Simpson Manufacturing (NYSE: SSD) reported Q1 EPS of $0.83, $0.21 better than the analyst estimate of $0.62. Revenue for the quarter came in at $283.7 million versus the consensus estimate of $274.81 million.

• Net sales of $283.7 million increased 9.4% year-over-year on stronger sales volumes
• Strong gross margin of 45.7% improved 320 basis points year-over-year
• Operating profit of $49.4 million increased 64.4% year-over-year
• Diluted earnings per share of $0.83 increased 66.0% year-over-year
• Repurchased $62.7 million of the Company's common stock during the quarter
• Declared a $0.23 per share cash dividend
• Withdrawing 2020 Plan targets and financial outlook due to COVID-19

Management Commentary

"We delivered a solid first quarter both operationally and financially with sales of $283.7 million improving 9.4% year-over-year on higher sales volume in North America," commented Karen Colonias, President and Chief Executive Officer of Simpson Manufacturing Co., Inc. "Our gross margin was strong at 45.7%, an improvement of 320 basis points year-over-year largely due to sales mix and lower material costs. Our gross margin, coupled with relatively flat operating expenses, helped generate operating income of $49.4 million, up 64.4% year–over–year, and strong earnings of $0.83 per diluted share, up 66.0% year–over–year. We also completed the final phase of the SAP implementation in our major U.S.–based sales organizations during the quarter with the successful on–boarding of our Stockton manufacturing facility."

Mrs. Colonias continued, "Our thoughts go out to all of those who have been impacted by the COVID-19 pandemic. The health, safety and wellbeing of our employees, their families, our customers and our communities remains our top priority. We took immediate action at the onset of this crisis, implementing preparedness plans to keep our employees and customers healthy and safe, as well as to ensure continued operations and business continuity across our global network. While government authorities in the countries and states where we operate have issued various and differing shelter in place and other similar governmental orders, in many of those locations our products and services are classified as an essential business and all of our North America manufacturing and distribution facilities continue to operate in accordance with those orders. However in late March, two of our larger European manufacturing facilities in the United Kingdom and France were ordered to cease nearly all operations, forcing us to temporarily furlough many of those affected employees. We have every intention of being able to bring those employees back to work when the timing is right. Our supply chain partners have been very supportive and continue to do their part to ensure that service levels to our customers remain strong. To date, we have not experienced any supply-chain disruptions related to COVID-19 and have been able to meet our customers' needs."

Mrs. Colonias concluded, "Due to the significant level of uncertainty regarding future market conditions surrounding COVID-19, we have chosen to withdraw our previously issued annual 2020 outlook as well as the financial targets associated with our "2020 Plan." While this situation is highly unique, we believe our strong balance sheet, combined with the investments we have made in adjacent products and markets to diversify our business, and our recent cost rationalization efforts have positioned us to emerge on the other side of this crisis from a position of strength. We ended the quarter with nearly $306 million in cash on hand after drawing down $150 million on our $300 million revolving credit facility as a precautionary measure to preserve financial flexibility. We have proactively taken measures to ensure we maintain our strong financial position, including implementing a hiring freeze and adjusting employee hours based on lower production levels in the near term. We will also remain conservative in our capital allocation approach with a focus on cash preservation."

Business Outlook

During the first quarter of 2020, the execution of the Company's 2020 Plan continued to deliver financial and operational efficiencies. The rapidly developing COVID-19 pandemic has generated significant uncertainty in the economy and for the Company's outlook for the full year of 2020. While the magnitude and duration of the outbreak, including its impact on its operations, supply chain partners and general economic conditions, is uncertain, the Company is continuing to monitor the impact of the pandemic on its operations and financial condition, which was not significantly adversely impacted in the first quarter of 2020. Given the uncertainties surrounding the impact of COVID-19 on its business, which may include the economic impact on the Company's operations, consumers, suppliers and vendors, Simpson is withdrawing its prior full year 2020 guidance issued on February 3, 2020, as well as the financial targets associated with its "2020 Plan." The Company is unable to provide updated full year 2020 guidance at this time.

A significant portion of the Company's total product sales is dependent on housing starts and its business, financial condition and results of operations depends significantly on the level of housing and residential construction activity, which is expected to be negatively affected by the COVID-19 outbreak and pandemic. In the month of April, sales declined compared to March levels due to lower demand from the anticipated slowdown in housing starts and general construction activity. Declines in housing and residential construction, such as housing starts and home improvement projects, which generally occur during economic downturns, have in the past significantly reduced, and in the future can be expected to reduce, the demand for, and net sales, of the Company's products.

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