Q4 2020 Simpson Manufacturing Co Inc Earnings Call
Greetings and welcome to Simpson manufacturing Companys fourth quarter, and full year 'twenty 'twenty earnings conference call.
This time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If any once you require operator assistance during the conference. Please press star zero on your telephone keypad. Please note. This conference is being recorded.
Now, let's turn the conference over to your host Kim Orlando, which I don't Investor Relations. Thank you you may begin.
Good afternoon, ladies and gentlemen, and welcome to the Simpson manufacturing company fourth quarter and full year 2020 earnings conference call.
Any statements made on this call that are not based on historical facts are forward looking statements.
Such statements are based on certain estimates and expectations and are subject to a number of risks and uncertainties.
Actual future results may vary materially from those expressed or implied by the forward looking statements.
We encourage you to read the risks described in the company's public filings and reports, which are available on the SEC's or the company's corporate website.
Except to the extent required by applicable securities laws, we undertake no obligation to update or publicly revise any of the forward looking statements that we make here today, whether as a result of new information future events or otherwise.
Please note that the company's earnings press release was issued today at approximately 415 P M Eastern time.
The earnings press release is available on the Investor Relations page of the company's website at Simpson M. F. G dotcom.
Today's call is being webcast and a replay will also be available on the Investor Relations page of the company's website.
Now I would like to turn the conference over to Karen Colonias, Simpson's President and Chief Executive Officer.
Thanks, Kim and good afternoon, everyone and thank you for joining us today.
I'll begin with a summary of our full year 2020 results before turning to a discussion on our key fourth quarter performance drivers and initiatives.
Brian will then walk you through our financials and fiscal 2021 business outlook in greater detail.
I am extremely proud of our strong financial and operational.
In 2020.
Which we delivered in a highly challenging operating environment.
The COVID-19 pandemic.
Our net sales improved 11, 6% over 2019 to one point to $8 billion the highest in the company's history.
And by strong sales volume.
As a result, we generated record earnings of $4.27 per diluted share.
43, 3% over 2019.
These results, but not impossible without the hard work and dedication of all our Simpson employees.
Their diligence, including strict adherence to protocol to help minimize the spread of COVID-19 has enabled us to continue operating our business with minimal disruptions from the pandemic.
On behalf of the entire Simpson management team, we applaud them for their tremendous efforts.
Health safety and wellbeing of all our employees remains our number one priority and we will strive for continuous improvement to ensure Simpson remains safe and rewarding place to work.
Our record 2020 results were further supported by our commitment to position Simpson for long term sustainable and increasingly profitable growth.
In October of 2017, we unveiled a three year 'twenty 'twenty plan with.
With aggressive targets to maximize our operating efficiency and drive long term shareholder value.
Since then we've made significant progress against our goal from.
Of which we updated in July of 2019 to reflect changes in the macroeconomic landscape.
Well, we elected to withdraw these financial targets in April of 2020 is just a significant level of uncertainty surrounding COVID-19, we continue to execute based on the same underlying principles.
Focusing on operating efficiencies and cost savings to guide us through the Covid pandemic.
Isn't it.
At the same time, we did experience certain tailwind in our business as a result of the COVID-19 related macroeconomic condition.
I think we had favorable fuel prices.
Embraer reduction in travel and related operating expenses and an increase in repair and remodel activity.
Due to the combination of these factors, we were able to meet or exceed nearly all of our ambitious 2020 plan objectives. We are very proud of these accomplishments and I'd like to spend a few minutes discussing those with you.
Our first 'twenty 'twenty plan objective with a continued focus on organic growth.
Our goal was to achieve a compounded annual growth rate in net sales of approximately 8% from.
2016 through 2020.
As of the year end of 2020, we well exceeded this target achieving a compounded annual growth rate over 10% relative to our 2016 baseline.
Milestones that help support the schools, who did a price increase for the majority of our U S. Wood connector products in the third quarter of 2018.
The signing of one of our largest U S homebuilding companies onto our builder program, resulting in 23 of the top 25 U S builders now engaged on our program.
Strong repair and remodel trends associated with the COVID-19 pandemic.
And the return of Lowe's as a home center customer in mid 2020.
Our second objective involves rationalizing our cost structure to improve company wide profitability.
We aim to reduce our total operating expense as a percent of net sales from 31, 3% in 2016 to a range of 26% to 27% by the end of 2020.
We tackled this through a combination of zero based budgeting.
Lowering our indirect procurement costs and other cost reduction measures, we took in both Europe and in our concrete business.
In addition.
Typically in 2020, we experienced solid cost savings from our expense management practices.
Well as one time benefits from the reduced travel and trade show costs as a result of the COVID-19 restrictions.
These factors combined with strong top line growth.
Enabled us to exceed our operating expense target for the full year of 2020, we recorded operating expenses as a percent of net sales of 25, 6% or 570 basis points of improvement compared to 2016.
Our next plan was to improve our operating income margin to a range of 16% to 17% by the end of 2020.
We exceeded this target as our gross margin significantly benefit from lower material costs and limited spending on operating expense due to the COVID-19 strictest.
We reported an operating income margin of 19, 9% for 2020, a 350 basis point improvement compared to 16, 4% in 2016.
At the consolidated level, our gross margin improvement was supported enhanced gross margin in our concrete business.
Other twenty-twenty Michael.
Following the unveiling of the 'twenty 'twenty plan, we implemented a new concrete strategy.
17.
Narrowing our concentration to six distinct product categories.
By focusing on these higher margin products to increase profitability, we exceeded our goal of improving our global concrete gross margin from 34, 7% in 2016% to 42% in 2020.
Our final profitability goal was to improve our operating income margin in Europe, we've made substantial progress in Europe over the past few years.
Rolling out our fastener lines in the Nordic region and in France.
The consolidation of our European management team create efficiencies as well as sort of significant cost cutting initiatives.
As a result, we achieved an operating income margin of 7%, excluding our S. E T cost of approximately $2 5 million in 2020.
While this is lower than our original target range of 8% to 9%. We are pleased with our results, which reflect approximately 350 basis points of improvement.
Versus the 2016 numbers.
Our third objective focused on improving our working capital management and overall balance sheet discipline.
Since the onset of the 'twenty 'twenty plan, we've made headway on this front primarily through inventory reduction.
And the implementation of lean principles throughout our operations.
We've completed a three phase SKU reduction program, eliminating upwards of 12000, non moving our slow moving items and converted our customers over to replacement products.
In addition, we carried out rapid improvement events at many of our U S production facilities.
No opinion efficiency enhancements as well as improved management of inventory and purchasing practices.
As we move forward, we remain committed to driving continuous cost management and improved efficiencies through our lean initiatives.
However, consistent with our strategy. It is critical that we balance our inventory purchases with our liquidity needs in order to maintain our commitment to product availability standards and an exceptional customer service experience.
The final element of our 2020 plan was focused on maximizing shareholder value from the goal of improving our return on invested capital from 10, 5% in 2016 to a range of 15% to 16% by the end of 2020.
Who are solid operational execution combined with the enactment of the U S tax cuts and jobs Act of 2017, which lowered our effective income tax rate beginning in 2018, we surpassed this target.
Indeed, 2020 with a return on invested capital of 20%.
You're on this we continued to return capital to our shareholders in the form of dividends and share buybacks.
In 2020, we returned $116 $2 million to our stockholders.
Due to the payments of $40 million in dividends and $76 2 million in share repurchases.
Since the onset of the 'twenty 'twenty plan, we have returned over 83% of our cash generated by operations to our shareholders.
Far exceeding our target of 50%.
I am extremely proud of all that we've accomplished in these past three years and by executing on the 'twenty 'twenty plan, we achieved solid organic growth.
Rationalize our cost structure to improve company wide profitability and we've improved our working capital management and balance sheet position.
In turn creating value for all key Simpson stakeholders I'd like to once again, thank all of our employees for their dedication hard work to meet these extraordinary achievements.
Now, let's turn to a brief.
Information on our fourth quarter results and operating initiatives.
Our fourth quarter consolidated net sales grew 12% year over year to $293 $9 million on significantly higher volume.
Gross margin increased to 42, 1% from 41, 9% in the prior year quarter, primarily related to strength in Europe, where we experienced lower material and warehouse costs.
Our solid gross margin combined with effective expense management and reduced costs from travel and other restrictions as a result of the COVID-19.
Drove a seven 8% year over year increase in our income from operations to $39 $5 million and earnings of 68 cents per diluted share.
The increase in sales volume, we experienced in the fourth quarter was primarily related to ongoing momentum in the home Center distribution channel, which includes both our home centers and co op customers.
We are continuing to experience a shift in consumer behavior toward home renovations as a result of the pandemic.
Sales from home center distribution channels, where we see much of a repair and remodel business improved over the prior year period.
Growth was supported by our product rollout of our connector mechanical anchors and fastener product solution into all 1700, and 37, Lowe's stores, which we completed during the fourth quarter.
As a reminder, Loews returned to Simpson has a home center customer beginning in the second quarter of 2020.
Our sales were further supported by solid U S housing starts.
As we generally experience a multiple month lag in the demand from the time of the start in the fourth quarter. We benefited from strong third quarter 2020 housing starts which grew over 11% year over year.
In addition, while we typically see lower seasonal sales in the fourth quarter related to holiday closures and winter conditions.
In 2020, the fourth quarter, we experienced a very mild winter. This enabled construction activity to continue late into the year further bolstering our net sales.
Turning now to Europe.
Sales continued to recover nicely following government ordered shutdowns co our operations in the United Kingdom, and France due to COVID-19 in late March.
Sales were assisted by strong demand trends and our ability to meet our customer needs to our solid inventory management practices.
We believe ourselves benefited in Europe during the fourth quarter as many of our competitors experienced supply chain issues.
During this time, we were able to offer customers the important products they required to keep up with demand and to maintain job site on schedule.
I'd also like to note that while the United Kingdom has re implemented shutdowns due to the most region COVID-19 surge we have been deemed an essential business in all of our major production and distribution facilities have remained open and operational with remote work being promoted work.
Hospital, such as in our corporate offices in regards to true implementation the rollout to.
Travel limitations related to COVID-19.
In the fourth quarter, we completed the SAP rollout at our U K branch and Gallatin, Tennessee locations, both of which are now live.
Most recently, we have successfully transitioned all of our Canadian based sales organization over to S. P.
Thus completing the full safety rollout in North America, a very important milestone.
This year, we will continue working on the S&P transition in our European locations and the rest of the World and we currently anticipate a companywide completion in 2022.
And we will continue to monitor and update our timeline should circumstances change.
Now I'd like to briefly touch on our capital allocation structure.
We're very grateful to be able to operate as a supplier to other essential businesses only minimal disruptions due to the pandemic.
As our business continues to generate strong cash flow, we remain focused on appropriately balancing our growth and stockholder return priorities.
We're also very pleased to be on a position to pay off our line of credit borrowing and pool as well as declare our quarterly dividend as we have done consistently since 2004.
Well the challenges of the COVID-19 pandemic continue to impact our broader economy.
Existing 2020, we feel confident in the bright future that we believe lies ahead for Simpson.
With another quarter of strong year over year growth in housing starts which were up over 11% in the fourth quarter of 2020. We believe housing will continue to be a key element of the economic recovery in the coming years ahead, and we are well positioned to capitalize on this environment.
The same time, we continue to pursue our strategy of diversification and positioning our business to be less vulnerable to U S housing market through key investments in adjacent products and markets.
And we also remain focused on growth, including M&A opportunities that would complement our existing product offering manufacturing footprint or strength in our software capabilities.
Our success in achieving the 'twenty 'twenty plan targets has created a very strong foundation for Simpson.
That's really positioning our company for long term sustainable and increasingly profitable growth.
But now we are ready for our next chapter.
Today I'm pleased to announce that on Tuesday March 23rd we plan to host a virtual analyst and Investor day to provide more insight and detail surrounding the elements of our business strategy in 2021 and beyond <unk>.
Additional information about this event will be released in the coming day.
Thank you very much for your time and attention now like to turn the call over to Brian who will discuss our fourth quarter financial results and 'twenty 'twenty one outlook in greater detail.
Thank you Karen and good afternoon, everyone I'm pleased to discuss our fourth quarter financial results with you today.
Before I begin I'd like to mention that unless otherwise stated all financial measures discussed in my prepared remarks today refer to the fourth quarter of 2020.
All comparisons will be year over year comparisons versus the fourth quarter of 2019.
Now turning to our results.
Karen highlighted our consolidated net sales were strong.
From 12% to $293 $9 million within North America segment, net sales increased nine 8% to $249 $1 million, primarily due to higher sales volumes and our home Center distribution channel, which includes our home center and co op customers.
Sales volumes were supported by the return of Loews, along with increased repair and remodel activity.
Our net sales further benefited from other distribution channels.
Which experienced increased demand from new housing starts and repair and remodel activity.
In Europe net sales increased 24, 9% to $41.8 million, primarily due to higher sales volumes in local currencies.
Europe's sales benefited by approximately $2 $5 million of positive foreign currency translations, resulting from some Europe currencies strengthening against the United States dollar.
Yeah.
Wood construction products represented 85% of total sales compared to 83% and concrete construction products represented 15% of total sales compared to 17% last year.
Consolidated gross profit increased by 12, 4% to $123 $7 million, which resulted in a stronger Q4 gross margin of 42, 1% compared to last year.
Gross margin increased by 20 basis points, primarily due to lower material and warehouse costs, which were partially offset by higher labor costs.
On a segment basis, our gross margin in North America declined to 43, 2% compared to 43, 9% while in Europe, our gross margin increased to 35, 3% compared to 29, 9%.
Yeah.
From a product perspective, our fourth quarter gross margin on wood products was 41, 8% compared to 48%.
In the prior year quarter.
And was 39, 6% for concrete products compared to 43, 7% in the prior year quarter.
Now turning to our fourth quarter costs and operating expenses.
Research and development and engineering expenses increased 10% to $12 $9 million, primarily due to personnel costs.
Stock based compensation.
Product testing and.
On cash profit sharing expenses.
So and it expenses decreased one 2% to $27 $8 million due to lower travel and entertainment and advertising and trade show expenses.
Partly offset by higher personnel costs cash profit sharing.
Sales commissions on stock based compensation expense.
On a segment basis selling expenses in North America were down two 1% and in Europe, They were mostly flat.
General and administrative expenses increased 10.9% to $43 $6 million, primarily due to.
Increases in cash profit sharing and stock based compensation and software subscriptions and licenses.
Yeah.
Total operating expenses were $84 $3 million, an increase of $5 $1 million or approximately six 5%.
As a percentage of net sales total operating expenses were 28, 7%.
An improvement of 150 basis points compared to 32%.
Yeah.
Our solid topline performance combined with our stronger Q4 gross margin and diligent management of costs and operating expenses helped drive a seven 8% increase in consolidated income from operations to $39 $5 million compared to $36 $6 million.
In North America income from operations decreased one 8% to $36 $1 million.
In the fourth quarter of 2019, North America income from operations included a $5 $6 million gain on the sale will be selling and distribution facility.
In Europe income from operations increased 145, 8% to $1 $3 million, primarily due to increased gross profit.
On a consolidated basis, our operating income margin of 13, 4%.
Decreased by approximately 50 basis points.
Our effective tax rate increased to 25, 6% from 22, 3% due to the release of foreign valuation allowances in 2019.
Accordingly, net income totaled $29 $6 million or <unk> 68 cents per fully diluted share compared to $28 $1 million or 63 cents per fully diluted share.
Now, let's turn to our balance sheet and cash flow.
Our balance sheet remained healthy with ample liquidity to operate our day to day operations.
At December 31, cash and cash equivalents totaled $274 $6 million, an increase of $44.4 million compared to December 31.
2019.
After paying down the remaining $75 million on our revolving credit facility during the quarter.
As of December 31, 2020, the full 300 billion on our primary Atlanta credit was available for borrowing.
Our inventory position of $283 $7 million at December 31st increased by $23 $6 million from our balance at September 30th.
We continue to see higher levels of construction activity.
Along with the unprecedented demand.
We've experienced through the pandemic.
We continue to be highly selective in regard to inventory purchases through careful management and purchasing practices, along with maintaining our high level high levels of customer service and on time delivery standards.
As a result of our improved profitability and effective working capital management, we draw on it generated strong cash flow from operations.
$77 $5 million for the fourth quarter of 2020, an increase of $21 $1 million or 37, 4% from.
For the full year of 2020, we generated $207 $1 million of cash flow from operations, which increased nearly $1.5 million.
During the fourth quarter, we used approximately $17 million for capital expenditures.
From a full year of 2020 capital expenditures were approximately $37 $9 million.
In line with our reduced expectations as a result of our focus on cash preservation in mid 2020 due to COVID-19.
We were also pleased to have paid 44.
$4 million in dividends in fiscal.
2020, including $10 $2 million from the fourth quarter.
In addition, we repurchased approximately 1.15 million shares of our common stock in 2020 at an average price of $72.33 per share.
Total total of $76 $2 million.
This includes approximately 151000 shares of our common stock that we repurchased during the fourth quarter.
On average price of $89 from 49 cents per share for a total of $13 $5 million.
As our authorization for repurchases of common stock expired at year end on December 16th our board of directors authorized.
The repurchase of up to $100 million of our common stock which went into effect.
On January one 'twenty 'twenty, one and runs through December 31, 2021.
In addition on January 22nd our board of Directors declared a quarterly cash dividend of 23 cents per share, which will be payable on April 22nd 2021 to stockholders of record as of April one 2021.
Before we turn the call over to questions I'd like to discuss our 'twenty 'twenty one financial outlook.
Based on business trends and conditions as of today February eight.
We are initiating guidance from the full year ending December 31, 2021 as follows.
Operating margin is estimated to be in the range of 16, 5% to 18, 5%.
The effective tax rate is estimated to be in the range of 25% to 26%, including both federal and state income taxes.
And capital expenditures are estimated to be in the range of $50 million to $55 million, including approximately.
$10 million to $13 million, which will be used for maintenance capex.
As of today, the magnitude and duration of the COVID-19 pandemic and its impact on general economic conditions remains uncertain.
Important to note that the potential economic impact related to COVID-19 on our operations.
Raw material costs consumers suppliers and vendors.
They have a material adverse impact on our 2021 financial outlook should conditions materially change from the current environment.
We will continue to monitor the impact of COVID-19 on our operations.
Which were not significantly impacted in the fourth quarter of 2020.
In summary, despite the COVID-19 related challenges in the marketplace and ongoing uncertainty.
We were very pleased with our fourth quarter financial results and operating performance.
I'd like to I'd like to once again, thank all of our employees, who are dedicated to working safely and supporting our customers during these difficult circumstances.
Our industry, leading position geographic reach and diverse product offerings.
Volume with our strong balance sheet and liquidity position gives us confidence in our ability to maintain operational excellence and support current and future demand trends.
As Karen mentioned, we look forward to updating you on our go forward business strategy in 'twenty 'twenty, one and be on during our virtual analyst and Investor day on March 23rd.
Thank you for your time and attention today.
At this time I'd like to open the call up for questions operator.
At this time, we'll be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is from the question queue you.
Do you mean for search if you would like to remove your question from the queue from participants using speaker equipment may be necessary to pick up your handset before pressing the star keys. One moment. Please we poll for questions.
So before we go to questions I need to make a correction.
In my script I stated that our 'twenty 'twenty revenue was one point to $8 billion. The corrected number is one point to $7 billion.
Thank you operator.
And with that on our first question comes from the line of Daniel Moore with CJS Securities. Please proceed with your question.
Karen and Brian Good afternoon, thanks for taking the questions.
Please go on down.
Alright.
With the the adjusted guidance for 'twenty, one the operating margin range implies you know a fair bit of compression, you've clearly signaled from higher G&A investment spend and a little bit of gross margin. So the direction is not a surprise.
But maybe just what level of Opex growth do you anticipate this year and can you give us a sense for what type of revenue growth ranges and gross margin ranges or sort of implied or contemplated at the low end to the high on the range.
Are you.
Sure Dan So let me walk through some of this are our guidance.
It does include that gross margin headwind with with higher opex relative to 2020.
We spoke last quarter. There was there were some growth opportunities we'd be looking to fund we do plan on going into further detail.
On those growth opportunities at that Investor day.
We do have.
Both.
From.
From gross margin compression and the other opex.
As a percent of revenues increasing to reflect.
Well I guess both of those conditions.
Hmm on looking at SG&A.
We're expecting at some point in 2020.
That certain activities will flow.
We'll resume such as travel trade show activities such like that.
And we'll have some.
Higher opex relative to 2020.
In regards to to those.
General categories.
And then on revenue.
Low to mid single digit overall growth rate from a volume perspective.
Karen was there anything you'd like to add that.
No I think that covers it.
Again, just to reiterate we had some savings in our SG&A.
Due to lack of travel trade shows are basically you know.
On projects and things that were cancelled so I would anticipate that those would pick up somewhat again as we're starting to see a little bit of easing in some of the restrictions around the COVID-19 pandemic.
Pandemic.
And I think Brian hit the rest of those elements perfectly.
Got it that's helpful. So if if if we think about mid single digits being the higher end of the range. If R&R is remains robust in housing activity remains robust and we pushed through those at the higher end, maybe a little bit of upside to the guide at least that's what I'm hearing.
Yeah, I mean, I think Dan as we.
There's a lot of enthusiasm right now amongst some of the builders about starts.
And certainly we've seen an increase in R&R from the standpoint of people staying at home and doing.
Remodels index in sensors, and all kinds of projects.
We'll see if that continues but.
But I think the that's free to you know sort of in the mid to single digit growth for us seems like a pretty reasonable based on what we're seeing.
Absolutely very helpful. And then is it possible to quantify how much of a benefit.
In ballpark terms reduce travel trade show activity was and part of the reason as you know it was is it possible that some of that you know it doesn't necessarily come back you know what.
Whether it's in 'twenty, 'twenty, one or beyond but just trying to get a sense of the magnitude of that benefit.
Benefit that we had this year.
Well I think that there so far in the early part of the year it doesn't seem.
Much different from that perspective.
Relative to <unk>.
The latter part of 2020 from a travel and those other activities perspective.
We would anticipate those to to pick up at some point, but.
A lot of uncertainty right now around.
When that might be maybe mid year, maybe a little earlier, maybe a little bit later.
Yeah.
I don't have the specific dollar amount.
In front of me for the Oh travel and trade I'll see if I can pull it before the.
The call ends we did note the.
Yeah.
But I do note that as we put in the release.
Well there were some variable comp elements that debt did increase but.
Other net.
Other elements were.
Not really called out yet so let me see if I can pull that for you today.
Okay and.
And long shot here, but any chance, we get any sort of a preview on what type of metrics.
You might be talking about in March not necessarily the magnitude, but whether they'd be similar or different to your last three less.
Three year goals on that.
Obviously executed on extremely well.
Yeah, that's a great question and we we.
We don't want to you know we want to hold our surprises here, but we obviously will be giving you. Some information on where we believe our growth strategy is in some metrics associated with that and Ah well just wait till.
That March day to be able to clarify all of that for Ya alright, well on won't spoil. The fun. Thanks, you. Thank you again I'll circle back with any follow ups.
Thanks, Dan.
Our next question comes from the line of tools with Baird. Please share with your question.
Hey, everybody good evening good afternoon.
Okay.
Maybe hello, maybe just to start.
In your in your EBIT guidance range, what exactly and maybe even revenue what exactly have you factored in for price for steel inflation if anything.
Well right now with.
With her with our guide we do include some assumptions.
On some steel price increases we do want to.
Provide more granular more more detail on that Investor day.
And so that comes out.
So if you could bear with us until until that time, Tim we'll plan on disclosing more of that information.
Around what we're seeing and planning for as far as Oh.
And looking to implement as far as.
On the.
The rising steel price and what we were planning to do for that.
Okay.
I guess, so so we should take revenue expectations in terms of the low to mid single digit volume growth you've talked about and we should layer in some price on top of that growth.
Correct.
Okay.
And then secondly, just just on on the investments that I know you want on kind of keep the cat in the bag a little bit but could you just quantify how much incremental investment related to your growth opportunities you're making in 'twenty one.
There there'll be a little bit in in Opex.
But what what we'd like to do is on that Investor day talk about the those growth opportunities and and then at the same time.
Talk about the debt.
The investment that we'll be making in 'twenty one to move us.
Uh huh.
To to be able to go after and achieve some of those opportunities.
Okay, Okay and.
I guess big picture I mean is there any reason why SG&A should it continue to grow at a slower rate relative to revenue over time.
Over time.
Typically our debt.
But that would be the case for 'twenty 'twenty one.
As we'll detail out later on.
That may or may not but in general over the longer run.
Then we should definitely see the.
Leverage on the revenue.
Okay, Great and then.
Sorry, I would just add yeah.
You know, we've we've done a really nice job over the in the 'twenty 'twenty plan of.
Ensuring that we looked at all of our SG&A spend very carefully and so where we will not get out of that habit. We will continue to very very closely monitor our SG&A spend.
Okay. That's great and then just the last question kind of back on price cost.
Has anything changed relative to history in terms of your ability to go out and get price from your customers.
Yeah I think.
It really hasn't as we've talked about there's a lot of information in the market about the rising cost of steel on the availability of steel.
We certainly are our customers know that that's a key element in our costs.
And that as we have steel increases its we have to evaluate that and be able to.
Pushed that off into her to our customers. So I don't think anything's really changed there I think the change is how rapidly. It has increased from where we were.
Last year, when the pandemic kind of first struck us.
Quite a big difference between that point and what we're seeing now on steel costs.
Okay. Okay fair enough that's good to hear I'll hop back in queue, but look forward to margin and good luck on the year.
Thank you, Tim Thanks to them and before we jump to the next question.
Travel and entertainment savings for the fiscal for the full year 2020 was about seven and a half million dollars.
Split most more in others.
The selling line then.
The G&A line and other lines.
Sorry, operator can we.
Go back into the queue.
Absolutely. Our next question comes from the line of Julio Romero with Sidoti from Sidoti.
Good question.
Hey, good afternoon, Karen and Brian.
But julio.
Hey, so I do want to ask about your approach to growth that you guys have and you know understanding that you'd like to hold some of the details for the Investor day, but.
Maybe if you could talk about I guess, you know what do you think Simpson does exceptionally well there.
It should continue to be part of your approach to growth going forward.
Well kind of a broad question, but you know the best way you can imagine.
I think the things that distinguish us.
Or the complete solution that we supply and that's typically a complete engineered solution. So.
We do quite well with building materials that are helping make those buildings safer and stronger.
And we do that by not only differentiate our product from the standpoint of it's.
Performance, it's corrosion resistance, but also the availability so as we look to growth markets, we'd want to be sure that we're not looking into commodity areas, but that we are looking to be able to use that engineering manufacturing technology.
Complete solutions approach into these other markets.
Yeah.
Got it and.
I guess.
Yeah.
I guess some of your engineered products you know similar things we've benefited from over the last three or so years is really having that narrowed product focus I guess is that maybe one aspect of the growth growth growth approach that kind of continues since it's worked for us so well over the last three to four years.
Yeah, I think when you.
When you say a narrowed product focus you know, we we look at things and all in all look back at our fasteners, which we've talked about this you know theres billions of dollars of opportunities in fasteners, and we note that our structural fastener market.
$750 million right. So we have really taken a very large.
Market and we've narrowed it down to where we can differentiate and provide an exceptional product that provides exceptional performance.
Performance versus commodity type of products. So when you when you look at areas that we grow and we do look at areas that we can differentiate ourselves even though it might be a very large market. We want to we want to provide our product and our services in that market that can be differentiated.
And not Commoditized and so I think that's why you start to see as we focus on these narrow markets, we provide a service and a solution.
It certainly helps.
To have that engineered solution that helps us with our gross margin standpoints.
Selling being able to sell at that higher level.
Got it and just touching on your Capex guidance I guess, you know you did pull your original 2020 capex target once the pandemic hit and but if I go back to that original 2020 guide number I think Kim your full year number you reported today. It came in about 9 million below what your original goal was for the year. So.
As I think about your 'twenty 'twenty, one outlook right and it's is that you know how should I think about that is that catch up or is there should I consider your annualized growth capex to be kind of <unk>.
Higher.
On 'twenty one.
Good question part of it is catch up for sure.
On the element rolling over from 'twenty 'twenty into 'twenty and 'twenty one.
And then periodically there will be.
The years, where.
We may have a higher investment amount due to.
Maybe investing and.
Some element that needs to get refreshed every say four to five years. So there's a bit of that element in 'twenty 'twenty, one as well so.
The number is higher.
From a guide perspective in 'twenty and 'twenty, one, but due to the that element that there. There is some of the things that we didn't do in 'twenty and some of the things that are more.
Every few years in nature.
Got it that's helpful. Thanks.
Thanks for taking the questions and look forward to Investor Day next month.
Great. Thanks Julio.
And our final question comes from the line of cooking with D. A Davidson please share with your question.
Yes, good afternoon, everyone and thanks for taking my questions.
Yeah, I mean, not to belabor, the steel and gross margin points, but I just.
Just to confirm it doesn't sound like you guys have have taken any action on pricing today is that right.
Well right now we are in initial stages.
Communicating price increase out due to rising steel costs.
So we need to.
Allow that process to occur where our customers are hearing about it from from our folks on our team and then well.
Have you know that greater detail that I mentioned.
Or when I mentioned in the.
The latter part of March at the.
Virtual Investor Analyst day.
Okay got it that's fair and then from an inventory standpoint, I mean, how far out do you have I guess, the visibility or confidence before some of this inflation that we've seen starts to roll through the P&L or is that something that would really be relegated to the back half of the year.
Or could we see it here in the first half from 'twenty 'twenty one.
Yeah really good question, because as we purchased steel and consume at R. R.
Weighted average cost of change based on the B and.
And out there and there is a bit of a delay factor just because.
What we have on hand today.
Versus what we're buying at.
Today. So there there is a bit of a delay and.
Steel price increases.
Our or decreases for that matter as they roll through cost of sales just due to the amount that we do have on hand, so it would be.
The latter part of the year and we model that out based on volume assumptions utilization.
Or how much we're going to produce in any given quarter or period to try to.
Correlate or predict what.
Gross margin will be based on facts known today, so steel prices don't today or the like.
Okay got it that makes sense and you know.
The revenue performance was very strong relative to at least what you talked about through October and it sounds like.
The home center customer set was again, a big driver of that I'm curious, whether you would view that upside as you know a load in benefit associated with gaming back loews or whether that's really indicative of just strong sell through and the ability to kind of sustain the strength you've seen here in the <unk>.
Second half even without.
You know, having me a load in benefits and as you lap it in 'twenty and 'twenty one.
Yeah.
I don't think there's much if any load in in Q4.
It's largely done towards the end of Q3 may be a couple co.
A couple of few stores at the beginning of the quarter. So so largely due to some of the elements that Karen mentioned more favorable weather.
They are on a continued.
DIY.
Element for them.
That that that trend that has definitely been prevalent in the earlier.
Q2, Q3 of 2020.
So as far as on a go forward basis, you know definitely a tougher comp.
But I would love to continue to monitor and follow the DIY R&R trend.
Relative to <unk>.
2020.
To see how strong those.
This growth elements might be.
Got it okay.
And you guys had alluded to some share gains in Europe with competitors kind of being.
I guess caught short on supply and you know here in the U S. Just across the building material supply chain that seems to be you know a really relevant issue as well I'm curious whether.
Here in North America, you're seeing similar type opportunities or do you think that could be on market share gain type of opportunity for you guys. Just given the focus on customer service and inventory and everything like that.
Yeah, Kurt I think you know obviously as you stated where you know our number one goal is is the relentless customer focus.
And we have been able to meet our customers' needs and as I've mentioned, even amazingly as we have many many people working remote but.
To ensure that we have the product availability as it is a big key and as you mentioned there's.
Wood is an issue in the building industry certainly steel is not an issue.
But I I I T. S really are continuing to maintain our customer service levels and our product availability.
I'm not.
Not seeing a debt so much potential from market share gains as we saw in Europe.
And really the reason is in Europe, we have.
A lot of very small customers and so if they were not able to meet the needs. We were able to meet those customers' needs versus in the U S. We have a substance substantially larger sized customers, so a little bit different market and.
In both those areas.
And Karen you were saying customers, but I believe you were meeting competitors.
Oh, sorry, sorry, yeah, Yeah, alright, yeah, I didn't mean, yeah in Europe, we have small competitors who.
Who had some problems meeting availability in the U S. We have much more much larger competitors, so much difficult much more difficult to get market share.
Because they're they're also meeting customer needs.
Right right. Okay. That's helpful. And then just last one from me Karen I know you kind of alluded to the lag impact between starts and in seeing that pull through but just curious as you sit back and think about I guess the volumes go into more new residential type customers, whether there's anything that's.
Surprised to you and you know whether there's any reason why we wouldn't necessarily see that strength in the starts data here in the second half really come through in the first half 'twenty 'twenty one whether there's.
A geographic issue or any sort of leakage points that you could think of.
Yeah, I think there's definitely demand, but I still see some on the same headwinds that we had we've talked about material shortage headwinds, but to me. The biggest one is still labor.
I think the demand has increased but being able to complete projects is still are a function of that debt limited labor resource that we have on the construction area.
That hasn't really picked up and so I really believe that that becomes the limiting factor on the number of starts that you can build.
Got it okay. That's very helpful. All right well thanks for the details and good luck here in Q1.
Great. Thanks, Kurt Kurt.
And with that we've reached the end of our question and answer session as well as today's conference call. Thank you for joining US you may now disconnect your lines and have a wonderful day.
Hum.
Yeah.
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