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spk06: Greetings, and welcome to the Simpson Manufacturing Company's fourth quarter and full year 2020 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the full presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note, this conference is being recorded. I would now like to turn the conference over to your host, Kim Rolando, with Attaway Investor Relations. Thank you. You may begin.
spk03: Good afternoon, ladies and gentlemen, and welcome to Simpson Manufacturing Company's 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 4.15 p.m. Eastern Time. The earnings press release is available on the investor relations page of the company's website at SimpsonMFG.com. 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 Colonius, Simpson's President and Chief Executive Officer.
spk04: 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 financial and fiscal 2021 business outlook in greater detail. I am extremely proud of our strong financial and operational performance in 2020. which we delivered in a highly challenging operating environment amidst the COVID-19 pandemic. Our net sales improved 11.6% over 2019 to $1.28 billion, the highest in the company's history, driven by strong sales volume. As a result, we generated record earnings of $4.27 per diluted share of 43.3% over 2019. These results would not have been possible without the hard work and dedication of all our Simpson employees. Their diligence, including strict adherence to protocols 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. The health, safety, and well-being of all our employees remains our number one priority. and we will strive for continuous improvement to ensure Simpson remains a 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 2020 plan with aggressive targets to maximize our operating efficiencies, and drive long-term shareholder value. Since then, we've made significant progress against our goals, some of which we updated in July of 2019 to reflect changes in the macroeconomic landscape. While we elected to withdraw these financial targets in April of 2020 due to the significant level of uncertainty surrounding COVID-19, We continued to execute based on the same underlying principles, focusing on operating efficiencies and cost savings to guide us through the COVID-19 pandemic. At the same time, we did experience certain tailwinds in our business as a result of the COVID-19 related macroeconomic conditions. Mainly, we had favorable steel prices, temporary reduction in travel and related operating expenses, and an increase in repair and remodel activity. Due to the culmination 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 2020 plan objective was 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 this goal included 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. home building 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 aimed 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 country's business. In addition, specifically in 2020, we experienced solid cost savings from our expense management practices, as 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%, representing 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 benefited from lower material costs and limited spending on operating expenses due to the COVID-19 restrictions. 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 by enhanced gross margins in our concrete business, another 2020 plan goal. Following the unveiling of the 2020 plan, we implemented a new concrete strategy in late 2017 by 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, including rolling out our fastener lines in the Nordic region and in France, The consolidation of our European management team create efficiencies, as well as significant cost-cutting initiatives. As a result, we achieved an operating income margin of 7%, excluding our SAP costs of approximately 2.5 million in 2020. While this is lower than our original target range of 8% to 9%, we are pleased with the 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 2020 plan, we've made headway on this front primarily through inventory reduction and the implementation of lean principles throughout our operation. We've completed a three-phase skew reduction program eliminating upwards of 12,000 non-moving or 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, resulting in 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 with 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. Through our solid operational execution, combined with the enactment of the US Tax Cuts and Jobs Act of 2017, which lowered our effective income tax rate beginning in 2018, We surpassed this target, ending 2020 with a return on investment capital of 20%. Beyond 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 through the payments of $40 million in dividends and $76.2 million in share repurchases. Since the onset of the 2020 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 2020 plan, we achieved solid organic growth, we've rationalized 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 and hard work to meet these extraordinary achievements. Now let's turn to some 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 7.8% 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 our repair and remodel business improved over the prior year period. Growth was supported by our product rollout of our connectors, mechanical anchors, and fastener product solutions into all 1,737 Lowe's stores, which we completed during the fourth quarter. As a reminder, Lowe's returned to Simpson as 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 to 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 through 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 sites on schedule. I'd also like to note that while the United Kingdom has reimplemented shutdowns due to the most recent COVID-19 surge, We have been deemed an essential business, and all of our major production and distribution facilities have remained open and operational, with remote work being promoted where possible, such as in our corporate offices. In regards to our SAP implementation, the rollout continued to progress despite travel limitations related to COVID-19. In the fourth quarter, we completed the SAP rollout at our UK branch and the Allison, Tennessee locations, both of which are now live. Most recently, we have successfully transitioned all of our Canadian-based sales organizations over to SAP, thus completing the full SAP rollout in North America, a very important milestone. This year, we will continue working on the SAP transition in our European locations and the rest of the world, And we currently anticipate a company-wide completion in 2022. And we will continue to monitor and update our timeline should circumstances change. And I'd like to briefly touch on our capital allocation structure. We are 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 are also very pleased to be in a position to pay off our line of credit borrowing in full, as well as declare our quarterly dividend as we have done consistently since 2004. While the challenges of the COVID-19 pandemic continue to impact our broader economy, Exiting 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. At the same time, we continue to pursue our strategy of diversification positioning our business to be less vulnerable to U.S. housing markets through key investments and 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 strengthening our software capabilities. Our success in achieving the 2020 plan targets has created a very strong foundation for Simpson. successfully 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 details surrounding the elements of our business strategy in 2021 and beyond. Additional information about this event will be released in the coming days. Thank you very much for your time and attention. Now I'd like to turn the call over to Brian, who will discuss our fourth quarter financial results and 2021 outlook in greater detail.
spk02: 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 And all comparisons will be year-over-year comparisons versus the fourth quarter of 2018. Now, I'll get into our results. As Karen highlighted, our consolidated net sales were strong, increasing 12% to $293.9 million. Within North America segment, net sales increased 9.8% to $249.1 million, primarily due to higher sales volumes in our home center distribution channel which includes our home center and co-op customers. Sales volumes were supported by the return of Lowe's 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 and 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. 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%. From a product perspective, our fourth quarter gross margin on wood products was 41.8% compared to 40.8% 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 cash profit sharing expenses. Selling expenses decreased 1.2% 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, and stock-based compensation expense. On a segment basis, selling expenses in North America were down 2.1%, 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, stock-based compensation, and software subscriptions and licenses. Total operating expenses were $84.3 million, an increase of $5.1 million, or approximately 6.5%. As a percentage of net sales, total operating expenses were 28.7%, an improvement of 150 basis points compared to 30.2%. Our solid top line performance combined with our stronger Q4 gross margin and diligent management of costs and operating expenses helped drive a 7.8% increase in consolidated income from operations to $39.5 million. compared to $36.6 million. In North America, income from operations decreased 1.8 percent to $36.1 million. In the fourth quarter of 2019, North America income from operations included a $5.6 million gain on the sale of a selling and distribution facility. In Europe, income from operations increased 145.8 percent 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 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 31st, 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 a revolving credit facility during the quarter. As of December 31, 2020, the full $300 million on our primary line of 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, as 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 levels of customer service and on-time delivery standards. As a result of our improved profitability and effective working capital management, we generated strong cash flow from operations of $77.5 million for the fourth quarter of 2020, an increase of $21.1 million, or 37.4%. 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. In the 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 $40.4 million in dividends in fiscal 2020, including $10.2 million in the fourth quarter. In addition, we repurchased approximately 1.05 million shares of our common stock in 2020 at an average price of $72.33 per share for a total of $76.2 million. This includes approximately 151,000 shares of our common stock that we repurchased during the fourth quarter at an average price of $89.49 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 1st, 2021, and runs through December 31st. 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 1st, 2021. Before we turn the call over to questions, I'd like to discuss our 2021 financial outlook. Based on business trends and conditions as of today, February 8th, we are initiating guidance for the full year ending December 31st, 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. It's important to note that the potential economic impact related to COVID-19 on our operations Raw material costs, consumers, suppliers, and vendors may 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 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 combined 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 2021 and beyond 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?
spk06: At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please as we poll for questions.
spk04: So before we go to questions, I need to make a correction. In my script, I stated that our 2020 revenue was $1.28 billion. The corrected number is $1.27 billion. Thank you, operator.
spk06: And with that, our first question comes from the line of Daniel Moore with CJS Securities. Please, see you with your question.
spk01: Karen and Brian, good afternoon. Thanks for taking the questions.
spk04: How are you doing, Dan?
spk01: Let me start with just the guidance for 21. The operating margin range implies, you know, a fair bit of compression. You clearly signaled some 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 are sort of implied or contemplated at the low end or the high end of the range? Thank you.
spk02: Sure, Dan. So let me walk through some of that. So our guidance does include that gross margin headwind with higher OPEX relative to 2020. We spoke last quarter. 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 some gross margin compression and the OPEX as a percent of revenues increasing to reflect I guess both of those conditions. And looking at SG&A, we're expecting at some point in 2020 that certain activities will resume, such as travel, trade show activities, such like that. And we'll have some higher OPEX relative to 2020 in regards to those conditions. general categories. And then on revenue, kind of a low to mid single digit overall growth rate from a volume perspective. Karen, was there anything you'd like to add?
spk04: 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, basic, you know, projects and things that were canceled. 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 pandemic. And I think Brian hit the rest of those elements perfectly.
spk01: Got it. That's helpful. So if we think about mid-single digits being the higher end of the range, if R&R remains robust and housing activity remains robust and we push through those at the higher end, maybe a little bit of upside to the guide, at least that's what I'm hearing.
spk04: Yeah, I mean, I think, Dan, as we, you know, 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 and decks and fences and all kinds of projects. We'll see if that continues, but I think the mid- to single-digit growth for us seems pretty reasonable based on what we're seeing.
spk01: Absolutely, very helpful. And then is it possible to quantify how much of a benefit, in ballpark terms, reduced travel, trade show activity was? And part of the reason is, is it possible that some of that doesn't necessarily come back whether it's in 2021 or beyond, but just trying to get a sense of the magnitude of that benefit that we had this year.
spk02: I think that so far in the early part of the year, it doesn't seem much different from that perspective relative to the latter part of 2020 from a travel and those other activities perspective. We would anticipate those 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. I don't have the specific dollar amount in front of me for the travel and trade. I'll see if I can pull it before the call ends. We did note the I do note that as we put in the release, there were some variable comp elements that did increase, but other elements were not really called out yet. So let me see if I can pull that for you at the end.
spk01: Okay, and long shot here, but any chance we get any sort of 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-year goals that obviously you executed on extremely well?
spk04: Yeah, that's a great question, and we don't want to, you know, We obviously will be giving you some information on where we believe our growth strategy is and some metrics associated with that. And we'll just wait till that March date to be able to clarify all of that for you.
spk01: All right. I won't spoil the fun. Thank you. Thank you again. I'll circle back with any follow-ups.
spk04: Thanks, Dan.
spk06: Our next question comes from the line of Tim Wolfe with Baird. Please, he has a question.
spk07: Hey, everybody. Good evening. Good afternoon. Okay. Maybe, hello. Maybe just to start, in your EVIC guidance range, what exactly, and maybe even revenue, what exactly have you factored in for price for steel inflation, if anything?
spk02: Well, right now with our guide, we do include some assumptions on some steel price increases. We do want to provide more detail on that investor day as that comes out. So, if you could bear with us until that time, Tim, we'll plan on disclosing more of that information around what we're seeing and planning for as far as – or looking to implement as far as the rising steel price and what we would plan to do for that.
spk07: Okay. I guess, so we should take revenue expectations in terms of the low to mid-single-digit volume growth you talked about, and we should layer in some price on top of that, correct?
spk02: Correct.
spk07: Okay. Okay. And then secondly, just on the investments, I know you want to 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 21?
spk02: There will be a little bit in OPEX, but what we'd like to do is on that investor day talk about the those growth opportunities, and then at the same time talk about the investment that we'll be making in 21 to move us to be able to go after and achieve some of those opportunities.
spk07: Okay. Okay. And I guess big picture, I mean, is there any reason why SG&A shouldn't continue to grow at a slower rate relative to revenue over time?
spk02: Over time, typically, that would be the case. 2021, as we'll detail out later, 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, go ahead.
spk04: You know, we've done a really nice job in the 2020 plan of ensuring that we've looked at all of our SG&A spend very carefully, and so we will not get out of that habit. We will continue to very, very closely monitor our SG&A spend.
spk07: 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, you know, your ability to go out and get price from your customers?
spk04: Yeah, I think it really hasn't. As we've talked about, there's a lot of information in the market about the rising costs of steel and the availability of steel. We certainly, our customers know that that's a key element in our costs. And that as we have steel increases, we have to evaluate that and be able to push that off into 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, you know, kind of first struck us. Quite a big difference between that point and what we're seeing now on steel costs.
spk07: Okay. Okay. Fair enough. That's good to hear. I'll hop back in queue, but look forward to March and good luck on the end.
spk04: Thank you, Tim.
spk02: Thanks, Tim. And before we jump to the next question, travel and entertainment savings for the full year 2020 was about $7.5 million. Split more in the selling line than the G&A line and other lines. Sorry, Operator, can we? Go back into the queue now.
spk06: Absolutely. Our next question comes from the line of Julio Romero with Sidoti. Please, see what the question.
spk08: Hey, good afternoon, Karen and Brian. Hi, Julio. Hi. Hey, so I do want to ask about the 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 that should continue to be part of your approach to growth going forward? Kind of a broad question, but the best way you can answer.
spk04: I think the things that distinguish us are 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 differentiating our product from the standpoint of its performance, its corrosion resistance, but also the availability. So as we look to growth markets, we 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.
spk08: Got it. And I guess some of your engineered products, some of the things you'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 approach that kind of continues since it's worked for you so well over the last three to four years?
spk04: Yeah, I think when you – when you say narrow product focus, we look at things, and I'll look back at our fasteners. We've talked about this. There's billions of dollars of opportunities in fasteners, and we note that our structural fastener market is $750 million. 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 versus commodity type of products. So when you look at areas that we grow in, we do look at areas that we can differentiate ourselves. Even though it might be a very large market, 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, being able to sell at that higher level.
spk08: 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. But if I go back to that original 2020 guide number, I think you came – your full year number you reported today came in about $9 million below what your original goal was for the year. So as I think about your 2021 outlook, right, it's – is that – you know, how should I think about that? Is that catch-up or is there – or should I consider your annualized growth capex to be kind of higher, you know, beyond 21?
spk02: Good question. Part of it is catch-up for sure. an element rolling over from 2020 into 2021. And then periodically there will be years where we may have a higher investment amount due to maybe investing in some element that needs to get refreshed every, say, four to five years. So there's a bit of that element in 2021 as well. The number is higher from a guide perspective in 2021, but due to that element that there's some of the things that we didn't do in 20 and some of the things that are more every few years in nature.
spk08: Got it. That's helpful. Thanks for taking the questions and look forward to your rest of the day next month.
spk06: Thanks, Julio. And our final question comes from the line of Curt Yinger with DA Davidson. Please, you with your question.
spk05: Yes. Good afternoon, everyone, and thanks for taking my questions.
spk00: Hey, Curt. Sure, Curt.
spk05: Yeah. I mean, not to belabor the steel and gross margin points, but just to confirm, it doesn't sound like you guys have taken any action on pricing to date. Is that right?
spk02: Well, right now we are in initial stages of 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 our folks and our team. And then we'll have that greater detail that I mentioned or when I mentioned in the the latter part of March at the Virtual Investor Analyst Day.
spk05: Okay, got it. That's fair. And then from an inventory standpoint, I mean, how far out do you have, I guess, visibility or confidence before some of this inflation that we've seen starts to roll through the P&L? 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 of 2021?
spk02: Yeah, really good question, because as we purchase steel and consume it, our weighted average costs change based on the ins and outs 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 is a bit of a delay in steel price increases 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 a given quarter or period to try to correlate or predict what that gross margin will be based on facts known today. So, steel prices known today or the like.
spk05: 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, you know, the home center customer set was, again, a big driver that I'm curious whether you would view that upside as, you know, a load-in benefit associated with gaining back lows 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 second half, even without, you know, having these load-in benefits and as you lap it in 2021?
spk02: I don't think there's much, if any, load-in in Q4. It was largely done toward the end of Q3, maybe a couple weeks. a couple of few stores at the beginning of the quarter. So largely due to some of the elements that Karen mentioned, more favorable weather, the continued DIY element for that trend that has definitely been prevalent in the earlier Q2, Q3 of 2020. So as far as on a go-forward basis, definitely a tougher comp. but we'll have to continue to monitor and follow the DIY R&R trend relative to 2020 to see how strong those growth elements might be.
spk05: 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 materials supply chain, that seems to be, you know, a really relevant issue as well. I'm curious whether, you know, here in North America, you're seeing similar type opportunities, or you think that could be a market share gain type opportunity for you guys, just given the focus on customer service and inventory and everything like that?
spk04: Yeah, Kurt, I think, you know, obviously, as you've stated, we're, you know, our number one goal is is the relentless customer focus. And we have been able to meet our customers' needs, as I've mentioned, even amazingly, as we have many, many people working remote. But to ensure that we have the product availability is a big key. And as you mentioned, wood is an issue in the building industry. Certainly steel is now an issue. But I see us really continuing to maintain our customer service levels and our product availability, not seeing so much potential for 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 substantially larger-sized customers, so a little bit different market in both those areas.
spk02: And Karen, you were saying customers, but I believe you were meaning competitors.
spk04: Oh, sorry. Sorry. Yeah, I didn't mean that. Yeah. In Europe, we have small competitors who had some problems meeting availability. In the U.S., we have much larger competitors, so much more difficult to get market share because they're also meeting customer needs.
spk05: Right, right. Okay, that's helpful. And then just last one for me. Karen, I know you kind of alluded to the lag impact between starts and seeing that pull through, but just curious as you sit back and think about, I guess, the volumes going to more new residential-type customers, whether there's anything that's surprised you and 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 of 2021, whether there's a geographic issue or any sort of leakage points that you could think of.
spk04: Yeah, I think there's definitely demand, but I still see some of 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 a function of that limited labor resource that we have in the construction area. That hasn't really picked up, and so I really believe that that becomes your limiting factor on the number of starts that you can build.
spk05: Got it. Okay. That's very helpful. All right. Well, thanks for the details, and good luck here in Q1. Great. Thanks, Kurt.
spk06: Thanks, 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.
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