**UNITEDSTATES**

**SECURITIESAND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

 

**FORM 10-Q**

 

**(Mark One)**

 
| **x** | **QUARTERLY  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE  ACT OF 1934** |
|-------|---------------------------------------------------------------------------------------------------------|

 

**For the quarterly period ended:  September 30,2009**

** **

**OR**

 
| **o** | **TRANSITION  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE  ACT OF 1934** |
|-------|----------------------------------------------------------------------------------------------------------|

 

**For thetransition period from           to**

 

**Commission file number:  1-13429**

 

**Simpson Manufacturing Co., Inc.**

(Exact name of registrant as specified in its charter)

 

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

** **

**5956 W. Las Positas Blvd., Pleasanton, CA 94588**

(Address of principal executive offices)

 

(Registrant’s telephone number, including areacode):  **(925)560-9000**

 

Indicate by checkmark whether the registrant (1) has filed all reports required to be filedby Section 13 or 15(d) of the Securities Exchange Act of 1934 duringthe preceding 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days. Yes x No o

 

Indicate by checkmark whether the registrant has submitted electronically and posted on itscorporate Web site, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 ofthis chapter) during the preceding 12 months (or for such shorter period thatthe registrant was required to submit and post such files).Yes o No o

 

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer,a non-accelerated filer, or a smaller reporting company. See the definitions of“large accelerated filer,” “accelerated filer” and “smaller reporting company”in Rule 12b-2 of the Exchange Act.

 

| Large  accelerated filer x                |   | Accelerated  filer o         |
|------------------------------------------------|--------|-----------------------------------|
|                                           |   |                              |
| Non-accelerated  filer o                  |   | Smaller  reporting company o |
| (Do  not check if a smaller reporting company) |   |                              |

 

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2of the Exchange Act). Yes o No x

 

The number ofshares of the registrant’s common stock outstanding as of September 30,2009:  49,302,460

 

 

 

----

 

PART I — FINANCIAL INFORMATION

 

**Item 1. Financial Statements.**

 

**Simpson Manufacturing Co., Inc.and Subsidiaries**

**Condensed Consolidated BalanceSheets**

*(In thousands, unaudited)*

 
| ** **                                       | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
|--------------------------------------------------|------------|------------------------|------------|-----------------------|------------|
| ** **                                       | ** ** | **2009**               | ** ** | **2008**              | ** ** | **2008** | ** ** |
|                                             |       |                   |       |                  |       |   |   |
| **ASSETS**                                       |       |                   |       |                  |       |   |   |
| Current assets                                   |       |                   |       |                  |       |   |   |
| Cash and cash equivalents                        |       | $                      | 220,139    |                  | $          | 163,857 |   | $ | 170,750 |   |
| Trade accounts receivable, net                   |       | 108,005                |       | 125,875               |       | 76,005 |   |
| Inventories                                      |       | 178,237                |       | 251,647               |       | 251,878 |   |
| Deferred income taxes                            |       | 13,888                 |       | 11,745                |       | 11,995 |   |
| Assets held for sale                             |       | 7,887                  |       | 8,429                 |       | 8,387 |   |
| Other current assets                             |       | 10,899                 |       | 7,191                 |       | 8,582 |   |
| Total current assets                             |       | 539,055                |       | 568,744               |       | 527,597 |   |
|                                             |       |                   |       |                  |       |   |   |
| Property, plant and equipment, net               |       | 191,326                |       | 195,062               |       | 193,318 |   |
| Goodwill                                         |       | 81,289                 |       | 75,799                |       | 68,619 |   |
| Intangible assets, net                           |       | 31,885                 |       | 22,376                |       | 23,453 |   |
| Equity method investment                         |       | —                 |       | —                |       | 214 |   |
| Other noncurrent assets                          |       | 13,614                 |       | 16,720                |       | 16,999 |   |
| Total assets                                     |       | $                      | 857,169    |                  | $          | 878,701 |   | $ | 830,200 |   |
|                                             |       |                   |       |                  |       |   |   |
| **LIABILITIES  AND STOCKHOLDERS’ EQUITY**   |       |                   |       |                  |       |   |   |
| Current liabilities                              |       |                   |       |                  |       |   |   |
| Line of credit                                   |       | $                      | 29         |                  | $          | 629 |   | $ | 26 |   |
| Trade accounts payable                           |       | 29,638                 |       | 46,113                |       | 21,675 |   |
| Accrued liabilities                              |       | 31,654                 |       | 39,835                |       | 34,102 |   |
| Income taxes payable                             |       | 1,189                  |       | 3,593                 |       | — |   |
| Accrued profit sharing trust contributions       |       | 5,436                  |       | 7,603                 |       | 9,541 |   |
| Accrued cash profit sharing and commissions      |       | 5,620                  |       | 10,313                |       | 2,264 |   |
| Accrued workers’ compensation               |       | 4,276                  |       | 4,116                 |       | 4,286 |   |
| Total current liabilities                        |       | 77,842                 |       | 112,202               |       | 71,894 |   |
|                                             |       |                   |       |                  |       |   |   |
| Long-term liabilities                            |       | 9,019                  |       | 10,607                |       | 9,280 |   |
| Total liabilities                                |       | 86,861                 |       | 122,809               |       | 81,174 |   |
|                                             |       |                   |       |                  |       |   |   |
| Commitments and contingencies (Note 8)           |       |                   |       |                  |       |   |   |
|                                             |       |                   |       |                  |       |   |   |
| Stockholders’ equity                        |       |                   |       |                  |       |   |   |
| Common stock, at par value                       |       | 493                    |       | 486                   |       | 490 |   |
| Additional paid-in capital                       |       | 144,199                |       | 130,032               |       | 136,867 |   |
| Retained earnings                                |       | 606,251                |       | 609,010               |       | 605,950 |   |
| Accumulated other comprehensive income           |       | 19,365                 |       | 16,364                |       | 5,719 |   |
| Total stockholders’ equity                  |       | 770,308                |       | 755,892               |       | 749,026 |   |
| Total  liabilities and stockholders’ equity |       | $                      | 857,169    |                  | $          | 878,701 |   | $ | 830,200 |   |

 

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

 

2

----

 

**Simpson Manufacturing Co., Inc.and Subsidiaries**

**Condensed Consolidated Statementsof Operations**

*(In thousands except per-share amounts, unaudited)*

 
| ** **                                     | ** ** | **Three Months Ended** | ** ** | **Nine Months Ended**  | ** ** |
|------------------------------------------------|------------|------------------------|------------|------------------------|------------|
| ** **                                     | ** ** | **September 30,** | ** ** | **September 30,** | ** ** |
| ** **                                     | ** ** | **2008**               | ** ** | **2009**               | ** ** | **2009** | ** ** | **2008** | ** ** |
|                                           |       |                   |       |                   |       |   |   |   |   |
| Net sales                                      |       | $                      | 167,200    |                   | $          | 219,823 |   | $ | 452,446 |   | $ | 606,742 |   |
| Cost of sales                                  |       | 106,299                |       | 130,143                |       | 299,594 |   | 376,939 |   |
| Gross profit                                   |       | 60,901                 |       | 89,680                 |       | 152,852 |   | 229,803 |   |
|                                           |       |                   |       |                   |       |   |   |   |   |
| Operating expenses:                            |       |                   |       |                   |       |   |   |   |   |
| Research and development and other engineering |       | 4,971                  |       | 5,662                  |       | 14,997 |   | 16,375 |   |
| Selling                                        |       | 15,563                 |       | 21,323                 |       | 48,440 |   | 63,264 |   |
| General and administrative                     |       | 19,351                 |       | 25,514                 |       | 59,828 |   | 67,155 |   |
|                                           |       | 39,885                 |       | 52,499                 |       | 123,265 |   | 146,794 |   |
|                                           |       |                   |       |                   |       |   |   |   |   |
| Income from operations                         |       | 21,016                 |       | 37,181                 |       | 29,587 |   | 83,009 |   |
|                                           |       |                   |       |                   |       |   |   |   |   |
| Loss in equity method investment, before tax   |       | —                 |       | —                 |       | (214 | ) | — |   |
| Interest income, net                           |       | —                 |       | 579                    |       | 64 |   | 2,213 |   |
|                                           |       |                   |       |                   |       |   |   |   |   |
| Income before income taxes                     |       | 21,016                 |       | 37,760                 |       | 29,437 |   | 85,222 |   |
|                                           |       |                   |       |                   |       |   |   |   |   |
| Provision for income taxes                     |       | 8,258                  |       | 14,398                 |       | 14,405 |   | 33,126 |   |
|                                           |       |                   |       |                   |       |   |   |   |   |
| Net income                                     |       | $                      | 12,758     |                   | $          | 23,362 |   | $ | 15,032 |   | $ | 52,096 |   |
|                                           |       |                   |       |                   |       |   |   |   |   |
| Net income per common share                    |       |                   |       |                   |       |   |   |   |   |
| Basic                                          |       | $                      | 0.26       |                   | $          | 0.48 |   | $ | 0.31 |   | $ | 1.07 |   |
| Diluted                                        |       | $                      | 0.26       |                   | $          | 0.48 |   | $ | 0.31 |   | $ | 1.06 |   |
|                                           |       |                   |       |                   |       |   |   |   |   |
| Cash dividends declared per common share       |       | $                      | 0.10       |                   | $          | 0.10 |   | $ | 0.30 |   | $ | 0.30 |   |
|                                           |       |                   |       |                   |       |   |   |   |   |
| Number of shares outstanding                   |       |                   |       |                   |       |   |   |   |   |
| Basic                                          |       | 49,195                 |       | 48,612                 |       | 49,066 |   | 48,593 |   |
| Diluted                                        |       | 49,355                 |       | 48,946                 |       | 49,185 |   | 48,939 |   |

 

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

 

3

----

 

**Simpson Manufacturing Co., Inc. and Subsidiaries**

**Condensed**Consolidated Statements ofStockholders’ Equity

**for thenine months ended September 30, 2008 and 2009, and three months ended December 31,2008**

*(In thousands except per-share amounts, unaudited)*

 
| ** **                                                | ** ** | ** **       | ** ** | ** **     | ** ** | ** **     | ** ** | ** **        | ** ** | **Accumulated**    | ** ** | ** ** | ** ** |
|-----------------------------------------------------------|------------|------------------|------------|----------------|------------|----------------|------------|-------------------|------------|--------------------|------------|------------|------------|
| ** **                                                | ** ** | ** **       | ** ** | ** **     | ** ** | **Additional** | ** ** | ** **        | ** ** | **Other**          | ** ** | ** ** | ** ** |
| ** **                                                | ** ** | **Common Stock** | ** ** | **Paid-in**    | ** ** | **Retained**   | ** ** | **Comprehensive** | ** ** | ** **         | ** ** |
| ** **                                                | ** ** | **Shares**       | ** ** | **Par  Value** | ** ** | **Capital**    | ** ** | **Earnings**      | ** ** | **Income  (Loss)** | ** ** | **Total**  | ** ** |
| Balance, January 1, 2008                             |       | 48,552           |       | $              | 485        |           | $          | 126,119           |       | $                  | 571,499    |       | $          | 25,297 |   | $ | 723,400 |   |
| Comprehensive income:                                     |       |             |       |           |       |           |       |              |       |               |       |       |       |
| Net income                                                |       | —           |       | —         |       | —         |       | 52,096            |       | —             |       | 52,096     |       |
| Other comprehensive income:                               |       |             |       |           |       |           |       |              |       |               |       |       |       |
| Translation adjustment, netof tax of $(317)               |       | —           |       | —         |       | —         |       | —            |       | (8,933             | )          | (8,933     | )          |
| Comprehensive income                                      |       |             |       |           |       |           |       |              |       |               |       | 43,163     |       |
| Stock options exercised                                   |       | 75               |       | 1              |       | 1,380          |       | —            |       | —             |       | 1,381      |       |
| Stock compensation                                        |       | —           |       | —         |       | 2,309          |       | —            |       | —             |       | 2,309      |       |
| Tax benefit of options exercised                          |       | —           |       | —         |       | (23            | )          | —            |       | —             |       | (23        | )          |
| Cash dividends declared on common stock, $0.30 per  share |       | —           |       | —         |       | —         |       | (14,585           | )          | —             |       | (14,585    | )          |
| Common stock issued at $26.59per share for stock bonus    |       | 9                |       | —         |       | 247            |       | —            |       | —             |       | 247        |       |
| Balance, September 30, 2008                          |       | 48,636           |       | 486            |       | 130,032        |       | 609,010           |       | 16,364             |       | 755,892    |       |
| Comprehensive income:                                     |       |             |       |           |       |           |       |              |       |               |       |       |       |
| Net income                                                |       | —           |       | —         |       | —         |       | 1,838             |       | —             |       | 1,838      |       |
| Other comprehensive income:                               |       |             |       |           |       |           |       |              |       |               |       |       |       |
| Translation adjustment, netof tax of $395                 |       | —           |       | —         |       | —         |       | —            |       | (10,645            | )          | (10,645    | )          |
| Comprehensive income                                      |       |             |       |           |       |           |       |              |       |               |       | (8,807     | )          |
| Stock options exercised                                   |       | 335              |       | 4              |       | 5,496          |       | —            |       | —             |       | 5,500      |       |
| Stock compensation                                        |       | —           |       | —         |       | 940            |       | —            |       | —             |       | 940        |       |
| Tax benefit of options exercised                          |       | —           |       | —         |       | 399            |       | —            |       | —             |       | 399        |       |
| Cash dividends declared oncommon stock, $0.10 per  share  |       | —           |       | —         |       | —         |       | (4,898            | )          | —             |       | (4,898     | )          |
| Balance, December 31, 2008                           |       | 48,971           |       | 490            |       | 136,867        |       | 605,950           |       | 5,719              |       | 749,026    |       |
| Comprehensive income:                                     |       |             |       |           |       |           |       |              |       |               |       |       |       |
| Net income                                                |       | —           |       | —         |       | —         |       | 15,032            |       | —             |       | 15,032     |       |
| Other comprehensive income:                               |       |             |       |           |       |           |       |              |       |               |       |       |       |
| Translation adjustment, netof tax of ($33)                |       | —           |       | —         |       | —         |       | —            |       | 13,646             |       | 13,646     |       |
| Comprehensive income                                      |       |             |       |           |       |           |       |              |       |               |       | 28,678     |       |
| Stock options exercised                                   |       | 321              |       | 3              |       | 6,351          |       | —            |       | —             |       | 6,354      |       |
| Stock compensation                                        |       | —           |       | —         |       | 1,176          |       | —            |       | —             |       | 1,176      |       |
| Tax benefit of options exercised                          |       | —           |       | —         |       | (495           | )          | —            |       | —             |       | (495       | )          |
| Cash dividends declared oncommon stock, $0.30 per  share  |       | —           |       | —         |       | —         |       | (14,731           | )          | —             |       | (14,731    | )          |
| Common stock issued at $27.76per share for stock bonus    |       | 10               |       | —         |       | 300            |       | —            |       | —             |       | 300        |       |
| Balance, September 30, 2009                          |       | 49,302           |       | $              | 493        |           | $          | 144,199           |       | $                  | 606,251    |       | $          | 19,365 |   | $ | 770,308 |   |

 

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

 

4

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**Simpson Manufacturing Co., Inc.and Subsidiaries**

**Condensed Consolidated Statements of Cash Flows**

*(In thousands, unaudited)*

 
| ** **                                                                         | ** ** | **Nine Months**              | ** ** |
|------------------------------------------------------------------------------------|------------|------------------------------|------------|
| ** **                                                                         | ** ** | **Ended September 30,** | ** ** |
| ** **                                                                         | ** ** | **2009**                     | ** ** | **2008** | ** ** |
| **Cash flows from operating activities**                                           |       |                         |       |   |   |
| Net  income                                                                        |       | $                            | 15,032     |   | $ | 52,096 |   |
| Adjustments  to reconcile net income to net cash provided by operating activities: |       |                         |       |   |   |
| (Gain)  loss on sale of assets                                                     |       | 236                          |       | (58 | ) |
| Depreciation  and amortization                                                     |       | 22,093                       |       | 22,634 |   |
| Deferred  income taxes                                                             |       | (1,597                       | )          | (505 | ) |
| Noncash  compensation related to stock plans                                       |       | 1,554                        |       | 2,715 |   |
| Loss  in equity method investment                                                  |       | 214                          |       | — |   |
| Excess  tax benefit of options exercised                                           |       | (283                         | )          | (118 | ) |
| Provision  for doubtful accounts                                                   |       | 456                          |       | 7 |   |
| Provision  for obsolete inventory                                                  |       | 788                          |       | — |   |
| Changes  in operating assets and liabilities, net of effects of acquisitions:      |       |                         |       |   |   |
| Trade  accounts receivable                                                         |       | (27,552                      | )          | (36,078 | ) |
| Inventories                                                                        |       | 77,883                       |       | (27,616 | ) |
| Trade  accounts payable                                                            |       | 6,182                        |       | 15,679 |   |
| Income  taxes payable                                                              |       | 2,929                        |       | 6,206 |   |
| Accrued  profit sharing trust contributions                                        |       | (4,178                       | )          | (991 | ) |
| Accrued  cash profit sharing and commissions                                       |       | 3,279                        |       | 6,223 |   |
| Other  current assets                                                              |       | (4,628                       | )          | (858 | ) |
| Accrued  liabilities                                                               |       | (4,345                       | )          | (454 | ) |
| Other  long-term liabilities                                                       |       | 2,529                        |       | 631 |   |
| Accrued  workers’ compensation                                                |       | (11                          | )          | — |   |
| Other  noncurrent assets                                                           |       | (1,844                       | )          | (2,931 | ) |
| Net  cash provided by operating activities                                         |       | 88,737                       |       | 36,582 |   |
| ** **                                                                         | ** ** | ** **                   | ** ** | ** ** | ** ** |
| **Cash flows from investing activities**                                           |       |                         |       |   |   |
| Capital  expenditures                                                              |       | (12,452                      | )          | (10,326 | ) |
| Proceeds  from sale of capital assets                                              |       | 930                          |       | 2,674 |   |
| Asset  acquisitions, net of cash acquired                                          |       | (23,670                      | )          | (34,028 | ) |
| Net cash  used in investing activities                                             |       | (35,192                      | )          | (41,680 | ) |
|                                                                               |       |                         |       |   |   |
| **Cash flows from financing activities**                                           |       |                         |       |   |   |
| Line  of credit borrowings                                                         |       | 1,527                        |       | 3,695 |   |
| Repayment  of debt and line of credit borrowings                                   |       | (1,527                       | )          | (4,101 | ) |
| Issuance  of common stock                                                          |       | 6,354                        |       | 1,381 |   |
| Excess  tax benefit of options exercised                                           |       | 283                          |       | 118 |   |
| Dividends  paid                                                                    |       | (14,702                      | )          | (14,576 | ) |
| Net  cash used in financing activities                                             |       | (8,065                       | )          | (13,483 | ) |
|                                                                               |       |                         |       |   |   |
| Effect  of exchange rate changes on cash                                           |       | 3,909                        |       | (3,704 | ) |
|                                                                               |       |                         |       |   |   |
| Net  increase (decrease) in cash and cash equivalents                              |       | 49,389                       |       | (22,285 | ) |
| Cash  and cash equivalents at beginning of period                                  |       | 170,750                      |       | 186,142 |   |
| Cash  and cash equivalents at end of period                                        |       | $                            | 220,139    |   | $ | 163,857 |   |
|                                                                               |       |                         |       |   |   |
| **Noncash activity during the period**                                             |       |                         |       |   |   |
| Noncash  capital expenditures                                                      |       | $                            | —     |   | $ | 135 |   |
| Dividends  declared but not paid                                                   |       | $                            | 4,919      |   | $ | 4,863 |   |
| Issuance  of Company’s common stock for compensation                          |       | $                            | 300        |   | $ | 247 |   |
| Noncash  asset acquisition                                                         |       | $                            | —     |   | $ | 1,457 |   |

 

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

 

5

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** **

**Simpson Manufacturing Co., Inc. andSubsidiaries**

**Notes to Condensed Consolidated FinancialStatements**

**(Unaudited)**

 

1.             Basis of Presentation

 

### ***Principles ofConsolidation***

### ** **

The consolidatedfinancial statements include the accounts of Simpson Manufacturing Co., Inc.and its subsidiaries (the “Company”). Investments in 50% or less ownedaffiliates are accounted for using either cost or the equity method. Allsignificant intercompany transactions have been eliminated.

 

*Interim Period Reporting*

 

The accompanyingunaudited interim condensed consolidated financial statements have beenprepared pursuant to the rules and regulations for reporting on Form 10-Q.Accordingly, certain information and footnotes required by accountingprinciples generally accepted in the United States of America (“GAAP”) havebeen condensed or omitted. These interim statements should be read inconjunction with the consolidated financial statements and the notes theretoincluded in the Company’s Annual Report on Form 10-K for the fiscal yearended December 31, 2008 (the “2008 Annual Report”).

 

The unaudited quarterlycondensed consolidated financial statements have been prepared on the samebasis as the audited annual consolidated financial statements and, in theopinion of management, contain all adjustments (consisting of only normalrecurring adjustments) necessary to state fairly the financial information setforth therein, in accordance with GAAP. The year-end condensed consolidatedbalance sheet data were derived from audited financial statements, but do notinclude all disclosures required by GAAP. The Company’s quarterly resultsfluctuate. As a result, the Company believes the results of operations for theinterim periods are not necessarily indicative of the results to be expectedfor any future period.

 

*Subsequent Events*

 

The Company has evaluated thefinancial statements for subsequent events through November 6, 2009, thedate of the filing of this Form 10-Q. See Note 11 “Subsequent Events.”

 

*Revenue Recognition*

 

The Company recognizes revenue whenthe earnings process is complete, net of applicable provision for discounts,returns and incentives, whether actual or estimated based on the Company’sexperience. This generally occurs when products are shipped to the customer inaccordance with the sales agreement or purchase order, ownership and risk ofloss pass to the customer, collectibility is reasonably assured and pricing isfixed or determinable. The Company’s general shipping terms are F.O.B. shippingpoint, where title is transferred and revenue is recognized when the productsare shipped to customers. When the Company sells F.O.B. destination point,title is transferred and the Company recognizes revenue on delivery or customeracceptance, depending on terms of the sales agreement. Service sales,representing after-market repair and maintenance, engineering activities andsoftware sales and service, though significantly less than 1% of net sales andnot material to the consolidated financial statements, are recognized as theservices are completed or the software products and services are delivered. Ifactual costs of sales returns, incentives and discounts were to significantlyexceed the recorded estimated allowance, the Company’s sales would be adverselyaffected.

 

*Net Income Per Common Share*

 

Basic net incomeper common share is computed based on the weighted average number of commonshares outstanding. Potentially dilutive securities, using the treasury stockmethod, are included in the diluted per-share calculations for all periods whenthe effect of their inclusion is dilutive.

 

6

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The following is areconciliation of basic earnings per share (“EPS”), to diluted EPS:

 
| ** **                               | ** ** | **Three Months Ended,**     | ** ** | **Three Months Ended,**     | ** ** |
|------------------------------------------|------------|-----------------------------|------------|-----------------------------|------------|
| ** **                               | ** ** | **September 30, 2009** | ** ** | **September 30, 2008** | ** ** |
| **(in thousands, except**                | ** ** | ** **                  | ** ** | ** **                  | ** ** | **Per** | ** ** | ** ** | ** ** | ** ** | ** ** | **Per** | ** ** |
| **per-share amounts)**                   | ** ** | **Income**                  | ** ** | **Share**                   | ** ** | **Shares** | ** ** | **Income** | ** ** | **Shares** | ** ** | **Share** | ** ** |
| **Basic EPS**                            |       |                        |       |                        |       |   |   |   |   |   |   |   |   |
| Income  available to common stockholders |       | $                           | 12,758     |                        | 49,195     |   | $ | 0.26 |   | $ | 23,362 |   | 48,612 |   | $ | 0.48 |   |
|                                     |       |                        |       |                        |       |   |   |   |   |   |   |   |   |
| **Effect of Dilutive Securities**        |       |                        |       |                        |       |   |   |   |   |   |   |   |   |
| Stock  options                           |       | —                      |       | 160                         |       | — |   | — |   | 334 |   | — |   |
|                                     |       |                        |       |                        |       |   |   |   |   |   |   |   |   |
| **Diluted EPS**                          |       |                        |       |                        |       |   |   |   |   |   |   |   |   |
| Income  available to common stockholders |       | $                           | 12,758     |                        | 49,355     |   | $ | 0.26 |   | $ | 23,362 |   | 48,946 |   | $ | 0.48 |   |

 
| ** **                               | ** ** | **Nine Months Ended,**      | ** ** | **Nine Months Ended,**      | ** ** |
|------------------------------------------|------------|-----------------------------|------------|-----------------------------|------------|
| ** **                               | ** ** | **September 30, 2009** | ** ** | **September 30, 2008** | ** ** |
| ** **                               | ** ** | ** **                  | ** ** | ** **                  | ** ** | **Per** | ** ** | ** ** | ** ** | ** ** | ** ** | **Per** | ** ** |
| ** **                               | ** ** | **Income**                  | ** ** | **Share**                   | ** ** | **Shares** | ** ** | **Income** | ** ** | **Share** | ** ** | **Shares** | ** ** |
| **Basic EPS**                            |       |                        |       |                        |       |   |   |   |   |   |   |   |   |
| Income  available to common stockholders |       | $                           | 15,032     |                        | 49,066     |   | $ | 0.31 |   | $ | 52,096 |   | 48,593 |   | $ | 1.07 |   |
|                                     |       |                        |       |                        |       |   |   |   |   |   |   |   |   |
| **Effect of Dilutive Securities**        |       |                        |       |                        |       |   |   |   |   |   |   |   |   |
| Stock  options                           |       | —                      |       | 119                         |       | — |   | — |   | 346 |   | (0.01 | ) |
|                                     |       |                        |       |                        |       |   |   |   |   |   |   |   |   |
| **Diluted EPS**                          |       |                        |       |                        |       |   |   |   |   |   |   |   |   |
| Income  available to common stockholders |       | $                           | 15,032     |                        | 49,185     |   | $ | 0.31 |   | $ | 52,096 |   | 48,939 |   | $ | 1.06 |   |

 

Anti-dilutiveshares attributable to outstanding stock options were excluded from thecalculation of diluted net income per share. For the three months ended September 30,2009 and 2008, 0.9 million shares and 1.0 million shares, respectively, subjectto stock options were anti-dilutive. For the nine months ended September 30,2009 and 2008, 1.0 million shares and 1.1 million shares, respectively, subjectto stock options were anti-dilutive.

 

*Accountingfor Stock-Based Compensation*

 

The Company maintains twostock option plans under which it may grant incentive stock options andnon-qualified stock options, although the Company has granted onlynon-qualified stock options under these plans. The Simpson Manufacturing Co., Inc.1994 Stock Option Plan (the “1994 Plan”) is principally for the Company’semployees, and the Simpson Manufacturing Co., Inc. 1995 IndependentDirector Stock Option Plan (the “1995 Plan”) is for its independent directors.The Company generally grants options under each of the 1994 Plan and the 1995Plan once each year. The exercise price per share of each option granted in February 2009,February 2008 and April 2008 under the 1994 Plan equaled the closingmarket price per share of the Company’s common stock as reported by the NewYork Stock Exchange on the day preceding the day that the CompensationCommittee of the Company’s Board of Directors met to approve the grant of theoptions. The exercise price per share under each option granted under the 1995Plan is at the fair market value on the date specified in the 1995 Plan.Options vest and expire according to terms established at the grant date. Therewere no options granted under the 1995 Plan in 2009 or 2008.

 

Under the 1994 Plan, nomore than 16 million shares of the Company’s common stock may be sold (includingshares already sold) pursuant to all options granted under the 1994 Plan. Underthe 1995 Plan, no more than 320 thousand shares of common stock may be sold(including shares already sold) pursuant to all options granted under the 1995Plan. Shares of common stock issued onexercise of stock options under both of the plans are registered under theSecurities Act of 1933. Options granted under the 1994 Plan typicallyvest evenly over the requisite service period of four years and have a term ofseven years. The vesting of options granted under the 1994 Plan will beaccelerated if the grantee ceases to be employed by the Company after reachingage 60 or if there is a change in control of the Company. Options granted underthe 1995 Plan are fully vested on the date of grant.

 

7

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The following tablerepresents the Company’s stock option activity for the three and nine monthsended September 30, 2009 and 2008:

 
| ** **                                                                               | ** ** | **Three Months Ended** | ** ** | **Nine Months Ended**  | ** ** |
|------------------------------------------------------------------------------------------|------------|------------------------|------------|------------------------|------------|
| ** **                                                                               | ** ** | **September 30,** | ** ** | **September 30,** | ** ** |
| **(in thousands)**                                                                       | ** ** | **2008**               | ** ** | **2009**               | ** ** | **2009** | ** ** | **2008** | ** ** |
|                                                                                     |       |                   |       |                   |       |   |   |   |   |
| Stock option expense recognized in operating  expenses                                   |       | $                      | 386        |                   | $          | 772 |   | $ | 1,231 |   | $ | 2,473 |   |
|                                                                                     |       |                   |       |                   |       |   |   |   |   |
| Tax benefit of stock option expense in provision for  income taxes                       |       | 131                    |       | 305                    |       | 413 |   | 975 |   |
|                                                                                     |       |                   |       |                   |       |   |   |   |   |
| Stock option expense, net of tax                                                         |       | $                      | 255        |                   | $          | 467 |   | $ | 818 |   | $ | 1,498 |   |
|                                                                                     |       |                   |       |                   |       |   |   |   |   |
| Fair value of shares vested                                                              |       | $                      | 385        |                   | $          | 769 |   | $ | 1,176 |   | $ | 2,309 |   |
|                                                                                     |       |                   |       |                   |       |   |   |   |   |
| Proceeds to the Company from the exercise of stock  options                              |       | $                      | 5,228      |                   | $          | 640 |   | $ | 6,354 |   | $ | 1,381 |   |
|                                                                                     |       |                   |       |                   |       |   |   |   |   |
| Tax benefit from exercise of stock options,  including windfall (shortfall) tax benefits |       | $                      | (251       | )                      | $          | 159 |   | $ | (495 | ) | $ | 272 |   |

 
| ** **                                 | ** ** | ** ** | ** ** | ** ** | ** ** | **At September 30,** |       |
|--------------------------------------------|------------|------------|------------|------------|------------|---------------------------|------------|
| ** **                                 | ** ** | ** ** | ** ** | ** ** | ** ** | **2009**                  | ** ** | **2008** |   |
| Stock option cost capitalized in inventory |       |       |       |       |       | $                         | 46         |   | $ | 88 |   |
|                                            |            |            |            |            |            |                           |            |  |  |  |  |

 

The amounts included incost of sales, research and development and other engineering, selling, orgeneral and administrative expense depend on the job functions performed by theemployees to whom the stock options were granted.

 

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

 

*Fair Value of FinancialInstruments*

 

As of September 30, 2009, the Company’sinvestments consisted of only United States Treasury securities and moneymarket funds aggregating $114.0 million, which are maintained in cashequivalents and are carried at cost, approximating fair value, based on Level 1inputs. Level 1 inputs are quoted prices (unadjusted) in active markets for identicalassets or liabilities, as defined in the “Fair Value Measurements andDisclosures” topic of the Financial Accounting Standards Board (“FASB”) Accounting Standards CodificationTM (“ASC”).

 

*Income Taxes*

 

In general, the Companyis required to use an estimated annual effective tax rate to measure the taxbenefit or tax expense recognized in an interim period. The income tax expensefor the first three quarters of 2009, however, has been computed based on thosequarters as discrete periods due to the uncertainty regarding the Company’sability to reliably estimate pre-tax income for the remainder of the year. Theeffective tax rate was 19.4% in the first quarter of 2009, which, as a result of the loss before taxes in thefirst quarter of 2009, resulted in income tax benefit of $2.0 million.The effective tax rate was 43.3% in the second quarter of 2009 which resultedin income tax expense of $8.2 million. The effective tax rate was 39.3% in thethird quarter of 2009 which resulted in income tax expense of $8.3 million. TheCompany cannot reliably estimate pre-tax income for the remainder of 2009 orfor the full year, primarily due to the continued uncertainty in theconstruction markets in which the Company operates. The income tax provisionfor the three months and nine months ended September 30, 2008, wascalculated using estimated annual effective tax rates.

 

8

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*Acquisitions*

 

Effective January 1,2009, the Company adopted the revised business combinations guidance codifiedas the “Business Combinations” topic of the FASB ASC. This revised guidancerequires the acquiring entity in a business combination to recognize the fullfair value of assets acquired and liabilities assumed in the transaction(whether a full or partial acquisition); establishes the acquisition-date fairvalue as the measurement objective for all assets acquired and liabilitiesassumed; requires expensing of most transaction and restructuring costs; andrequires the acquirer to disclose to investors and other users the informationneeded to evaluate and understand the nature and financial effect of thebusiness combination. The revised business combination guidance applies to alltransactions or other events in which the Company obtains control of one ormore businesses, including combinations achieved without the transfer ofconsideration, such as by contract alone or through the lapse of minority vetorights. This guidance applies prospectively to business combinations for whichthe acquisition date is on or after January 1, 2009, except that resolution of certain taxcontingencies and adjustments to valuation allowances related to businesscombinations, which previously were adjusted to goodwill, will be adjusted toincome tax expense for all such adjustments after January 1, 2009,regardless of the date of the original business combination. While thisguidance did not have a material effect on the Company’s consolidated financialstatements on adoption, the effects on future periods will depend on the natureand significance of future business combinations subject to this guidance.

 

In January 2009, theCompany’s subsidiary, Simpson Strong-Tie Company Inc., acquired the business ofRO Design Corp, a Florida corporation doing business as DeckTools, whichlicenses deck design and estimation software. The software providesprofessional deck builders, home centers and lumber yards a simple,graphics-driven solution for designing decks and estimating material and laborcosts for the project. Payments under the purchase agreement total $4.0 millionin cash, including $2.5 million to be paid in the future, which will be treatedas compensation expense to the principal officer of RO Design Corp, who is nowemployed by the Company. As a result of the acquisition, the Company recordedgoodwill of $0.4 million and intangible assets subject to amortization of $1.1million in the connector products segment.

 

In April 2009, the Company’ssubsidiary, Simpson Strong-Tie Europe EURL, purchased the equity of AgenceInternationale Commerciale et Industrielle, S.A.S. (“Aginco”). Agincomanufactures a line of high-quality builder products and distributes them inFrance. The purchase price (subject to post-closing adjustments) was $21.9million in cash. Through this acquisition, the Company increased its presencein the connector market in France. The Company believes that the additionalpresence will further its position in the construction products market. Thisfactor contributed to a purchase price in excess of fair market value of Aginco’snet tangible and intangible assets acquired, and as a result, the Company hasrecorded goodwill in connection with the transaction of $12.1 million andintangible assets subject to amortization of $7.4 million in the connector productssegment. Net tangible assets, including machinery and equipment, inventory andtrade accounts receivable, accounted for the balance of the purchase price.

 

The Company has notfinalized the purchase price allocation for the RO Design Corp and Aginco acquisitions,as the Company is still obtaining information and analyzing the fair value ofcertain acquired assets and liabilities. The results of operations of thebusinesses acquired in 2009 are included in the Company’s consolidated resultsof operations since the dates of the acquisitions and, for periods prior to2009, were not material to the Company. Accordingly, pro forma results ofoperations have not been presented.

 

*Recently Issued AccountingStandards*

 

In April 2009, theFASB issued new guidance to the “Business Combinations” topic of the FASB ASC,which applies to all assets and liabilities assumed in a business combinationthat would be within the scope of the “Contingencies” topic of the FASB ASC, ifnot acquired in a business combination, except for assets or liabilitiesarising from contingencies that are subject to specific guidance in the “BusinessCombinations” topic of the FASB ASC. An acquirer must recognize at fair value,at the acquisition date, an asset or liability assumed in a businesscombination that arises from a contingency if the acquisition-date fair valueof that asset or liability can be determined during the measurementperiod.  If the acquisition-date fairvalue of an asset acquired or liability assumed in a business combination thatarises from a contingency cannot be determined during the measurement

 

9

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period, an asset orliability must be recognized at the acquisition date if both information isavailable before the end of the measurement period indicates that it isprobable that an asset existed or that a liability had been incurred at theacquisition date and the amount of the assets or liability can be reasonablyestimated. This new guidance became effective for the Company for businesscombinations for which the acquisition date was on or after January 1,2009, and has not and is not currently expected to have a material effect onthe Company’s consolidated financial statements.

 

In May 2009, theFASB issued guidance codified in the “Subsequent Events” topic of the FASB ASC,which establishes general standards of accounting for, and disclosures of,events that occur after the balance sheet date but before the financialstatements are issued or are available to be issued. The subsequent eventsguidance requires the disclosure of the date through which an entity hasevaluated subsequent events and is effective for interim and annual reportingperiods ending after June 15, 2009.  The Company adopted the newdisclosure requirements in its June 30, 2009, condensed consolidatedfinancial statements and the adoption did not have a material effect on theCompany’s consolidated financial statements.

 

In June 2009, the FASB issued guidancecodified as the “Generally Accepted Accounting Principles” topic of the FASBASC. The ASC is the sole source of authoritative GAAP for companies that areregistered under section 12 of the Securities Exchange Act of 1934. Thisguidance was effective for financial statements issued for interim and annualperiods ending after September 15, 2009. The ASC superseded all then-existing non-SECaccounting and reporting standards, and all other non-grandfathered non-SECaccounting literature not included in the ASC became non-authoritative.  This guidance only required achange in disclosure and did not affect the Company’s consolidated financialstatements.

 

In June 2009, theFASB issued a new standard, not yet codified in the FASB ASC, amending theaccounting and disclosure requirements for the consolidation of variableinterest entities. Thisstandard clarifies the characteristics that identify a variable interest entity(“VIE”) and changes how a reporting entity identifies a primary beneficiarythat would consolidate the VIE from a quantitative risks and rewardscalculation to a qualitative approach based on which variable interest holderhas controlling financial interest and the ability to direct the mostsignificant activities that affect the VIE’s economicperformance.  This standard requires the primary beneficiaryassessment to be performed on a continuous basis and also requires additionaldisclosures about an entity’s involvement with the VIE, restrictions on the VIE’sassets and liabilities that are included in the reporting entity’s consolidatedbalance sheet, significant risk exposures due to the entity’s involvement withthe VIE, and how its involvement with a VIE affects the reporting entity’sconsolidated financial statements. It is effective for fiscal years beginningafter November 15, 2009.  The Company will adopt this accountingstandard on January 1, 2010, and has not yet determined the effect, ifany, on its consolidated financial statements.

 

2.             Trade Accounts Receivable, Net

 

Trade accounts receivableconsist of the following:

 
| ** **                                | ** ** | **At September 30,** | ** ** | **At December 31,** | ** ** |
|-------------------------------------------|------------|---------------------------|------------|--------------------------|------------|
| **(in thousands)**                        | ** ** | **2009**                  | ** ** | **2008**                 | ** ** | **2008** | ** ** |
|                                      |       |                      |       |                     |       |   |   |
| Trade accounts receivable                 |       | $                         | 114,942    |                     | $          | 130,919 |   | $ | 81,929 |   |
| Allowance for doubtful accounts           |       | (4,759                    | )          | (2,222                   | )          | (4,368 | ) |
| Allowance for sales discounts and returns |       | (2,178                    | )          | (2,822                   | )          | (1,556 | ) |
|                                      |       | $                         | 108,005    |                     | $          | 125,875 |   | $ | 76,005 |   |

 

10

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3.             Inventories

 

Inventories consist ofthe following:

 
| ** **          | ** ** | **At****September 30****,** | ** ** | **At  December 31,** | ** ** |
|---------------------|------------|----------------------------------|------------|---------------------------|------------|
| **(in thousands)**  | ** ** | **2009**                         | ** ** | **2008**                  | ** ** | **2008** | ** ** |
|                |       |                             |       |                      |       |   |   |
| Raw materials       |       | $                                | 61,387     |                      | $          | 96,021 |   | $ | 92,638 |   |
| In-process products |       | 22,546                           |       | 29,246                    |       | 26,371 |   |
| Finished products   |       | 94,304                           |       | 126,380                   |       | 132,869 |   |
|                |       | $                                | 178,237    |                      | $          | 251,647 |   | $ | 251,878 |   |

 

4.             Property, Plant and Equipment, Net

 

Property, plant andequipment, net, consist of the following:

 
| ** **                                     | ** ** | **At****September 30****,** | ** ** | **At  December 31,** | ** ** |
|------------------------------------------------|------------|----------------------------------|------------|---------------------------|------------|
| **(in thousands)**                             | ** ** | **2009**                         | ** ** | **2008**                  | ** ** | **2008** | ** ** |
|                                           |       |                             |       |                      |       |   |   |
| Land                                           |       | $                                | 23,709     |                      | $          | 22,856 |   | $ | 23,989 |   |
| Buildings and site improvements                |       | 141,233                          |       | 132,525                   |       | 135,992 |   |
| Leasehold improvements                         |       | 3,859                            |       | 4,440                     |       | 4,287 |   |
| Machinery and equipment                        |       | 227,204                          |       | 220,448                   |       | 219,641 |   |
|                                           |       | 396,005                          |       | 380,269                   |       | 383,909 |   |
| Less accumulated depreciation and amortization |       | (211,944                         | )          | (192,430                  | )          | (193,639 | ) |
|                                           |       | 184,061                          |       | 187,839                   |       | 190,270 |   |
| Capital projects in progress                   |       | 7,265                            |       | 7,223                     |       | 3,048 |   |
|                                           |       | $                                | 191,326    |                      | $          | 195,062 |   | $ | 193,318 |   |

 

The Company’s vacant facility in San Leandro,California, remained classified as an asset held for sale as of September 30,2009, consistent with the classification at December 31, 2008. Thisfacility is associated with the connector segment.

 

5.             Investments

 

*Equity Method Investment*

 

At September 30,2009, the Company had a 35% equity interest in Keymark Enterprises, LLC (“Keymark”),for which the Company accounts using the equity method. Keymark developssoftware that assists in designing and engineering residential structures. TheCompany’s relationship with Keymark includes the specification of the Company’sproducts in the Keymark software. The Company has no obligation to make anyadditional capital contributions to Keymark. In October 2009, the Companyobtained an additional 5.6% equity interest in Keymark, bringing its totalequity interest to 40.6%. See Note 11.

 

6.             Goodwill and Intangible Assets, Net

 

Goodwill by segment wasas follows:

 
| ** **          | ** ** | **At September 30,** | ** ** | **At December 31,** | ** ** |
|---------------------|------------|---------------------------|------------|--------------------------|------------|
| **(in thousands)**  | ** ** | **2009**                  | ** ** | **2008**                 | ** ** | **2008** | ** ** |
| Connector  products |       | $                         | 76,854     |                     | $          | 68,239 |   | $ | 64,205 |   |
| Venting  products   |       | 4,435                     |       | 7,560                    |       | 4,414 |   |
| Total               |       | $                         | 81,289     |                     | $          | 75,799 |   | $ | 68,619 |   |

 

11

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Intangible assets,net, by segment was as follows:

 
| ** **          | ** ** | **At September 30, 2009** | ** ** |
|---------------------|------------|--------------------------------|------------|
| ** **          | ** ** | **Gross**                      | ** ** | ** ** | ** ** | **Net** | ** ** |
| ** **          | ** ** | **Carrying**                   | ** ** | **Accumulated** | ** ** | **Carrying** | ** ** |
| **(in thousands)**  | ** ** | **Amount**                     | ** ** | **Amortization** | ** ** | **Amount** | ** ** |
| Connector  products |       | $                              | 45,352     |   | $ | 15,715 |   | $ | 29,637 |   |
| Venting  products   |       | 3,291                          |       | 1,043 |   | 2,248 |   |
| Total               |       | $                              | 48,643     |   | $ | 16,758 |   | $ | 31,885 |   |

 
| ** **          | ** ** | **At September 30, 2008** | ** ** |
|---------------------|------------|--------------------------------|------------|
| ** **          | ** ** | **Gross**                      | ** ** | ** ** | ** ** | **Net** | ** ** |
| ** **          | ** ** | **Carrying**                   | ** ** | **Accumulated** | ** ** | **Carrying** | ** ** |
| ** **          | ** ** | **Amount**                     | ** ** | **Amortization** | ** ** | **Amount** | ** ** |
| Connector  products |       | $                              | 34,533     |   | $ | 12,157 |   | $ | 22,376 |   |
| Venting  products   |       | —                         |       | — |   | — |   |
| Total               |       | $                              | 34,533     |   | $ | 12,157 |   | $ | 22,376 |   |

 
| ** **          | ** ** | **At December 31, 2008** | ** ** |
|---------------------|------------|-------------------------------|------------|
| ** **          | ** ** | **Gross**                     | ** ** | ** ** | ** ** | **Net** | ** ** |
| ** **          | ** ** | **Carrying**                  | ** ** | **Accumulated** | ** ** | **Carrying** | ** ** |
| ** **          | ** ** | **Amount**                    | ** ** | **Amortization** | ** ** | **Amount** | ** ** |
| Connector  products |       | $                             | 32,669     |   | $ | 11,780 |   | $ | 20,889 |   |
| Venting  products   |       | 2,962                         |       | 398 |   | 2,564 |   |
| Total               |       | $                             | 35,631     |   | $ | 12,178 |   | $ | 23,453 |   |

 

Intangible assetsconsist primarily of customer relationships, patents, unpatented technology andnon-compete agreements. Amortization expense for intangible assets during thethree months ended September 30, 2009 and 2008, was $1.6 million and $1.2million, respectively, and during the nine months ended September 30, 2009and 2008, was $4.9 million and $3.5 million, respectively.

 

At September 30,2009, estimated future amortization of intangible assets was as follows:

 

| **(in thousands)**          | ** ** | ** ** | ** ** |
|-----------------------------|------------|------------|------------|
|                        |       |       |       |
| Final three  months of 2009 |       | $          | 1,386      |   |
| 2010                        |       | 4,708      |       |
| 2011                        |       | 4,670      |       |
| 2012                        |       | 3,795      |       |
| 2013                        |       | 2,855      |       |
| 2014                        |       | 2,729      |       |
| Thereafter                  |       | 11,742     |       |
|                        |       | $          | 31,885     |   |

 

12

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The changes in thecarrying amount of goodwill and intangible assets from December 31, 2008,to September 30, 2009, were as follows:

 
| ** **                                             | ** ** | ** **   | ** ** | **Intangible** | ** ** |
|--------------------------------------------------------|------------|--------------|------------|----------------|------------|
| **(in thousands)**                                     | ** ** | **Goodwill** | ** ** | **Assets**     | ** ** |
|                                                   |       |         |       |           |       |
| Balance  at December 31, 2008                     |       | $            | 68,619     |           | $          | 23,453 |   |
| Acquisitions                                           |       | 10,209       |       | 8,493          |       |
| Amortization                                           |       | —       |       | (4,870         | )          |
| Reclassifications                                      |       | (4,144       | )          | 3,891          |       |
| Adjustments  due to recognition of deferred tax assets |       | 3,706        |       | —         |       |
| Foreign  exchange                                      |       | 2,899        |       | 918            |       |
| Balance  at September 30, 2009                    |       | $            | 81,289     |           | $          | 31,885 |   |

 

7.             Debt

 

Outstanding debt at September 30,2009 and 2008, and December 31, 2008, and the available lines of credit atSeptember 30, 2009, consisted of the following:

 
| ** **                                                                                                                                                                                                                          | ** ** | **Available**          | ** ** | **Debt Outstanding**   | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------|------------|------------------------|------------|
| ** **                                                                                                                                                                                                                          | ** ** | **Credit at**          | ** ** | **at**                 | ** ** | **at** | ** ** |
| ** **                                                                                                                                                                                                                          | ** ** | **September 30,** | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
| **(dollar amounts in thousands)**                                                                                                                                                                                                   | ** ** | **2009**               | ** ** | **2009**               | ** ** | **2008** | ** ** | **2008** | ** ** |
|                                                                                                                                                                                                                                |       |                   |       |                   |       |   |   |   |   |
| Revolving  line of credit, interest at LIBOR plus 0.27% (at September 30, 2009,  LIBOR plus 0.27% was 0.51%), expires October 2012, commitment fees payable at  the annual rate of 0.08% on the unused portion of the facility |       | $                      | 200,000    |                   | $          | — |   | $ | — |   | $ | — |   |
|                                                                                                                                                                                                                                |       |                   |       |                   |       |   |   |   |   |
| Revolving  line of credit, interest at the bank’s base rate plus 3% (at  September 30, 2009, the bank’s base rate plus 3% was 3.50%), expires  December 2009                                                    |       | 403                    |       | —                 |       | — |   | — |   |
|                                                                                                                                                                                                                                |       |                   |       |                   |       |   |   |   |   |
| Revolving  lines of credit, interest rates between 1.16% and 3.51%                                                                                                                                                                  |       | 4,660                  |       | 29                     |       | 629 |   | 26 |   |
| Line  of credit                                                                                                                                                                                                                     |       |                   |       | $                      | 29         |   | $ | 629 |   | $ | 26 |   |
| Available  credit                                                                                                                                                                                                                   |       | $                      | 205,063    |                   |       |   |   |   |   |   |

 

8.             Commitments and Contingencies

 

Note 9 to the consolidated financialstatements in the 2008 Annual Report provides information concerningcommitments and contingencies. From time to time, the Company is involved invarious legal proceedings and other matters arising in the normal course ofbusiness. The resolution of claims and litigation is subject to inherentuncertainty and could have a material adverse effect on the Company’s financialcondition, cash flows and results of operations.

 

The Company’spolicy with regard to environmental liabilities is to accrue for futureenvironmental assessments and remediation costs when information becomesavailable that indicates that it is probable that the Company is liable for anyrelated claims and assessments and the amount of the liability is reasonablyestimable. The Company does not believe that these matters will have a materialadverse effect on the Company’s financial condition, cash flows or results ofoperations. The Company has completed its environmental remediation at its SanLeandro, California, facility.

 

13

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Corrosion, hydrogenenbrittlement, cracking, material hardness, wood pressure-treating chemicals,misinstallations, misuse, design and assembly flaws, environmental conditionsor other factors can contribute to failure of fasteners, connectors, tools andventing products. On occasion, some of the fasteners and connectors that theCompany sells have failed, although the Company has not incurred any materialliability resulting from those failures. The Company attempts to avoid suchfailures by establishing and monitoring appropriate product specifications,manufacturing quality control procedures, inspection procedures and informationon appropriate installation methods and conditions. The Company subjects itsproducts to extensive testing, with results and conclusions published inCompany catalogues and on its websites. Based on test results to date, theCompany believes that, generally, if its products are appropriately selected,installed and used in accordance with the Company’s guidance, they may bereliably used in appropriate applications.

 

Three lawsuits (the “Cases”)have been filed against the Company in the Hawaii First Circuit Court:  *Kai et al. v. Haseko Homes, Inc.,Haseko Construction, Inc. and Simpson Manufacturing, Inc.*,Case No. 09-1-1476 RAT (“Case 1”); *Ke Noho Development, LLCv. Simpson Strong-Tie Company, Inc.*, *and HonoluluWood Treating Co., LTD.*, Case No. 09-1-1491-06 SSM (“Case 2”);and *North American Specialty Ins. Co. v. SimpsonStrong-Tie Company. Inc. and K.C. Metal Products, Inc.*, Case No. 09-1-1490-06VSM (“Case 3”).  Case 1 was filed on June 26,2009.  Cases 2 and 3 were filed on June 30,2009.  The Cases all relate to allegedpremature corrosion of the Company’s strap tie holdown products installed inbuildings in a housing development known as Ocean Pointe in Honolulu, Hawaii,allegedly causing property damage.  Case1 is a putative class action brought by the owners of allegedly affected OceanPointe houses.  Case 1 appears to havebeen voluntarily dismissed, although the Company has been informed that Case 1will be re-filed.  Case 1 has not beenserved on the Company.  Case 2 is anaction by the builders and developers of Ocean Pointe against the Company,claiming that either the Company’s strap tie holdowns are defective in designor manufacture or the Company failed to provide adequate warnings regarding theproducts’ susceptibility to corrosion in certain environments.  Case 2 has not been served on theCompany.  Case 3 is a subrogation actionbrought by the insurance company for the builders and developers against theCompany claiming the insurance company expended funds to correct problemsallegedly caused by the Company’s products. Case 3 is the only Case that has been served on the Company.  None of the Cases alleges a specific amountof damages sought, although each of the Cases seeks compensatory damages, andCase 1 seeks punitive damages.  The Companyis currently investigating the facts underlying the claims asserted in theCases, including, among other things, the cause of the alleged corrosion; theseverity of any problems shown to exist; the buildings affected; theresponsibility of the general contractor, various subcontractors and otherconstruction professionals for the alleged damages; the amount, if any, ofdamages suffered; and the costs of repair, if needed.  At this time, the likelihood that the Companywill be found liable for any property damage allegedly suffered and the extentof such liability, if any, are unknown. Based on facts currently known to the Company, the Company believes thatall or part of the claims alleged in the Cases may be covered by its insurancepolicies.  The Company intends to defenditself vigorously in connection with the Cases.

 

9.             Stock Option Plans

 

The Company currently hastwo stock option plans (see Note 1 “Basis of Presentation — *Accounting for Stock-Based Compensation”*). Participants aregranted stock options only if the applicable Company-wide or profit-centeroperating goals, or both, established by the Compensation Committee of theBoard of Directors at the beginning of the year, are met.

 

The fair value of eachoption award was estimated on the date of grant using the Black-Scholes optionpricing model. Expected volatility is based on historical volatilities of theCompany’s common stock measured monthly over a term that is equivalent to theexpected life of the option. The expected term of options granted is estimatedbased on the Company’s prior exercise experience and future expectations of theexercise and termination behavior of the grantees. The risk-free rate is basedon the yield of United States Treasury zero-coupon bonds with maturities comparableto the expected life in effect at the time of grant. The dividend yield isbased on the expected dividend yield on the grant date.

 

14

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Black-Scholes optionpricing model assumptions for options granted in 2009 and 2008 are as follows:

 
| **Number**         | ** ** | ** ** | ** ** | **Risk-**    | ** ** | ** **   | ** ** | ** **   | ** ** | ** **     | ** ** | ** **         | ** ** | **Weighted** | ** ** |
|--------------------|------------|------------|------------|--------------|------------|--------------|------------|--------------|------------|----------------|------------|--------------------|------------|--------------|------------|
| **of Options**     | ** ** | ** ** | ** ** | **Free**     | ** ** | ** **   | ** ** | ** **   | ** ** | ** **     | ** ** | ** **         | ** ** | **Average**  | ** ** |
| **Granted**        | ** ** | **Grant**  | ** ** | **Interest** | ** ** | **Dividend** | ** ** | **Expected** | ** ** | ** **     | ** ** | ** **         | ** ** | **Fair**     | ** ** |
| **(in thousands)** | ** ** | **Date**   | ** ** | **Rate**     | ** ** | **Yield**    | ** ** | **Life**     | ** ** | **Volatility** | ** ** | **Exercise Price** | ** ** | **Value**    | ** ** |
|               |       |       |       |         |       |         |       |         |       |           |       |               |       |         |       |
| **1994 Plan**      |       |       |       |         |       |         |       |         |       |           |       |               |       |         |       |
| 24                 |       | 02/23/09   |       | 2.08         | %          | 2.48         | %          | 6.5 years    |       | 30.9           | %          | $                  | 16.10      |         | $          | 4.06 |   |
| 29                 |       | 02/04/09   |       | 2.17         | %          | 1.88         | %          | 6.5 years    |       | 30.9           | %          | $                  | 21.25      |         | $          | 5.86 |   |
| 14                 |       | 04/23/08   |       | 3.15         | %          | 1.55         | %          | 6.0 years    |       | 27.1           | %          | $                  | 25.74      |         | $          | 6.92 |   |
| 40                 |       | 02/13/08   |       | 2.90         | %          | 1.68         | %          | 6.0 years    |       | 27.1           | %          | $                  | 23.78      |         | $          | 6.16 |   |

 

No options were grantedunder the 1995 Plan in 2009 or 2008.

 

The following tablesummarizes the Company’s stock option activity for the nine months ended September 30,2009:

 
| ** **                                                   | ** ** | ** **         | ** ** | ** **    | ** ** | **Weighted-**       | ** ** | ** **         | ** ** |
|--------------------------------------------------------------|------------|--------------------|------------|---------------|------------|---------------------|------------|--------------------|------------|
| ** **                                                   | ** ** | ** **         | ** ** | **Weighted-** | ** ** | **Average**         | ** ** | **Aggregate**      | ** ** |
| ** **                                                   | ** ** | ** **         | ** ** | **Average**   | ** ** | **Remaining**       | ** ** | **Intrinsic**      | ** ** |
| ** **                                                   | ** ** | **Shares**         | ** ** | **Exercise**  | ** ** | **Contractual**     | ** ** | **Value***         | ** ** |
| **Non-Qualified  Stock Options**                             | ** ** | **(in thousands)** | ** ** | **Price**     | ** ** | **Life (in years)** | ** ** | **(in thousands)** | ** ** |
|                                                         |       |               |       |          |       |                |       |               |       |
| Outstanding at  January 1, 2009                         |       | 2,250              |       | $             | 29.70      |                |       |               |       |   |
| Granted                                                      |       | 53                 |       | 18.92         |       |                |       |               |       |
| Exercised                                                    |       | (321               | )          | 19.79         |       |                |       |               |       |
| Forfeited                                                    |       | (108               | )          | 36.46         |       |                |       |               |       |
| Outstanding at  September 30, 2009                      |       | 1,874              |       | $             | 30.70      |                | 2.3        |               | $          | 1,075 |   |
| Outstanding and  expected to vest at September 30, 2009 |       | 1,865              |       | $             | 30.72      |                | 2.3        |               | $          | 1,050 |   |
| Exercisable at  September 30, 2009                      |       | 1,699              |       | $             | 30.80      |                | 2.1        |               | $          | 746 |   |

 

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*  The intrinsic value represents the amount, ifany, by which the fair market value of the underlying common stock exceeds theexercise price of the option, using the closing price per share of $25.26 asreported by the New York Stock Exchange on September 30, 2009.

 

The total intrinsic value of options exercised during thenine months ended September 30, 2009 and 2008, was $2.3 million and $0.7million, respectively.

 

15

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Asummary of the status of unvested options as of September 30, 2009, andchanges during the nine months ended September 30, 2009, are presentedbelow:

 
| ** **                           | ** ** | ** **          | ** ** | **Weighted-**   | ** ** |
|--------------------------------------|------------|---------------------|------------|-----------------|------------|
| ** **                           | ** ** | ** **          | ** ** | **Average**     | ** ** |
| ** **                           | ** ** | **Shares**          | ** ** | **Grant-Date**  | ** ** |
| **Unvested Options**                 | ** ** | **(in  thousands)** | ** ** | **Fair  Value** | ** ** |
|                                 |       |                |       |            |       |
| Unvested at  January 1, 2009    |       | 258                 |       | $               | 11.58      |   |
| Granted                              |       | 53                  |       | 5.04            |       |
| Vested                               |       | (131                | )          | 12.05           |       |
| Forfeited                            |       | (5                  | )          | 13.24           |       |
| Unvested at  September 30, 2009 |       | 175                 |       | $               | 9.22       |   |

 

As of September 30, 2009, $1.4 million of total unrecognized compensationcost was related to unvested share-based compensation arrangements under the1994 Plan. This cost is expected to be recognized over a weighted-averageperiod of 1.1 years. Options granted under the 1995 Plan are fullyvested and are expensed on the date of grant.

 

10.           Segment Information

 

The Company is organizedinto two primary operating segments. The segments are defined by types ofproducts manufactured, marketed and distributed to the Company’s customers. Thetwo product segments are connector products and venting products. Thesesegments are differentiated in several ways, including the types of materials,the production processes, the distribution channels and the productapplications. Transactions between the two segments were immaterial for each ofthe periods presented.

 

The following tableillustrates certain measurements used by management to assess the performanceof the segments described above as of or for the following periods:

 
| ** **                    | ** ** | **Three Months Ended** | ** ** | **Nine Months Ended**  | ** ** |
|-------------------------------|------------|------------------------|------------|------------------------|------------|
| ** **                    | ** ** | **September 30,** | ** ** | **September 30,** | ** ** |
| **(in thousands)**            | ** ** | **2008**               | ** ** | **2009**               | ** ** | **2008** | ** ** | **2009** | ** ** |
| *Net Sales*                   |       |                   |       |                   |       |   |   |   |   |
| Connector  products           |       | $                      | 150,085    |                   | $          | 192,450 |   | $ | 411,426 |   | $ | 552,332 |   |
| Venting  products             |       | 17,115                 |       | 27,373                 |       | 41,020 |   | 54,410 |   |
| Total                         |       | $                      | 167,200    |                   | $          | 219,823 |   | $ | 452,446 |   | $ | 606,742 |   |
|                          |       |                   |       |                   |       |   |   |   |   |
| *Income from Operations*      |       |                   |       |                   |       |   |   |   |   |
| Connector  products           |       | $                      | 20,783     |                   | $          | 35,310 |   | $ | 34,363 |   | $ | 88,241 |   |
| Venting  products             |       | 597                    |       | 1,777                  |       | (3,674 | ) | (3,861 | ) |
| Administrative  and all other |       | (364                   | )          | 94                     |       | (1,102 | ) | (1,371 | ) |
| Total                         |       | $                      | 21,016     |                   | $          | 37,181 |   | $ | 29,587 |   | $ | 83,009 |   |

 
| ** **                    | ** ** | ** **                 | ** ** | ** **            | ** ** | **At**   | ** ** |
|-------------------------------|------------|----------------------------|------------|-----------------------|------------|----------|------------|
| ** **                    | ** ** | **At  September 30,** | ** ** | **December 31,** | ** ** |
| **(in thousands)**            | ** ** | **2009**                   | ** ** | **2008**              | ** ** | **2008** | ** ** |
| *Total Assets*                |       |                       |       |                  |       |     |       |
| Connector  products           |       | $                          | 660,220    |                  | $          | 646,677  |       | $ | 612,733 |   |
| Venting  products             |       | 72,742                     |       | 79,121                |       | 77,218   |       |
| Administrative  and all other |       | 124,207                    |       | 152,903               |       | 140,249  |       |
| Total                         |       | $                          | 857,169    |                  | $          | 878,701  |       | $ | 830,200 |   |

 

Cash collected by the Company’s subsidiaries is routinelytransferred into the Company’s cash management accounts and, therefore, hasbeen included in the total assets of “Administrative and all other.” Cash andcash equivalent balances in the “Administrative and all other” segment were$170.6 million, $135.6 million, and $136.2 million, as of September 30,2009 and 2008, and December 31, 2008, respectively.

 

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11.           Subsequent Events

 

In October 2009, theCompany’s Board of Directors declared a cash dividend of $0.10 per share, atotal currently estimated at $4.9 million, to be paid on January 28, 2010,to stockholders of record on January 7, 2010.

 

In October 2009, theCompany obtained an additional 5.6% equity interest in Keymark as a result ofnon-payment from Keymark’s other owner under terms of a loan and pledgeagreement the Company made with the other owner in October 2008. TheCompany’s total equity interest in Keymark is now 40.6%.

 

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**Item 2.Management’s Discussion and Analysis of Financial Condition and Results ofOperations.**

 

*Thisdocument contains forward-looking statements, based on numerous assumptions andsubject to risks and uncertainties. Although the Company believes that theforward-looking statements are reasonable, it does not and cannot give anyassurance that its beliefs and expectations will prove to be correct. Manyfactors could significantly affect the Company’s operations and cause theCompany’s actual results to be substantially different from the Company’sexpectations. See “Part II, Item 1A -**RiskFactors.**”**Actual results might differ materially from resultssuggested by any forward-looking statements in this report.**The Company does nothave an obligation to publicly update any forward-looking statements, whetheras a result of the receipt of new information, the occurrence of future eventsor otherwise.*

 

The following is a discussion andanalysis of the consolidated financial condition and results of operations forthe Company for the three and nine months ended September 30, 2009 and2008. The following should be read in conjunction with the interim CondensedConsolidated Financial Statements and related Notes appearing elsewhere herein.

 

Results of Operations for the Three Months EndedSeptember 30, 2009, Compared with the Three Months EndedSeptember 30, 2008

 

Net sales decreased 23.9% from $219.8million in the third quarter of 2008 to $167.2 million in the third quarter of2009. Net income decreased 45.4% from $23.4 million in the third quarter of2008 to $12.8 million in the third quarter of 2009. Diluted net income percommon share was $0.26 in the third quarter of 2009 compared to diluted netincome per common share of $0.48 in the third quarter of 2008.

 

In the third quarter of 2009, salesdeclined throughout the United States. Sales during the quarter also decreasedthroughout Europe, with the exception of France, and decreased in the UnitedKingdom and Canada. Sales in France were up primarily due to the acquisition ofAgence Internationale Commerciale et Industrielle, S.A.S. (“Aginco”) in April 2009.Simpson Strong-Tie’s third quarter sales decreased 22.0% from the same quarterlast year, while Simpson Dura-Vent’s sales decreased 37.5%. Simpson Strong-Tie’ssales to contractor distributors and dealer distributors decreasedsignificantly as home-building activity, and general economic conditions,remained weak. Sales to home centers also decreased. Sales decreased across allof Simpson Strong-Tie’s major product lines, particularly those used in newhome construction. Simpson Dura-Vent’s sales decreased across most of itsproduct lines, with the exception of special gas vent products, which were upslightly.

 

Income from operations decreased43.5% from $37.2 million in the third quarter of 2008 to $21.0 million in thethird quarter of 2009. Gross margins decreased from 40.8% in the third quarterof 2008 to 36.4% in the third quarter of 2009. The decrease in gross marginswas primarily due to reduced absorption of fixed overhead, as a result of lowerproduction volumes, as well as higher manufacturing costs, including highercosts of material and labor. The decline in steel prices slowed in the secondquarter of 2009 and prices again started to rise in the third quarter of 2009.The Company expects steel prices to continue to increase as demand returns tothe market. Through the first nine months of 2009, inventories decreased 29.2%from $251.9 million at December 31, 2008, to $178.2 million at September 30,2009.

 

Research and development expensedecreased 12.2% from $5.7 million in the third quarter of 2008 to $5.0 millionin the third quarter of 2009, primarily due to a $0.4 million decrease inpersonnel expenses. Selling expense decreased 27.0% from $21.3 million in thethird quarter of 2008 to $15.6 million in the third quarter of 2009, whichresulted primarily from a $3.6 million decrease in expenses associated withsales and marketing personnel, most of which was related to cost-cuttingmeasures, a $1.1 million decrease in promotional expenditures and a $0.6million decrease in commissions paid to selling agents. General andadministrative expense decreased 24.2% from $25.5 million in the third quarterof 2008 to $19.4 million in the third quarter of 2009. This decrease resultedfrom several factors, including a $1.8 million decrease in administrativepersonnel expenses, related in part to cost-cutting measures, a $1.7 milliondecrease in cash profit sharing, a $1.6 million decrease in legal andprofessional service expenses and a $0.9 million decrease in the provision forbad debt, partly offset by a $0.5 million increase in amortization ofintangible assets, primarily related to the acquisition of Aginco. Interestincome decreased primarily due to lower interest rates. The effective tax ratewas 39.3% in the third quarter of 2009, up from 38.1% in the third quarter of2008.  The effective tax rate is higher than thestatutory rate primarily due to the valuationallowances taken on foreign losses and a reduced benefit from the reduction orloss of enterprise zone tax credits at two of the Company’s facilities inCalifornia. In general, the Company is required to use an estimatedannual effective tax rate to measure the tax benefit or tax expense recognizedin an interim period. The income tax expense for the three months ended September 30,2009, however, has been computed based on the three months ended September 30,

 

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2009, as a discrete period due to theuncertainty regarding the Company’s ability to reliably estimate pre-tax incomefor the remainder of the year. The Company cannot reliably estimate pre-taxincome for the remainder of 2009 or for the full year, primarily due to thecontinued uncertainty in the construction markets, in which the Companyoperates. The income tax provision for the three months ended September 30,2008, was calculated using estimated annual effective tax rates.

 

***ConnectorProducts — Simpson Strong-Tie***

 

Simpson Strong-Tie’s netsales decreased 22.0% from $192.4 million in the third quarter of 2008 to$150.1 million in the third quarter of 2009.Simpson Strong-Tie accounted for89.8% of the Company’s total net sales in the third quarter of 2009, up from87.5% in the third quarter of 2008. The decrease in net sales at SimpsonStrong-Tie resulted primarily from a decrease in sales volume, some of whichwas offset by increases from newly acquired businesses, although average pricesincreased 3.0% as compared to the third quarter of 2008. In the thirdquarter of 2009, Simpson Strong-Tie’s sales declined throughout the UnitedStates. California and the western and the southeastern regions had the largestdecrease in sales. Simpson Strong-Tie’s sales during the quarter also decreasedthroughout Europe, with the exception of France, and decreased in the UnitedKingdom and Canada. Sales in France increased, primarily due to the acquisitionof Aginco in April 2009. Simpson Strong-Tie’s sales to contractordistributors and dealer distributors decreased significantly as home-buildingactivity, and general economic conditions, remained weak. Sales to home centersalso decreased. Sales decreased across all of Simpson Strong-Tie’s majorproduct lines, particularly those used in new home construction.

 

SimpsonStrong-Tie’s income from operations decreased 41.1% from $35.3 million in thethird quarter of 2008 to $20.8 million in the third quarter of 2009. Grossmargin decreased from43.7% in the third quarter of 2008 to38.1% in the third quarter of 2009. This decrease was primarily due to reducedabsorption of fixed overhead, as a result of lower production volumes, as wellas higher manufacturing costs, including higher costs of material and labor.

 

Simpson Strong-Tie’sresearch and development expense decreased 13.1% from $5.3 million in the thirdquarter of 2008 to $4.6 million in the third quarter of 2009. This decrease wasprimarily due to a $0.4 million decrease in personnel expenses and a $0.2million decrease in professional service fees.  Simpson Strong-Tie’s selling expense decreased 26.1% from $19.2million in the third quarter of 2008 to$14.2 million in the third quarter of 2009,which  resulted primarily from a $3.5million decrease in expenses associated with sales and marketing personnel, mostof which was related to cost-cutting measures, and a $1.1 million decrease inpromotional expenditures. Simpson Strong-Tie’s general and administrativeexpense decreased 27.3% from $24.2 million in the third quarter of 2008 to$17.6 million in the third quarter of 2009, which was primarily due to a $2.4million decrease in cash profit sharing, a $1.7 million decrease inadministrative personnel expenses, a $1.3 million decrease in professionalservice fees and a $1.0 million decrease in bad debt expense, partly offset byan increase of $0.3 million in amortization of intangible assets, primarilyrelated to the businesses acquired since June 2008.

 

For its European and United Kingdomoperations, Simpson Strong-Tie recordedincome from operations of $0.5 million in the third quarter of 2009 compared toincome from operations of $1.4 million in the third quarter of 2008.

 

SimpsonStrong-Tie has continued to adjust production levels downward at variousfacilities in the United States, and as a result, has reduced its labor forceat these facilities.

 

***VentingProducts — Simpson Dura-Vent***

 

Simpson Dura-Vent’s netsales decreased 37.5% from $27.4 million in the third quarter of 2008 to $17.1million in the third quarter of 2009.  Simpson Dura-Vent accounted for 10.2% of the Company’s total net sales in the thirdquarter of 2009, a decrease from 12.5% in the third quarter of 2008. Thedecrease in net sales at Simpson Dura-Vent resulted primarily from a decrease in sales volume, although average prices increased 2.5% as compared to thethird quarter of 2008. In the thirdquarter of 2009, Simpson Dura-Vent’s sales decreased throughout theUnited States, resulting from the weaknessin new home construction, with the exception of the southeast wheresales were flat. Simpson Dura-Vent’ssales decreased across most of its product lines, with the exception of specialgas vent products, which were up slightly.

 

SimpsonDura-Vent’s income from operations decreased 66.4% from $1.8 million in thethird quarter of 2008 to $0.6 million in the third quarter of 2009. Grossmargin increased to21.7% in the third quarter of 2009 from 20.6% in the third quarter of 2008, primarily due to lower fixed overheadcosts, partly offset by higher costs of material and labor.

 

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Simpson Dura-Vent’sselling expense decreased 35.5% from $2.1 million in the third quarter of 2008to $1.4 million in the third quarter of 2009, which was primarily due to a $0.6million decrease in expenses associated with agent commissions due to lowersales.

 

***Administrativeand All Other (Company)***

 

Interestincome is generated on the Company’s cash and cash equivalents balances. Interest income decreased primarily as aresult of lower interest rates and was more than offset by interest expense, which includes interest, accountmaintenance fees and bank charges.

 

Results of Operations for the Nine Months Ended September 30,2009, Compared with the Nine Months Ended September 30, 2008

 

Net sales decreased 25.4% from $606.7million in the first nine months of 2008 to $452.4 million in the first ninemonths of 2009. Net income decreased 71.1% from $52.1 million in the first ninemonths of 2008 to $15.0 million in the first nine months of 2009. Diluted netincome per common share was $0.31 in the first nine months of 2009 compared todiluted net income per common share of $1.06 in the first nine months of 2008.

 

In the first nine months of 2009,sales declined throughout the United States. California and the western andsoutheastern regions had the largest decreases in sales. Sales during theperiod also decreased in Europe, the United Kingdom and Canada. SimpsonStrong-Tie’s sales for the first nine months of the year decreased 25.5% fromthe same period last year, while Simpson Dura-Vent’s sales decreased 24.6%.Simpson Strong-Tie’s sales to contractor distributors and dealer distributorsdecreased as a result of the weakness in the U.S. housing market. Sales to homecenters also decreased. Sales decreased across all of Simpson Strong-Tie’smajor product lines, particularly those used in new home construction. Sales ofSimpson Dura-Vent’s Direct-Vent and gas vent, hearth and pellet vent productlines decreased, while sales of special gas vent and relining productsincreased, primarily as a result of the acquisition of ProTech in June 2008.

 

Income from operations decreased64.4% from $83.0 million in the first nine months of 2008 to $29.6 million inthe first nine months of 2009. Gross margins decreased from 37.9% in the firstnine months of 2008 to 33.8% in the first nine months of 2009. The decrease ingross margins was primarily due to reduced absorption of fixed overhead, as aresult of lower production volumes, as well as higher manufacturing costs,including higher costs of material and labor.

 

Research and development expensedecreased 8.4% from $16.4 million in the first nine months of 2008 to $15.0million in the first nine months of 2009, primarily due to a $0.7 milliondecrease in professional service fees and a $0.6 million decrease in personnelexpenses. Selling expense decreased 23.4% from $63.3 million in the first ninemonths of 2008 to $48.4 million in the first nine months of 2009, whichresulted primarily from an $8.6 million decrease in expenses associated withsales and marketing personnel, most of which was related to cost-cuttingmeasures, a $4.0 million decrease in promotional expenditures and a $1.0million decrease in commissions paid to selling agents. General andadministrative expense decreased 10.9% from $67.2 million in the first ninemonths of 2008 to $59.8 million in the first nine months of 2009, whichresulted primarily from a $6.1 million decrease in cash profit sharing, a $1.7million decrease in administrative personnel expenses, related in part tocost-cutting measures, and a $1.5 million decrease in legal and professionalservice expenses, partly offset by a $1.3 million increase in bad debt charges,most of which was recorded in the first quarter of 2009, and a $1.5 millionincrease in amortization of intangible assets, primarily related to thebusinesses acquired since June 2008. Interest income decreased from $2.2million in the first nine months of 2008 to $64 thousand in the first ninemonths of 2009, primarily due to lower interest rates. The effective tax ratewas 48.9% in the first nine months of 2009, up from 38.9% in the first ninemonths of 2008. The effective tax rate is higher than the statutory rateprimarily due to the valuationallowances taken on foreign losses and a reduced benefit from the reduction orloss of enterprise zone tax credits at two of the Company’s facilities inCalifornia. The income tax expense for the first nine months of 2009,however, has been computed based on the first three quarters of 2009 asdiscrete periods due to the uncertainty regarding the Company’s ability toreliably estimate pre-tax income for the remainder of the year. The effectivetax rate was 19.4% in the first quarter of 2009, which, as a result of the loss before taxes in the first quarter of 2009,resulted in income tax benefit of $2.0 million. The effective tax rate was43.3% in the second quarter of 2009, which resulted in income tax expense of$8.2 million. The effective tax rate was 39.3% in the third quarter of 2009,which resulted in income tax expense of $8.3 million. The Company cannotreliably estimate pre-tax income for the remainder of

 

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2009 or for the full year, primarilydue to the continued uncertainty in the construction markets, in which theCompany operates. The income tax provision for the nine months ended September 30,2008, was calculated using estimated annual effective tax rates.

 

***ConnectorProducts — Simpson Strong-Tie***

 

Simpson Strong-Tie’s netsales decreased 25.5% from $552.3 million in the first nine months of 2008 to$411.4 million in the first nine months of 2009.  Simpson Strong-Tie accountedfor 90.9% of the Company’s total net sales in the first nine months of 2009, aslight decrease from 91.0% in the first nine months of 2008. The decrease innet sales at Simpson Strong-Tie resulted primarily from a decrease in salesvolume, partly offset by increases from newly acquired businesses and increasesin prices averaging 13.7% from the first nine months of 2008. In the firstnine months of 2009, Simpson Strong-Tie’s sales declined throughout the UnitedStates. California, the western states and the southeastern states had thelargest decrease in sales. Simpson Strong-Tie’s sales to contractordistributors and dealer distributors decreased as a result of the weakness inthe U.S. housing market. Sales to home centers also decreased. Sales decreasedacross all of Simpson Strong-Tie’s major product lines, particularly those usedin new home construction.

 

SimpsonStrong-Tie’s income from operations decreased 61.1% from $88.2 million in thefirst nine months of 2008 to $34.4 million in the first nine months of 2009.Gross margin decreasedfrom 40.6% in the first nine months of 2008to 35.7% in the first nine months of 2009. This decrease was primarilydue to reduced absorption of fixed overhead, as a result of lower productionvolumes, as well as higher manufacturing costs, including higher costs ofmaterial, labor and distribution.

 

Simpson Strong-Tie’sresearch and development expense decreased 9.9% from $15.5 million in the firstnine months of 2008 to $14.0 million in the first nine months of 2009,primarily due to a $0.7 million decrease in professional services and a $0.7million decrease in personnel expenses.  SimpsonStrong-Tie’s selling expense decreased 23.6% from $58.0 million in the first nine months of 2008 to $44.3million in the first nine months of 2009,which resulted primarily from a $8.4 million decrease in expenses associatedwith sales and marketing personnel, most of which was related to cost-cuttingmeasures, a $3.9 million decrease in promotional expenditures and a $0.6million decrease in professional services. Simpson Strong-Tie’s general andadministrative expense decreased 13.3% from $62.6 million in the first ninemonths of 2008 to $54.3 million in the first nine months of 2009, primarily dueto a $6.1 million decrease in cash profit sharing that resulted from loweroperating income, a $2.6 million decrease in administrative personnel expenses,a $1.3 million decrease in legal and professional fees and a $0.8 milliondecrease in information technology expenditures, partly offset by a $1.2million increase in the provision for bad debt, a $1.1 million increase in homeoffice administrative allocations, and a $0.9 million increase in intangibleasset amortization expense, primarily related to the acquisition of Aginco.

 

For its European and United Kingdomoperations, Simpson Strong-Tie recordedlosses from operations of $5.1 million in the first nine months of 2009compared to income from operations of $3.0 million in the first nine months of2008.

 

SimpsonStrong-Tie has continued to adjust production levels downward at variousfacilities in the United States and, as a result, has reduced its labor forceat these facilities.

 

***VentingProducts — Simpson Dura-Vent***

 

Simpson Dura-Vent’s net salesdecreased 24.6% from $54.4 million in the first nine months of 2008 to $41.0million in the first nine months of 2009. Simpson Dura-Vent accounted for 9.1%of the Company’s total net sales in the first nine months of 2009, a slightincrease from 9.0% in the first nine months of 2008. The decrease in net salesat Simpson Dura-Vent resulted primarily from a decrease in sales volume, partlyoffset by the addition of ProTech sales and an increase in average prices of5.3% from the first nine months of 2008. In the first nine months of 2009,Simpson Dura-Vent’s sales decreased throughout the United States, with thelargest decreases in California and the western and northeastern regions,resulting from the weakness in new home construction. These decreases wereoffset slightly by increases in the southeastern region. Sales of SimpsonDura-Vent’s Direct-Vent and gas vent, hearth and pellet vent product linesdecreased, while sales of special gas vent and relining products increased,primarily as a result of the acquisition of ProTech in June 2008.

 

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SimpsonDura-Vent’s loss from operations decreased slightly from $3.9 million in thefirst nine months of 2008 to $3.7 million in the first nine months of 2009.Gross margin increasedto 14.6% in the first nine months of 2009 from 10.3% in the first nine months of 2008,primarily due to lower fixed overhead and labor costs, offset slightly byhigher material costs.

 

Simpson Dura-Vent’sresearch and development expense increased 20.7% to $1.0 million in the firstnine months of 2009 from $0.8 million in the first nine months of 2008, whichresulted primarily from an increase of $0.1 million in professional serviceexpenses and a $0.1 million increase in personnel costs.  Simpson Dura-Vent’s selling expense decreased20.9% from $5.2 million in the first ninemonths of 2008 to $4.1 million in the first nine months of 2009. This decrease resulted primarily from a$0.8 million decrease in agent commissions, a $0.2 million decrease in expensesassociated with sales and marketing personnel and a $0.1 million decrease inpromotional expenditures. Simpson Dura-Vent’s general and administrative expenseincreased 33.5% to $4.5 million in the first nine months of 2009 from $3.4million in the first nine months of 2008, primarily due to a $0.2 millionincrease in expenses associated with administrative personnel, including thoseat businesses acquired in 2008, and a $0.6 million increase in intangible assetamortization expense.

 

***Administrativeand All Other (Company)***

 

Interestincome is generated on the Company’s cash and cash equivalents balances. In thefirst nine months of 2009, interest income decreased primarily as a result of lowerinterest rates and was nearly offset by interestexpense, which includes interest, account maintenance fees and bank charges.

 

CriticalAccounting Policies and Estimates

 

The Company did not makeany significant changes to its critical accounting policies and estimatesduring the three or nine months ended September 30, 2009, from thosedisclosed in “Item 7. Management’s Discussion and Analysis of FinancialCondition and Results of Operations,” included in the Company’s Annual Reporton Form 10-K for the fiscal year ended December 31, 2008. See Note 1, “Basis of Presentation*— Recently Issued Accounting Standards,*”  to the Company’s Condensed ConsolidatedFinancial Statements appearing elsewhere in this report regarding recentlyissued accounting standards.

 

Liquidity and Sources of Capital

 

As of September 30, 2009, working capital was$461.2 million as compared to $456.5 million at September 30, 2008, and$455.7 million at December 31, 2008. The increase in working capital from December 31,2008, was primarily due to a $49.4 million increase in cash and cashequivalents, a $32.0 million increase in net trade accounts receivable, a $4.1million decrease in accrued profit sharing trust contributions and a $2.4million decrease in other accrued liabilities. Net trade accounts receivableincreased 42.1% from December 31, 2008, as a result of increased sales inthe latter part of the third quarter of 2009 compared to the latter part of thefourth quarter of 2008. Partly offsetting the increases in working capital werea $73.6 million decrease in inventories, an $8.0 million increase in tradeaccounts payable, a $3.4 million increase in accrued cash profit sharing andcommissions and a $1.2 million increase in income taxes payable. Raw materialinventories decreased 33.7% from December 31, 2008, and in-progress andfinished goods inventories decreased 26.6% over the same period. The decreasein inventories resulted primarily from decreased raw material purchases. Thebalance of the change in working capital was due to the fluctuation of variousother asset and liability accounts, none of which was individually material.The working capital change and changes in noncurrent assets and liabilities,combined with net income of $15.0 million and noncash expenses, primarilydepreciation, amortization and stock-based compensation charges totaling $23.6million, resulted in net cash provided by operating activities of $88.7million. As of September 30, 2009, the Company had unused credit facilitiesavailable of $205.1 million.

 

In January 2009, theCompany’s subsidiary, Simpson Strong-Tie Company Inc., acquired the business ofRO Design Corp, a Florida corporation doing business as DeckTools, whichlicenses deck design and estimation software. The software providesprofessional deck builders, home centers and lumber yards a simple,graphics-driven solution for designing decks and estimating material and laborcosts for the project. Payments under this agreement total $4.0 million incash, including $2.5 million to be paid in the future, which will be treated ascompensation expense to the principal officer of RO Design Corp, who is nowemployed by the Company. The

 

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Company recorded goodwillof $0.4 million and intangible assets subject to amortization of $1.1 millionin the connector products segment as a result of the acquisition, but thepurchase price allocation has not been finalized.

 

In April 2009, the Company’ssubsidiary, Simpson Strong-Tie Europe EURL, purchased the equity of Aginco,which manufactures a line of high-quality builder products and distributes themin France. The purchase price (subject to post-closing adjustments) was $21.9million in cash. The Company recorded goodwill of $12.1 million and intangibleassets subject to amortization of $7.4 million in the connector productssegment as a result of the acquisition. Net tangible assets, includingmachinery and equipment, inventory and trade accounts receivable, accounted forthe balance of the purchase price, but the purchase price allocation has notbeen finalized.

 

The Company used $35.2 million in its investing activities,primarily for the acquisitions of the RO Design Corp and Aginco businesses andcapital expenditures mainly at its facilities in Europe and Asia. The Companyestimates that its full-year capital spending will total $14.5 million in 2009.

 

The Company hasclassified its vacant facility in San Leandro, California, as an asset held forsale. The Company has completed its environmental remediation at this facility.

 

The Company’s financingactivities used net cash of $8.1 million. The payment of cash dividends in theamount of $14.7 million was the primary financing activity use of cash. Cashprovided by financing activities was primarily from the issuance of the Company’scommon stock through the exercise of stock options totaling $6.4 million. In October 2009,the Company’s Board of Directors declared a cash dividend of $0.10 per share,estimated at $4.9 million, to be paid on January 28, 2010, to stockholdersof record on January 7, 2010.

 

The Company believes that cash generated by operations andborrowings available under its credit facility will be sufficient for theCompany’s working capital needs and planned capital expenditures for the next12 months. Depending, however, on the Company’s future growth and possibleacquisitions, it may become necessary to secure additional sources offinancing, which may not be available on reasonable terms, or at all.

 

The Company believes that the effect of inflation on theCompany has not been material in recent years, as general inflation rates haveremained relatively low. Because, however, the Company’s main raw material issteel, increases in steel prices may adversely affect the Company’s grossmargins if it cannot recover the higher costs through price increases.

 

**Item 3.Quantitative and Qualitative Disclosures About Market Risk.**

 

The Company hasforeign exchange rate risk in its international operations, primarily Europeand Canada, and through purchases from foreign vendors. The Company does notcurrently hedge this risk. If the exchange rate were to change by 10% in anyone country or currency where the Company has operations, the change in netincome would not be material to the Company’s operations as a whole. Thetranslation adjustment resulted in an increase in accumulated othercomprehensive income of $7.1 million and $13.6 million for the three and ninemonths ended September 30, 2009, primarily due to the effect of theweakening of the United States dollar in relation to the Canadian dollar andmost European currencies.

 

**Item 4.Controls and Procedures.**

 

*DisclosureControls and Procedures.*As of September 30, 2009, an evaluation of theeffectiveness of the design and operation of the Company’s disclosure controlsand procedures was performed under the supervision and with the participationof the Company’s management, including the chief executive officer (“CEO”) andthe chief financial officer (“CFO”). Based on that evaluation, the CEO and theCFO concluded that the Company’s disclosure controls and procedures wereeffective as of that date, at the reasonable assurance level, in ensuring thatinformation required to be disclosed is recorded, processed, summarized andreported within the time periods specified in the rules and forms of theSecurities and Exchange Commission and in seasonably alerting them to materialinformation required to be included in this report.

 

The Company’s management,including the CEO and the CFO, does not expect that the Company’s disclosurecontrols and procedures or the Company’s internal control over financialreporting will necessarily prevent all fraud and material errors.  An internal control system, no matter howwell conceived and operated, can provide only reasonable, not absolute,assurance that the objectives of the control system are met.  In addition, the design of a 

 

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control system mustreflect the facts that there are resource constraints and that the benefits ofcontrols must be considered relative to their costs.  The inherent limitations in an internalcontrol system include the realities that judgments can be faulty and that breakdownscan occur because of simple error or mistake. Controls also can be circumvented by the individual acts of somepersons, by collusion of two or more people, or by management override of thecontrol.  The design of any system ofinternal control is also based in part on assumptions about the likelihood offuture events, and there can be only reasonable, not absolute, assurance thatany design will succeed in achieving its stated goals under all potentialevents and conditions.  Over time,controls may become inadequate because of changes in circumstances, or thedegree of compliance with the policies and procedures may deteriorate.

 

*Changesin Internal Control over Financial Reporting.*During the three months ended September 30,2009, the Company made no changes to its internal control over financialreporting (as defined in Rules 13a-15(f) and 15d-15(f) under theSecurities Exchange Act of 1934) that have materially affected, or arereasonably likely to materially affect, its internal control over financialreporting.

 

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PART II — OTHERINFORMATION

 

**Item 1.Legal Proceedings.**

 

From time to time,the Company is involved in various legal proceedings and other matters arisingin the normal course of business.

 

Three lawsuits (the “Cases”)have been filed against the Company in the Hawaii First Circuit Court:  *Kai et al. v. Haseko Homes, Inc.,Haseko Construction, Inc. and Simpson Manufacturing, Inc.*,Case No. 09-1-1476 RAT (“Case 1”); *Ke Noho Development, LLCv. Simpson Strong-Tie Company, Inc.*, *and HonoluluWood Treating Co., LTD.*, Case No. 09-1-1491-06 SSM (“Case 2”);and *North American Specialty Ins. Co. v. SimpsonStrong-Tie Company. Inc. and K.C. Metal Products, Inc.*, Case No. 09-1-1490-06VSM (“Case 3”).  Case 1 was filed on June 26,2009.  Cases 2 and 3 were filed on June 30,2009.  The Cases all relate to allegedpremature corrosion of the Company’s strap tie holdown products installed inbuildings in a housing development known as Ocean Pointe in Honolulu, Hawaii,allegedly causing property damage.  Case1 is a putative class action brought by the owners of allegedly affected OceanPointe houses.  Case 1 appears to havebeen voluntarily dismissed, although the Company has been informed that Case 1will be re-filed.  Case 1 has not beenserved on the Company.  Case 2 is anaction by the builders and developers of Ocean Pointe against the Company,claiming that either the Company’s strap tie holdowns are defective in designor manufacture or the Company failed to provide adequate warnings regarding theproducts’ susceptibility to corrosion in certain environments.  Case 2 has not been served on theCompany.  Case 3 is a subrogation actionbrought by the insurance company for the builders and developers against theCompany claiming the insurance company expended funds to correct problemsallegedly caused by the Company’s products. Case 3 is the only Case that has been served on the Company.  None of the Cases alleges a specific amountof damages sought, although each of the Cases seeks compensatory damages, andCase 1 seeks punitive damages.  TheCompany is currently investigating the facts underlying the claims asserted inthe Cases, including, among other things, the cause of the alleged corrosion;the severity of any problems shown to exist; the buildings affected; theresponsibility of the general contractor, various subcontractors and otherconstruction professionals for the alleged damages; the amount, if any, ofdamages suffered; and the costs of repair, if needed.  At this time, the likelihood that the Companywill be found liable for any property damage allegedly suffered and the extentof such liability, if any, are unknown. Based on facts currently known to the Company, the Company believes thatall or part of the claims alleged in the Cases may be covered by its insurancepolicies.  The Company intends to defenditself vigorously in connection with the Cases.

 

The Company is notengaged in any other legal proceedings as of the date hereof, which the Companyexpects individually or in the aggregate to have a material adverse effect onthe Company’s financial condition, cash flows or results of operations. Theresolution of claims and litigation, however, is subject to inherentuncertainty and could have a material adverse effect on the Company’s financialcondition, cash flows or results of operations.

 

**Item 1A.Risk Factors**

 

We are affected by risksspecific to us, as well as risks that affect all businesses operating inglobal markets. Some of the significant factors that could materially adverselyaffect our business, financial condition and operating results appear in “Item1A. Risk Factors” of our most recent Annual Report on Form 10-K(available at www.simpsonmfg.com/docs/10K-2008.pdf or www.sec.gov), but wehave changed the risk factors titled “Impairmentcharges on goodwill or other intangible assets would adversely affect ourfinancial position and results of operations” and “We aresubject to international tax laws that could affect our financial results,” and have added an additional riskfactor, as follows:

 

**Impairment charges on goodwill or other intangibleassets would adversely affect our financial position and results of operations.**

 

We are required toperform impairment tests on our goodwill and other intangible assets annuallyor at any time when events occur that could affect the value of our businesssegments.  To determine whether agoodwill impairment has occurred, we compare fair value of each of ourreporting units with its carrying value. Significant and unanticipated changes in circumstances, such assignificant adverse changes in business climate, adverse actions by regulatoryauthorities, unanticipated competition, loss of key customers or changes intechnology or markets, can require a charge for impairment that can materiallyand adversely affect our reported net income and our stockholders’ equity.  For example, in 2008, our annual impairmenttest resulted in goodwill impairment charge of

 

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$3.0 million associatedwith assets acquired in England in 1999 as part of our U.K. reportingunit.  Our U.K. reporting unit’s carryingvalue exceeded its fair value, primarily due to reduced future expected netcash flows. If current adverse conditions in the home-building industry, thefinancial markets or the economy generally should continue longer than weexpect, we may need to take further charges for impairment, which we are notnow able to estimate, but which may be substantial.

 

**We are subject to U.S. and international tax laws thatcould affect our financial results.**

 

We conduct international operations through our subsidiaries.  Tax laws affecting international operationsare complex and subject to change.  Ourincome tax liabilities in the different countries where we operate depend inpart on internal settlement prices and administrative charges among us and oursubsidiaries.  These arrangements requireus to make judgments with which tax authorities may disagree.  Tax authorities may impose additionaltariffs, duties, taxes, penalties and interest on us.  For example, we manufacture steel products inforeign countries for importation into the U.S. and other countries, andgovernment agencies may impose substantial prospective or retroactive tariffson such products.  Transactions that wehave arranged in light of current tax rules could have material andadverse consequences if tax rules change, and changes in tax rules orimposition of any new or increased tariffs, duties and taxes could materiallyand adversely affect our sales, profits and financial condition.

 

**Contractsthat we file as exhibits to our public reports contain recitals,representations and warranties that may not be factually correct.**

 

Any recital,representation, warranty or other statement of purported fact in any contract,agreement or similar instrument that we file as an exhibit to this or any otherreport may not be true or complete, either at the date of such instrument or atany later time.  Even if such statementswere accurate when made, they may not be accurate when we file the instrumentas an exhibit to any of our reports.  Theparties to such instruments did not intend such statements to establish orconfirm any facts, but intended such statements to allocate contractual riskbetween the parties.  Such instrumentsmay be subject to standards of materiality that differ from the standardsapplicable to our reports.  In addition,such statements may have been qualified by schedules and other disclosures thatwe have not filed with (or incorporated by reference into) this or any otherreport or document.  In reviewing any ofour reports, you should rely on the text of the report, which we believed wascomplete and correct in all material respects when we filed the report.  You should not assume that any statement ofpurported fact in any such instrument is accurate or complete, because such anassumption could result in misapprehension of the facts and circumstances.

 

**Item 2.Unregistered Sales of Equity Securities and Use of Proceeds.**

 

In December 2008,the Board of Directors authorized the Company to repurchase up to $50.0 millionof the Company’s common stock. This replaced the $50.0 million repurchaseauthorization from December 2007. The authorization will remain in effectthrough the end of 2009. The Company did not repurchase any of its common stockin the first nine months of 2009.

 

**Item 6.Exhibits.**

 

The following exhibitsare either incorporated by reference into this report or filed with thisreport, as indicated below.

 

3.1                     Certificate of Incorporation of Simpson ManufacturingCo., Inc., as amended, is incorporated by reference to Exhibit 3.1 ofits Quarterly Report on Form 10-Q for the quarter ended September 30,2007.

 

3.2                     Bylaws of Simpson Manufacturing Co., Inc., asamended through August 1, 2008, are incorporated by reference to Exhibit 3.2of its Current Report on Form 8-K dated August 4, 2008.

 

4.1                   Amended Rights Agreement dated as of June 15,2009, between Simpson Manufacturing Co., Inc. and Computershare TrustCompany, N.A., which includes as Exhibit B the form of Rights Certificate,is incorporated by reference to Exhibit 4.1 of Simpson Manufacturing Co., Inc.’sRegistration Statement on Form 8-A/A dated June 15, 2009.

 

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4.2                   Certificate of Designation, Preferences and Rights of Series AParticipating Preferred Stock of Simpson Manufacturing Co., Inc., dated July 30,1999, is incorporated by reference to Exhibit 4.2 of its RegistrationStatement on Form 8-A dated August 4, 1999.

 

10.1             Simpson Manufacturing Co., Inc. 1994 Stock OptionPlan, as amended through February 13, 2008, is incorporated by referenceto exhibit 10.1 of Simpson Manufacturing Co., Inc.’s Quarterly Report on Form 10-Qfor the quarter ended June 30, 2008.

 

10.2             Simpson Manufacturing Co., Inc. 1995 IndependentDirector Stock Option Plan, as amended through November 18, 2004, isincorporated by reference to exhibit 10.2 of Simpson Manufacturing Co., Inc.’sQuarterly Report on Form 10-Q for the quarter ended June 30, 2008.

 

10.3             Simpson Manufacturing Co., Inc. Executive OfficerCash Profit Sharing Plan, as amended through February 25, 2008, isincorporated by reference to exhibit 10.3 of Simpson Manufacturing Co., Inc.’sQuarterly Report on Form 10-Q for the quarter ended June 30, 2008.

 

10.4             Credit Agreement dated as of October 10, 2007,among Simpson Manufacturing Co., Inc. as Borrower, the Lenders partythereto, Wells Fargo Bank as Agent, and Simpson Dura-Vent Company, Inc.,Simpson Strong Tie Company Inc., and Simpson Strong-Tie International, Inc.as Guarantors, is incorporated by reference to Exhibit 10.1 of SimpsonManufacturing Co., Inc.’s Current Report on Form 8-K dated October 15,2007.

 

10.5             Form of Indemnification Agreement between SimpsonManufacturing Co., Inc. and its directors and executive officers, as wellas the officers of Simpson Strong-Tie Company Inc. and Simpson Dura-VentCompany, Inc., is incorporated by reference to Exhibit 10.2 ofSimpson Manufacturing Co., Inc.’s Annual Report on Form 10-K for theyear ended December 31, 2004.

 

10.6               Compensation of Named Executive Officers of Simpson Manufacturing Co., Inc.is incorporated byreference to Exhibit 10 of Simpson Manufacturing Co., Inc.’s CurrentReport on Form 8-K dated October 2, 2009.

 

31                        Rule 13a-14(a)/15d-14(a) Certificationsare filed herewith.

 

32                        Section 1350 Certifications arefiled herewith.

 

99.1               Simpson Manufacturing Co., Inc. 1994 EmployeeStock Bonus Plan, as amended through November 18, 2004, is incorporated byreference to Exhibit 99.1 of Simpson Manufacturing Co., Inc.’s AnnualReport on Form 10-K for the year ended December 31, 2007.

 

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**SIGNATURES**

 

Pursuant to the requirements of the SecuritiesExchange Act of 1934, the registrant has duly caused this report to be signedon its behalf by the undersigned thereunto duly authorized.

 

 
|      | **Simpson Manufacturing Co., Inc.** |
|-----------|------------------------------------------|
|      | (Registrant)                             |
|      |                                     |
|      |                                     |   |
| **DATE:** | November 6,  2009                   |   | By | /s/Karen  Colonias |
|      |                                     | Karen Colonias |
|      |                                     | Chief Financial Officer |
|      |                                     | (principal accounting  and financial officer) |
|           |                                          |  |  |  |

 

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