
by Accounting Standard No. 137, which deferred the effective date of
implementation to the first quarter of fiscal years beginning after June
15, 2000. Accounting Standard No. 133 requires companies to record
derivative financial instruments on the balance sheet as assets or
liabilities, as appropriate, at fair value. Gains or losses resulting from
changes in the fair value of those derivatives are accounted for depending
on the use of the derivative and whether it qualifies for hedge accounting.
The Company does not believe that the implementation of this standard will
have a material adverse effect on its financial position or results of
operations.

Reclassifications

Certain prior year amounts have been reclassified to conform to the 1999
presentation with no effect on net income or retained earnings as
previously reported.


2. Acquisitions

In August 1999, Simpson Strong-Tie International, Inc. ("SSTI"), a
subsidiary of the Company, purchased the assets of Furfix Products Limited
and Easy Arches Limited (together, "Furfix"), which manufacture a line of
structural connectors for the wood and masonry construction markets in the
United Kingdom and Europe. The purchase price was approximately $7.8
million in cash plus an earnout based on future operating performance.
Included in the purchase price were costs associated with the closure of
Furfix's existing facility and integration into SSTI's facility in
Tamworth, England.


3. Trade Accounts Receivable

Trade accounts receivable consist of the following:




December 31,
----------------------------
1999 1998
------------ ------------


Trade accounts receivable $ 43,952,137 $ 35,550,836
Allowance for doubtful accounts (1,203,147) (1,173,656)
Allowance for sales discounts (328,767) (288,058)
------------ ------------
$ 42,420,223 $ 34,089,122
============ ============



The Company sells product on credit and generally does not require collateral.



4. Inventories

The components of inventories consist of the following:




December 31,
----------------------------
1999 1998
------------ ------------


Raw materials $ 22,816,584 $ 18,904,545
In-process products 7,593,038 5,255,755
Finished products 42,341,623 32,179,753
------------ ------------
$ 72,751,245 $ 56,340,053
============ ============



At December 31, 1999, LIFO cost exceeded the replacement value of LIFO
inventories by approximately $1,503,000. At December 31, 1998, the
replacement value of LIFO inventories exceeded LIFO cost by approximately
$359,000.


5. Property, Plant and Equipment, net

Property, plant and equipment consists of the following:




December 31,
----------------------------
1999 1998
------------ ------------


Land $ 4,316,015 $ 3,891,519
Buildings and site improvements 26,724,935 25,743,968
Leasehold improvements 3,942,613 3,463,063
Machinery and equipment 81,147,265 67,052,907
------------ ------------
116,130,828 100,151,457
Less accumulated depreciation
and amortization (58,949,908) (49,498,717)
------------ ------------
57,180,920 50,652,740
Capital projects in progress 3,962,604 4,311,964
------------ ------------
$ 61,143,524 $ 54,964,704
============ ============



Included in property, plant and equipment at December 31, 1999 and 1998,
are fully depreciated assets with an original cost of approximately
$24,453,000 and $22,166,000, respectively. These fully depreciated assets
are still in use in the Company's operations.


6. Investments

The Company's 49% investment in Bulldog-Simpson GmbH is accounted for using
the equity method. The Company's equity in the earnings or losses of its
equity investments was not material in any of the three years in the period
ended December 31, 1999.


7. Accrued Liabilities

Accrued liabilities consist of the following:




December 31,
----------------------------
1999 1998
------------ ------------


Sales incentive and advertising allowances $ 3,138,607 $ 2,124,242
Vacation liability 1,505,409 1,409,518
Other 3,175,139 2,057,532
------------ ------------
$ 7,819,155 $ 5,591,292
============ ============





8. Debt

The outstanding debt at December 31, 1999 and 1998, and the available
credit at December 31, 1999, consisted of the following:





Available
on Credit Debt Outstanding
Facility at at December 31,
December 31, ----------------------------
1999 1999 1998
------------ ------------ ------------


Revolving line of credit, interest at
bank's reference rate (at December
31, 1999, the bank's reference rate
was 8.50%), matures June 2000,
commitment fees are paid at the
annual rate of 0.125% on the unused
portion of the facility $ 12,456,845 $ - $ -

Revolving term commitment, interest at
bank's prime rate (at December
31, 1999, the bank's prime rate was
8.50%), matures June 2000, commitment
fees are paid at the annual rate of
0.125% on the unused portion of the
facility 8,616,628 - -

Revolving line of credit, interest rate
at the bank's base rate of interest
plus 2% (at December 31, 1999, this
rate was 7.50%), matures July 2000,
has an annual commission charge of 0.45% 404,139 - -

Revolving line of credit, interest rate
at the weighted average European interbank
rate of interest plus 1% (at December
31, 1999, this rate was 4.75%), matures
March 2000, has an annual commission
charge of 0.25% 153,071 - -

Term loan, interest at LIBOR plus 1.375%
(at December 31, 1999, the LIBOR plus
1.375% was 7.1975%), expires May 2008 - 2,550,000 2,850,000

Term loan, fixed interest rate of 5.3%,
expires September 2006 - 164,562 -

Standby letter of credit facilities 1,926,528 - -

Other notes payable - 49,541 45,886
------------ ------------ ------------
23,557,211 2,764,103 2,895,886
Less current portion (349,541) (330,704)
------------ ------------
$ 2,414,562 $ 2,565,182
============ ============
Less standby letters of credit issued
and outstanding (1,926,528)
------------
Net credit available $ 21,630,683
============




The revolving lines of credit are guaranteed by the Company and its
subsidiaries. At December 31, 1999, the Company had three outstanding
standby letters of credit. Two of these letters of credit, in the aggregate
amount of $1,166,748, were used to support the Company's self-insured
workers' compensation insurance requirements. The third, in the amount of
$759,780, was used to guarantee performance on the Company's leased
facility in the UK. These letters of credit mature between June 2000 and
January 2001.



9. Commitments and Contingencies

Leases

Certain properties occupied by the Company are leased. The leases expire at
various dates through 2012 and generally require the Company to assume the
obligations for insurance, property taxes, and maintenance of the
facilities.

Some of the properties were leased from partnerships formed by certain
current and former Company stockholders, directors, officers and employees.
Rental expenses under these related party leases were as follows:




Years Ended December 31,
--------------------------------------------
1999 1998 1997
------------ ------------ ------------


Simpson Investment Company $ 185,100 $ 185,100 $ 185,100
Doolittle Investors 253,080 239,400 239,400
Vacaville Investors 437,640 437,640 437,640
Vicksburg Investors 354,868 353,411 334,279
Columbus Westbelt Investment Co. 581,064 581,064 581,064
------------ ------------ ------------
$ 1,811,752 $ 1,796,615 $ 1,777,483
============ ============ ============



Rental expense for 1999, 1998 and 1997 with respect to all other leased
property was approximately $2,362,000, $2,285,000 and $2,128,000,
respectively.

At December 31, 1999, minimum rental commitments under all noncancelable
leases are as follows:

2000 $ 4,790,868
2001 4,287,509
2002 3,344,345
2003 2,817,851
2004 2,134,407
Thereafter 8,533,697
------------
$ 25,908,677

Some of these minimum rental commitments involve the related parties
described above, contain renewal options, and provide for periodic rental
adjustments based on changes in the consumer price index or current market
rental rates.

The nominal term of SSTI's lease in the United Kingdom is 25 years but
includes an option to terminate without penalty in either the fifteenth or
twentieth year upon one year written notice by SSTI. As such, future
minimum rental payments associated with the first 15 years of this lease
are included in minimum rental commitments in the table above.


Environmental

At two of the Company's operating facilities, evidence of contamination
resulting from activities of prior occupants was discovered. The Company
took certain remedial actions at one facility in 1990 and continues to
monitor the condition of this property. The Company does not believe that
any further action will be required. The Company has been informed by the
lessor of the other facility, Vicksburg Investors, that appropriate
remedial action has been taken. The Company does not believe that either of
these matters will have a material adverse effect on its financial
condition or results of operations.

Litigation

From time to time, the Company is involved in litigation that it considers
to be in the normal course of its business. No such litigation within the
last five years resulted in any material loss. The Company is not engaged
in any legal proceedings as of the date hereof, which the Company expects
individually or in the aggregate to have a material adverse effect on the
Company's financial condition or results of operations.


10. Income Taxes

The provision for income taxes consists of the following:




Years Ended December 31,
--------------------------------------------
1999 1998 1997
------------ ------------ ------------


Current
Federal $ 22,509,000 $ 18,075,000 $ 15,546,000
State 4,354,000 3,345,000 3,115,000
Foreign 97,000 82,000 145,000
Deferred (1,207,000) (474,000) (1,039,000)
------------ ------------ ------------
$ 25,753,000 $ 21,028,000 $ 17,767,000
============ ============ ============



Reconciliations between the statutory federal income tax rates and the
Company's effective income tax rates as a percentage of income before
income taxes are as follows:



Years Ended December 31,
--------------------------------
1999 1998 1997
-------- -------- --------


Federal tax rate 35.0% 35.0% 35.0%
State taxes, net of federal benefit 4.3% 4.5% 4.2%
Other 0.8% 0.8% 1.4%
-------- -------- --------
Effective income tax rate 40.1% 40.3% 40.6%
======== ======== ========




The tax effects of the significant temporary differences that constitute
the deferred tax assets and liabilities at December 31, 1999, 1998 and
1997, were as follows:





Years Ended December 31,
--------------------------------------------
1999 1998 1997
------------ ------------ ------------


Current deferred tax assets
State tax $ 1,488,904 $ 1,170,805 $ 1,037,753
Compensation related to
stock plans 46,728 128,657 140,579
Workers' compensation 298,808 115,436 155,416
Health claims 604,580 435,294 272,393
Vacation 555,420 399,472 416,268
Accounts receivable allowance 600,439 573,265 602,802
Inventory allowance 874,726 619,447 477,304
Sales incentive and advertising
allowances 125,277 163,008 206,210
Other 150,652 144,215 228,025
------------ ------------ ------------
$ 4,745,534 $ 3,749,599 $ 3,536,750
============ ============ ============


Long-term deferred tax assets (liabilities)
Depreciation $ 1,161,552 $ 911,723 $ 639,063
Goodwill amortization 560,479 602,182 574,269
Other (419,829) (421,710) (402,545)
------------ ------------ ------------
$ 1,302,202 $ 1,092,195 $ 810,787
============ ============ ============




No valuation allowance has been recorded for deferred tax assets for the
years ended December 31, 1999, 1998 and 1997, due to the Company's taxable
income in 1999 and prior years.


11. Profit Sharing and Pension Plans

The Company has five profit sharing plans covering substantially all
salaried employees and nonunion hourly employees. Two of the plans,
covering U.S. employees, provide for annual contributions in amounts the
Board of Directors may authorize, subject to certain limitations, but in no
event more than the amount permitted under the Internal Revenue Code as
deductible expense. The other three plans, covering the Company's European
and Canadian employees, require the Company to make contributions ranging
from three to 15% of the employees' compensation. The total cost for these
profit sharing plans for the years ended December 31, 1999, 1998 and 1997,
was approximately $3,360,000, $3,078,000 and $2,775,000, respectively.

The Company also contributes to various industry-wide, union-sponsored
defined benefit pension funds for union, hourly employees. Payments to
these funds aggregated approximately $977,000, $809,000 and $708,000 for
the years ended December 31, 1999, 1998 and 1997, respectively.


12. Related Party Transactions

The Chairman and the President and Chief Executive Officer of the Company,
who are directors and significant stockholders of the Company, served as
directors and officers of the Simpson PSB Fund (a charitable organization)
until October 1997. The Company contributed $75,496 and $207,156 to this
organization in 1998 and 1997, respectively. The Chairman and the President
and Chief Executive Officer of the Company were again appointed as
directors and officers of the Simpson PSB Fund in January 1999.

Refer to Note 9 regarding related party transactions involving Company
leases.



13. Stock Bonus and Stock Options Plans

The Company applies Accounting Principles Board Opinion 25, Accounting for
Stock Issued to Employees, and related interpretations in accounting for
its stock option plans. Accordingly, no compensation cost has been
recognized for its non-qualified stock option plan as stock options granted
under this plan have an exercise price equal to 100% of the market price on
the date of grant. If the compensation cost for this plan had been
determined based on the fair value at the grant dates for awards consistent
with the method of SFAS No. 123, the pro forma effect on the Company's net
income and earnings per share in 1999, 1998 and 1997 would have been:




Years Ended December 31,
--------------------------------------------
1999 1998 1997
------------ ------------ ------------


Net income, as reported $ 38,467,392 $ 31,141,523 $ 25,985,779
Pro forma 37,458,366 30,423,968 25,464,303

Diluted earnings per share,
as reported 3.14 2.58 2.17
Pro forma 3.06 2.53 2.13



The fair value of each option granted was estimated on the date of grant
using the Black-Sholes option-pricing model with the following assumptions
for 1999, 1998 and 1997, respectively: risk-free interest rate of 4.60% for
1999, and 4.63% for 1998 and 5.50% for 1997; no dividend yield for all
years; expected lives of 6.3 for all years; and volatility of 30.4% for
1999, and 30.7% for 1998 and 1997. The weighted average fair value per
share of options granted during 1999, 1998 and 1997 was $17.49, $15.09 and
$14.12, respectively.

The Company currently has two stock option plans. The first is principally
for the Company's employees and the second is for the Company's independent
directors. During the last three years, the Company met most of the
operating goals established for its two stock option plans and accordingly,
has committed to grant options to purchase 143,250 shares for 1999 and has
granted options to purchase 118,750 and 122,750 shares for 1998 and 1997,
respectively. These options have an exercise price range of $38.94 to
$48.13 per share, $36.63 to $41.18 per share and $33.31 to $37.31 per share
for 1999, 1998 and 1997, respectively.

The following table summarizes the Company's stock option activity for the
years ended December 31, 1999, 1998 and 1997:





1999 1998 1997
---------------------- ---------------------- ----------------------
Weighted- Weighted- Weighted-
Average Average Average
Exercise Exercise Exercise
Non-Qualified Stock Options Shares Price Shares Price Shares Price
- -------------------------------- ---------- ---------- ---------- ---------- ---------- ----------


Outstanding at beginning of year 1,033,019 $ 17.05 978,917 $ 14.29 922,734 $ 11.29
Granted 143,250 43.65 118,750 37.44 122,250 33.39
Additional grants - - - - 500 33.31
Exercised (436,279) 10.49 (57,147) 10.09 (61,595) 7.33
Forfeited (1,000) 33.90 (7,501) 31.37 (4,972) 18.66
---------- ---------- ----------
Outstanding at end of year 738,990 26.08 1,033,019 17.05 978,917 14.29
========== ========== ==========




The number of stock options exercisable at the end of 1999, 1998 and 1997
was 414,817, 740,638 and 700,497, respectively.


The following table summarizes information about the Company's stock options
outstanding at December 31, 1999:





Options Outstanding Options Exercisable
-------------------------------------------- ----------------------------
Weighted-
Number Average Weighted- Number Weighted-
Outstanding Remaining Average Outstanding Average
at December Contractual Exercise at December Exercise
Range of Exercise Prices 31, 1999 Life Price 31, 1999 Price
- ---------------------------- ------------ ------------ ------------ ------------ ------------


$3.64 62,377 1.4 years $ 3.64 62,377 $ 3.64
$11.50 92,374 1.4 years 11.50 92,374 11.50
$10.00 to $11.28 53,208 2.1 years 10.23 53,208 10.23
$13.50 61,648 3.0 years 13.50 60,364 13.50
$23.00 to $29.25 97,850 4.0 years 23.08 67,089 23.13
$33.31 to $37.31 111,276 5.0 years 33.36 51,070 33.40
$36.63 to $41.18 117,007 6.0 years 37.45 24,835 37.40
$38.94 to $48.13 143,250 7.0 years 43.65 3,500 38.94
------------ ------------
$3.64 to $48.13 738,990 4.3 years 26.08 414,817 16.48
============ ============




The tax benefit to the Company from the exercise of stock options, a
reduction of the Company's income tax payable, was $6,303,873, $600,045 and
$589,133 for 1999, 1998 and 1997, respectively.

The Company also maintains a Stock Bonus Plan whereby for each ten years of
continuous employment with the Company each employee who does not
participate in one of the Company's stock option plans receives 100 shares
of common stock. In 1999, 1998 and 1997, the Company committed to issue
4,500, 3,200 and 5,100 shares, respectively, which resulted in compensation
charges of $353,149, $203,500 and $305,038, respectively. The shares are
issued in the year following the year in which they are earned.


14. Segment Information

The Company is organized into two primary segments. The segments are
defined by types of products manufactured, marketed and distributed to the
Company's customers. The two product segments are construction connector
products and venting products. These segments are differentiated in several
ways, including the types of materials used, the production process, the
distribution channels used and the applications in which the products are
used. Transactions between the two segments were immaterial for each of the
years presented.

The following table illustrates certain measurements used by management to
assess the performance of the segments described above as of December 31,
1999, 1998 and 1997, or for the years then ended:





Connector Venting
1999 Products Products All Other Total
- ------------------------------ ------------ ------------ ------------ ------------


Net sales $260,943,000 $ 67,497,000 $ - $328,440,000
Income from operations 51,902,000 10,628,000 21,000 62,551,000
Depreciation and amortization 8,895,000 1,867,000 100,000 10,862,000
Capital expenditures and
acquisitions 21,642,000 1,930,000 - 23,572,000
Total assets 148,328,000 38,828,000 60,098,000 247,254,000






Connector Venting
1998 Products Products All Other Total
- ------------------------------ ------------ ------------ ------------ ------------


Net sales $220,319,000 $ 58,762,000 $ - $279,081,000
Income from operations 42,674,000 8,709,000 (153,000) 51,230,000
Depreciation and amortization 6,738,000 1,417,000 103,000 8,258,000
Capital expenditures and
acquisitions 11,509,000 8,548,000 - 20,057,000
Total assets 115,507,000 35,095,000 40,998,000 191,600,000





Connector Venting
1997 Products Products All Other Total
- ------------------------------ ------------ ------------ ------------ ------------


Net sales $190,553,000 $ 55,521,000 $ - $246,074,000
Income from operations 34,344,000 9,187,000 (207,000) 43,324,000
Depreciation and amortization 5,472,000 1,094,000 146,000 6,712,000
Capital expenditures and
acquisitions 22,778,000 3,102,000 4,000 25,884,000
Total assets 98,069,000 30,032,000 22,664,000 150,765,000




Cash collected by the Company's subsidiaries is routinely transferred into
the Company's cash management accounts, and therefore, has been included in
the total assets of the segment entitled "All Other." Cash and short-term
investment balances in this segment were approximately $53,682,000,
$36,433,000 and $18,096,000 as of December 31, 1999, 1998 and 1997,
respectively.

The following table illustrates how the Company's net sales and long-lived
assets are distributed geographically as of December 31, 1999, 1998 and
1997, or for the years then ended.





1999 1998 1997
---------------------------- ---------------------------- ----------------------------
Net Long-Lived Net Long-Lived Net Long-Lived
Sales Assets Sales Assets Sales Assets
------------ ------------ ------------ ------------ ------------ ------------


United States $310,300,000 $ 55,097,000 $265,201,000 $ 50,753,000 $233,596,000 $ 38,027,000
Other countries 18,140,000 15,105,000 13,880,000 6,891,000 12,478,000 7,639,000
------------ ------------ ------------ ------------ ------------ ------------
$328,440,000 $ 70,202,000 $279,081,000 $ 57,644,000 $246,074,000 $ 45,666,000
============ ============ ============ ============ ============ ============




Net sales and long-lived assets are attributable to the country where the
operations are located.

In 1999, revenues from a single customer exceeded 10% of the Company's
total revenues. Revenues from this customer were approximately $35,784,000
and were attributable mostly to the Connector segment.






SCHEDULE II

SIMPSON MANUFACTURING CO., INC. AND SUBSIDIARIES

VALUATION AND QUALIFYING ACCOUNTS
for the years ended December 31, 1999, 1998 and 1997

Column A Column B Column C Column D Column E
Additions
----------------------------
Charged Charged
Balance at to Costs to Other Balance
Beginning and Accounts - at End
Classification of Year Expenses Write-offs Deductions of Year
- ------------------------------------ ------------ ------------ ------------ ------------ ------------


YEAR ENDED DECEMBER 31, 1999
Allowance for doubtful accounts $ 1,173,656 $ 646,236 $ - $ 616,745 $ 1,203,147
Allowance for obsolete inventory 944,331 967,074 - 269,659 1,641,746

YEAR ENDED DECEMBER 31, 1998
Allowance for doubtful accounts 1,539,691 767,339 - 1,133,374 1,173,656
Allowance for obsolete inventory 742,578 212,334 - 10,581 944,331

YEAR ENDED DECEMBER 31, 1997
Allowance for doubtful accounts 1,108,950 1,010,012 - 579,271 1,539,691
Allowance for obsolete inventory 648,881 220,000 - 126,303 742,578





ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES.

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

Information required by this Item will be contained in the Registrant's
proxy statement for the annual meeting of stockholders to be held on May
16, 2000, to be filed not later than 120 days following the end of the
Registrant's fiscal year ended December 31, 1999, which will set forth
certain information with respect to the directors and executive officers of
the Registrant and is incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION.

Information required by this Item will be contained in the Registrant's
proxy statement for the annual meeting of stockholders to be held on May
16, 2000, to be filed not later than 120 days following the end of the
Registrant's fiscal year ended December 31, 1999, which will set forth
certain information with respect to executive compensation of the
Registrant and is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

Information required by this Item will be contained in the Registrant's
proxy statement for the annual meeting of stockholders to be held on May
16, 2000, to be filed not later than 120 days following the end of the
Registrant's fiscal year ended December 31, 1999, which will set forth
certain information with respect to security ownership of certain
beneficial owners and management of the Registrant and is incorporated
herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

Information required by this Item will be contained in the Registrant's
proxy statement for the annual meeting of stockholders to be held on May
16, 2000, to be filed not later than 120 days following the end of the
Registrant's fiscal year ended December 31, 1999, which will set forth
certain information with respect to certain relationships and related
transactions of the Registrant and is incorporated herein by reference.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

a. Exhibits

11. Statement re computation of earnings per share.
21. List of Subsidiaries of the Registrant.
23. Consent of Independent Certified Public Accountants.

b. No reports on Form 8-K were filed during the last quarter of the
period for which this report is filed.



SIGNATURES

Pursuant to the requirements Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.


Dated: March 28, 2000 SIMPSON MANUFACTURING CO., INC.
-------------- ----------------------------------
(Registrant)


By /s/ Stephen B. Lamson
----------------------------------
Stephen B. Lamson
Chief Financial Officer
and Duly Authorized Officer
of the Registrant


Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated below.

Signature Title Date
- ------------------------- --------------------------- --------------

Chief Executive Officer:

/s/ Thomas J Fitzmyers President, Chief Executive March 28, 2000
- ------------------------- Officer and Director
(Thomas J Fitzmyers)

Chief Financial Officer:

/s/ Stephen B. Lamson Chief Financial Officer, March 28, 2000
- ------------------------- Secretary and Director
(Stephen B. Lamson)


Directors:

/s/ Barclay Simpson Chairman of the Board March 28, 2000
- -------------------------
(Barclay Simpson)


/s/ Earl F. Cheit Director March 28, 2000
- -------------------------
(Earl F. Cheit)


/s/ Peter N. Louras Director March 28, 2000
- -------------------------
(Peter N. Louras)


/s/ Sunne Wright McPeak Director March 28, 2000
- -------------------------
(Sunne Wright McPeak)


/s/ Barry Lawson Williams Director March 28, 2000
- -------------------------
(Barry Lawson Williams)