Simpson Manufacturing Co., Inc. - Quarter Report: 2012 March (Form 10-Q)

 

UNITED STATES

SECURITIES AND 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: March 31, 2012

 

OR

 

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

 

For the transition period from               to              

 

Commission file number: 1-13429

 

Simpson Manufacturing Co., Inc.

(Exact name of registrant as specified in its charter)

 

 

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

(Address of principal executive offices)

 

(Registrant’s telephone number, including area code):  (925) 560-9000

 

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

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x  Noo

 

Indicate by check mark 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.

 

 

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

 

The number of shares of the registrant’s common stock outstanding as of March 31, 2012: 48,309,948

 

 

 

PART I — FINANCIAL INFORMATION

 

Item 1. Financial Statements.

 

Simpson Manufacturing Co., Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(In thousands, unaudited)

 

		March 31,						December 31,
		2012			2011			2011
ASSETS
Current assets
Cash and cash equivalents		$	160,092		$	301,231		$	213,817
Trade accounts receivable, net		107,257			91,076			76,420
Inventories		184,068			166,966			180,129
Deferred income taxes		12,139			10,360			11,774
Assets held for sale		—			9,148			6,793
Other current assets		14,095			11,927			13,131
Total current assets		477,651			590,708			502,064
Property, plant and equipment, net		209,460			184,606			195,716
Goodwill		130,556			71,338			99,849
Intangible assets, net		43,484			22,896			27,856
Equity method investment		—			200			—
Other noncurrent assets		5,860			13,422			10,602
Total assets		$	867,011		$	883,170		$	836,087
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Line of credit and current portion of long-term debt		$	3,556		$	—		$	—
Trade accounts payable		35,109			29,822			22,034
Accrued liabilities		35,746			31,831			36,156
Income taxes payable		1,193			—			—
Accrued profit sharing trust contributions		1,683			6,508			4,477
Accrued cash profit sharing and commissions		6,598			5,396			3,446
Accrued workers’ compensation		5,485			4,715			5,474
Total current liabilities		89,370			78,272			71,587
Long-term debt, net of current portion		240			—			—
Long-term liabilities		6,300			7,833			6,137
Total liabilities		95,910			86,105			77,724
Commitments and contingencies (Note 7)
Stockholders’ equity
Common stock, at par value		482			500			481
Additional paid-in capital		174,831			167,025			170,483
Retained earnings		581,779			608,056			580,616
Accumulated other comprehensive income		14,009			21,484			6,783
Total stockholders’ equity		771,101			797,065			758,363
Total liabilities and stockholders’ equity		$	867,011		$	883,170		$	836,087

 

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

 

2

 

Simpson Manufacturing Co., Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(In thousands except per-share amounts, unaudited)

 

		Three Months Ended
		March 31,
		2012			2011
Net sales		$	158,734		$	132,536
Cost of sales		89,329			75,588
Gross profit		69,405			56,948
Operating expenses:
Research and development and other engineering		9,198			5,994
Selling		20,432			17,075
General and administrative		26,244			21,621
Loss (gain) on sale of assets		23			(25		)
		55,897			44,665
Income from operations		13,508			12,283
Loss in equity method investment, before tax		—			(14		)
Interest income, net		65			72
Income before taxes		13,573			12,341
Provision for income taxes		6,372			5,263
Net income		$	7,201		$	7,078
Earnings per common share:
Basic		$	0.15		$	0.14
Diluted		$	0.15		$	0.14
Number of shares outstanding
Basic		48,273			50,107
Diluted		48,337			50,165
Cash dividends declared per common share		$	0.125		$	0.125

 

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

 

3

 

Simpson Manufacturing Co., Inc. and Subsidiaries

Statements of Comprehensive Income

(In thousands, unaudited)

 

		Three Months Ended
		March 31,
		2012			2011
Net Income		$	7,201		$	7,078
Other comprehensive income
Translation adjustment, net of tax of $23 and ($1) at March 31, 2012 and 2011, respectively		7,226			6,857
		7,226			6,857
Comprehensive income		$	14,427		$	13,935

 

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

 

4

 

Simpson Manufacturing Co., Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity

for the three months ended March 31, 2011 and 2012 and nine months ended December 31, 2011

(In thousands except per-share amounts, unaudited)

 

													Accumulated
							Additional						Other
		Common Stock					Paid-in			Retained			Comprehensive			Treasury
		Shares		Par Value			Capital			Earnings			Income (Loss)			Stock			Total
Balance, January 1, 2011		50,096		$	500		$	165,425		$	607,241		$	14,627		—			$	787,793
Net income		—		—			—			7,078			—			—			7,078
Translation adjustment, net of tax of ($1)		—		—			—			—			6,857			—			6,857
Stock options exercised		6		—			154			—			—			—			154
Stock compensation		—		—			1,281			—			—						1,281
Tax effect of options exercised		—		—			(39		)	—			—			—			(39		)
Cash dividends declared on common stock, $0.125 per share		—		—			—			(6,263		)	—			—			(6,263		)
Common stock issued at $30.91 per share for stock bonus		7		—			204			—			—			—			204
Balance, March 31, 2011		50,109		500			167,025			608,056			21,484			—			797,065
Net income		—		—			—			43,822			—			—			43,822
Translation adjustment, net of tax of $0		—		—			—			—			(14,701		)	—			(14,701		)
Stock options exercised		2		—			60			—			—			—			60
Stock compensation		—		—			4,913			—			—			—			4,913
Tax effect of options exercised		—		—			(1,515		)	—			—			—			(1,515		)
Repurchase of common stock		(1,948	)	—			—			—			—			(53,208		)	(53,208		)
Retirement of common stock		—		(19		)	—			(53,189		)	—			53,208			—
Cash dividends declared on common stock, $0.375 per share		—		—			—			(18,073		)	—			—			(18,073		)
Balance, December 31, 2011		48,163		481			170,483			580,616			6,783			—			758,363
Net income		—		—			—			7,201			—			—			7,201
Translation adjustment, net of tax of $23		—		—			—			—			7,226			—			7,226
Stock options exercised		74		1			1,757			—			—			—			1,758
Stock compensation		—		—			3,110			—			—			—			3,110
Tax effect of options exercised		—		—			(2		)	—			—			—			(2		)
Shares issued from release of RSU		61		—			(935		)	—			—			—			(935		)
Cash dividends declared on common stock, $0.125 per share		—		—			—			(6,038		)	—			—			(6,038		)
Common stock issued at $33.71 per share for stock bonus		12		—			418			—			—			—			418
Balance, March 31, 2012		48,310		$	482		$	174,831		$	581,779		$	14,009		$	—		$	771,101

 

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

 

5

 

Simpson Manufacturing Co., Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(In thousands, unaudited)

 

		Three Months
		Ended March 31,
		2012			2011
Cash flows from operating activities
Net income		$	7,201		$	7,078
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Loss (gain) on sale of assets		23			(25		)
Depreciation and amortization		6,721			4,972
Impairment loss on assets held for sale		461			—
Deferred income taxes		(205		)	(740		)
Noncash compensation related to stock plans		3,184			1,521
Loss in equity method investment		—			14
Excess tax benefit of options exercised		(99		)	4
Provision for doubtful accounts		(87		)	126
Changes in operating assets and liabilities, net of acquisitions:
Trade accounts receivable		(26,585		)	(21,896		)
Inventories		3,154			(13,103		)
Trade accounts payable		10,379			(6,250		)
Income taxes payable		3,899			2,943
Accrued profit sharing trust contributions		(2,802		)	905
Accrued cash profit sharing and commissions		3,115			2,534
Other current assets		723			(692		)
Accrued liabilities		(9,865		)	(647		)
Long-term liabilities		313			627
Accrued workers’ compensation		10			31
Other noncurrent assets		(1,100		)	190
Net cash provided by (used in) operating activities		640			(22,408		)
Cash flows from investing activities
Capital expenditures		(3,249		)	(10,095		)
Asset acquisitions, net of cash acquired		(56,040		)	—
Proceeds from sale of property and equipment		6,847			1,786
Net cash used in investing activities		(52,442		)	(8,309		)
Cash flows from financing activities
Repayment of debt and line of credit borrowings		(41		)	—
Issuance of common stock		1,758			154
Excess tax benefit of options exercised		99			(4		)
Dividends paid		(6,020		)	(5,010		)
Net cash used in financing activities		(4,204		)	(4,860		)
Effect of exchange rate changes on cash and cash equivalents		2,281			1,759
Net decrease in cash and cash equivalents		(53,725		)	(33,818		)
Cash and cash equivalents at beginning of period		213,817			335,049
Cash and cash equivalents at end of period		$	160,092		$	301,231
Noncash activity during the period
Noncash capital expenditures		$	70		$	66
Dividends declared but not paid		6,038			6,263
Issuance of Company’s common stock for compensation		418			204
Asset acquisitions		786			—

 

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

 

6

 

Simpson Manufacturing Co., Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

1.             Basis of Presentation

 

Principles of Consolidation

 

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

 

Interim Period Reporting

 

The accompanying unaudited interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations for reporting on Form 10-Q. Accordingly, certain information and footnotes required by accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted. These interim statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011 (the “2011 Annual Report”).

 

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

 

Revenue Recognition

 

The Company recognizes revenue when the earnings process is complete, net of applicable provision for discounts, returns and incentives, whether actual or estimated, based on the Company’s experience. This generally occurs when products are shipped to the customer in accordance with the sales agreement or purchase order, ownership and risk of loss pass to the customer, collectibility is reasonably assured and pricing is fixed or determinable. The Company’s general shipping terms are F.O.B. shipping point, where title is transferred and revenue is recognized when the products are shipped to customers. When the Company sells F.O.B. destination point, title is transferred and the Company recognizes revenue on delivery or customer acceptance, depending on terms of the sales agreement. Service sales, representing after-market repair and maintenance, engineering activities, software license sales and services and lease income, though significantly less than 1% of net sales and not material to the consolidated financial statements, are recognized as the services are completed or the software products and services are delivered. If actual costs of sales returns, incentives and discounts were to significantly exceed the recorded estimated allowance, the Company’s sales would be adversely affected.

 

Net Earnings Per Common Share

 

Basic earnings per common share is computed based on the weighted average number of common shares outstanding. Potentially dilutive securities, using the treasury stock method, are included in the diluted per-share calculations for all periods when the effect of their inclusion is dilutive.

 

7

 

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

 

(in thousands, except per share amounts)

 

		Three Months Ended
		March 31,
		2012			2011
Net income available to common stockholders		$	7,201		$	7,078
Basic weighted average shares outstanding		48,273			50,107
Dilutive effect of potential common stock equivalents — stock options		64			58
Diluted weighted average shares outstanding		48,337			50,165
Earnings per common share:
Basic		$	0.15		$	0.14
Diluted		$	0.15		$	0.14
Potentially dilutive securities excluded from earnings per diluted share because their effect is anti-dilutive		1,347			1,743

 

Accounting for Stock-Based Compensation

 

With the approval of the Company’s stockholders on April 26, 2011, the Company adopted the Simpson Manufacturing Co., Inc. 2011 Incentive Plan (the “2011 Plan”). The 2011 Plan amended and restated in their entirety, and incorporated and superseded, both the Simpson Manufacturing Co., Inc. 1994 Stock Option Plan (the “1994 Plan”), which was principally for the Company’s employees, and the Simpson Manufacturing Co., Inc. 1995 Independent Director Stock Option Plan (the “1995 Plan”), which was for its independent directors. Options previously granted under the 1994 Plan or the 1995 Plan will not be affected by the adoption of the 2011 Plan and will continue to be governed by the 1994 Plan or the 1995 Plan, respectively.

 

Under the 1994 Plan, the Company could grant incentive stock options and non-qualified stock options. The Company has, however, granted only non-qualified stock options under both the 1994 Plan and the 1995 Plan. The Company generally granted options under each of the 1994 Plan and the 1995 Plan once each year. The exercise price per share of each option granted in February 2011 under the 1994 Plan equaled the closing market price per share of the Company’s common stock as reported by the New York Stock Exchange on the day preceding the day that the Compensation and Leadership Development Committee of the Company’s Board of Directors met to approve the grant of the options. The exercise price per share under each option granted under the 1995 Plan was 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. Options granted under the 1994 Plan typically vest evenly over the requisite service period of four years and have a term of seven years. The vesting of options granted under the 1994 Plan will be accelerated if the grantee ceases to be employed by the Company after reaching age 60 or if there is a change in control of the Company. Options granted under the 1995 Plan are fully vested on the date of grant. Shares of common stock issued on exercise of stock options under the 1994 Plan and the 1995 Plan are registered under the Securities Act of 1933.

 

Under the 2011 Plan, the Company may grant incentive stock options, non-qualified stock options, restricted stock and restricted stock units, although the Company currently intends to award primarily restricted stock units and to a lesser extent, if at all, non-qualified stock options. The Company does not currently intend to award incentive stock options or restricted stock. Under the 2011 Plan, no more than 16.3 million shares of the Company’s common stock may be issued (including shares already sold) pursuant to all awards under the 2011 Plan, including on exercise of options previously granted under the 1994 Plan and the 1995 Plan. Shares of common stock to be issued pursuant to the 2011 Plan are registered under the Securities Act of 1933.

 

8

 

The following table represents the Company’s stock option and restricted stock unit activity for the three months ended March 31, 2012 and 2011:

 

(in thousands)

 

		Three Months Ended
		March 31,
		2012			2011
Stock-based compensation expense recognized in operating expenses		$	3,068		$	1,449
Tax benefit of stock-based compensation expense in provision for income taxes		1,066			522
Stock-based compensation expense, net of tax		$	2,002		$	927
Fair value of shares vested		$	3,110		$	1,281
Proceeds to the Company from the exercise of stock-based compensation		$	1,758		$	154
Tax effect from exercise of stock-based compensation, including shortfall tax benefits		$	(2	)	$	(39	)

 

		At March 31,
		2012			2011
Stock-based compensation cost capitalized in inventory		$	387		$	115

 

The amounts included in cost of sales, research and development and other engineering, selling, or general and administrative expense depend on the job functions performed by the employees to whom the stock options and restricted stock units were awarded.

 

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

 

Fair Value of Financial Instruments

 

The “Fair Value Measurements and Disclosures” topic of the Financial Accounting Standards Board (“FASB”) Accounting Standards CodificationTM (“ASC”) establishes a valuation hierarchy for disclosure of the inputs used to measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows: Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument; Level 3 inputs are unobservable inputs based on the Company’s assumptions used to measure assets and liabilities at fair value. A financial asset’s or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

 

As of March 31, 2012, the Company’s investments consisted of only United States Treasury securities and money market funds aggregating $70.0 million, which are maintained in cash equivalents and are carried at cost, approximating fair value, based on Level 1 inputs. All other financial assets and financial liabilities, including accounts receivable, accounts payable, accrued liabilities and long-term debt, are carried at cost, approximating fair value, based on Level 3 inputs.

 

9

 

Income Taxes

 

The Company uses an estimated annual effective tax rate to measure the tax benefit or tax expense recognized in each interim period.

 

The following table presents the Company’s effective tax rates and income tax expense for the three months ended March 31, 2012 and 2011:

 

(in thousands, except percentage amounts)

 

		Three Months Ended
		March 31,
		2012			2011
Effective tax rate		46.9		%	42.6		%
Provision for income taxes		$	6,372		$	5,263

 

Acquisitions

 

In January 2012, the Company purchased all the shares of S&P Clever Reinforcement Company AG and S&P Clever International AG, both companies incorporated under the laws of Switzerland (collectively, “S&P Clever”), for $58.1 million, subject to post-closing adjustments. S&P Clever manufactures and sells engineered materials to repair, strengthen and restore concrete and masonry construction and has operations in Switzerland, Germany, Portugal, Poland, The Netherlands and Austria. Payments under the purchase agreement include cash payments of $57.5 million and contingent consideration of $0.6 million payable over a three year period if sales goals are met. As a result of the acquisition, the Company has increased its presence in the infrastructure, commercial and industrial construction market in Europe, resulting in goodwill being recorded with this transaction. The Company’s provisional measurement of assets acquired and liabilities assumed included cash and cash equivalents of $6.8 million, other current assets of $9.9 million, non-current assets of $54.2 million, current liabilities of $12.6 million and non-current liabilities of $0.2 million. Included in non-current assets is goodwill of $26.1 million, which was assigned to the European segment and is not deductible for tax purposes, and intangible assets of $15.0 million, which is deductible for tax purposes.

 

In March 2012, the Company purchased substantially all the assets of CarbonWrap Solutions, L.L.C. (“CarbonWrap”) for $5.5 million, subject to post-closing adjustments. CarbonWrap develops fiber-reinforced polymer products primarily for infrastructure and transportation projects. Payments under the purchase agreement total $5.3 million in cash and contingent consideration of $0.2 million to be paid on resolution of specified post-closing contingencies to the principal officer of CarbonWrap, who is now employed by the Company. Goodwill of $3.6 million was assigned to the North American segment and is deductible for tax purposes.  Intangible assets were valued at $1.6 million and are subject to tax deductible amortization.  Net tangible assets of accounts receivable, inventory, equipment and prepaid expenses accounted for the balance of the purchase price.

 

Under the business combinations topic of the FASB ASC, the Company accounted for these acquisitions as business combinations and ascribed acquisition-date fair values to the acquired assets and assumed liabilities. Provisional fair value measurements were made in the first quarter 2012 for acquired assets and assumed liabilities. Adjustments to those measurements may be made in subsequent periods, up to one year from the acquisition date, as information necessary to complete the analysis is obtained. Fair value of intangible assets was based on Level 3 inputs. The Company expects the measurement process for each acquisition to be finalized within a year of its date.

 

Proforma financial information is not presented as it would not be materially different from the information presented, in the Condensed Consolidated Statements of Operations.

 

Recently Adopted Accounting Standards

 

Effective January 1, 2012, the Company adopted the guidance codified in the “Comprehensive Income” topic of the FASB ASC, amending the comprehensive income guidance to eliminate the option to present components of other comprehensive income as part of the statement of stockholders’ equity. This amendment requires that all non-owner changes in stockholders’ equity be presented in a single continuous statement or in two separate but consecutive statements. The Company has chosen to present comprehensive income in two separate consecutive statements. The implementation of this amended accounting guidance did not have a material effect on the Company’s consolidated financial position and results of operations.

 

10

 

Recently Issued Accounting Standards

 

Other recent authoritative guidance issued by the FASB (including technical corrections to the ASC), the American Institute of Certified Public Accountants and the Securities and Exchange Commission did not or is not expected to have a material effect on the Company’s consolidated financial statements.

 

2.             Trade Accounts Receivable, Net

 

Trade accounts receivable consisted of the following:

 

(in thousands)

 

		At March 31,						At December 31,
		2012			2011			2011
Trade accounts receivable		$	110,133		$	94,641		$	78,642
Allowance for doubtful accounts		(1,086		)	(1,457		)	(991		)
Allowance for sales discounts and returns		(1,790		)	(2,108		)	(1,231		)
		$	107,257		$	91,076		$	76,420

 

3.             Inventories

 

Inventories consisted of the following:

 

(in thousands)

 

		At March 31,						At December 31,
		2012			2011			2011
Raw materials		$	72,616		$	70,780		$	77,364
In-process products		22,226			19,218			21,357
Finished products		89,226			76,968			81,408
		$	184,068		$	166,966		$	180,129

 

4.             Property, Plant and Equipment, Net

 

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

 

(in thousands)

 

		At March 31,						At December 31,
		2012			2011			2011
Land		$	32,601		$	29,287		$	28,996
Buildings and site improvements		165,085			143,227			153,597
Leasehold improvements		3,793			3,794			3,820
Machinery and equipment		211,042			187,819			208,292
		412,521			364,127			394,705
Less accumulated depreciation and amortization		(206,971		)	(194,869		)	(201,540		)
		205,550			169,258			193,165
Capital projects in progress		3,910			15,348			2,551
		$	209,460		$	184,606		$	195,716

 

11

 

5.             Goodwill and Intangible Assets, Net

 

Goodwill was as follows:

 

(in thousands)

 

		At March 31,						At December 31,
		2012			2011			2011
North America		$	77,606		$	41,871		$	73,901
Europe		50,975			27,500			24,000
Asia/Pacific		1,975			1,967			1,948
Total		$	130,556		$	71,338		$	99,849

 

Intangible assets, net, were as follows:

 

(in thousands)

 

		At March 31, 2012
		Gross						Net
		Carrying			Accumulated			Carrying
		Amount			Amortization			Amount
North America		$	34,552		$	(14,304	)	$	20,248
Europe		28,953			(5,717		)	23,236
Total		$	63,505		$	(20,021	)	$	43,484

 

		At March 31, 2011
		Gross						Net
		Carrying			Accumulated			Carrying
		Amount			Amortization			Amount
North America		$	24,022		$	(11,443	)	$	12,579
Europe		15,078			(4,761		)	10,317
Total		$	39,100		$	(16,204	)	$	22,896

 

		At December 31, 2011
		Gross						Net
		Carrying			Accumulated			Carrying
		Amount			Amortization			Amount
North America		$	32,912		$	(13,288	)	$	19,624
Europe		13,114			(4,882		)	8,232
Total		$	46,026		$	(18,170	)	$	27,856

 

Intangible assets consist primarily of customer relationships, patents, unpatented technology and non-compete agreements. Amortization expense for intangible assets during the three months ended March 31, 2012 and 2011, totaled $1.9 million and $1.1 million, respectively.

 

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At March 31, 2012, estimated future amortization of intangible assets was as follows:

 

(in thousands)

 

Final nine months of 2012		$	5,227
2012		6,550
2013		6,334
2014		5,566
2015		5,410
2016		3,912
Thereafter		10,485
		$	43,484

 

The changes in the carrying amount of goodwill and intangible assets from December 31, 2011, to March 31, 2012, were as follows:

 

(in thousands)

 

					Intangible
		Goodwill			Assets
Balance at December 31, 2011		$	99,849		$	27,856
Acquisitions		29,674			16,638
Amortization		—			(1,851		)
Foreign exchange		1,033			841
Balance at March 31, 2012		$	130,556		$	43,484

 

6.             Debt

 

The Company has revolving lines of credit with various banks in the United States and Europe. Total available credit at March 31, 2012, was $206.5 million including revolving credit lines. The Company’s primary credit facility, a revolving line of credit with $200.0 million in available credit, charges interest at LIBOR plus 0.27% (at March 31, 2012, LIBOR plus 0.27% was 0.51%), expires in October 2012, and has commitment fees payable at the annual rate of 0.08% on the unused portion of the facility. The borrowing capacity of other revolving credit lines and a term note totaled $10.2 million at March 31, 2012. The other revolving credit lines and term note charge interest ranging from 1.6% to 3.8%, have maturity dates from December 2012 to September 2020 and total outstanding balances of $3.8 million at March 31, 2012. Included in the total outstanding amount is a long-term debt balance of $0.2 million. There were no outstanding balances due on March 31, 2011, and December 31, 2011. The Company was in compliance with its financial covenants at March 31, 2012.

 

7.             Commitments and Contingencies

 

Note 9 to the consolidated financial statements in the 2011 Annual Report provides information concerning commitments and contingencies.  From time to time, the Company is involved in various legal proceedings and other matters arising in the normal course of business.  The resolution of claims and litigation is subject to inherent uncertainty and could have a material adverse effect on the Company’s financial condition, cash flows and results of operations.

 

The Company’s policy with regard to environmental liabilities is to accrue for future environmental assessments and remediation costs when information becomes available that indicates that it is probable that the Company is liable for any related claims and assessments and the amount of the liability is reasonably estimable.  The Company does not believe that these environmental matters will have a material adverse effect on the Company’s financial condition, cash flows or results of operations.

 

Corrosion, hydrogen embrittlement, cracking, material hardness, wood pressure-treating chemicals, misinstallations, misuse, design and assembly flaws, manufacturing defects, environmental conditions or other factors can contribute to failure of fasteners, connectors, tools, anchors, adhesives and venting products.  On occasion, some of the fasteners and connectors that the Company sells have failed, although the Company has not incurred any material

 

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