SSD
#Thanks, <UNK>.
I'd like to begin by starting and congratulating <UNK> on his fantastic career at Simpson.
<UNK> joined the Company in 1978 and was instrumental in shaping and growing our business, including taking the company public in 1994.
He also greatly influenced our company culture, what we fondly call our secret sauce.
Barc often credited <UNK> for much of the Company's success and was quick to point out his many contributions and leadership.
<UNK> served as President for a number of years and in 1994 became CEO.
Since 2012 <UNK> has served on the Board of Directors as Chairman and most recently as Vice Chairman.
Thanks, <UNK>, we certainly appreciate all your no equal service to Simpson Strong-Tie.
In January we acquired CG Visions, an established Indiana based company providing BIM, technology services, and consultation to the U.S. residential building industry.
BIM stands for building information modeling.
This acquisition enabled Simpson Strong-Tie to build closer partnerships with builders by offering software and services to help them control their costs and increase efficiencies at all stages of the home building process, including design, estimation, selling, and construction.
CG Visions provides to a number of the top 100 U.S. mid-size to large production builders.
They provide services and consultation using open industry BIM platforms such as AutoCAD, REVIT and VERTEX BD.
They have also developed multiple software tools that simplify and enhance these platforms.
Additionally, we will look for opportunities to incorporate our products into these BIM packages and apply CG Visions' expertise to our existing and future software initiative.
We also acquired Gunnebo Fasteners AB, one of Europe's leading manufacturers of fastening solutions.
Headquartered in Gunnebo, Sweden.
Founded in 1764, Gunnebo Fastening Systems has specialized in design and manufacturing unique and innovative fastening solutions for structural application and corrosive environments.
Gunnebo Fastening Systems provides Simpson Strong-Tie with a complete line of European approved.
CE marked structural fasteners, unique fastening dimensioning software for wood applications, and Gunnebo teams' in-depth expertise in product development and testing.
As well as proficiency in fastener manufacturing, surface treatment, and painting.
The geographic footprint of Gunnebo and its great brand recognition enables us to develop and extend distribution in other Nordic countries.
We are continuing work on our manufacturing efficiency program and our SAP rollout and will give updates on these projects as the year progresses.
Truss sales, although small, were up 16% over 2015.
Our truss specialists continued to represent and ---+ our truss design and manufacturing software and are working on converting additional customers in 2017.
As a reminder our current future set allows us the approach about one third of the U.S. market.
I'd now like to turn the call over to <UNK> who shares some additional financial information.
Thanks, <UNK>.
The gross margin on wood increased to 48% up from 45% last Q4 and the concrete products increased to 32% up from 29% last Q4, both on increased sales.
The wood product gross margin also benefited from the price increase I mentioned earlier.
Those factors led to a Q4 2016 consolidated gross margin of 47%, up from Q4 last year of 45%.
As noted in the press release, we believe the estimated consolidated gross margin will be in the 46.5% to 47.5% range for 2017.
Total operating expenses of R&D, engineering, selling and ADMIN, as a percent of sales, were up about 160 basis points in the quarter compared to last year as the company had increased legal and professional fees, as the company works to deliver on its long-term strategic initiatives, as well as the other items noted in the press release.
Also cash profit sharing on higher operating income and other personnel costs contributed.
Regarding taxes, the tax rate of 33% for this Q4 is down from 34% last Q4 primarily related to lower foreign losses and a tax law change in the U.S. related to foreign currency translation of foreign branches.
Those were offset by the R&D tax credit, which was made permanent at the end of 2015, but was recognized throughout the quarters of 2016.
We believe the annual effective of tax rate for 2017 will be between 36% and 37% based on current information.
Q4 2016 CapEx was $12.1 million, primarily for improvement from the new chemical facility that we announced last year, as well as our Texas facility expansion.
We've also invested in manufacturing equipment and software development.
Total 2016 CapEx is approximately $42 million.
For 2017, depreciation and amortization expense was expected to be between $30 million and $32 million.
Depreciation is at $25 million to $27 million.
2017 CapEx is expected to be in the range of $50 million to $55 million and includes finishing the two facilities noted earlier and assumes all projects are completed by the year 2017.
Before we turn it over to questions, I'd like to remind you that if you'd like further information, please contact <UNK> at the phone number listed on the press release.
Also look for our annual report on form 10-K to be filed at the end of February.
We'd like to now open it up to your questions.
Hi, Dan, it's <UNK>.
As we noted, we had spent some professional fees in relation to the acquisitions of due diligence and attorneys and other advisors.
Those are deal-specific.
But as we've noted and we've got a strategic initiative to grow in certain areas, so although I can't predict if and when those will repeat, I would expect that as we continue to look for those opportunities that we would have some of those.
As we noted, we had some software project write-offs in the year.
I wouldn't expect those to repeat.
And we've done some work around shareholder engagement and some of the efforts that resulted from that.
So working with advisors on compensation programs, governance, and, you know, I don't know how much of that would repeat.
But hard to predict.
Decreases of $4.2 million and I don't have a precise number on the shareholder engagement numbers.
Yes.
Why don't you take the revenue ---+.
Yes.
Let me give you a ---+ while <UNK> is looking up the integration.
So the interesting thing about Gunnebo, I think if you looked at them, they got the got the same product line that we currently have at Simpson.
They are a manufacturer of nails and screws.
Currently they buy their connector line from one of our competitors in Sweden.
Sweden and Norway are interesting because they build with wood a residential house, very similar to how we build in the U.S. So it's a great market for more use of our connectors and our fasteners and the Gunnebo name, obviously, is very well-known in the Swedish and Norway markets.
So we are looking to be able to take their expertise in fasteners and bring that fasteners into France and Germany, the UK and our other European locations while taking our connector line and really expanding that connector business in Sweden and Norway.
Certainly there is some work to do on the integration.
We have not only our European Director, but also our lead person of fasteners helping out on this integration and we think within a couple years, two to three years, that we'll see some pretty positive results from that acquisition, again, expanding our connector line in Sweden and Norway, which we have a very small percentage of today and also expanding that fastener line through our sets through the rest of Europe.
And, Dan, this is <UNK>, on the integration costs, I would say for 2017, it would be about $1 million, $2 million.
We don't have those yet.
As you saw in the press release, we had some management supplied reports of some cooperating income.
But with the purchase accounting and the amortization of intangibles or the like, too early to tell at this point.
There will be some expenses associated with purchase accounting acquired intangible assets.
But we don't have those yet.
No.
On CG Visions, it's really their technical expertise with our relationships that we currently have with all those builders, both large and mid-size builders.
So it's really working on that introduction and, of course, getting our products into some of those BIM models.
But we don't see a lot of additional costs associated with that.
Good morning, <UNK>.
Well, I think a couple interesting points, you know, Q4 we did have a price increase that went into effect December first and that tends to accelerate a little bit of the purchases as some of our customers sort of beat that price increase.
As we look at first quarter, we certainly had a very dry first quarter and as it's pouring down rain here currently, certainly I think January was one of the wettest months, at least in the California history in quite a long time.
So I think it's going to be a difficult, as you mentioned last year was a fairly mild winter, the grounds are fairly saturated here, at least on the west coast and unless you've got your foundations in, you would have a very difficult time right now even trying to dig for a foundation.
So I think your point is very accurate that it's going to be a pretty tough comparison in Q1 versus last year's Q1.
Yes.
The impact in Q4 was $2 million on the price increase.
We always try and put the price increase, obviously, to help us offset the impact of the increase steel.
But as you can imagine, it's kind of a staggered process on how those increases are accepted.
So we'll get a little bit better feel on how that filters out here probably in Q1.
And I think as you see in the reports, we still have steel I would say kind of unstable as we look at what's going on in the steel industry.
So we watch it very carefully, but we do put in what we think will cover the steel increase and again, it's staggered the way those price increases are accepted.
Yes, I think we're in good shape on all of our business units to be able to take advantage of increased revenue with not additional need for both either people or code reports or any of the other locations that happen from an operating expense.
So I think we would anticipate that we should not be adding operating expenses to cover additional sales.
Hi, <UNK>, it's <UNK>.
So no, I wouldn't expect that to continue in future quarters.
We had a couple of projects that we had been working on over the last couple of years and decided to and basically discontinue those projects and write off the capitalized portion of the software development, the internal software development or external software development cost.
So I wouldn't expect those to recur.
Thanks, <UNK>.
Thanks, everybody.
Appreciate your time.
Thank you.
