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What changed in Simpson Manufacturing Co., Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Simpson Manufacturing Co., Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+232 added−230 removedSource: 10-K (2024-02-28) vs 10-K (2023-02-28)

Top changes in Simpson Manufacturing Co., Inc.'s 2023 10-K

232 paragraphs added · 230 removed · 178 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

55 edited+14 added−7 removed32 unchanged
Biggest changeEmployees Individual Contributors Middle Management Senior Leadership American Indian or Alaska Native 1 % 1 % — % — % Asian 10 % 10 % 8 % 8 % Black or African American 10 % 12 % 3 % 4 % Hispanic or Latino 18 % 19 % 9 % — % Native Hawaiian or Other Pacific Islander — % — % — % — % Two or More Races 2 % 2 % 2 % — % White 54 % 51 % 77 % 88 % Not disclosed 5 % 5 % 2 % — % Talent Development Talent development underpins our efforts to execute our strategy and continue to develop, manufacture and market innovative products and services.
Biggest changeEmployees Individual Contributors Middle Management Senior Leadership American Indian or Alaska Native 1% 1% —% —% Asian 11% 11% 8% 14% Black or African American 9% 11% 3% 3% Hispanic or Latino 19% 20% 9% —% Native Hawaiian or Other Pacific Islander 1% 1% —% —% Two or More Races 2% 2% 2% —% White 52% 49% 75% 83% Not disclosed 5% 6% 3% —% Talent Development Our focus on talent development is fundamental to executing our strategy and advancing the development, manufacture, and marketing of innovative products and services.
As described below, the Company’s concrete construction products include: • Anchor Products - Anchor products include adhesives, mechanical anchors, carbide drill bits and powder-actuated pins and tools used for numerous applications of anchoring or attaching elements onto concrete, brick, masonry and steel; and • Construction, Repair, Protection and Strengthening Products - Concrete construction repair, protection and strengthening products include grouts, coatings, sealers, mortars, fiberglass and fiber-reinforced polymer systems and asphalt products.
As described below, the Company’s concrete construction products include: • Anchor Products - Anchor products include adhesives, mechanical anchors, carbide drill bits and powder-actuated pins and tools used for numerous applications of anchoring or attaching elements onto concrete, brick, masonry and steel; and • Repair, Protection and Strengthening Products - Concrete construction repair, protection and strengthening products include grouts, coatings, sealers, mortars, fiberglass and fiber-reinforced polymer systems and asphalt products.
The 7 Company also has ongoing development of truss software for the design, modeling and truss plate selection for its integrated component manufacturing customers. Competition Simpson is a category creator in the building products space. Our mission is to provide solutions that help people design and build safer, stronger structures.
The Company also has ongoing development of truss software for the design, modeling and truss plate selection for its integrated component manufacturing customers. Competition Simpson is a category creator in the building products space. Our mission is to provide solutions that help people design and build safer, stronger structures.
Our Environmental, Health and Safety program focuses on implementing change through employee observation feedback channels to recognize risk and continuously improve our processes, as well as conducting regular risk reviews and self-audits at our 10 manufacturing facilities around the world to explore new opportunities to reduce potential employee exposure to occupational injuries.
Our Environmental, Health and Safety program focuses on implementing change through employee observation feedback channels to recognize risk and continuously improve our processes, as well as conducting regular risk reviews and self-audits at our manufacturing facilities around the world to explore new opportunities to reduce potential employee exposure to occupational injuries.
In an effort to help mitigate our exposure to the cyclicality of the U.S. housing market, as well as to respond to the needs of our customers, we’ve made investments over the years in adjacent products such as anchors, fasteners and software solutions and expanded operations into Europe through acquisitions.
In an effort to help mitigate our exposure to the cyclicality of the U.S. housing market, as well as to respond to the needs of our customers, we’ve made investments over the years in adjacent products such as anchors, fasteners and software solutions and 8 expanded operations into Europe through acquisitions.
The Company works closely with manufacturers of engineered wood, composite laminated timber and original equipment manufacturers ("OEMs") for off-site construction to develop and expand the application and sales of its engineered wood connector, fastener, anchor, and truss products. The Company has relationships with many of the leaders in these industries. • International Sales.
The Company works closely with manufacturers of engineered wood, composite laminated timber and original equipment manufacturers ("OEMs") for off-site construction to develop and expand the application and sales of its engineered wood connector, fastener, anchor, and truss products. The Company has relationships with many of the leaders in these industries.
See “Item 1A — Risk Factors” and “Item 7 — Management’s Discussion and Analysis of Financial 8 Condition and Results of Operations.” The Company historically has not attempted to hedge against changes in prices of steel or other raw materials.
See “Item 1A — Risk Factors” and “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The Company historically has not attempted to hedge against changes in prices of steel or other raw materials.
The Company has U.S. and foreign patents, the majority of which cover products that the Company currently manufactures and markets. These patents, and applications for new patents, cover various design aspects of the Company’s products, as well as processes used in their manufacture.
The Company has U.S. and foreign patents, the majority of which cover products that the Company currently manufactures and markets. These patents, and applications for new and continuation patents, cover various design aspects of the Company’s products, as well as processes used in their manufacture.
See “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Note 19 — Segment Information” to the Company’s consolidated financial statements for financial information regarding revenues by product 5 category.
See “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Note 19 — Segment Information” to the Company’s consolidated financial statements for financial information regarding revenues by product category.
This test and load information is used by architects, engineers, contractors, building officials, and homeowners in selecting our products and comparing them to those of competitors, and is useful across all applications of the Company’s products, ranging from the deck constructed by a homeowner to a multi-story structure designed by an architect or engineer. Wood Construction Products.
This test and load information is used by architects, engineers, contractors, building officials, and homeowners in selecting our products and comparing them to those of competitors, and is useful across all applications of the Company’s products, ranging from the deck constructed by a homeowner to a multi-story structure designed by an architect or engineer. Structural Products for Wood Construction.
We purchase steel at market prices, which fluctuate as a result of supply and demand driven by economic conditions in the marketplace.
We purchase steel at market prices, which fluctuate as a result of supply and demand driven by prevailing economic conditions in the marketplace.
The Company may, from time to time, becomes involved in trademark licensing transactions. Most works of authorship produced for the Company, such as computer programs, catalogs and sales literature, carry appropriate notices indicating the Company's claim to copyright protection under U.S. law and appropriate international treaties.
The Company may, from time to time, become involved in trademark licensing transactions. Most works of authorship produced for the Company, such as computer programs, catalogs and sales literature, carry appropriate notices indicating the Company's claim to copyright protection under U.S. law and appropriate international treaties.
In addition, the SEC maintains a website that contains reports, proxy and information statements, and other information regarding issuers, where you may obtain a copy of all information we file publicly with the SEC. The SEC website address is www.sec.gov.
In addition, the SEC maintains a website that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, where you may obtain a copy of all information we file publicly with the SEC. The SEC website address is www.sec.gov. 11
We continue to develop our software solutions and provide better technology solutions increasing our truss connector plate sales as well as other Simpson Strong-Tie core products sales within the component industry. • OEM Relationships.
We continue to develop our software solutions, equipment offerings, and provide better technology solutions increasing our truss connector plate sales as well as other Simpson Strong-Tie core products sales within the component industry. • OEM Relationships.
We have two facility locations with collective bargaining agreements covering tool and die craftsmen, maintenance workers, and sheet-metal workers. In Stockton, California, two union contracts will expire in June 2023 and September 2023, respectively. Also, we have two union contracts in San Bernardino County, California that will expire in February 2025 and in June 2026.
We have two facility locations with collective bargaining agreements covering tool and die craftsmen, maintenance workers, and sheet-metal workers. In Stockton, California, two union contracts will expire in June 2027 and September 2028, respectively. Also, we have two union contracts in San Bernardino County, California that will expire in February 2025 and in June 2026.
The Company has established a presence in Europe through acquisition of companies with existing customer bases and through servicing U.S.-based customers operating in Europe. The Company also distributes connector, anchor and epoxy products in Canada, Mexico, Chile, Australia and New Zealand.
The Company has established a presence in Europe through acquisition of companies with existing customer bases, such as the acquisition of ETANCO, and through servicing U.S.-based customers operating in Europe. The Company also distributes connector, anchor, and epoxy products in Canada, Mexico, Chile, Australia, and New Zealand.
With some exceptions, our sales and income have historically been lower in the first and fourth quarters than in the second and third quarters of a fiscal year, as the Company's customers tend to purchase construction materials in the late spring and summer months for the construction season.
Our sales and income have historically been lower in the first and fourth quarters than in the second and third quarters of a fiscal year, as the Company's customers tend to purchase construction materials in the late spring and summer months for the construction season.
Through, the acquisition of ETANCO, the Company expanded its product portfolio to include commercial building envelope solutions and significantly increased its market presence across Europe. Many of the Company’s products are approved by building code evaluation agencies. To achieve these approvals, the Company conducts extensive product testing, which is witnessed and certified by independent testing laboratories.
Additionally, with the acquisition of ETANCO, the Company expanded its product portfolio to include commercial building envelope solutions and significantly increased its market presence across Europe. Many of the Company’s products are code-listed and approved by building code evaluation agencies. To achieve these approvals, the Company conducts extensive product testing, which is witnessed and certified by independent testing laboratories.
Concrete Construction Products. The Company produces and markets over 3,000 standard and custom concrete construction products. The Company’s concrete construction products are composed of various materials including steel, chemicals and carbon fiber. They are used primarily to anchor, protect and strengthen concrete, brick and masonry applications in industrial, infrastructure, residential, commercial and DIY projects.
Structural Products for Concrete Construction. The Company produces and markets over 3,000 standard and custom products for concrete construction applications. These products are composed of various materials including steel, chemicals and carbon fiber. They are used primarily to anchor, protect and strengthen concrete, brick and masonry applications in industrial, infrastructure, residential, commercial and DIY projects.
We intend to disclose on our website any amendment to, or waiver of, any provisions of our Code of Business Conduct and Ethics that apply to any of our directors, executive officers or senior financial officers that would otherwise be required to be disclosed under the rules of the SEC or the NYSE.
We intend to disclose on our website any amendment to, or waiver of, any provisions of our Code of Business Conduct and Ethics that apply to any of our directors, executive officers or senior financial officers that would otherwise be required to be disclosed under the rules of the SEC or the New York Stock Exchange (the "NYSE").
The Company manufactures and warehouses its products in geographic proximity to its markets to help ensure availability and facilitate timely delivery to customers, which enables us to promptly respond to customer requests for specially designed products and services. The Company maintains levels of inventory intended to operate with minimum backlog and fill most customer orders within a few days.
The Company manufactures and warehouses its products in geographic proximity to its markets to help ensure availability and facilitate timely delivery to customers, which enables us to promptly respond to customer requests for specially designed products and services. The Company maintains levels of inventory intended to operate with minimum backlog and fill most customer orders within 24-48 hours.
Our continuous focus on workplace safety has enabled us to preserve business continuity without sacrificing our commitment to keeping our colleagues and workplace visitors safe since the COVID-19 outbreak. Labor Relations As of December 31, 2022, approximately 9% of the Company’s employees are represented by labor unions and are covered by collective bargaining agreements.
Our continuous focus on workplace safety has enabled us to preserve business continuity without sacrificing our commitment to keeping our colleagues and workplace visitors safe. Labor Relations As of December 31, 2023, approximately 9% of the Company’s employees are represented by labor unions and are covered by collective bargaining agreements.
In 2022, through our research and development efforts, the Company, including ETANCO, developed over 40 new products expanding its product offerings by adding: • new connectors and lateral products for wood framing applications; • new connectors and fasteners for mass timber & offsite constructions; • connections for structural steel construction; • new connectors for cold formed steel applications; • new fastener products and tools for wood construction; • new mechanical and adhesive anchors for concrete and masonry construction; and • new repair and strengthening systems for concrete, masonry and wood pile applications.
In 2023, through our research and development efforts, the Company developed over 50 new products expanding its product offerings by adding: • new connectors and lateral products for wood framing applications; • new connectors and fasteners for mass timber and offsite constructions; • connections for structural steel construction; • new connectors for cold formed steel applications; • new fastener products and tools for wood construction; • new mechanical and adhesive anchors for concrete and masonry construction; and • new repair and strengthening systems for concrete and masonry applications.
For more information, see “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Sales The Company attracts and retains customers by designing, manufacturing and selling high quality products that perform well, are easy to use and cost-effective for customers.
For more information, see “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Sales The Company attracts and retains customers by designing, manufacturing and selling high quality, high-performing products that are cost-effective and easy for our customers to install.
The Company produces and markets over 15,000 standard and custom wood construction products. These products are used primarily to strengthen, support and connect wood applications in residential and commercial construction and DIY projects. The Company’s wood construction products contribute to structural integrity and resistance to seismic, wind and gravitational forces.
The Company produces and markets over 15,000 standard and custom products for wood construction applications. These products are used primarily to strengthen, support and connect wood applications in residential and commercial construction and do-it-yourself (“DIY”) projects. The Company’s wood construction products contribute to structural integrity and resistance to seismic, wind and gravitational forces.
The Company’s concrete construction products contribute to structural integrity and resistance to seismic, wind and gravitational forces. These products are sold in all segments of the Company.
The Company’s product solutions for concrete construction applications contribute to structural integrity and resistance to seismic, wind and gravitational forces. These products are sold in all segments of the Company.
Our concrete construction products are used in concrete, masonry and steel construction and include adhesives, chemicals, mechanical anchors, carbide drill bits, powder actuated tools, fiber reinforced materials and other repair products used for protection and strengthening.
Our products for concrete construction products are used in concrete, masonry and steel building applications and include adhesives, chemicals, mechanical anchors, carbide drill bits, powder actuated tools, fiber reinforced materials, and other repair products used for protecting and strengthening structures.
In addition to financial compensation we offer a health and wellness package to our employees, which is designed to provide a range of options that are customizable to suit their individual and/or family needs.
In addition to financial compensation, we offer a health and wellness package to our employees which is designed to provide a range of options that can be personalized to suit their individual and/or family needs.
As of December 31, 2022, our employees, including those employed by consolidated subsidiaries, by region were approximately: Asia Pacific 544 Europe 1,579 North America 3,035 5,158 9 Inclusion & Diversity Our commitment to diversity and inclusion starts at the top with a highly skilled and diverse board.
As of December 31, 2023, our employees, including those employed by consolidated subsidiaries, by region were approximately: Asia Pacific 668 Europe 1,555 North America 3,274 5,497 Inclusion and Diversity Our commitment to diversity and inclusion starts at the top with a highly skilled and diverse board.
Included in this category are connectors, holddowns, and truss connector plates. • Fasteners - The fastening line includes various nails, screws and staples, which are complemented by the Company's Quik Drive auto-feed screw driving system, which is used in numerous applications such as building envelope applications, decking, subfloors, drywall and roofing; and • Lateral Resistive Systems - Lateral resistive systems are assemblies used to resist earthquake or wind forces and include steel and wood shearwalls, Anchor Tiedown Systems (ATS), and steel moment frames.
Included in this category are connectors, holddowns, and truss connector plates. • Fasteners - The fastening line includes various nails, screws and staples, which are complemented by the Company's multiple screw fastening systems, which are used in numerous applications such as building envelope applications, decking, subfloors, drywall and roofing; and • Lateral-Force Resisting Systems - Lateral-force resisting systems are assemblies used to resist earthquake or wind forces and include pre-fabricated steel and wood shearwalls, Anchor Tiedown Systems (ATS), and yield-link connections for steel moment and braced frames.
ETANCO is a leading designer, manufacturer and distributor of fixing and fastening solutions for the European building and construction market. ETANCO's primary product applications directly align with the addressable markets in which the Company operates, expands our portfolio of solutions, including mechanical anchors, fasteners and commercial building envelope solutions, and significantly increase our market presence across Europe.
ETANCO's primary product applications directly align with the addressable markets in which the Company operates, expands our portfolio of solutions, including mechanical anchors, fasteners and commercial building envelope solutions, and significantly increase our market presence across Europe.
For over 65 years, through SST, we have led the industry with a majority market share in the wood connectors products space and a growing presence in both the concrete and fastener markets in the U.S. and Europe.
For over 67 years, through Simpson Strong-Tie® brand, we have led the industry in the wood connectors products space and a growing presence in both the concrete and fastener markets in the U.S. and Europe.
The Company’s product research and development is based largely on products or solutions that are identified within the Company, feedback or requests from customers for new or specialty products and in connection with the Company’s strategic initiatives to expand into new markets and/or develop new product lines.
The Company’s engineering, sales, product management, and marketing teams work together with architects, engineers, building inspectors, code officials, builders and customers in the new product development process. 7 The Company’s product research and development is based largely on products or solutions that are identified within the Company, feedback or requests from customers for new or specialty products and in connection with the Company’s strategic initiatives to expand into new markets and/or develop new product lines.
The majority of SST’s products have been developed through its internal research and development program. The Company believes it is the only U.S. manufacturer with the capability to internally test multi-story wall systems, thus enabling full scale testing rather than analysis alone to prove system performance.
The Company believes it is the only U.S. manufacturer with the capability to internally test multi-story wall systems, thus enabling full scale testing rather than analysis alone to prove system performance.
The Company has continuously manufactured structural connectors since 1956 and believes that the Simpson Strong-Tie® brand benefits from strong brand name recognition in residential, light industrial and commercial applications among architects and engineers who frequently request the use of our products. Recent Acquisition As previously disclosed, on April 1, 2022, the Company successfully completed the acquisition of ETANCO.
The Company has continuously manufactured structural connectors since 1956 and believes that the Simpson Strong-Tie® brand benefits from strong brand name recognition in residential, light industrial and commercial applications. Acquisition of ETANCO As previously disclosed, on April 1, 2022, the Company successfully completed the acquisition of 100% of the outstanding equity interest of FIXCO Invest S.A.S.
We believe people should be paid for what they do and how they do it, regardless of their gender, race, or other personal characteristics and are committed to internal pay equity.
Pay Equity The Company’s compensation philosophy is to attract, retain, motivate, and differentiate employees through its rewards programs. We believe people should be paid for what they do and how they do it, regardless of their gender, race, or other personal characteristics, and we are committed to internal pay equity.
As of December 31, 2022, we had the following global gender demographics: Women Men Not Disclosed All employees 19% 64% 17% Individual Contributors 19% 63% 18% Middle Management 17% 68% 15% Senior Leadership 27% 73% —% As of December 31, 2022, our U.S. employees had the following race and ethnicity demographics: All U.S.
As of December 31, 2023, we had the following global gender demographics: Women Men Not Disclosed All employees 22% 69% 9% Individual Contributors 22% 68% 10% Middle Management 19% 74% 7% Senior Leadership 19% 81% —% As of December 31, 2023, our U.S. employees had the following race and ethnicity demographics: All U.S.
Generally, in connection with any engineering services the Company provides, the Company’s engineers serve as a point of reference and support for the customer’s engineers and other service professionals, who ultimately determine and are responsible for the engineering approach and design loads for any project.
Generally, in connection with any engineering services the Company provides, the Company’s engineers serve as a point of reference and support for the customer’s engineers and other service professionals, who ultimately determine and are responsible for the engineering approach and design loads for any project. 6 The growth of the Company’s business, as well as many of its current growth initiatives, have been and are currently facilitated by its current technology and software solutions, as well as its ongoing software development initiatives.
The Company seeks to expand existing and identify new distributions channels in the markets we serve, and expand into new markets. Presently, we primarily serve three markets, which are also our operating segments, consisting of the North America, Europe and Asia/Pacific segments. The North America segment includes operations primarily in the U.S. and Canada.
Presently, the Company primarily serves in three geographic markets, which are also its operating segments, consisting of the North America, Europe and Asia/Pacific segments. The North America segment includes operations primarily in the U.S. and Canada.
Item 1. Business. Company Background Simpson Manufacturing Co., Inc. ("Simpson," the "Company," "we," "us," or "our,") through its subsidiaries, including, Simpson Strong-Tie Company Inc. ("SST"), designs, engineers and is a leading manufacturer of high quality wood and concrete construction products designed to make structures safer and more secure.
Item 1. Business. Company Background Simpson Manufacturing Co., Inc. ("Simpson," the "Company," "we," "us," or "our,") through its subsidiaries, including, Simpson Strong-Tie Company Inc. ("SST"), designs, engineers and is a leading manufacturer of structural solutions for wood, concrete, and steel connections. These solutions help customers design and build safer and stronger structures.
Seasonality and Cyclicality The Company’s sales have been seasonal and cyclical, with operating results varying from quarter to quarter.
Seasonality and Cyclicality Although the Company’s sales have been seasonal and cyclical, with operating results varying from quarter to quarter, as a result of the acquisition of ETANCO overall sales are becoming less seasonal.
These segments are similar in several ways, including similarities in the products manufactured and distributed, the types of materials used, the production processes, the distribution channels and the product applications. New Products In order to innovate, advance and diversify our product offerings, the Company commits substantial resources to new product development.
These segments are similar in several ways, including similarities in the products manufactured and distributed, the types of materials used, the production processes, the distribution channels and the product applications. The Company sells its products through multiple channels, including the following: • Dealers.
Our products are designed to perform at high levels and be easy to use and cost-effective for customers. Our wood construction products are used in light-frame construction and include connectors, truss plates, fastening systems, fasteners and pre-fabricated lateral resistive systems.
Our products for wood construction are used in light-frame building applications and include connectors, truss plates, screw fastening systems, fasteners and pre-fabricated lateral-force resisting systems.
The Company continues to develop new potentially patentable products, product enhancements and product designs as well as acquire patented product. Although the Company does not intend to apply for additional foreign patents covering existing products, the Company has developed an international patent program to protect new products that it may develop.
Although the Company does not have plans to apply for additional foreign patents covering existing products, the Company is committed to pursuing intellectual property protection for patentable enhancements as appropriate. The Company has developed an international patent program to protect any innovative new products that it may develop, ensuring its competitive advantage is safeguarded.
The steel market continues to be dynamic, with a high degree of uncertainty about future pricing trends. Given current conditions, the Company currently expects that raw material costs may continue to increase. Numerous factors may cause steel prices to remain high in the future.
The steel market continues to be dynamic, with a high degree of uncertainty about future pricing trends. Numerous factors may cause steel prices to increase in the future. In addition to increases in steel prices, steel mills may add surcharges for zinc, energy and freight in response to increases in their costs.
The Company’s sales force maintains ongoing contact with home centers to work with them in a broad range of areas, including inventory levels, retail display maintenance and product knowledge training. The Company’s strategy is to ensure that the home center retail stores are fully stocked with adequate supplies of the 6 Company’s products carried by those stores.
The Company intends to increase penetration of the DIY and contractor customer markets by continuing to expand its product offerings through home centers. The Company’s sales force maintains ongoing contact with home centers to work with them in a broad range of areas, including inventory levels, retail display maintenance and product knowledge training.
We continue to engage our partners and benefits consultants to ensure our health and wellness package continues to meet the needs of our diverse workforce today and into the future. Workplace Safety and Health A vital part of our business is providing our workforce with a safe, healthy and sustainable working environment.
Workplace Safety and Health A vital part of our business is providing our workforce with a safe, healthy and sustainable working environment.
The opportunity to grow and develop skills and abilities, regardless of job role, division, or geographical location is critical to the success of the Company as a global organization and we continually invest in our employees’ career growth and provide employees access to a wide variety of learning and development resources, including a suite of online courses for developing both soft and technical skills.
We continually invest in 10 our employees’ career growth and provide employees access to a wide variety of learning and development resources, including a suite of online courses for developing both soft and technical skills. Our extraordinary leadership development programs provide employees with training, tools and experiences that are targeted to develop their full leadership potential.
Weather conditions, such as extended cold or wet weather, which affected and sometimes delayed installation of some of our products, would negatively affect our results of operations. Operating results vary from quarter to quarter and with economic cycles. The Company’s sales are also dependent, to a degree, on the North American residential home construction industry.
Additionally, weather conditions, such as extended cold or wet weather, which affected and sometimes delayed installation of some of our products, would negatively affect our results of operations.
The Company evaluates distributor product mix and conducts promotions to encourage distributors to add the Company’s products that complement the mix of product offerings in their markets. • Home Centers. The Company intends to increase penetration of the DIY markets by continuing to expand its product offerings through home centers.
The Company evaluates distributor product mix and conducts promotion to encourage distributors to add the Company's products that complement the mix of their product offerings in their markets. • Contractors. In some markets, the Company sells to a wide range of end customers mainly through direct sales.
Our products improve the performance and integrity of the structures they are installed in, helping to make those structures more sustainable, and often helping to save lives in times of natural disasters and catastrophe. We sell our products through multiple channels including contractor distributors, home centers and co-ops, lumber dealers and OEMs.
Our products improve the performance and integrity of the structures they are installed in, helping to make those structures more sustainable, and often helping to save lives in times of natural disasters and catastrophe. Currently, 26 of the top 30 U.S. builders (based on number of housing starts per year) are engaged in our builder program.
Distribution Channels and Markets The Company seeks to expand its product and distribution coverage through several channels: • Distributors. The Company regularly evaluates its distribution coverage and the service levels provided by its distributors, and from time to time implements changes.
The Company also intends to expand opportunities with the other OEMs where its products complement their offerings. • Distributors. The Company regularly evaluates its distribution coverage and the service level provided by its distributors, and from time to time implement changes.
The Company has further developed extensive bar coding and merchandising aids and has devoted a portion of its research and development efforts to DIY products. The Company’s sales to home centers increased year-over-year in 2022, 2021 and 2020. The Company brought back Lowe's as a home center customer in the second quarter of 2020. • Dealers.
The Company’s strategy is to ensure that the home center retail stores are fully stocked with adequate supplies of the Company’s products carried by those stores. The Company has further developed extensive bar coding and merchandising aids and has devoted a portion of its research and development efforts to DIY products.
We market our products to the residential construction, light industrial and commercial construction, remodeling and do-it-yourself (“DIY”) markets domestically in North America, primarily in the United States, and Europe internationally. We also provide engineering services in support of some of our products and increasingly offer design and other software that facilitates the specification, selection and use of our products.
We market our products to the residential construction, commercial construction, original equipment manufacturer ("OEM"), component manufacturers and national retail markets domestically in North America, primarily in the United States, and internationally, primarily in Europe.
In some markets, the Company sells its products directly to lumber dealers and cooperatives. • Contractors . In some markets, the Company sells to a wide-range of end-customers mainly through direct sales. • Wood Component Manufacturers. The company works directly with wood component manufacturer customers.
The Company’s sales to home centers increased year-over-year in 2023, 2022 and 2021. • Wood Component Manufacturers. The company works directly with wood component manufacturer customers.
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The Company intends to continue efforts to increase market share in both the wood construction and concrete construction product groups by: • maintaining frequent customer contacts and service levels; • continuing to sponsor seminars to inform architects, engineers, contractors and building officials on appropriate use, proper installation and identification of the Company’s products; • continuing to invest in mobile, web and software applications for customers to both help them do their jobs more efficiently and allow us to connect with them utilizing social media, blog posts and videos; • continuing to invest in Building Information Modeling ("BIM") software services and solutions for home builders and lumber-building material suppliers; and • continuing to innovate, advance and diversify our product offerings.
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The Company is relentlessly focused on providing customers the best in-class field support, technical expertise, digital tools, and training. Our research, rigorous testing, and focus on innovation enable us to design cost-effective, high-performing, and easy-to-install solutions for a multitude of applications in wood, steel, and concrete structures.
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Products and Services Historically, the Company’s product lines have encompassed connectors, anchors, fasteners, lateral resistive systems, and truss plates, as well as repair and strengthening product lines for the industrial and transportation markets.
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We also provide engineering services to support and enhance products and specifications of products while growing our offering of digital tools and design, planning and estimating software to facilitate the specification, selection and use of our products.
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The Company’s engineering, sales, product management, and marketing teams work together with architects, engineers, building inspectors, code officials, builders and customers in the new product development process.
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(together with its subsidiaries, "ETANCO"). ETANCO is a leading designer, manufacturer and distributor of fixing and fastening solutions for the European building and construction market.
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Currently, 26 of the top 30 U.S. builders (based on number of housing starts per year) are engaged in our builder program. In terms of home centers, we were pleased to welcome back Lowe’s as a home center customer in 2020, where we had successfully completed the rollout of our product sets in over 1,700 Lowe’s stores.
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The Company intends to continue efforts to increase market share in its geographic markets of North America, Europe, and Asia/Pacific as well as across its broad product range through: • An increasingly diverse portfolio of products and software, and a commitment to developing complete solutions for the markets we serve; • Our long-standing reputation, relationships and engagement with engineers, building officials, and contractors to design safer, stronger structures and improve construction standards and practices; • A dedication to innovation and extensive product engineering along with rigorous research and testing in our nine state-of-the-art labs; • Striving for best-in-class field support, technical expertise, digital tools, and training to make it easy to select, specify, install and purchase our products; • Industry-leading product availability and delivery standards on our vast product offering across multiple distribution channels, with typical delivery within 24-48 hours and high fill rates; • A deep commitment to trades education and partnering with organizations that provide training and career opportunities to attract more people to the construction industry and alleviate labor shortages; and • Building out or introducing additional solutions and offerings to our end-market customers in the residential, OEM, commercial, national retail, and component manufacturer areas. 5 Products and Services Historically, the Company’s product lines have encompassed connectors, anchors, fasteners, lateral-force resisting systems, and truss plates, as well as repair and strengthening product lines for the industrial and transportation markets.
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In addition to increases in steel prices, steel mills may add surcharges for zinc, energy and freight in response to increases in their costs.
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The Company has an ever-growing suite of advanced technology tools, including software, to improve operational efficiencies in the building industry. The Company’s early software solutions started by supporting engineers and designers with product selection and specification applications as well as estimating solutions for builders and retailers.
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Our extraordinary leadership development programs provide employees with training, tools and experiences that are targeted to develop their full leadership potential. Pay Equity The Company’s compensation philosophy is to attract, retain, motivate, and differentiate employees through its rewards programs.
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The Company strategically expanded its software offerings to enhance collaboration with building industry partners in an effort to streamline workflows, reduce labor time and costs, improve accuracy, support scalability, and increase its profitability. The Company has grown its software solutions to support the growth of many customer groups, such as component manufacturers, builders and lumber yards.
Removed
In addition, in an effort to continue to attract, retain, and motivate our workforce, in the U.S., we offer remote and flexible work packages for positions which allow for remote work.
Added
The Company has also introduced software applications for the DIY and repair and remodel markets. Whether focusing on residential, commercial, or outdoor structures, the Company’s technology solutions are designed to solve challenges, simplify tasks and provide cost-effective product and design recommendations that ultimately enhance customer efficiency and business success.
Added
The Company’s customer-facing software and other technology solutions are anticipated to expand over time to address the growing needs of its end-markets to become a larger portion of the Company’s overall value-added offerings. Distribution Channels and Markets The Company seeks to expand existing and identify new distributions channels in the markets it serves and expand into new markets.
Added
The Company intends to increase penetration of the residential market by expanding its markets in which it sells products directly to lumber dealers and cooperatives. The Company's sales force maintains ongoing contact with these customers and supports the inventory levels, resets, and displays. • Home Centers.
Added
New Products In order to innovate, advance and diversify our product offerings, the Company commits substantial resources to new product development. The majority of SST’s products have been developed through its internal research and development program.
Added
The Company continues to develop new potentially patentable products, product enhancements and product designs as well as acquire patented product. The Company also seeks continuation patents for all pending patents and it is dedicated to securing patents for any new developments.
Added
Operating results vary from quarter to quarter and with economic cycles. 9 Although the Company’s sales are also dependent, to a degree, on the North American residential home construction industry, our North America Segment accounted for approximately 78% of our net sales for the fiscal year ended December 31, 2023.
Added
The opportunity to grow and develop skills and abilities, regardless of job role, division, or geographical location is critical to the success of the Company as a global organization.
Added
As part of our ongoing commitment to attract, retain, and inspire our workforce in the United States, we provide remote and flexible work options for positions that support remote work. We regularly engage our partners and benefits consultants to ensure our health and wellness package evolves to meet the needs of our diverse workforce both now and in the future.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

38 edited+18 added−12 removed150 unchanged
Biggest changeThe management and acquisition of businesses involves substantial risks, any of which may result in a material adverse effect on our business and results of operations, including: • the uncertainty that an acquired business will achieve anticipated operating results; • significant expenses to integrate; • diversion of management’s attention from business operations to integration matters; • departure of key personnel from the acquired business; • effectively managing entrepreneurial spirit and decision-making; • integration of different information systems; 19 • unanticipated costs and exposure to unforeseen liabilities; and • impairment of assets.
Biggest changeA potential acquisition, divestiture, or other strategic transaction may involve a number of risks including, but not limited to: • the transaction may not effectively advance our business strategy, and its anticipated benefits may never materialize; • integration of an acquired business' accounting, information technology, human resources, and other administrative systems may fail to permit effective management and expense reduction; • diversion of management’s attention from business operations to integration matters; • departure of key personnel from the acquired business; • effectively managing entrepreneurial spirit and decision-making; • unanticipated costs and exposure to unforeseen liabilities; and • impairment of assets.
There are many factors that may materially and adversely affect the schedule, cost, and execution of the implementation process, including, without limitation, problems during the design and testing phases of new systems; system delays and malfunctions; the deviation by suppliers and contractors from the required performance under their contracts with us; the diversion of management attention from our daily operations to the implementation project; reworks due to unanticipated changes in business processes; difficulty in training employees in the operation of new systems and maintaining internal control while converting from legacy systems to new systems; and integration with our existing systems.
There are many factors that may materially and adversely affect the schedule, cost, and execution of the implementation process, including, without limitation, problems during the design and testing phases of new systems; system delays and malfunctions; the deviation by suppliers and contractors from the required performance under their contracts with us; the diversion of management attention from our daily operations to the implementation project; reworks 16 due to unanticipated changes in business processes; difficulty in training employees in the operation of new systems and maintaining internal control while converting from legacy systems to new systems; and integration with our existing systems.
Additionally, we are subject to Section 203 of the Delaware General Corporation Law, which generally prohibits a Delaware corporation from engaging in any of a broad range of business combinations with any “interested” stockholder for a period of three years following the date on which the stockholder became an “interested” stockholder and which may discourage, delay or prevent a change in control of our company.
Additionally, we are subject to Section 203 of the Delaware General Corporation Law, which generally prohibits a Delaware corporation from engaging in any of a broad range of business combinations with any “interested” stockholder for a period of three years following the date on which the stockholder became an “interested” stockholder and which may discourage, delay or 23 prevent a change in control of our company.
We are also subject to other federal and state laws and regulations regarding health and safety matters. Our manufacturing operations involve the use of solvents, chemicals, oils and other materials that are regarded as hazardous or toxic. We also use complex and heavy machinery and equipment that can pose severe safety hazards, especially if not properly and carefully used.
We are also subject to other federal and state laws and regulations regarding health and safety matters. 22 Our manufacturing operations involve the use of solvents, chemicals, oils and other materials that are regarded as hazardous or toxic. We also use complex and heavy machinery and equipment that can pose severe safety hazards, especially if not properly and carefully used.
To the extent that such damage or injury is not covered by our product liability 15 insurance and we are held to be liable, we could be required to correct such damage and to compensate persons who might have suffered injury or death, and our business, reputation, financial condition, results of operations and cash flows could be materially and adversely affected.
To the extent that such damage or injury is not covered by our product liability insurance and we are held to be liable, we could be required to correct such damage and to compensate persons who might have suffered injury or death, and our business, reputation, financial condition, results of operations and cash flows could be materially and adversely affected.
In addition, the laws of some non-U.S. 16 jurisdictions provide less protection for our proprietary rights than the laws of the U.S. and we therefore may not be able to effectively enforce our intellectual property rights in these jurisdictions. If we are unable to maintain certain exclusive licenses, our brand recognition and sales could be adversely impacted.
In addition, the laws of some non-U.S. jurisdictions provide less protection for our proprietary rights than the laws of the U.S. and we therefore may not be able to effectively enforce our intellectual property rights in these jurisdictions. If we are unable to maintain certain exclusive licenses, our brand recognition and sales could be adversely impacted.
Claims of intellectual property infringement also might require us to redesign affected products, pay costly damage awards, or face injunctions prohibiting us from manufacturing, importing, marketing or selling certain of our products. Even if we have agreements to indemnify us, indemnifying parties may be unable or unwilling to do so.
Claims of intellectual property 15 infringement also might require us to redesign affected products, pay costly damage awards, or face injunctions prohibiting us from manufacturing, importing, marketing or selling certain of our products. Even if we have agreements to indemnify us, indemnifying parties may be unable or unwilling to do so.
We depend on our information technology infrastructure for electronic communications among our locations around the world and between our personnel and our subsidiaries, customers and suppliers. We collect and retain large volumes of internal and customer, vendor and supplier data, including some personally identifiable information, for business purposes. We also maintain personally identifiable information about our employees.
We depend on our information technology infrastructure for electronic communications among our locations 14 around the world and between our personnel and our subsidiaries, customers and suppliers. We collect and retain large volumes of internal and customer, vendor and supplier data, including some personally identifiable information, for business purposes. We also maintain personally identifiable information about our employees.
Product, Services and Sales Risks Product liability claims and litigation could affect our business, reputation, financial condition, results of operations and cash flows. In the ordinary course of business, the products that we design and/or manufacture, and/or the services we provide, have led to product liability claims or other legal claims being filed against us.
Risks Related to Product, Services and Sales Risks Product liability claims and litigation could affect our business, reputation, financial condition, results of operations and cash flows. In the ordinary course of business, the products that we design and/or manufacture, and/or the services we provide, have led to product liability claims or other legal claims being filed against us.
Increases in prices of raw materials and energy, our inability or unwillingness to pass increased costs through to our customers could materially and adversely affect our financial condition or results of operations. 13 We depend on third parties for transportation services and the lack of availability of transportation and/or increases in cost could materially and adversely affect our business and operations.
Increases in prices of raw materials and energy, our inability or unwillingness to pass increased costs through to our customers could materially and adversely affect our financial condition or results of operations. We depend on third parties for transportation services and the lack of availability of transportation and/or increases in cost could materially and adversely affect our business and operations.
If a significant portion of those communities were to decide that the design, materials, manufacturing, testing or quality control of our products is inferior to that of any of our competitors or the cost differences between our products and any competitors are not justifiable, our sales and profits could be materially reduced.
If a significant portion of those communities were to decide that the design, materials, 13 manufacturing, testing or quality control of our products is inferior to that of any of our competitors or the cost differences between our products and any competitors are not justifiable, our sales and profits could be materially reduced.
Our foreign operations subject us to certain commercial, political and financial risks. Our business in these 22 foreign markets is subject to general political conditions, including any political instability (such as those resulting from war, terrorism and insurrections) and general economic conditions in these markets, such as inflation, deflation, interest rate volatility and credit availability.
Our foreign operations subject us to certain commercial, political and financial risks. Our business in these foreign markets is subject to general political conditions, including any political instability (such as those resulting from war, terrorism and insurrections) and general economic conditions in these markets, such as inflation, deflation, interest rate volatility and credit availability.
Regulatory Risks Failure to comply with industry regulations could result in reduced sales and increased costs. 18 We are 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.
Regulatory Risks Failure to comply with industry regulations could result in reduced sales and increased costs. We are 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.
Climate change, drought, weather conditions and storm activity could have a material adverse impact on our results of operations. 14 In North America, weather conditions and the level of severe storms can have a significant impact on the markets for residential construction and home improvement.
Climate change, drought, weather conditions and storm activity could have a material adverse impact on our results of operations. In North America, weather conditions and the level of severe storms can have a significant impact on the markets for residential construction and home improvement.
Many of our products are integral to the structural soundness or safety of the structures in which they are used and we have on occasion found flaws and deficiencies in the design, manufacturing, assembling, labeling, product formulations, chemical mixes or testing of our products.
Many of our products are integral to the structural soundness or safety of the structures in which they are used and we have on occasion found flaws and deficiencies in the design, manufacturing, assembling, labeling, product formulations, chemical mixes 19 or testing of our products.
Although we believe that our relations with our employees are generally good, no assurance can be given that we will be able to successfully extend or renegotiate our collective bargaining agreements as they expire.
Although we believe that our relations with our employees are generally good, no assurance can be 20 given that we will be able to successfully extend or renegotiate our collective bargaining agreements as they expire.
We also migrate from legacy systems to new systems from time to time. 17 Maintaining existing software systems, implementing upgrades and converting to new systems are costly and require a significant allocation of personnel and other resources.
We also migrate from legacy systems to new systems from time to time. Maintaining existing software systems, implementing upgrades and converting to new systems are costly and require a significant allocation of personnel and other resources.
The CCPA, which became effective in 2022 established a new privacy framework for covered businesses by, among other things, creating an expanded definition of personal information, establishing new data privacy rights for consumers in the State of California and creating a new and potentially severe statutory damages framework for violations of the CCPA and for businesses that fail to implement reasonable security procedures and practices to prevent data breaches.
The CCPA, which became effective in 2023 established a new privacy framework for covered businesses by, among other things, creating an expanded definition of personal information, establishing new data privacy rights for consumers in the State of California and creating a new and potentially severe statutory damages framework for violations of the CCPA and for businesses that fail to implement reasonable security procedures and practices to prevent data breaches.
As a result, if we fail to evaluate and execute acquisitions properly, we might not achieve the anticipated benefits of such acquisitions and we may incur costs in excess of what we anticipate. These risks would likely be greater in the case of larger acquisitions.
As a result, if we fail to evaluate and execute these transactions properly, we might not achieve the anticipated benefits of such transactions and we may incur costs in excess of what we anticipate. These risks would likely be greater in the case of larger transactions.
Both domestic and international markets experienced significant inflationary pressures in fiscal year 2022 and inflation rates in the U.S., as well as in other countries in which we 11 operate, are currently expected to continue at elevated levels for the near-term. We may be adversely affected during periods of high inflation, mainly from raw material and labor costs.
Both domestic and international markets experienced significant inflationary pressures in fiscal year 2023 and inflation rates in the U.S., as well as in other countries in which we operate, are currently expected to continue at elevated levels for the near-term. We may be adversely affected during periods of high inflation, mainly from raw material and labor costs.
We have a few large customers, the loss of any one of which could negatively affect our sales and profits. Our largest customers accounted for a significant portion of net sales for the years ended December 31, 2022, 2021, and 2020.
We have a few large customers, the loss of any one of which could negatively affect our sales and profits. Our largest customers accounted for a significant portion of net sales for the years ended December 31, 2023, 2022, and 2021.
Global and Economic Risks Global economic conditions, including inflation and supply chain disruptions, could continue to adversely affect our operations General global economic downturns and macroeconomic trends, including heightened inflation, capital market volatility, interest rate and currency rate fluctuations, and economic slowdown or recession, may result in unfavorable conditions that could negatively affect demand for our products due to customers decreasing their inventories in the near-term or long-term, reduction in sales due to raw material shortages, reduction in research and development efforts, our inability to sufficiently hedge our currency and raw material costs, insolvency of suppliers and customers and exacerbate some of the other risks that affect our business, financial condition and results of operations.
General global economic downturns and macroeconomic trends, including heightened inflation, capital market volatility, interest rate and currency rate fluctuations, and economic slowdown or recession, may result in unfavorable conditions that could negatively affect demand for our products due to customers decreasing their inventories in the near-term or long-term, reduction in sales due to raw material shortages, reduction in research and development efforts, our inability to sufficiently hedge our currency and raw material costs, insolvency of suppliers and customers and exacerbate some of the other risks that affect our business, financial condition and results of operations.
The price of steel has historically fluctuated on a cyclical basis and has often depended on a variety of factors over which we have no control including general economic conditions and currency exchange rates. Import tariffs and/or other mandates also could significantly increase the prices on raw materials that are critical to our business, such as steel.
The price of steel has historically fluctuated on a cyclical basis and has often depended on a variety of factors over which we have no control including geopolitical and macroeconomic conditions and currency exchange rates. Import tariffs and/or other mandates also could significantly increase the prices on raw materials that are critical to our business, such as steel.
Additionally, our ability to compete effectively depends, to a significant extent, on the specification or approval of our products by architects, engineers, building inspectors, building code officials and customers and their acceptance of our premium brand.
Additionally, our ability to compete effectively in North America depends, to a significant extent, on the specification or approval of our products by architects, engineers, building inspectors, building code officials and customers and their acceptance of our premium brand.
Risks Related to Our Intellectual Property and Information Technology Our recent efforts to increase our technology offerings and integrate new software and application offerings may prove unsuccessful and may affect our future prospects. In North America the residential construction industry has experienced increased complexity in some home design and builders are more aggressively trying to reduce their costs.
Our recent efforts to increase our technology offerings and integrate new software and application offerings may prove unsuccessful and may affect our future prospects. In North America the residential construction industry has experienced increased complexity in some home design and builders are more aggressively trying to reduce their costs.
Our work force could become increasingly unionized in the future and our unionized or union-free work force could strike, which could adversely affect the stability of our production and reduce our profitability. 20 A significant number of our employees are represented by labor unions and covered by collective bargaining agreements that will expire between 2023 and 2026.
Our work force could become increasingly unionized in the future and our unionized or union-free work force could strike, which could adversely affect the stability of our production and reduce our profitability. A significant number of our employees are represented by labor unions and covered by collective bargaining agreements that will expire between 2025 and 2028.
Sales outside of the U.S. accounted for 23.6% of our consolidated net sales in 2022 and we anticipate that sales from international operations will continue to represent a significant portion of our net sales in the future. In addition, many of our manufacturing facilities and suppliers are located outside of the U.S.
Sales outside of the U.S. accounted for 26.4% of our consolidated net sales in 2023 and we anticipate that sales from international operations will continue to represent a significant portion of our net sales in the future. In addition, many of our manufacturing facilities and suppliers are located outside of the U.S.
Risks Related to Our International Operations International operations and our financial results in those markets may be affected by legal, regulatory, political, currency exchange and other economic risks. During 2022, revenue from sales outside of the U.S. was $500.4 million, representing approximately 23.6% of consolidated sales.
Risks Related to Our International Operations International operations and our financial results in those markets may be affected by legal, regulatory, political, currency exchange and other economic risks. During 2023, revenue from sales outside of the U.S. was $583.4 million, representing approximately 26.4% of consolidated sales.
Where we face such inconsistencies, it may be impossible for us to comply with all applicable regulations. 21 If we do not obtain all necessary import and export licenses required by applicable export and import regulations, including ITAR and EAR, or do business with sanctioned countries or individuals, we may be subject to fines, penalties and other regulatory action by governmental authorities, including, among other things, having our export or import privileges suspended.
If we do not obtain all necessary import and export licenses required by applicable export and import regulations, including ITAR and EAR, or do business with sanctioned countries or individuals, we may be subject to fines, penalties and other regulatory action by governmental authorities, including, among other things, having our export or import privileges suspended.
Risks Related to Our Business and Our Industry Business cycles and uncertainty regarding the housing market, economic conditions, political climate and other factors beyond our control could adversely affect demand for our products and services, and our costs of doing business, any of which may harm our business, financial condition and results of operations.
Risks Related to Our Business and Our Industry Business cycles and uncertainty regarding the housing market, economic conditions, political climate and other factors beyond our control could adversely affect demand for our products and services, and our costs of doing business, any of which may harm our business, financial condition and results of operations. 12 The primary drivers of our North America segment are residential remodeling, replacement activities and housing starts.
These conditions include, but are not limited to: • uncertainty about the housing and residential construction and home improvement markets; • consumer confidence and spending; • unemployment levels; • foreclosure rates; • interest rates; • raw material, logistics and energy costs; • labor and healthcare costs; • capital availability, or lack thereof, to builders, developers and consumers; • unfavorable weather conditions and natural disasters; and • political or social instability, such as war, or acts of terrorism or other international incidents. 12 These factors could adversely affect demand for our products and services, and our costs of doing business, and our business, financial condition and results of operations may be harmed.
These conditions include, but are not limited to: • uncertainty about the housing and residential construction and home improvement markets; • consumer confidence and spending; • unemployment levels; • foreclosure rates; • interest rates; • raw material, logistics and energy costs; • labor and healthcare costs; • capital availability, or lack thereof, to builders, developers and consumers; • unfavorable weather conditions and natural disasters; and • political or social instability, such as war, or acts of terrorism or other international incidents.
These agreements often require reoccurring payments for online access to the products and have limited terms. In the future, we will be required to renegotiate the terms of these agreements, and may be unable to renew such agreements on favorable terms.
We have various agreements with a number of third parties that provide software and software-as-a-service products to us. These agreements often require reoccurring payments for online access to the products and have limited terms. In the future, we will be required to renegotiate the terms of these agreements, and may be unable to renew such agreements on favorable terms.
Foreign governments where we have operations also implement export, import and sanction laws and regulations, some of which may be inconsistent or conflict with ITAR and EAR.
Foreign governments where we have operations also implement 17 export, import and sanction laws and regulations, some of which may be inconsistent or conflict with ITAR and EAR. Where we face such inconsistencies, it may be impossible for us to comply with all applicable regulations.
Some of such factors may not be reasonably anticipated or may be beyond our control. We have experienced and may in the future experience delays, outages, cyber-based attacks or security breaches in relation to our information systems and computer networks, which have disrupted and may in the future disrupt our operations and may result in data corruption.
Risks Related to Our Intellectual Property and Information Technology We have experienced and may in the future experience delays, outages, cyber-based attacks or security breaches in relation to our information systems and computer networks, which have disrupted and may in the future disrupt our operations and may result in data corruption.
Further, many of our customers in the construction industry are small and medium-sized businesses that are more likely to be adversely affected by economic downturns than larger, more established businesses.
These factors could adversely affect demand for our products and services, and our costs of doing business, and our business, financial condition and results of operations may be harmed. Further, many of our customers in the construction industry are small and medium-sized businesses that are more likely to be adversely affected by economic downturns than larger, more established businesses.
Our insurance may not be adequate to cover all of our resulting costs, business interruption and lost profits when a major natural disaster or catastrophe occurs. A natural disaster rendering one or more of our manufacturing facilities totally or partially inoperable, whether or not covered by insurance, would materially and adversely affect our business and financial condition.
Our insurance may not be adequate to cover all of our resulting costs, business interruption and lost profits when a major natural disaster or catastrophe occurs.
Some of our agreements for software and software-as-services products have limited terms, and we may be unable to renew such agreements and may lose access to such products. We have various agreements with a number of third parties that provide software and software-as-a-service products to us.
Some of such factors may not be reasonably anticipated or may be beyond our control. Some of our agreements for software and software-as-services products have limited terms, and we may be unable to renew such agreements and may lose access to such products.
Changes in government and industry regulatory standards pertaining to health and safety could have a material adverse effect on our business, financial condition or results of operations. We are subject to risks associated with public health crises, such as pandemics and epidemics, including the COVID-19 pandemic. The nature and extent of future impacts are highly uncertain and unpredictable.
Changes in government and industry regulatory standards pertaining to health and safety could have a material adverse effect on our business, financial condition or results of operations.
Removed
COVID-19 was identified in late 2019 and spread globally. Our operations expose us to risks associated with a pandemic, or outbreak of contagious diseases in the human population, including the COVID‑19 pandemic.
Added
Global and Economic Risks Global economic conditions, including inflation and supply chain disruptions, could continue to adversely affect our operations.
Removed
The COVID-19 pandemic has negatively impacted the global economy, disrupted consumer spending and global supply chains, disrupted the labor market, created significant volatility and disruption of financial markets and has resulted in governments around the world implementing stringent measures to help control the spread of the virus.
Added
Global pandemics, such as COVID-19, or other public health crises may adversely affect, among other things, our supply chain and associated costs; demand for our products and services; our operations and sales, marketing and distribution efforts; our research and development capabilities; our engineering, design, and manufacturing processes; and other important business activities.
Removed
These economic uncertainties could adversely affect our business, financial condition, demand for our products, services, and contribute to volatile supply and demand conditions affecting prices and volumes in the markets for our products, services and raw materials.
Added
These events could result in significant losses, adversely affect our competitive position, increase our costs, require substantial expenditures and recovery time, make it difficult or impossible to provide services or deliver products to our customers or to receive components from our suppliers, create delays and inefficiencies in our supply chain and result in the need to impose employee travel restrictions.
Removed
While many countries around the world have removed or reduced the restrictions taken in response to the COVID-19 pandemic, the emergence of new variants of the SARS-CoV-2 virus may result in new governmental lockdowns, quarantine requirements or other restrictions to slow the spread of the virus.
Added
Our operations and those of our suppliers and distributors could be adversely affected if manufacturing, logistics, or other operations in key locations, are disrupted for any reason, such as those described above or other economic, business, labor, environmental, public health, regulatory or political reasons.
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Any such measures could also impact the global economy more broadly, for example by leading to further economic slowdowns. The global outlook remains uncertain as case counts fluctuate and vaccination and booster rates remain relatively low in many parts of the world.
Added
In addition, even if our operations are unaffected or recover quickly, if our customers cannot timely resume their own operations, they may reduce or cancel their orders, or these events could otherwise result in a decrease in demand for our products.
Removed
The scope and duration of any future public health crisis, including the potential emergence of new variants of the SARS-CoV-2 virus, the pace at which government restrictions, including, but not limited to, quarantines, “shelter in place” and “stay at home” order, travel restrictions and other similar measures, are imposed and lifted, the scope of additional actions taken to mitigate the spread of disease, global vaccination and booster rates, may significantly impact our production throughout the supply chain and constrict distribution channels.
Added
Public health crises, such as the COVID-19 pandemic, and the measures taken in response to such events have in the past negatively impacted, and may again in the future negatively impact, our operations and workforce, as well as those of our partners, customers and suppliers.
Removed
We are unable to predict the potential future impact that these factors will have on our business, financial condition or results of operations.
Added
Additionally, concerns over the economic impact of such events have, from time to time, caused increased volatility in financial and other capital markets.
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Our North America Segment accounted for approximately 80% of our net sales for the fiscal year ended December 31, 2022. The primary drivers of our North America segment are residential remodeling, replacement activities and housing starts.
Added
The negative impacts of any such events on business operations and demand for our offerings will depend on future developments and actions taken in response to such events, which may be outside our control, highly uncertain, and cannot be predicted at this time.
Removed
Capital Expenditures, Expansions, Acquisitions and Divestitures Risks The integration of ETANCO may not result in anticipated improvements in market position or the realization of anticipated operating synergies or may take longer to realize than expected.
Added
Increases in income tax rates, changes in income tax laws or disagreements with tax authorities could adversely affect our financial performance. 18 Increases in income tax rates or other changes in tax laws, including changes in how existing tax laws are interpreted or enforced, could adversely affect our financial performance.
Removed
Although we believe that our acquisition of ETANCO will improve our market position and realize positive operating results, including operating synergies, we cannot be assured that these improvements will be obtained or the timing of such improvements.
Added
For example, economic and political conditions in countries where we are subject to taxes, including the United States, have in the past and could continue to result in significant changes in tax legislation or regulation.
Removed
Our acquisition activities from time to time present unique risks for our business, and any acquisition could materially and adversely affect our business and operating results. We may consider and evaluate acquisitions and compete for acquisitions with other potential acquirers, some of which may have greater financial or operational resources than we do.
Added
For example, numerous countries have agreed to a statement in support of the Organization for Economic Co-operation and Development model (OECD) rules that propose a partial global profit reallocation and a global minimum tax rate of 15%.
Removed
Any acquisitions we undertake involve numerous risks, including: • unforeseen difficulties in integrating operations, products, technologies, services, accounting and employees; • diversion of financial and management resources attention from existing operations; • unforeseen difficulties integrating geographic regions where we do not have prior experience; • the potential loss of key employees of acquired businesses; • unforeseen liabilities associated with businesses acquired; and • inability to generate sufficient revenue or realize sufficient cost savings to offset acquisition or investment costs.
Added
Certain countries, including European Union member states, have enacted or are expected to enact legislation incorporating the global minimum tax with effect as early as 2024 and widespread implementation of a global minimum tax is expected by 2025.
Added
As the legislation becomes effective in countries in which we do business, our taxes could increase and negatively impact our provision for income taxes. This increasingly complex global tax environment could increase tax uncertainty, which could in turn result in higher compliance costs and adverse effects on our financial performance.
Added
We are also subject to regular reviews, examinations and audits by numerous taxing authorities with respect to income and non-income based taxes.
Added
Economic and political pressures to increase tax revenues in jurisdictions in which we operate, or the adoption of new or reformed tax legislation or regulation, also could make resolving any tax disputes more difficult and the final resolution of any tax audits could have an adverse effect on our financial performance.
Added
A natural disaster rendering one or more of our manufacturing facilities totally or partially inoperable, whether or not covered by insurance, would materially and adversely affect our business and financial condition. 21 Capital Expenditures, Expansions, Acquisitions and Divestitures Risks Acquisitions, divestitures, and other strategic transactions could fail to achieve financial or strategic objectives, disrupt our ongoing business, and adversely impact our results of operations.
Added
In furtherance of our business strategy, we routinely evaluate opportunities and may enter into agreements for possible acquisitions, divestitures, or other strategic transactions. A significant portion of our growth has been generated by acquisitions, such as the acquisition of ETANCO and we may continue to acquire businesses in the future as part of our growth strategy.
Added
Furthermore, there is no assurance that any such transaction will result in synergistic benefits.

Item 2. Properties

Properties — owned and leased real estate

4 edited+0 added−0 removed1 unchanged
Biggest changeAs of February 28, 2023, the Company’s owned and leased facilities were as follows: Number Of Approximate Square Footage Properties Owned Leased Total (in thousands of square feet) North America 28 2,235 1,031 3,266 Europe 36 1,749 725 2,474 Asia/Pacific 9 175 40 215 Administrative and all other 1 89 — 89 Total 74 4,248 1,796 6,044 We believe that our properties are maintained in good operating condition.
Biggest changeAs of February 27, 2024, the Company’s owned and leased facilities were as follows: 25 Number Of Approximate Square Footage Properties Owned Leased Total (in thousands of square feet) North America 32 2,235 1,271 3,506 Europe 38 1,886 668 2,554 Asia/Pacific 9 175 41 216 Administrative and all other 1 89 — 89 Total 80 4,385 1,980 6,365 We believe that our properties are maintained in good operating condition.
The principal manufacturing facilities located outside the U.S., the majority of which we own, are in France, Italy, Romania, Denmark, Germany, Poland, Switzerland, Sweden, Portugal and China. We also own and lease smaller manufacturing facilities, warehouses, research and development facilities and sales offices in the U.S., Canada, the United Kingdom, Europe, Asia, Australia, New Zealand, and Chile.
The principal manufacturing facilities located outside the U.S., the majority of which we own, are in France, Italy, Denmark, Germany, Poland, Switzerland, Sweden, Portugal and China. We also own and lease smaller manufacturing facilities, warehouses, research and development facilities and sales offices in the U.S., Canada, the United Kingdom, Europe, Asia, Australia, New Zealand, and Chile.
Item 2. Properties. Our headquarters and principal executive offices in Pleasanton, California, and our principal U.S. manufacturing facilities in Stockton and San Bernardino County, California, McKinney, Texas, West Chicago, Illinois, Columbus, Ohio, and Gallatin, 23 Tennessee are located in owned premises.
Item 2. Properties. Our headquarters and principal executive offices in Pleasanton, California, and our principal U.S. manufacturing facilities in Stockton and San Bernardino County, California, McKinney, Texas, West Chicago, Illinois, Columbus, Ohio, and Gallatin, Tennessee are located in owned premises.
Our manufacturing facilities are equipped with specialized equipment and use extensive automation. Our leased facilities typically have renewal options and have expiration dates through 2032. We believe we will be able to extend leases on our various facilities as necessary, or as they expire. Currently, our manufacturing facilities are being operated with at least one full-time shift.
Our manufacturing facilities are equipped with specialized equipment and use extensive automation. Our leased facilities typically have renewal options and have expiration dates through 2036. We believe we will be able to extend leases on our various facilities as necessary, or as they expire. Currently, our manufacturing facilities are being operated with at least one full-time shift.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeRefer to Note 14, “Commitments and Contingencies,” to the Company’s consolidated financial statements included in this Annual Report on Form 10-K for a discussion of recent developments related to certain of the legal proceedings in which we are involved. Item 4. Mine Safety Disclosures. Not applicable. PART II
Biggest changeRefer to Note 15, “Commitments and Contingencies,” to the Company’s consolidated financial statements included in this Annual Report on Form 10-K for a discussion of recent developments related to certain of the legal proceedings in which we are involved. Item 4. Mine Safety Disclosures. Not applicable. PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeSee “Note 5 — Stockholder's Equity. 81,543 shares of the Company's common stock were repurchased in 2022, in connection with the withholding of shares to cover payroll taxes on vesting of stock-based compensation awards vested and for retirement eligible employees who retired during 2022. 811,330 of the Company's common stock shares for $78.6 million were repurchased in 2022, pursuant to the Board’s $100.0 million repurchase authorization that was publicly announced on November 18, 2021, which authorization expired on December 31, 2022.
Biggest changeApproximately 361 thousand shares of the Company's common stock were repurchased in 2023 for a total amount of $50.0 million pursuant to the Board’s $100.0 million repurchase authorization that was publicly announced on December 15, 2022, which authorization expired on December 31, 2023.
The Peer Group Index below consisted of AAON, Inc., Advance Drainage Systems, Inc., Allegion Plc, American Woodmark Corp, Apogee Enterprises, Inc., Armstrong World Industries, Inc., Atkore Inc., Axek Company Inc., Eagle Materials, Inc., Gibraltar Industries, Inc., Masonite International Corp., Patrick Industries, Inc., PGT Innovations, Inc., Quanex Building Products Corp., Summit Materials, Inc., and Trex Company, Inc. 26 Purchases of Equity Securities by the Issuer and Affiliated Purchasers The table below shows the monthly repurchases of shares of the Company's common stock in the fourth quarter of 2022.
The Peer Group Index below consisted of AAON, Inc., Advance Drainage Systems, Inc.; Allegion Plc; American Woodmark Corp.; Apogee Enterprises, Inc.; Armstrong World Industries, Inc.; Atkore, Inc.; Axek Company, Inc.; Azek Company, Inc.; Eagle Materials, Inc.; Gibraltar Industries, Inc.; Masonite International Corp.; Patrick Industries, Inc.; PGT Innovations, Inc.; Quanex Building Products Corp.; Summit Materials, Inc.; and Trex Company, Inc. 28 Purchases of Equity Securities by the Issuer and Affiliated Purchasers The table below shows the monthly repurchases of shares of the Company's common stock in the fourth quarter of 2023.
See “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations.” 25 Stock Performance Graph The following graph compares the cumulative total stockholder return on the Company’s common stock from December 31, 2017, through December 31, 2022, with the cumulative total return on the S&P 500 Index (a broad equity market index), the Dow Jones U.S.
See “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations.” 27 Stock Performance Graph The following graph compares the cumulative total stockholder return on the Company’s common stock from December 31, 2017, through December 31, 2023, with the cumulative total return on the S&P 500 Index (a broad equity market index), the Dow Jones U.S.
On December 15, 2022, the Board of Directors authorized the repurchase up to $100.0 million of the Company’s common stock from January 1, 2023 through December 31, 2023. Item 6. [Reserved]
On October 19, 2023, the Board of Directors authorized the repurchase up to $100.0 million of the Company’s common stock from January 1, 2024 through December 31, 2024.
Future dividends, if any, will be determined by the Company’s Board of Directors, based on the Company’s future earnings, cash flows, financial condition and other factors deemed relevant by the Board of Directors.
See "Note 20 — Subsequent Events" to the Company's consolidated financial statements. Future dividends, if any, will be determined by the Com pany’s Board of Directors, based on the Company’s future earnings, cash flows, financial 26 condition and other factors deemed relevant by the Board of Directors.
Market Information for Common Stock The Company’s common stock is listed on the New York Stock Exchange (the “NYSE”) under the symbol “SSD.” As of February 23, 2023 there were 46,260 holders of record of the Company’s common stock, although we believe that there are a significantly larger number of beneficial owners of our common stock. 24 Dividends During 2022, the Company paid a total of $43.9 million in cash dividends.
Market Information for Common Stock The Company’s common stock is listed on the NYSE under the symbol “SSD.” As of February 22, 2024 there were 61,712 holders of record of the Company’s common stock, although we believe that there are a significantly larger number of beneficial owners of our common stock.
On January 24, 2023, we declared a quarterly cash dividend of $0.26 per share of common stock to be paid on April 27, 2023 to stockholders of record as of April 6, 2023. See "Note 19 — Subsequent Events" to the Company's consolidated financial statements.
Dividends During 2023, the Company paid a total of $45.2 million in cash dividends. O n January 19, 2024, the Company declared a quarterly cash dividend of $0.27 per share of common stock to be paid on April 25, 2024 to stockholders of record as of April 4, 2024.
Removed
(a) (b) (c) (d) Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Value of Shares that May Yet Be Purchased Under the Plans or Programs (1) (in millions) October 1 - October 31, 2022 45 $ 78.40 — $25,438,087 November 1 - November 30, 2022 47,828 $ 84.95 47,800 $21,377,692 December 1 - December 31, 2022 69 $ 94.24 — $21,377,692 Total 47,942 (1) Pursuant to the $100.0 million repurchase authorization from the Board of Directors on November 18, 2021, and expired on December 31, 2022.
Added
(a) (b) (c) (d) Period Total Number of Shares Purchased Average Price Paid per Share 1 Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Value of Shares that May Yet Be Purchased Under the Plans or Programs (in thousands)2 October 1 - October 31, 2023 128,093 $ 133.12 128,000 $82,962 November 1 - November 30, 2023 232,746 $ 141.62 232,746 $50,000 December 1 - December 31, 2023 73 $ 166.97 — $50,000 Total 360,912 Approximately 66 thousand shares of the Company's common stock were repurchased in 2023, in connection with the withholding of shares to cover payroll taxes on vesting of stock-based compensation awards vested and for retirement eligible employees who retired during 2023.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeCanada's sales increased primarily due to increases in sales volume and were negatively affected by $2.9 million foreign currency translation in local currency. • Gross margin decreased to 47.7% from 50.0%, primarily due to higher material and factory & tooling costs, each as a percentage of net sales, and were partly offset by decreases in labor, warehouse and freight costs, each as a percentage of net sales. • Research and development and engineering expense increased $8.1 million, primarily due to increases of $4.5 million in professional fees, $4.1 million in personnel costs, $0.8 million in travel related costs, and $0.2 million in stock-based 33 compensation, offset by $1.9 million higher software development expenses capitalized and a decrease of $0.8 million cash profit sharing expense. • Selling expense increased $16.4 million, primarily due to increases of $7.1 million in personnel costs, $5.9 million in advertising and trade show events, $5.5 million in travel related costs, and $1.7 million in professional fees, partly offset by decreases of $4.4 million in sales commission and $0.3 million of stock-based compensation. • General and administrative expense decreased $3.9 million, primarily due to decreases of $8.3 million in professional fees, including legal fees, $1.6 million in cash profit sharing expense, $1.4 million in depreciation and amortization. and $0.8 million in stock-based compensation, partially offset by increases of $4.3 million of personal costs, and $2.8 million in computer software and hardware costs. • Income from operations increased $108.8 million, mostly due to increases in sales and gross profit, partly offset by higher operating expenses.
Biggest changeNorth America • Net sales increased 0.9% primarily due to higher sales volumes, partly offset by price decreases implemented during the first quarter of 2023. • Gross margin increased to 50.3% from 47.7%, primarily due to lower raw material and labor costs as a percentage of net sales. • Research and development and engineering expense increased $21.9 million, primarily due increased personnel costs of $7.0 million and professional fees of $5.8 million associated with our strategic growth initiatives and to further our Building Technologies offering, $3.1 million in variable compensation, and $1.0 million in depreciation and amortization. 35 • Selling expense increased $23.6 million, primarily due to increases of $10.5 million in personnel costs, $5.0 million in sales commission expense, $2.2 million in professional fees, $2.1 million in travel-related expenses, and $1.6 million in other variable compensation. • General and administrative expense increased $18.9 million, primarily due to increases of $6.9 million in personnel costs, $4.3 million in computer software and hardware costs, $2.7 million in variable compensation, and $1.4 million in depreciation and amortization. • Income from operations decreased $12.7 million , primarily due to higher operating expenses including personnel costs, professional fees, variable compensation, sales commission expense, and computer software and hardware costs.
Changes in raw material cost could impact the amount of inventory on-hand, and negatively affect our gross profit and operating margins depending on the timing of raw material purchases or how much sales prices can be increased to offset higher raw material costs.
Changes in raw material cost could impact the amount of inventory on-hand, and negatively affect our gross profit and operating margins depending on the timing of raw material purchases or how much sales prices can be increased to offset any increases in raw material costs.
Liquidity and Capital Resources On March 30, 2022, the Company entered into an Amended and Restated Credit Agreement. The Amended and Restated Credit Agreement provides for a 5-year revolving credit facility of $450.0 million, which includes a letter of credit-sub-facility up to $50.0 million, and for a 5-year term loan facility of $450.0 million.
On March 30, 2022, the Company entered into an Amended and Restated Credit Agreement. The Amended and Restated Credit Agreement provides for a 5-year revolving credit facility of $450.0 million, which includes a letter of credit-sub-facility up to $50.0 million, and for a 5-year term loan facility of $450.0 million.
Cash flows from operating activities years ended December 31, 2021 and 2020 are incorporated by reference to Form 10-K 2021 filing. Contingencies From time to time, we are subject to various claims, lawsuits, legal proceedings (including litigation, arbitration or regulatory actions) and other matters arising in the ordinary course of business.
Cash flows from operating activities years ended December 31, 2022 and 2021 are incorporated by reference to Form 10-K 202 2 filing. Contingencies From time to time, we are subject to various claims, lawsuits, legal proceedings (including litigation, arbitration or regulatory actions) and other matters arising in the ordinary course of business.
In order to grow in these markets, we aspire to be among the leaders in engineered load-rated construction building products and systems and building technology while leveraging our engineering expertise, deep-rooted relationships with top builders, engineers, contractors, code officials and distributors, along with our ongoing commitment to testing, research and innovation.
In order to grow in these markets, we aspire to be among the leaders in engineered load-rated construction building products and systems and digital product offerings while leveraging our engineering expertise, deep-rooted relationships with top builders, engineers, contractors, code officials and distributors, along with our ongoing commitment to testing, research and innovation.
Unless otherwise stated, the results announced below, when referencing “both years,” refer to the year ended December 31, 2021 and the year ended December 31, 2022.
Unless otherwise stated, the results announced below, when referencing “both years,” refer to the year ended December 31, 2022 and the year ended December 31, 2023.
Accordingly, the Company has not recorded any liability for costs related to these indemnities through December 31, 2022.
Accordingly, the Company has not recorded any liability for costs related to these indemnities through December 31, 2023.
Refer to "Note 11 - Leases" (Part II, Item 8), "Note 14 - Debt" and "Note 15 - Commitment and Contingencies" for details related to the Company's obligations and debt annual facility fees. The Company did not have any significant off-balance sheet commitments as of December 31, 2022.
Refer to "Note 12 - Leases", "Note 14 - Debt" and "Note 15 - Commitment and Contingencies" in Part II, Item 8 for details related to the Company's obligations and debt annual facility fees. The Company did not have any significant off-balance sheet commitments as of December 31, 2023.
Inflation and Raw Materials Inflation rates increased significantly during fiscal year 2022, which have negatively affected material costs as well as labor costs and other costs of doing business, and as such may adversely affect our operating profits if we cannot recover the higher costs through price increases.
Inflation and Raw Materials Inflation rates increased during fiscal year 2023, which have negatively affected labor costs and other costs of doing business, and as such may adversely affect our operating profits if we cannot recover the higher costs through price increases.
Discussions of 2020 results and year-to-ear comparison between 2021 and 2020 results are not included in this Form 10K and can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of our Annual Report on Form 10K for the fiscal year ended December 31, 2021.
Discussions of 2021 results and year-to-year comparison between 2022 and 2021 results are not included in this Annual Report on Form 10-K and can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
As of December 31, 2022, our cash and cash equivalents consisted of deposits and money market funds held with established national financial institutions, and includes $77.9 million held in the local currencies of our foreign operations and could be subject to additional taxation if repatriated to the U.S.
As of December 31, 2023, our cash and cash equivalents consisted of deposits and money market funds held with established national financial institutions, and includes $106.4 million held in the local currencies of our foreign operations and could be subject to additional taxation if repatriated to the U.S.
Wood construction product net sales, including sales of connectors, truss plates, fastening systems, fasteners and shearwalls, represented 87% of the Company’s total net sales for both years ended December 31, 2022 and 2021.
Wood construction product net sales, including sales of connectors, truss plates, fastening systems, fasteners and shearwalls, represented 85% and 87% of the Company’s total net sales for the years ended December 31, 2023 and 2022, respectively.
As a result, we identified facility expansion in the U.S. that we expect will improve our overall service, production efficiencies and safety in the workplace, as well as reduce our reliance on certain outsourced finished goods and component products and continue to ensure we have ample capacity to meet our customer needs.
We expect the expansion and replacement facility will improve our overall service, production efficiencies and safety in the workplace, as well as reduce our reliance on certain outsourced finished goods and component products and continue to ensure we have ample capacity to meet our customer needs.
Our growth investments will be primarily focused on purchases of new equipment to support increased productivity and efficiencies, enhancements to our existing facilities to expand our manufacturing footprint in-line with increasing customer needs, as well as investments for adjacencies and key growth initiatives .
The remaining $80.0 million in capital expenditures will be primarily focused on purchases of new equipment to support increased productivity and efficiencies, enhancements to our existing facilities to expand our manufacturing footprint in-line with increasing customer needs, as well as investments for adjacencies and key growth initiatives.
Our principal uses of capital include the costs and expenses associated with our operations, including financing working capital requirements and continuing our capital allocation strategy, which includes supporting capital expenditures, paying cash dividends, repurchasing the Company's common stock, and financing other investment opportunities over the next twelve months.
Our principal uses of capital include the costs and expenses associated with our operations, including financing working capital requirements and continuing our capital allocation strategy, which includes supporting capital expenditures, paying cash dividends, repurchasing the Company's common stock, and financing other investment opportunities from time to time.
The following table sets forth, for the years indicated, the Company’s operating results as a percentage of net sales for the years ended December 31, 2022, 2021 and 2020, respectively: Years Ended December 31, 2022 2021 2020 Net sales 100.0 % 100.0 % 100.0 % Cost of sales 55.5 % 52.0 % 54.5 % Gross profit 44.5 % 48.0 % 45.5 % Research and development and other engineering 3.2 % 3.8 % 4.0 % Selling expense 8.0 % 8.6 % 8.9 % General and administrative expense 10.8 % 12.3 % 12.7 % Total operating expense 22.0 % 24.7 % 25.6 % Acquisition and integration related costs 0.8 % — % — % Net gain on disposal of assets (0.1) % — % — % Income from operations 21.8 % 23.3 % 19.9 % Interest expense, net and other (0.4) % (0.2) % (0.2) % Other and foreign exchange loss, net (0.2) % (0.4) % (0.1) % Income before taxes 21.2 % 22.8 % 19.7 % Provision for income taxes 5.4 % 5.9 % 4.9 % Net income 15.8 % 16.9 % 14.8 % Comparison of the Years Ended December 31, 2022 and 2021 Unless otherwise stated, the results announced below results, when providing comparisons (which are generally indicated by words such as “increased,” “decreased,” “unchanged” or “compared to”), compare the results of operations for the year ended December 31, 2022, against the results of operations for the year ended December 31, 2021.
The following table sets forth, for the years indicated, the Company’s operating results as a percentage of net sales for the years ended December 31, 2023, 2022 and 2021, respectively: Years Ended December 31, 2023 2022 2021 Net sales 100.0 % 100.0 % 100.0 % Cost of sales 52.9 % 55.5 % 52.0 % Gross profit 47.1 % 44.5 % 48.0 % Research and development and other engineering expenses 4.2 % 3.2 % 3.8 % Selling expense 9.2 % 8.0 % 8.6 % General and administrative expense 12.1 % 10.8 % 12.3 % Total operating expense 25.5 % 22.0 % 24.7 % Acquisition and integration related costs 0.2 % 0.8 % — % Net gain on disposal of assets — % (0.1) % — % Income from operations 21.4 % 21.8 % 23.3 % Interest expense, net and other 0.2 % (0.4) % (0.2) % Other and foreign exchange loss, net (0.1) % (0.2) % (0.4) % Income before taxes 21.5 % 21.2 % 22.8 % Provision for income taxes 5.5 % 5.4 % 5.9 % Net income 16.0 % 15.8 % 16.9 % Comparison of the Years Ended December 31, 2023 and 2022 Unless otherwise stated, the results announced below results, when providing comparisons (which are generally indicated by words such as “increased,” “decreased,” “unchanged” or “compared to”), compare the results of operations for the year ended December 31, 2023, against the results of operations for the year ended December 31, 2022 and include the results of the acquisition of FIXCO Invest S.A.S ("ETANCO") on April 1, 2022. 2023 full year comparisons include twelve months of ETANCO operating results for the fiscal year ending December 31, 2023 compared to nine months for the fiscal year ending December 31, 2022.
The following table shows gross margins by segment for the years ended December 31, 2021 and 2022, respectively: North America Europe Asia/ Pacific Admin & All Other Total 2021 gross margin 50.0 % 35.1 % 36.9 % * 48.0 % 2022 gross margin 47.7 % 31.4 % 33.3 % * 44.5 % * The statistic is not meaningful or material.
The following table shows gross margins by segment for the years ended December 31, 2022 and 2023, respectively: North America Europe Asia/ Pacific Admin & All Other Total 2022 gross margin 47.7 % 31.4 % 33.3 % * 44.5 % 2023 gross margin 50.3 % 36.8 % 34.2 % * 47.1 % * The statistic is not meaningful or material.
Gross margins, including some inter-segment expenses, which were eliminated in consolidation, and excluding certain expenses that are allocated according to product group, decreased to 44.4% from 47.9% for wood construction products and decreased to 43.9% from 44.4% for concrete construction products.
Gross margins, including some inter-segment expenses, which were eliminated upon consolidation, and excluding certain expenses that are allocated according to product group, increased from 44.4% to 47.2% for wood construction products and increased from 43.9% to 46.0% for concrete construction products.
As we make progress on our key growth initiatives, we believe we can continue our above market growth relative to U.S. housing starts in fiscal 2023 and beyond. These examples further emulate our Founder, Barclay Simpson’s, nine principles of doing business, and more specifically the focus and obsession on customers and users.
As we continue to make progress on our growth initiatives, we believe we can continue to achieve above market growth in the United States relative to United States housing starts for fiscal 2024 and beyond. These examples further emulate our Founder, Barclay Simpson’s, nine principles of doing business, and more specifically the focus and obsession on customers and users.
Based on the qualitative assessment performed, the Company concluded that there was no evidence of events or circumstances that would indicate a material change from the Company’s prior year quantitative assessment by reporting unit and therefore, it was more likely than not that the estimated fair value of reporting units exceeded their respective carrying values.
Based on the qualitative assessment performed, the Company concluded that there was no evidence of events or circumstances that would indicate a material change from the Company’s prior year quantitative assessment by reporting unit and therefore, it was more likely than not that the estimated fair value of reporting units exceeded their respective carrying values The 2023 and 2022 annual testing of goodwill for impairment did not result in impairment charges.
During the fourth quarter of 2022, we completed our annual impairment assessment by performing a qualitative assessment. For this qualitative assessment, we assessed various assumptions, events and circumstances that would have affected the estimated fair value of the reporting units as compared to their quantitative fair value measurement determined in the fourth quarter of 2021.
We completed our annual impairment assessment by performing a qualitative assessment during the annual impairment assessment performed in the fourth quarter of 2022. For this qualitative assessment, we assessed various assumptions, events and circumstances that would have affected the estimated fair value of the reporting units.
On December 15, 2022, the Board authorized the Company to repurchase up to $100.0 million of the Company's common stock, effective January 1, 2023 through December 31, 2023.
On October 19, 2023, the Company's Board of Directors (the "Board") authorized the Company to repurchase up to $100.0 million of the Company's common stock, effective January 1, 2024 through December 31, 2024.
When impairments are established, a new cost basis of the inventory is created. Unexpected changes in market demand, building codes or buyer preferences could reduce the rate of inventory turnover and require the Company to recognize more obsolete inventory. Business Combinations. Accounting for business combinations requires us to make significant estimates and assumptions.
Unexpected changes in market demand, building codes or buyer preferences could reduce the rate of inventory turnover and require the Company to recognize more obsolete inventory. Business Combinations. Accounting for business combinations requires us to make significant estimates and assumptions.
Our operations also expose us to risks associated with pandemics, epidemics or other public health, such as the COVID-19 pandemic. Business Segment Information Historically our North America segment has generated more revenues from wood construction products compared to concrete construction products. North America sales increased 24.8% for the year ended December 31, 2022 compared to December 31, 2021.
Our operations also expose us to risks associated with pandemics, epidemics or other public health crises. Business Segment Information Historically, our North America segment has generated more revenues from wood construction products compared to concrete construction products. North America sales increased 0.9% for the year ended December 31, 2023 compared to December 31, 2022.
For the fiscal year ended December 31, 2022, the Company returned $122.5 million to the Company's stockholders, which represents 36.2% of our free cash flow from operations during the same period.
For the fiscal year ended December 31, 2023, the Company returned $95.2 million to the Company's stockholders, which represents 28.1% of our free cash flow from operations during the same period.
Cost includes all costs incurred in bringing each product to its present location and condition, as follows: 34 • Raw materials and purchased finished goods — principally valued at cost determined on a weighted average basis; and • In-process products and finished goods — cost of direct materials and labor plus attributable overhead based on a normal level of activity.
Cost includes all costs incurred in bringing each product to its present location and condition, as follows: • Raw materials and purchased finished goods — principally valued at cost determined on a weighted average basis; and • In-process products and finished goods — cost of direct materials and labor plus attributable overhead based on a normal level of activity. 36 The Company applies net realizable value and makes estimates for obsolescence to the gross value of inventory.
The Company is maintaining a permanent reinvestment assertion on its foreign earnings relative to remaining cash held outside the United States. 36 The following table presents selected financial information as of December 31, 2022, 2021 and 2020, respectively: As of December 31, (in thousands) 2022 2021 2020 Cash and cash equivalents $ 300,742 $ 301,155 $ 274,639 Property, plant and equipment, net 361,555 259,869 255,184 Equity investment, goodwill and intangible assets 863,841 170,309 162,644 Working capital 529,945 453,078 559,078 The following table presents the significant categories of cash flows for the twelve months ended December 31, 2022, 2021 and 2020, respectively: Years Ended December 31, (in thousands) 2022 2021 2020 Net cash provided by (used in): Operating activities $ 399,821 $ 151,295 $ 207,572 Investing activities (870,244) (58,805) (39,853) Financing activities 465,526 (71,616) (126,777) Cash flows from operating activities result primarily from our earnings, and are also affected by changes in operating assets and liabilities which consist primarily of working capital balances.
The Company is maintaining a permanent reinvestment assertion on its foreign earnings relative to remaining cash held outside the United States. 38 The following table presents selected financial information as of December 31, 2023, 2022 and 2021, respectively: As of December 31, (in thousands) 2023 2022 2021 Cash and cash equivalents $ 429,822 $ 300,742 $ 301,155 Property, plant and equipment, net 418,612 361,555 259,869 Equity investment, goodwill and intangible assets 883,079 872,699 170,309 Net working capital 521,362 529,945 453,078 The following table presents the significant categories of cash flows for the twelve months ended December 31, 2023, 2022 and 2021, respectively: Years Ended December 31, (in thousands) 2023 2022 2021 Net cash provided by (used in): Operating activities $ 427,022 $ 399,821 $ 151,295 Investing activities (103,251) (870,244) (58,805) Financing activities (199,034) 465,526 (71,616) Cash flows from operating activities result primarily from our earnings, and are also affected by changes in operating assets and liabilities which consist primarily of working capital balances.
Concrete construction product net sales, including sales of adhesives, chemicals, mechanical anchors, powder actuated tools and reinforcing fiber materials, represented 13% of the Company’s total net sales for both years ended December 31, 2022 and 2021. Gross profit increased to $941.3 million from $755.0 million.
Concrete construction product net sales, including sales of adhesives, chemicals, mechanical anchors, powder actuated tools and reinforcing fiber materials, represented 15% and 13% of the Company’s total net sales for the years ended December 31, 2023 and 2022, respectively. Gross profit increased to $1,043.8 million from $941.3 million, primarily due to the acquisition and integration of ETANCO.
The 2022 and 2021 annual testing of goodwill and intangible assets for impairment did not result in impairment charges. Revenue from Contracts with Customers The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product to a customer at a point in time. The Company's general shipping terms are Incoterm C.P.T.
Revenue from Contracts with Customers The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product to a customer at a point in time. The Company's general shipping terms are Incoterm C.P.T.
During 2022, we purchased, received and retired 811,330 shares of the Company’s common stock on the open market at an average price of $96.91 per share, for a total of $78.6 million under a previously announced $100.0 million share repurchase authorization (which expired at the end of 2022).
During 2023, we purchased and received approximately 361 thousand shares of the Company’s common stock on the open market at an average price of $138.60 per share, for a total of $50.0 million under a previously announced $100.0 million share repurchase authorization (which expired at the end of 2023).
Further, on January 24, 2023, the Company's Board of Directors (the "Board") declared a quarterly cash dividend of $0.26 per share payable on April 27, 2023 to stockholders of record on April 6, 2023, and estimated to be $11.1 million in total.
Further, on January 19, 2024, the Board declared a quarterly cash dividend of $0.27 per share payable on April 25, 2024 to stockholders of record on April 4, 2024, and estimated to be $11.5 million in total.
Since the beginning of 2019 to the fiscal year ended December 31, 2022, we have returned $405.9 million to stockholders, which represents 51.9% of our free cash flow and 37 over the same period the Company has repurchased over 3.1 million shares of the Company's common stock, which represents approximately 6.8% of the outstanding shares of the Company's common stock.
Since the beginning of 2021 to the fiscal year ended December 31, 2023, we have returned $283.5 million to stockholders, which represents 36.2% of our free cash flow and 39 over the same period the Company has repurchased over $1.4 million shares of the Company's common stock, which represents approximately 3.2% of the outstanding shares of the Company's common stock.
We also highlighted our five-year ambitions in 2021, which are as follows: • Strengthen our values-based culture; • Be the business partner of choice; • Strive to be an innovative leader in the markets we operate; • Continue above market growth relative to the United States housing starts; • Remain within the top quartile of our proxy peers for operating income margin; and • Remain in the top quartile of our proxy peers for return on invested capital.
Our commitment to continuous improvement has fostered our core Company ambitions, which we continue to pursue including: • Strengthen our values-based culture; • Be the partner of choice; • Be an innovative leader in the markets we operate; • Above market growth relative to the United States housing starts; • An operating income margin within the top quartile of our proxy peers; • Remain within the top quartile of our proxy peers for operating income margin; and • Integrate ETANCO and restoring our return on invested capital to be within the top quartile of our proxy peers.
These estimates are deducted from revenues and are reevaluated periodically during the reporting period. Effect of New Accounting Standards See "Note 1 — Recently Adopted Accounting Standards" and "Note 1 — Recently Issued Accounting Standards Not Yet Adopted" to the Company’s consolidated financial statements.
These estimates are deducted from revenues and are reevaluated periodically during the reporting period. Effect of New Accounting Standards See "Note 1 — Operations and Summary of Significant Accounting Policies" for effects of new accounting standards on the Company’s consolidated financial statements.
The Company applies net realizable value and makes estimates for obsolescence to the gross value of inventory. The Company estimates net realizable value based on estimated selling price less further costs through completion and disposal. The Company impairs slow-moving products by comparing inventories on hand to projected demand.
The Company estimates net realizable value based on estimated selling price less further costs through completion and disposal. The Company impairs slow-moving products by comparing inventories on hand to projected demand. If on-hand supply of a product exceeds projected demand or if the Company believes the product is no longer marketable, the product is considered obsolete inventory.
Unlike lumber or other products that have a more direct correlation to United States housing starts, our products are used to a greater extent in areas that are subject to natural forces, such as seismic or wind events. Our products are generally used in a sequential progression that follows the construction process.
Lower housing starts could result in lower demand, which would affect the Company's sales and possibly operating profit, Unlike lumber or other products that have a more direct correlation to United States housing starts, our products are used to a greater extent in areas that are subject to natural forces, such as seismic or wind events.
In 2022, operating activities provided $399.8 million in cash and cash equivalents as a result of $334.0 million from net income and $83.8 million from non-cash adjustments to net income which includes depreciation and amortization, stock-based compensation and non-recurring inventory fair-value adjustments from the acquisition of ETANCO, partially offset by a decrease of $18.0 million for the net change in operating assets and liabilities.
In 2023, operating activities provided $427.0 million in cash and cash equivalents as a result of $354.0 million from net income and adding back $101.8 million for non-cash adjustments from net income which includes depreciation and amortization, stock-based compensation and non-cash lease expense, partially offset by a decrease of $28.8 million for the net change in operating assets and liabilities.
Although these initiatives are all currently in different stages of development, our successful growth in these areas will ultimately be a function of expanding our sales and/or marketing functions to promote our products to different end users and distribution channels, expanding our customer base, and potentially introducing new products in the future.
Importantly, we currently have existing products, testing results, distribution and manufacturing capabilities to support our growth ambitions. This will ultimately be a function of expanding our sales and/or marketing functions to promote our products to different end users and distribution channels, expanding our customer base, and potentially introducing new products in the future.
Our Asia/Pacific segment has generated revenues from both wood and concrete construction products. We believe that the Asia/Pacific segment is not significant to our overall performance.
We believe that the Asia/Pacific segment is not significant to our overall performance.
Based on current information and subject to future events and circumstances, capital expenditures are estimated to be in the range of $90.0 million to $95.0 million for 2023 including the expected spend of $22.0 million to $25.0 million on our previously announced Columbus, Ohio facility expansion, with the balance of that project to be spent in 2024.
Based on current information and subject to future events and circumstances, capital expenditures are estimated to be approximately $200.0 million for 2024 including the expected spend of $120.0 million on our previously announced Columbus, Ohio facility expansion and replacement of Gallatin, Tennessee facility, with some spend potentially may carrying over to 2025.
Factors Affecting Our Results of Operations The Company’s business, financial condition and results of operations depends in large part on the level of United States housing starts and residential construction activity.
Factors Affecting Our Results of Operations The Company’s business, financial condition and results of operations depends in large part on the level of United States housing starts and residential construction activity. Both single-family and multi-family housing starts decreased during 2023 compared to the prior two years, primarily due to interest rate increases and inflation.
If on-hand supply of a product exceeds projected demand or if the Company believes the product is no longer marketable, the product is considered obsolete inventory. The Company revalues obsolete inventory to its net realizable value and has consistently applied this methodology. The Company believes that this approach is suitable for impairments of slow-moving and obsolete inventory.
The Company revalues obsolete inventory to its net realizable value and has consistently applied this methodology. The Company believes that this approach is suitable for impairments of slow-moving and obsolete inventory. When impairments are established, a new cost basis of the inventory is created.
Selling expense increased 25.5% to $169.4 million from $135.0 million, primarily due to increases of $20.3 million in personnel costs, $7.6 million in travel-related expenses, $6.1 million in advertising and promotional expense, $1.4 million in professional fees, and $0.9 million in leasing related costs, partially offset by decreases of $4.9 in commission expense and $0.3 million in stock based compensation expense.
Selling expense increased 20.4% to $204.0 million from $169.4 million, primarily due to increases of $14.0 million in personnel costs, $7.3 million in sales commission expense, $2.8 million in travel-related expenses, $2.8 million in professional fees, and $2.5 million in other variable compensation.
Europe gross profit included $59.5 million from the acquisition of ETANCO, which includes $13.6 million non-recurring fair-value adjustment for inventory costs as a result of purchase accounting. • Income from operations decreased $3.0 million, primarily due to $7.0 million in professional fees incurred prior to the acquisition of ETANCO.
Cost of sales in the prior year included a $13.6 million non-recurring fair-value adjustment for inventory costs as a result of purchase accounting with respect to the acquisition of ETANCO. • Income from operations increased $34.9 million , primarily due to higher gross profit and lower acquisition and integration costs.
Cash used in investing activities of $870.2 million during the year ended December 31, 2022, was mostly for the $805.4 million acquisition of ETANCO net of cash acquired, coupled with capital spending of $62.4 million, which was primarily used for machinery and equipment purchases and facility expansion projects.
Cash used in investing activities of $103.3 million during the year ended December 31, 2023, was mostly for capital spending of $88.8 million, which was primarily used for machinery and equipment purchases and facility expansion projects including a land purchase.
Cash provided by financing activities of $465.5 million during the year ended December 31, 2022, consisted primarily of $583.2 million in loan proceeds (net of principal payments) used for the acquisition of ETANCO, offset by $78.6 million for the repurchase of the Company’s common stock and $43.9 million used to pay cash dividends.
Cash used in financing activities of $199.0 million during the year ended December 31, 2023, consisted primarily of $98.7 million in loan principal payments, $50.0 million for the repurchase of the Company’s common stock and $45.2 million used to pay cash dividends.
Residential and commercial construction begins with the foundation, followed by the wall and the roof systems, and then the installation of our products, which flow into a project or a house according to these schedules. In prior years, our sales were heavily seasonal with operating results varying from quarter to quarter depending on weather conditions that could delay construction starts.
Our products are generally used in a sequential progression that follows the construction process. Residential and commercial construction begins with the foundation, followed by the wall and the roof systems, and then the installation of our products, which flow into a project or a house according to these schedules.
These investments reinforce our core business model differentiators to 29 remain the partner of choice as we continue to produce products locally and ensure superior levels of customer service. Facility investments have already started in 2022 with the announced expansion of the Columbus facility, expected to be completed in 2024 while additional facility expansions are being considered.
These investments reinforce our core business model differentiators to remain the partner of choice as we continue to produce products locally and ensure superior levels of customer service.
Our sales and income have historically been lower in the first and fourth quarters than in the second and third quarters of a fiscal year. Due to efforts in diversifying our global footprint, most notably with our acquisition of ETANCO, sales from our product line, customer base and customer purchases are becoming less seasonal.
Due to efforts in diversifying our global footprint with the acquisition of ETANCO and changing our path to market in the United States, sales from our product line, customer base and customer purchases are becoming less seasonal.
Administrative and All Other • General and administrative expense increased $14.2 million, primarily due to increases of $15.8 million in professional and legal fees and $0.6 million insurance related costs offset by decreases of $1.7 million in stock-based compensation expenses, $0.6 million in cash profit sharing expenses.
Administrative and All Other • General and administrative expense increased $4.4 million, primarily due to increases of $1.2 million in variable compensation, $1.0 million in personnel costs, and $1.0 million professional and legal fees.
Asia/Pacific • For information about the Company’s Asia/Pacific segment, please refer to the table above setting forth changes in our operating results for the years ended December 31, 2022 and 2021.
Prior year costs included a $13.6 million non-recurring fair-value adjustment for inventory costs as a result of purchase accounting with respect to the acquisition of ETANCO. Asia/Pacific • For information about the Company’s Asia/Pacific segment, please refer to the table above setting forth changes in our operating results for the years ended December 31, 2023 and 2022.
Net Sales The following table shows net sales by segment for the years ended December 31, 2021 and 2022, respectively: (in thousands) North America Europe Asia/ Pacific Total December 31, 2021 $ 1,362,941 $ 196,996 $ 13,280 $ 1,573,217 December 31, 2022 1,701,041 400,303 14,743 2,116,087 Increase $ 338,100 $ 203,307 $ 1,463 $ 542,870 Percentage increase 24.8 % 103.2 % 11.0 % 34.5 % The following table shows segment net sales as percentages of total net sales for the years ended December 31, 2021 and 2022, respectively: North America Europe Asia/ Pacific Total Percentage of total 2021 net sales 87 % 13 % — % 100 % Percentage of total 2022 net sales 80 % 19 % 1 % 100 % Gross Profit The following table shows gross profit by segment for the years ended December 31, 2021 and 2022, respectively: (in thousands) North America Europe Asia/ Pacific Admin & All Other Total December 31, 2021 $ 681,137 $ 69,164 $ 4,902 $ (173) $ 755,030 December 31, 2022 810,730 125,616 4,910 37 941,293 Increase $ 129,593 $ 56,452 $ 8 $ 210 $ 186,263 Percentage increase 19.0 % 81.6 % * * 24.7 % * The statistic is not meaningful or material.
Net Sales The following table shows net sales by segment for the years ended December 31, 2022 and 2023, respectively: (in thousands) North America Europe Asia/ Pacific Total December 31, 2022 $ 1,701,041 $ 400,303 $ 14,743 $ 2,116,087 December 31, 2023 1,716,422 480,756 16,625 2,213,803 Increase $ 15,381 $ 80,453 $ 1,882 $ 97,716 Percentage increase 0.9 % 20.1 % 12.8 % 4.6 % The following table shows segment net sales as percentages of total net sales for the years ended December 31, 2022 and 2023, respectively: North America Europe Asia/ Pacific Total Percentage of total 2022 net sales 80 % 19 % 1 % 100 % Percentage of total 2023 net sales 78 % 22 % — % 100 % Gross Profit The following table shows gross profit by segment for the years ended December 31, 2022 and 2023, respectively: (in thousands) North America Europe Asia/ Pacific Admin & All Other Total December 31, 2022 $ 810,730 $ 125,616 $ 4,910 $ 37 $ 941,293 December 31, 2023 862,557 177,048 5,679 (1,529) 1,043,755 Increase $ 51,827 $ 51,432 $ 769 $ (1,566) $ 102,462 Percentage increase 6.4 % 40.9 % * * 10.9 % * The statistic is not meaningful or material.
ETANCO will remain its own reporting unit until its integrated into our other European operations, and there are sufficient economic similarities between the ETANCO and the European reporting units. A qualitative assessment was performed immediately preceding the reporting unit change and determined that it was not more likely than not that any impairment existed prior to the reporting unit change.
As a result of this re-evaluation, all European reporting units were consolidated for reporting purposes into one overall Europe reporting unit. A qualitative assessment was performed immediately preceding the reporting unit change and determined that it was not more likely than not that any impairment existed prior to the reporting unit change.
Business Outlook Based on business trends and conditions, the Company's outlook for the full fiscal year ending December 31, 2023 is as follows: • Operating margin is estimated to be in the range of 18% to 20%. • Interest expense on the outstanding Revolving Credit Facility and Term Loans, which have borrowings of $150.0 million and $433.1 million as of December 31, 2022, respectively, is expected to be approximately $9.7 million, including the benefit from interest rate and cross currency swaps mitigating substantially all of the volatility from changes in interest rates. • The effective tax rate is estimated to be in the range of 25% to 26%, including both federal and state income tax rates and assuming no tax law changes are enacted. • Capital expenditures are estimated to be in the range of $90.0 million to $95.0 million including the expected spend of $22.0 million to $25.0 million on its previously announced Columbus, Ohio facility expansion, with the balance of that project to be spent in 2024. • The Company continues to work on integrating ETANCO into its operations.
Business Outlook Based on business trends and conditions, the Company's outlook for the full fiscal year ending December 31, 2024 is as follows: • Operating margin is estimated to be in the range of 20.0% to 21.5%, including $86.1 million in depreciation and amortization expense. • The effective tax rate is estimated to be in the range of 25.0% to 26.0%, including both federal and state income tax rates as well as international income tax rates, and assuming no tax law changes are enacted. • Capital expenditures are estimated to be approximately $200.0 million, which includes $120.0 million for the Columbus, Ohio facility expansion and the new Gallatin, Tennessee fastener facility construction, some of which may carry over to fiscal year 2025. 32 Results of Operations Our discussion of our results focuses on 2023 and 2022 and year-to-year comparisons between those periods.
Gross margins decreased to 44.5% from 48.0%, primarily due to higher material costs realized through cost of sales, and $13.6 million in non-recurring fair-value adjustments for inventory related to the acquisition of ETANCO.
Gross margins increased to 47.1% from 44.5%, primarily due to lower material costs. Cost of sales in the prior year period included a $13.6 million inventory fair-value adjustment as a result of purchase accounting with respect to the acquisition of ETANCO.
Our wood construction product sales increased 34.6% for the year ended December 31, 2022 compared to December 31, 2021 and our concrete construction product sales increased 33.9% over the same periods, for both, primarily due to product price increases throughout 2021 in an effort to offset rising raw material costs and partly due to increased volumes.
Our wood construction product sales decreased 0.9% for the year ended December 31, 2023 compared to December 31, 2022, primarily due to product price decreases implemented during the first quarter of 2023, partly offset by increased sales volumes.
General and administrative expense increased 18.3% to $228.5 million from $193.2 million, primarily due to increases of $12.7 million in depreciation and amortization, $9.5 million in personnel costs, $4.5 million in professional fees, $3.5 million of computer and software related costs, and $1.7 million in travel costs, partially offset by decreases of $2.6 million in stock-based compensation, and $1.9 million in cash profit sharing expense.
General and administrative expense increased 17.3% to $268.1 million from $228.5 million, primarily due to increases of $12.5 million in personnel costs, $7.6 million in depreciation and amortization, $6.0 million in variable compensation, and $1.6 million in travel costs. Our effective income tax rate increased to 25.7% from 25.5%. 34 Net income was $354.0 million compared to $334.0 million.
During 2021 and 2020, allocated expenses and management fees between the two segments were previously included in gross profit, operating expenses and in income from operations and have been adjusted herein to conform to the 2022 presentation. consolidated income from operations, income before tax and net income for all periods presented below are not affected by the change in presentation 31 The following table shows the change in the Company’s operations from 2021 to 2022, and the increases or decreases from the prior year, for each category by segment: Increase (Decrease) in Operating Segment North America Asia/ Pacific Admin & All Other (in thousands) 2021 Europe 2022 Net sales $ 1,573,217 $ 338,100 $ 203,307 $ 1,463 $ — $ 2,116,087 Cost of sales 818,187 208,507 146,855 1,455 (210) 1,174,794 Gross profit 755,030 $ 129,593 $ 56,452 $ 8 $ 210 941,293 Operating expenses: Research and development and other engineering expense 59,381 8,113 953 (92) (1) 68,354 Selling expense 135,004 16,418 17,647 296 13 169,378 General and administrative expense 193,176 (3,865) 24,682 230 14,245 228,468 Operating expenses 387,561 20,666 43,282 434 14,257 466,200 Net gain (loss) on disposal of assets (324) 97 (1,134) 44 — (1,317) Acquisition and integration related costs — — 17,343 — — 17,343 Income from operations 367,793 108,830 (3,039) (470) (14,047) 459,067 Interest expense, net and other (1,386) 1,784 (7,722) (172) (98) (7,594) Foreign exchange gain (loss) (7,858) (17,652) 1,050 841 20,211 (3,408) Income before income taxes 358,549 92,962 (9,711) 199 6,066 448,065 Provision for income taxes 92,102 24,575 (2,634) 850 (823) 114,070 Net income $ 266,447 $ 68,387 $ (7,077) $ (651) $ 6,889 $ 333,995 Net Sales increased 34.5% to $2,116.1 million from $1,573.2 million primarily due to product price increases and the acquisition of ETANCO, which contributed $212.6 million in net sales, partly offset by the negative effect of $27.8 million in foreign currency translation related mostly to Europe's currencies weakening against the United States dollar.
Consolidated income from operations, income before tax and net income for all periods presented below are not affected by the change in presentation 33 The following table shows the change in the Company’s operations from 2022 to 2023, and the increases or decreases from the prior year, for each category by segment: Increase (Decrease) in Operating Segment North America Asia/ Pacific Admin & All Other (in thousands) 2022 Europe 2023 Net sales $ 2,116,087 $ 15,381 $ 80,453 $ 1,882 $ — $ 2,213,803 Cost of sales 1,174,794 (36,446) 29,021 1,113 1,566 1,170,048 Gross profit 941,293 51,827 51,432 769 (1,566) 1,043,755 Operating expenses: Research and development and other engineering expense 68,354 21,905 2,057 (149) — 92,167 Selling expense 169,378 23,634 10,681 302 (15) 203,980 General and administrative expense 228,468 18,892 15,621 767 4,355 268,103 Operating expenses 466,200 64,431 28,359 920 4,340 564,250 Net gain (loss) on disposal of assets (1,317) 66 908 39 28 (276) Acquisition and integration related costs 17,343 — (12,711) — — 4,632 Income from operations 459,067 (12,670) 34,876 (190) (5,934) 475,149 Interest income (expense), net and other financing costs (7,594) (639) (3,354) 239 14,739 3,391 Other & foreign exchange gain (loss), net (3,408) 4,729 2,306 (98) (5,522) (1,993) Income before taxes 448,065 (8,580) 33,828 (49) 3,283 476,547 Provision for income taxes 114,070 (2,815) 10,243 222 840 122,560 Net income $ 333,995 $ (5,765) $ 23,585 $ (271) $ 2,443 $ 353,987 Net Sales increased 4.6% to $2,213.8 million from $2,116.1 million primarily due to the acquisition and integration of ETANCO as well as the positive effect of $12.7 million in foreign currency translation related mostly to Europe's currencies weakening against the United States dollar.
Our effective income tax rate de creased to 25.5% from 25.7%. 32 Net income was $334.0 million compared to $266.4 million. Diluted net income per share of common stock was $7.76 compared to $6.12.
Diluted net income per share of common stock was $8.26 compared to $7.76.
Research and development and other engineering expense increased 15.1% to $68.4 million from $59.4 million, primarily due to increases of $7.4 million in personnel costs, $1.1 million in professional fees, and $0.9 million in travel costs, partially offset by a decrease of $0.8 million in cash profit sharing expense.
Research and development and other engineering expense increased 34.8% to $92.2 million from $68.4 million, primarily due increased personnel costs of $11.7 million and professional fees of $5.7 million associated with our strategic growth initiatives and to further our Building Technologies offering, $3.2 million in variable compensation, and $1.2 million in depreciation and amortization.
Operating income was negatively impacted by higher operating expenses with $48.7 million attributable to ETANCO including $12.9 million in amortization costs for acquired intangibles, the $13.6 million in non-recurring fair-value adjustments noted above and acquisition and integration costs of $17.3 million.
Operating income in the prior period was negatively impacted by the $13.6 million in non-recurring fair-value adjustments noted above and $12.7 million in higher acquisition and integration costs. Fiscal 2024 operating margins will include anticipated integration costs estimated to range between $4.0 million to $5.0 million. Our Asia/Pacific segment has generated revenues from both wood and concrete construction products.
Gross profit increased $56.5 million due to the acquisition of ETANCO while gross margins decreased mostly due to ETANCO having a lower gross margin profile, and $13.6 million in non-recurring fair-value adjustments to increase the fair value of acquired inventory as a result of purchase accounting related to the acquisition of ETANCO.
Gross profit increased $51.4 million primarily due to the acquisition of ETANCO as well as due to lower material costs. Cost of sales in the prior year period included a $13.6 million inventory fair-value adjustment as a result of purchase accounting with respect to the acquisition of ETANCO. Operating income increased $34.9 million, primarily due to ETANCO.
Risk Factors." Overview We design, manufacture and sell building construction products that are of high quality and performance, easy to use and cost-effective for customers. We operate in three business segments determined by geographic region: North America, Europe and Asia/Pacific.
We do not intend our use or display of other companies’ trade names or trademarks to imply an endorsement or sponsorship of us by such companies, or any relationship with any of these companies. Overview We design, manufacture and sell building construction products that are of high quality and performance, easy to use and cost-effective for customers.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes that appear in this Annual Report.
This discussion should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and notes thereto included in this report. “Strong-Tie” and our other trademarks appearing in this report are our property. This report contains additional trade names and trademarks of other companies.
If the Company had not acquired ETANCO, Europe net sales would have declined by $23.5 million as a result of foreign currency translation due to a strengthened United States dollar, and lower sales volumes. Wood construction product sales increased 101.1% for the year ended December 31, 2022 compared to December 31, 2021 with ETANCO contributing $170.3 million.
Europe sales increased 20.1% for the year ended December 31, 2023 compared to December 31, 2022, primarily due to ETANCO as well as the positive effect of $12.7 million in foreign currency translation related mostly to Europe's currencies strengthening against the United States dollar.
During fiscal year 2022, we revised our European reporting units due to the acquisition of ETANCO and changes to the management, product distribution and operations structure of our legacy European operations. Subsequent to this change, all European reporting units, including the S&P Clever reporting unit, but excluding ETANCO, were consolidated for reporting purposes into one overall Europe reporting unit.
During fiscal year 2023, we re-evaluated our European reporting units after a full year of operations from our acquisition of ETANCO as it has become further integrated into our other European operations resulting in changes to the management, product distribution, and operations structure of our European operations.
Removed
In addition to historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and in this Annual Report, particularly in "Part I - Item 1A.
Added
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. Each of the terms the “Company,” “we,” “our,” “us” and similar terms used herein refer collectively to Simpson Manufacturing Co., Inc., a Delaware corporation, and its wholly-owned subsidiaries, including Simpson Strong-Tie Company Inc., unless otherwise stated.
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In 2021, we unveiled several key growth initiatives that we believe will help us continue our track record of achieving above market revenue growth through a combination of organic and inorganic opportunities. Our organic opportunities are focused on expansion into new markets within our core competencies of wood and concrete products.
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The Company regularly uses its website to post information regarding its business and governance. The Company encourages investors to use http://www.simpsonmfg.com as a source of information about the Company.
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These key growth initiatives will focus on the OEM, repair and remodel or do-it-yourself, mass timber, concrete and structural steel markets.
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The information on our website is not incorporated by reference into this report or other material we file with or furnish to the SEC, except as explicitly noted or as required by law. The following discussion and analysis provides information which management believes is relevant to an assessment and understanding of the Company’s consolidated financial condition and results of operations.
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Importantly, we currently have existing products, testing results, distribution and manufacturing capabilities for our key growth 27 initiatives.
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We operate in three business segments determined by geographic region: North America, Europe and Asia/Pacific. In 2021, we shared our strategy for continuing to achieve above market revenue growth through a combination of organic and inorganic opportunities.
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A few examples from 2022 were: • Acquired ETANCO which has resulted in additional scale for our legacy European operations, as well as the opportunity to realize synergies in those operations; • Realigned our sales teams to more specifically focus on five end use markets – Residential, Commercial, OEM, National Retail and Building Technology, which has led to new customer and project wins within five of our key growth initiatives; • We were awarded a structural steel opportunity In the Commercial market for a healthcare center in which our products will provide a means for bolted attachment of glass façades and temporary guard railings; • We were awarded a project in the mass timber OEM market for a four-story mixed use building for apartments and retail space; • Made strategic investments in building technology focused on creating solutions to help our customers be more efficient; • Achieved product fulfillment rate of 97% in North America; • Our North America sales volumes grew above housing starts; • Rolled out over 40 new products during 2022; and • Invested in venture capital funds and other companies focused on the home building industry and related new technologies.
Added
Our organic opportunities focused on expanding our product line with our current customers while also identifying new opportunities within our core competencies of wood and concrete products. These new growth opportunities focused on gaining share with OEM customers, DIY and construction contractors, and providing more solutions for mass timber, concrete and structural steel construction.
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Acquisition of ETANCO On April 1, 2022, the Company successfully completed the acquisition of ETANCO, a manufacturer of fixing and fastener products headquartered in France, for $805.4 million (730 million euros (1) ) net of cash. ETANCO's primary product applications directly align with the addressable markets in which the Company operates.
Added
A few recent examples include: • The acquisition and integration of ETANCO which has resulted in additional scale for our legacy European operations, as well as the opportunity to realize synergies in those operations; • Converted component manufacturers to using our truss software and purchasing our truss plate and connectors solution sets, including a major component manufacturer; • Our announced alliance with Structural Technologies drove record revenue of our concrete strengthening solutions, while our field support and strong industry relationships continued to drive specifications of our anchors, fasteners, cold-formed steel, and structural steel products on commercial projects; 30 • Expansion of our Outdoor Accents® decorative hardware, fasteners and anchors product lines, which contributed to our growth in the DIY or construction contractor segments of our national retail market; • Designed, manufactured, and installed many critical connections in the construction of a 112-foot wood building that was used for the world’s tallest shake table test; • Completed strategic asset acquisitions to accelerate the expansion of our product line to meet our customer needs; • Made strategic investments in software development critical to the component manufacturing market segment as well as other digital product offerings to support customers in our residential and national retail markets; • Achieved an industry-leading product fulfillment rate and increased our same day delivery service in North America; • Completed our path-to-market shift away from two-step distribution in North America, enabling us to sell our complete product line and drive additional market share gains; • Continued growing United States sales volumes above United States housing starts growth; • Rolled out over 50 new products during 2023 (a Company record); • Re-aligned our North America sales team to be customer market focused with the five groups: residential, commercial, OEM, national retail and component manufacturers; and • Invested in venture capital funds and other companies focused on the home building industry and related new technologies.
Removed
Leveraging ETANCO's leading market position in Europe, following the acquisition, the Company would expand its portfolio of solutions, including mechanical anchors, fasteners and commercial building envelope solutions, as well as significantly increase its market presence across Europe.
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We believe this progress is the result of our high service levels, increasingly diverse portfolio of products and software as well as our commitment to innovation and developing complete solutions for the markets we serve.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeForeign currency translation adjustments on our underlying assets and liabilities resulted in an accumulated other comprehensive loss of $20.7 million for the year ended December 31, 2022, due to the effects of the strengthening United States Dollar in relation to almost all other countries, The loss was offset by $32.3 million in accumulated other comprehensive gains from foreign currency forward contracts.
Biggest changeRefer to “Note 9 — Derivative Instruments” to the Company’s consolidated financial statements. Foreign currency translation adjustments on our underlying assets and liabilities resulted in an accumulated other comprehensive gain of $19.7 million for the year ended December 31, 2023, due to the effects of the strengthening United States Dollar in relation to almost all o ther countries.
Refer to Note 9, "Derivatives Instruments" to the Company’s consolidated financial statements, for further information on our interest rate swap contracts in effect as of December 31, 2022. Commodity Price Risk In the normal course of business, we are exposed to market risk related to our purchase of steel, a significant raw material upon which our manufacturing depends.
Refer to Note 9, "Derivatives Instruments" to the Company’s consolidated financial statements, for further information on our interest rate swap contracts in effect as of December 31, 2023. Commodity Price Risk In the normal course of business, we are exposed to market risk related to our purchase of steel, a significant raw material upon which our manufacturing depends.
We may manage our exposure to transactional exposures by entering into foreign currency forward contracts for forecasted transactions and projected cash flows for foreign currencies in future periods. In 2021 and 2022, we entered into financial 38 contracts at various times to hedge the risk of fluctuations associated with the Euro and the Chinese Yuan.
We may manage our exposure to transactional exposures by entering into foreign currency forward contracts for forecasted transactions and projected cash flows for foreign currencies in future periods. In 2022 and 2023, we entered into financial 40 contracts at various times to hedge the risk of fluctuations associated with the Euro and the Chinese Yuan.
As of December 31, 2022, the outstanding debt under the Amended and Restated Credit Agreement subject to interest rate fluctuations was $583.2 million. The variable interest rates on the Credit Agreement fluctuate and expose us to short-term changes in market interest rates as our interest obligation on this instrument is based on prevailing market interest rates.
As of December 31, 2023, the outstanding debt under the Amended and Restated Credit Agreement subject to interest rate fluctuations was $485.7 million. The variable interest rates on the Credit Agreement fluctuate and expose us to short-term changes in market interest rates as our interest obligation on this instrument is based on prevailing market interest rates.
While historically we have successfully mitigated these increased costs through the implementation of price increases, in the future we may not be able to successfully mitigate these costs, which could cause our operating margins to decline. 39
If the price of steel increases, our variable costs would also increase. While historically we have successfully mitigated these increased costs through the implementation of price increases, in the future we may not be able to successfully mitigate these costs, which could cause our operating margins to decline. 41
Refer to “Note 5 — Stockholders Equity” to the Company’s consolidated financial statements. Interest Rate Risk Our primary exposure to interest rate risk results from outstanding borrowings under the Amended and Restated Credit Agreement, which bears interest at variable rates.
The gain was partially offset by $25.7 million in accumulated other comprehensive losses from foreign currency forward contracts. Refer to “Note 5 — Stockholders Equity” to the Company’s consolidated financial statements. Interest Rate Risk Our primary exposure to interest rate risk results from outstanding borrowings under the Amended and Restated Credit Agreement, which bears interest at variable rates.
Steel cost started decreasing at the end of 2022 relative to the significant increases experienced in 2021 and 2020 due to the worldwide raw material shortage stemming from the COVID-19 pandemic . While steel is typically available from numerous suppliers, the price of steel is a commodity subject to fluctuations that apply across broad spectrums of the steel market.
Steel cost started decreasing at the end of 2022 with prices stabilizing by the end of 2023 . While steel is typically available from numerous suppliers, the price of steel is a commodity subject to fluctuations that apply across broad spectrums of the steel market. We do not use any derivative or hedging instruments to manage steel price risk.
Removed
Refer to “Note 9 — Derivative Instruments” to the Company’s consolidated financial statements.
Removed
We do not use any derivative or hedging instruments to manage steel price risk. If the price of steel increases, our variable costs would also increase.

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