Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

Commission file number:       0-23804

 

 

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    ý    No    o

 

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

 

Yes    ý    No    o

 

The number of shares of the Registrant’s Common Stock outstanding as of March 31, 2003:          24,585,519

 

 

PART I — FINANCIAL INFORMATION

 

Item 1. Financial Statements.

 

Simpson Manufacturing Co., Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

 

		March 31,						December 31,
		2003			2002			2002
		(Unaudited)
ASSETS
Current assets
Cash and cash equivalents		$	89,976,762		$	84,963,306		$	103,318,056
Short-term investments		22,105,675			—			17,683,611
Trade accounts receivable, net		71,803,708			62,864,794			55,313,885
Inventories		99,634,575			84,496,719			93,079,620
Deferred income taxes		7,456,455			5,811,584			7,276,642
Other current assets		4,892,069			4,348,920			3,342,423
Total current assets		295,869,244			242,485,323			280,014,237
Property, plant and equipment, net		101,529,045			84,016,901			97,396,608
Other noncurrent assets		19,670,037			18,525,025			18,990,220
Total assets		$	417,068,326		$	345,027,249		$	396,401,065
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Notes payable and current portion of long-term debt		$	2,631,986		$	2,738,434		$	1,257,782
Trade accounts payable		18,974,017			15,546,115			14,217,487
Accrued liabilities		11,902,102			8,741,762			13,267,373
Income taxes payable		5,876,448			6,130,691			—
Accrued profit sharing trust contributions		1,587,011			1,589,973			5,138,579
Accrued cash profit sharing and commissions		6,721,002			5,516,486			6,170,500
Accrued workers’ compensation		1,880,764			1,545,764			1,685,764
Total current liabilities		49,573,330			41,809,225			41,737,485
Long-term debt, net of current portion		5,278,586			5,142,698			5,479,834
Total liabilities		54,851,916			46,951,923			47,217,319
Commitments and contingencies (Notes 6 and 7)
Stockholders’ equity
Common stock		52,502,790			47,913,791			51,521,634
Retained earnings		308,378,713			255,149,605			297,353,812
Accumulated other comprehensive income		1,334,907			(4,988,070		)	308,300
Total stockholders’ equity		362,216,410			298,075,326			349,183,746
Total liabilities and stockholders’ equity		$	417,068,326		$	345,027,249		$	396,401,065

 

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

 

2

 

Simpson Manufacturing Co., Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited)

 

		Three Months Ended March 31,
		2003			2002
Net sales		$	116,456,180		$	102,371,235
Cost of sales		70,845,600			63,177,680
Gross profit		45,610,580			39,193,555
Operating expenses:
Selling		11,526,709			10,529,360
General and administrative		15,598,725			12,494,383
		27,125,434			23,023,743
Income from operations		18,485,146			16,169,812
Interest income, net		129,950			258,327
Income before income taxes		18,615,096			16,428,139
Provision for income taxes		7,590,194			6,698,199
Net income		$	11,024,902		$	9,729,940
Net income per common share
Basic		$	0.45		$	0.40
Diluted		$	0.44		$	0.39
Number of shares outstanding
Basic		24,581,348			24,369,426
Diluted		24,902,398			24,720,348

 

Simpson Manufacturing Co., Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)

 

		Three Months Ended March 31,
		2003			2002
Net income		$	11,024,902		$	9,729,940
Other comprehensive income, net of tax:
Foreign currency translation adjustments		1,039,283			(816,601		)
Change in net unrealized gains on available-for-sale investments		(12,676		)	—
Comprehensive income		$	12,051,509		$	8,913,339

 

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

 

3

 

Simpson Manufacturing Co., Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

		Three Months Ended March 31,
		2003			2002
Cash flows from operating activities
Net income		$	11,024,902		$	9,729,940
Adjustments to reconcile net income to net cash provided by operating activities:
Loss (gain) on sale of capital equipment		(36,326		)	35,781
Depreciation and amortization		3,966,453			3,765,212
Deferred income taxes and long-term liabilities		(669,914		)	423,551
Noncash compensation related to stock plans		575,147			120,000
Changes in operating assets and liabilities, net of effects of acquisitions:
Trade accounts receivable		(16,384,384		)	(20,357,444		)
Inventories		(6,024,822		)	(2,158,531		)
Trade accounts payable		4,535,400			(262,518		)
Income taxes payable		7,220,682			5,588,443
Accrued profit sharing trust contributions		(3,562,218		)	(3,115,326		)
Accrued cash profit sharing and commissions		549,212			3,528,493
Other current assets		(2,811,729		)	(2,144,038		)
Accrued liabilities		(1,408,331		)	(1,410,244		)
Accrued workers’ compensation		195,000			300,000
Other noncurrent assets		(70,715		)	(655,771		)
Total adjustments		(13,926,545		)	(16,342,392		)
Net cash used in operating activities		(2,901,643		)	(6,612,452		)
Cash flows from investing activities
Capital expenditures		(7,600,876		)	(6,272,216		)
Asset acquisitions, net of cash acquired		(65,684		)	(1,438		)
Proceeds from sale of equipment		39,705			24,693
Purchases of available-for-sale investments		(8,443,908		)	—
Sales of available-for-sale investments		4,009,168			—
Net cash used in investing activities		(12,061,595		)	(6,248,961		)
Cash flows from financing activities
Issuance of debt		1,323,368			1,942,453
Repayment of debt		(318,230		)	(604,388		)
Issuance of common stock		482,283			728,092
Net cash provided by financing activities		1,487,421			2,066,157
Effect of exchange rate changes on cash		134,523			(113,388		)
Net decrease in cash and cash equivalents		(13,341,294		)	(10,908,644		)
Cash and cash equivalents at beginning of period		103,318,056			95,871,950
Cash and cash equivalents at end of period		$	89,976,762		$	84,963,306

 

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

 

4

 

Simpson Manufacturing Co., Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

 

1.             Basis of Presentation

 

Interim Period Reporting

 

The accompanying unaudited interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations for reporting on Form 10-Q. Accordingly, certain information and footnotes required by accounting principles generally accepted in the United States of America have been condensed or omitted. These interim statements should be read in conjunction with the consolidated financial statements and the notes thereto included in Simpson Manufacturing Co., Inc.’s (the “Company’s”) 2002 Annual Report on Form 10-K (the “2002 Annual Report”).

 

The unaudited quarterly condensed consolidated financial statements have been prepared on the same basis as the audited annual consolidated financial statements and, in the opinion of management, contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the financial information set forth therein, in accordance with accounting principles generally accepted in the United States of America. The year-end condensed consolidated balance sheet data were derived from audited financial statements, but do not include all disclosures required by accounting principles generally accepted in the United States of America. The Company’s quarterly results may be subject to fluctuations. As a result, the Company believes the results of operations for the interim periods are not necessarily indicative of the results to be expected for any future period.

 

Revenue Recognition

 

The Company recognizes revenue as title to products is transferred to customers or services are rendered, net of applicable provision for discounts, returns and allowances.

 

Net Income Per Common Share

 

Basic net income per common share is computed based upon the weighted average number of common shares outstanding. Potentially dilutive securities, 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:

 

		Three Months Ended March 31, 2003								Three Months Ended March 31, 2002
		Income			Shares		Per Share			Income			Shares		Per Share
Basic EPS
Income available to common stockholders		$	11,024,902		24,581,348		$	0.45		$	9,729,940		24,369,426		0.40
Effect of Dilutive Securities
Stock options		—			321,050		(0.01		)	—			350,922		(0.01		)
Diluted EPS
Income available to common stockholders		$	11,024,902		24,902,398		$	0.44		$	9,729,940		24,720,348		$	0.39

 

The dilutive securities in the table above do not include 4,000 and 19,000 stock options for the three months ended March 31, 2003 and 2002, respectively, the effect of which would be anti-dilutive in nature.

 

5

 

Accounting for Stock-Based Compensation

 

The Company maintains two stock option plans under which the Company may grant incentive stock options and non-qualified stock options to employees, consultants and non-employee directors. Stock options have been granted with exercise prices at or above the fair market value on the date of grant. Options vest and expire according to terms established at the grant date.

 

Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock-Based Compensation,” encourages, but does not require, companies to record compensation cost for stock-based employee compensation plans based on the fair value of options granted. In December 2002, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure,” which amends SFAS No. 123. SFAS No. 148 requires more prominent and frequent disclosures about the effects of stock-based compensation.

 

The Company has adopted SFAS No. 148 and SFAS No. 123 and has used the prospective method of applying SFAS No. 123 for the transition. For stock options that have been granted prior to January 1, 2003, the Company will continue to account for stock-based compensation using the intrinsic value method prescribed in Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations. Accordingly, because the grant price equaled or exceeded the market price on the date of grant for options issued by the Company, no compensation expense has been recognized for stock options granted prior to January 1, 2003. For the three months ended March 31, 2003, the Company has recognized an after-tax expense of approximately $250,000.

 

On the condensed balance sheet included in the Company’s report on Form 8-K, dated April 17, 2003, other noncurrent assets and stockholders’ equity included an amount of $5,548,709 related to the deferred stock-based compensation of stock options granted in January and February 2003 in accordance with the implementation of SFAS No. 123 and SFAS No. 148. The Company has subsequently decided that this amount should not be recorded. As a result, the deferred stock-based compensation reduced total assets and stockholders’ equity by that amount.

 

Had compensation cost for the Company’s stock options for all grants been recognized based upon the estimated fair value on the grant date under the fair value methodology prescribed by SFAS No. 123, as amended by SFAS No. 148, the Company’s net income and earnings per share would have been as follows:

 

		Three Months Ended March 31,
		2003			2002
Net income, as reported		$	11,024,902		$	9,729,940
Deduct total stock-based employee compensation expense determined under the fair value method for all awards granted prior to January 1, 2003, net of related tax effects		93,274			151,482
Pro forma		$	10,931,628		$	9,578,458
Earnings per share
Basic, as reported		0.45			0.40
Basic, pro forma		0.44			0.39
Diluted, as reported		0.44			0.39
Diluted, pro forma		0.44			0.39

 

The assumptions used to calculate the fair value of options granted are evaluated and revised, as necessary, to reflect market conditions and the Company’s experience.

 

6

 

Reclassifications

 

Certain prior period amounts have been reclassified to conform to the 2003 presentation with no effect on net income or retained earnings as previously reported.

 

In August 2002, the Company completed a 2-for-1 split of its common stock. All of the share and per share numbers have been adjusted to reflect the stock split.

 

2.             Trade Accounts Receivable, net

 

Trade accounts receivable consist of the following:

 

		At March 31,
		2003			2002			At December 31, 2002
Trade accounts receivable		$	74,289,038		$	65,998,942		$	57,441,613
Allowance for doubtful accounts		(1,881,085		)	(2,588,271		)	(1,741,321		)
Allowance for sales discounts		(604,245		)	(545,877		)	(386,407		)
		$	71,803,708		$	62,864,794		$	55,313,885

 

3.             Inventories

 

The components of inventories consist of the following:

 

		At March 31,
		2003			2002			At December 31, 2002
Raw materials		$	33,709,295		$	26,027,695		$	30,684,411
In-process products		14,510,596			13,789,204			13,169,570
Finished products		51,414,684			44,679,820			49,225,639
		$	99,634,575		$	84,496,719		$	93,079,620

 

4.             Property, Plant and Equipment, Net

 

Property, plant and equipment, net consists of the following:

 

		At March 31,
		2003			2002			At December 31, 2002
Land		$	13,116,439		$	10,556,675		$	12,366,824
Buildings and site improvements		54,377,163			37,369,947			54,108,232
Leasehold improvements		5,838,193			5,798,461			5,833,165
Machinery and equipment		113,703,323			101,880,820			112,767,419
		187,035,118			155,605,903			185,075,640
Less accumulated depreciation and amortization		(97,068,370		)	(83,799,423		)	(92,943,166		)
		89,966,748			71,806,480			92,132,474
Capital projects in progress		11,562,297			12,210,421			5,264,134
		$	101,529,045		$	84,016,901		$	97,396,608

 

7

 

5.             Investments

 

As of March 31, 2003, the Company held a 32.5% investment in Keymark Enterprises, LLC (“Keymark”), for which it accounts using the equity method. In April 2003, it increased its investment to 35%. The Company believes that the carrying value of its investment in Keymark exceeds its fair value and therefore has written down the value of its investment to zero.

 

Available-for-Sale Investments

 

The Company’s investments in all debt securities are classified as either cash and cash equivalents or available-for-sale investments. As of March 31, 2003, the Company’s investments were as follows:

 

 

		Amortized Cost			Gross Unrealized Gains			Gross Unrealized Losses			Estimated Fair Value
Debt investments
Municipal bonds		$	19,145,206		$	21,435		$	—		$	19,166,641
Commercial paper		6,016,316			—			—			6,016,316
Total debt investments		25,161,522						—			25,182,957
Money market instruments and funds		37,904			—			—			37,904
		$	25,199,426		$	21,435		$	—		$	25,220,861

 

Of the total estimated fair value, $3,115,186 was classified as cash equivalents and $22,105,675 was classified as short-term investments.

 

As of March 31, 2003, contractual maturities of the Company’s available-for-sale investments were as follows:

 

		Amortized Cost			Estimated Fair Value
Amounts maturing in less than 1 year		$	8,038,407		$	8,031,094
Amounts maturing in 1 – 5 years		4,054,469			4,072,281
Amounts maturing in 5 – 10 years		3,441,364			3,452,300
Amounts maturing after 10 years		6,550,000			6,550,000
		$	22,084,240		$	22,105,675

 

During the three months ended March 31, 2003, there were realized losses of $1,368 related to the sale of available-for-sale investments.

 

8

 

6.             Debt

 

Outstanding debt at March 31, 2003 and 2002, and December 31, 2002, and the available credit at March 31, 2003, consisted of the following:

 

					Debt Outstanding
					at						at
					March 31,						December 31,
		Available Credit at March 31, 2003			2003			2002			2002
Revolving line of credit, interest at bank’s reference rate less 0.50% (at March 31, 2003, the bank’s reference rate less 0.50% was 3.75%), expires November 2004		$	11,652,001		$	—		$	—		$	—
Revolving term commitment, interest at bank’s prime rate less 0.50% (at March 31, 2003, the bank’s prime rate less 0.50% was 3.75%), expires June 2003		8,213,673			—			—			—
Revolving line of credit, interest at the bank’s base rate plus 2% (at March 31, 2003, the bank’s base rate plus 2% was 5.75%), expires September 2003		393,478			—			—			—
Revolving line of credit, interest at 5.75%, expires June 2003		2,368,680			—			1,950,221			530,515
Term loan, interest at LIBOR plus 1.375% (at March 31, 2003, LIBOR plus 1.375% was 2.715%), expires May 2008		—			1,650,000			1,950,000			1,650,000
Term loans, interest rates between 4.00% and 6.23%, expirations between 2006 and 2018		—			6,260,572			3,980,911			4,557,101
Standby letter of credit facilities		3,134,326			—			—			—
		25,762,158			7,910,572			7,881,132			6,737,616
Less current portion		—			(2,631,986		)	(2,738,434		)	(1,257,782		)
					$	5,278,586		$	5,142,698		$	5,479,834
Standby letters of credit issued and outstanding		(3,134,326		)
		$	22,627,832

 

As of March 31, 2003, the Company had four outstanding standby letters of credit. Two of these letters of credit, in the aggregate amount of $2,132,038, are used to support the Company’s self-insured workers’ compensation insurance requirements. The other two, in the amounts of $739,738 and $262,550, were used to guarantee performance on, respectively, the Company’s leased facility in the United Kingdom and public improvement costs associated with the construction of the Company’s facilities in Stockton, California. The letter of credit in the amount of $262,550 was cancelled in April 2003.

 

7.             Commitments and Contingencies

 

Note 9 to the consolidated financial statements in the Company’s 2002 Annual Report provides information concerning commitments and contingencies. From time to time, the Company is involved in various legal proceedings and other matters arising in the normal course of business. The Company does not believe that the outcomes of currently pending matters will have a material adverse effect on the Company’s financial condition, cash flows or results of operations.

 

9

 

The Company’s policy with regard to environmental liabilities is to accrue for future environmental assessments and remediation costs as they are discovered and become estimable. The Company does not believe that these matters will have a material adverse effect on the Company’s financial condition, cash flows or results of operations.

 

Corrosion, hydrogen enbrittlement, stress corrosion cracking, hardness, wood pressure-treating chemicals, misinstallations, environmental conditions or other factors can contribute to failure of fasteners and connectors. On occasion, some of the fasteners that the Company sells have failed, although the Company has not incurred any material liability resulting from those failures. The Company attempts to avoid such failures by establishing and monitoring appropriate product specifications, manufacturing quality control procedures, inspection procedures and information on appropriate installation methods and conditions.

 

8.             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 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 periods presented.

 

The following table illustrates certain measurements used by management to assess the performance of the segments described above as of or for the following periods:

 

		Three Months Ended March 31,
		2003			2002
Net Sales
Connector products		$	100,388,000		$	86,625,000
Venting products		16,068,000			15,746,000
Total		$	116,456,000		$	102,371,000
Income from Operations
Connector products		$	16,730,000		$	14,708,000
Venting products		2,197,000			1,653,000
All other		(442,000		)	(191,000		)
Total		$	18,485,000		$	16,170,000

 

		At March 31,
		2003			2002			At December 31, 2002
Total Assets
Connector products		$	254,251,000		$	209,864,000		$	228,601,000
Venting products		40,286,000			39,400,000			39,723,000
All other		122,531,000			95,763,000			128,077,000
Total		$	417,068,000		$	345,027,000		$	396,401,000

 

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 cash equivalent and short-term investment balances in the “All other” segment were approximately $111,019,000, $83,518,000 and $118,948,000 as of March 31, 2003 and 2002, and December 31, 2002, respectively.

 

10

 

Item 2. 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 report 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 three months ended March 31, 2003 and 2002. The following should be read in conjunction with the interim Condensed Consolidated Financial Statements and related Notes appearing elsewhere herein.

 

 

Results of Operations for the Three Months Ended March 31, 2003, Compared

with the Three Months Ended March 31, 2003

 

In the first quarter of 2003, sales growth occurred throughout North America and Europe. The growth in the United States was strongest in the western region. Simpson Strong-Tie’s first quarter sales increased 15.9% over the same quarter last year, while Simpson Dura-Vent’s sales increased 2.0%. Contractor distributors and lumber dealers were the fastest growing Simpson Strong-Tie connector sales channels. The sales increase was broad based across most of Simpson Strong-Tie’s major product lines. Simpson Strong-Tie’s engineered wood products and seismic and high wind related products had the highest percentage growth rates in sales. Sales of Simpson Dura-Vent’s Direct-Vent and gas vent products increased compared to the first quarter of 2002, while sales of its pellet vent and chimney product lines decreased.

 

Income from operations increased 14.3% from $16,169,812 in the first quarter of 2002 to $18,485,146 in the first quarter of 2003 and gross margins increased from 38.3% in the first quarter of 2002 to 39.2% in the first quarter of 2003. The increase in gross margins was primarily due to improved absorption of fixed overhead costs, offset somewhat by increased material costs. Selling expenses increased 9.5% from $10,529,360 in the first quarter of 2002 to $11,526,709 in the first quarter of 2003, primarily due to increased costs associated with the addition of sales personnel and advertising and promotional activities. General and administrative expenses increased 24.8% from $12,494,383 in the first quarter of 2002 to $15,598,725 in the first quarter of 2003. This increase was primarily due to a favorable comparison to the first quarter of 2002 when the Company recovered substantially all of the overdue receivables from a significant customer. In addition, the increase was partially related to increased cash profit sharing, as a result of higher operating income, increased professional fees and the recognition of stock option expenses in accordance with recently adopted accounting standards. The tax rate was 40.8% in the first quarter of 2003, unchanged from the first quarter of 2002.

 

The Company continues to face uncertain market conditions, tariffs and other factors that may influence the cost of steel and other raw materials. The Company might not be able to increase its product prices in amounts that correspond to increases in raw material prices without materially and adversely affecting its sales and profits.

 

Liquidity and Sources of Capital

 

As of March 31, 2003, working capital was $246.3 million as compared to $200.7 million at March 31, 2002, and $238.3 million at December 31, 2002. The increase in working capital from December 31, 2002, was primarily due to the increase in the Company’s trade accounts receivable of approximately $16.5 million, resulting from higher sales levels and the effect of seasonal buying programs, increases in inventories and short-term investments of approximately $6.6 million and $4.4 million, respectively, and a decrease in accrued profit sharing trust contributions of approximately $3.6 million. Offsetting these factors was a decrease in cash and cash equivalents of approximately $13.3 million and an increase in income taxes payable and accounts payable totaling approximately $10.6 million. The balance of the change in working capital was due to the fluctuation of various other asset and liability accounts. The working capital change and changes in noncurrent assets and liabilities, combined with net income and noncash expenses, including depreciation, amortization and stock compensation charges, totaling approximately $15.6 million, resulted in net cash used in operating activities of approximately $2.9 million. As of March 31, 2003, the Company had unused credit facilities available of approximately $22.6 million.

 

The Company used approximately $12.1 million in its investing activities of which approximately $7.6 million was used for capital expenditures. Approximately $2.4 million of the capital expenditures comprised real estate and

 

11

 

related purchases, primarily for the expansion of its manufacturing facilities in Stockton, California, and for additional land in McKinney, Texas. In addition, a net amount of approximately $4.4 million was invested in short-term securities.

 

The Company’s financing activities provided net cash of approximately $1.5 million, primarily from short-term borrowing for its Danish subsidiary, as well as from the issuance of the Company’s stock through its stock option and bonus plans.

 

The Company believes that cash generated by operations and borrowings available under its existing credit agreements will be sufficient for the Company’s working capital needs and planned capital expenditures through the remainder of 2003. Depending on the Company’s future growth and possible acquisitions, it may become necessary to secure additional sources of financing.

 

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

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

The Company’s short-term investments consisted of debt securities of approximately $22.1 million as of March 31, 2003. These securities, like all fixed income instruments, are subject to interest rate risk and will vary in value as market interest rates fluctuate. If market interest rates were to increase immediately and uniformly by 10% from levels as of March 31, 2003, the decline in the fair value of the investments would not be material.

 

The Company has foreign exchange rate risk in its international operations and through purchases from foreign vendors. The Company does not currently hedge this risk. If the exchange rate were to change by 10% in a substantial part of the Company’s non-U.S. operations, the change in the value of the assets and liabilities could be materially adverse to its operations taken as a whole.

 

Item 4. Controls and Procedures.

 

As of March 31, 2003, an evaluation was performed under the supervision and with the participation of the Company’s management, including the chief executive officer (“CEO”) and the chief financial officer (“CFO”), of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on that evaluation, the CEO and the CFO, concluded that the Company’s disclosure controls and procedures were effective as of that date. No significant changes in the Company’s internal controls or other factors have occurred that could significantly affect controls subsequent to that date.

 

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PART II — OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

From time to time, the Company is involved in various legal proceedings and other matters arising in the normal course of business. The Company does not believe that the outcomes of these matters will have a material adverse effect on the Company’s financial condition, cash flows or results of operations.

 

Item 2. Changes in Securities.

 

None.

 

Item 3. Defaults Upon Senior Securities.

 

None.

 

Item 4. Submission of Matters to a Vote of Security Holders.

 

The Annual Meeting of Shareholders (“Annual Meeting”) was held on March 31, 2003. The following two nominees were elected as directors by the votes indicated:

 

Name		Total Votes for Each Director		Total Votes Withheld from Each Director		Term Expires*
Sunne Wright McPeak		20,611,737		1,462,345		2006
Barclay Simpson		22,002,576		71,506		2006

 

* The term expires on the date of the Annual Meeting in the year indicated.

 

The following proposals were also adopted at the Annual Meeting by the vote indicated:

 

Proposal		For		Against		Abstain		Broker Non-Vote
To approve the Company’s Executive Officer Cash Profit Sharing Plan		19,808,339		529,883		1,735,860		—
To approve the amendment of the Simpson Manufacturing Co., Inc. 1994 Stock Option Plan		15,746,774		4,571,590		1,755,718		—
To ratify the appointment of PricewaterhouseCoopers LLP as independent auditors of the Company for 2003		20,036,467		2,035,305		2,310		—

 

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Item 5. Other Information.

 

None.

 

Item 6. Exhibits and Reports on Form 8-K.

 

a.                                       Exhibits.

 

11.         Statements re computation of earnings per share.

99.         Certificate of Chief Executive Officer and Chief Financial Officer.

 

b.                                      Reports on Form 8-K

 

Report on Form 8-K, dated January 23, 2003, reporting under item 5 the Company’s announcement of its fourth quarter 2002 earnings.

 

Report on Form 8-K, dated February 21, 2003, reporting under item 5 that the Company had signed a letter of intent  to purchase a Canadian connector company.

 

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SIGNATURES

 

Pursuant to the requirements 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.

 

				Simpson Manufacturing Co., Inc.
				(Registrant)
DATE:	May 9, 2003		By	/s/ Michael J. Herbert
				Michael J. Herbert
				Chief Financial Officer
				(principal accounting and financial officer)

 

CERTIFICATIONS

 

I, Thomas J Fitzmyers, Chief Executive Officer of Simpson Manufacturing Co., Inc. (the “Company”), certify that:

 

1.               I have reviewed this quarterly report on Form 10-Q of the Company;

 

2.               Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

 

3.               Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this quarterly report;

 

4.               The Company’s other certifying officer and I are responsible for e stablishing and maintaining disclosure controls and procedures (as defined in paragraph (c) of rule 13a-14 under the Securities Exchange Act of 1934, as amended) for the Company and we have:

 

a)              designed such disclosure controls and procedures to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

 

b)             evaluated the effectiveness of the Company’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

 

c)          ;     presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

 

5.               The Company’s other certifying officer and I have disclosed, based on our most recent evaluation, to the Company’s auditors and the Audit Committee of the Company’s Board of Directors (or persons performing the equivalent function):

 

a)              all significant deficiencies in the design or operation of internal controls which could adversely affect the Company’s ability to record, process, summarize and report financial data and have identified for the Company’s auditors any material weaknesses in internal controls; and

 

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b)             any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal controls; and

 

6.            & #160;  The Company’s other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

 

DATE:	May 9, 2003		By	/s/ Thomas J Fitzmyers
				Thomas J Fitzmyers
				Chief Executive Officer

 

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I, Michael J. Herbert, Chief Financial Officer of Simpson Manufacturing Co., Inc. (the “Company”), certify that:

 

1.               I have reviewed this quarterly report on Form 10-Q of the Company;

 

2.               Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

 

3.               Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this quarterly report;

 

4.               The Company’s other certifying officer and I are responsible for establishing and maintainin g disclosure controls and procedures (as defined in paragraph (c) of rule 13a-14 under the Securities Exchange Act of 1934, as amended) for the Company and we have:

 

a)              designed such disclosure controls and procedures to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

 

b)             evaluated the effectiveness of the Company’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

 

c)              presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

 

5.               The Company’s other certifying officer and I have disclosed, based on our most recent evaluation, to the Company’s auditors and the Audit Committee of the Company’s Board of Directors (or persons performing the equivalent function):

 

a)              all significant deficiencies in the design or operation of internal controls which could adversely affect the Company’s ability to record, process, summarize and report financial data and have identified for the Company’s auditors any material weaknesses in internal controls; and

 

b)             any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal controls; and

 

6.               The Company’s other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

 

DATE:	May 9, 2003		By	/s/ Michael J. Herbert
				Michael J. Herbert
				Chief Financial Officer

 

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