Please read the attached doc...the company is Simpson Manufacturing and I'm using the 2014 Annual Report

ACT 410 - Auditing Assignment for Review of 10-K (Annual) Report This report is due November 19th; a draft report is due October 8th. This project is worth 125 points. The Annual Report or 10-K filing must be turned in with the assignment The paper must be typed using 12 point font; analytic procedures should be completed in an Excel Workbook. Each question must appear before the answer. Spelling and grammar will carry a weigh of 5 points. Make sure you thoughts are concise, well expressed, and easily understood. Assignment As an auditor, you must evaluate the risks related to an audit engagement to determine if you will accept the engagement. Once the engagement is accepted, the auditor must identify areas that represent audit risk and make decisions regarding specific areas that require audit attention. You are also required to determine if an entity has the ability to continue as a going concern, that is, to continue its operations or meet its obligations for a reasonable period. In addition to the financial statements, carefully review (1) Letter to the Shareholders, (2) Management Discussion and Analysis and (3) Footnote disclosures. Spelling and grammar (5 points) Part I (10 points) 1. What is the purpose of the Management Discussion and Analysis (MD&A)? This section should be done in one paragraph. 2. Summarize the SEC requirements for the presentation of the MD&A.You may find the following links helpful in researching this topic: http://www.aicpa.org/Research/Standards/AuditAttest/DownloadableDocu ments/AT-00701.pdf http://www.sec.gov/rules/interp/33-8350.htm Part II (35 points) Use the footnote disclosures to answer the following questions: Please give the footnote number that relates to your response. 3. What types of risks that could negatively impact their business does the company identify? 4. How is inventory valued? 5. Explain how the company recognizes revenue. 6. How is depreciation on fixed assets calculated? ACT 410 Fall 2015 Page 1 of 3 7. Did the company have any special charges during the report year? If yes, for what? Special charges are any items that are not part of operating expenses, such as reserves for plant closing, early extinguishment of debts, costs related to acquisitions or divestitures, reserves for environmental clean ups, product recalls, etc. 8. What items and amounts make up commitments and contingencies? These items may be found in separate footnotes. 9. Discuss any legal proceedings in which the company is currently involved. Part III (20 points) Using the guidance provided in Chapter 8, perform the following analytic procedures and analysis: This analysis should be done in Excel with a column at the far right for observations and comments related to the results. This column should contain a statement for each significant difference. For instance, you might say, "significant increase (decrease)-inquire of client" or increase size of accounts receivable confirmation sampling" Use the Excel workbook provided to complete your computations 1. Compare the current year balances with the prior year balances, computing the % change between years and commenting on significant variances. 2. Prepare a common size income statement for the past three years. (See Exhibit 8-7, on page 227 for format) Use net sales as your denominator. Comment on significant variances. 3. Compute the selected ratios included in Table 8-1 (page 221) for the past two years and compare them to industry ratios. Use the format of Table 8-1 for your computations (formula are found on pages 232-233). State your conclusions regarding the status of your company to the industry average. Note any situations that skewed the ratio, such as industry uses accelerated depreciation but your company uses straight line method, so depreciation expense which favorably impacts profit margin. 4. Review the statement of cash flows and determine the primary source of working capital for the year being audited. Part IV (15 points) 1. What companies are considered competitors of your company? 2. How well or poorly does your company compare to their competitors? 3. What accounts for your company's superior/inferior/mediocre performance in the industry? Part V (30 points) Using what you have learned about the company from reading its Management Discussion and Analysis, footnote disclosures, and performing analytic procedures, identify at least five areas that would require special audit attention for the ACT 410 Fall 2015 Page 2 of 3 upcoming year and explain why the area is of concern. Be specific. Cite the section (number and page) of the MD&A report or footnote that discusses the area. ACT 410 Fall 2015 Page 3 of 3 THE POWER TO BUILD SIMPSON MANUFACTURING CO., INC. 2014 ANNUAL REPORT SIMPSON STRONG-TIE GIVES OUR CUSTOMERS THE POWER TO BUILD. Simpson Manufacturing Co., Inc. After nearly 60 years, everything we do focuses on providing powerful solutions to meet our customers' needs. Ever y day, we make it easier to design, build, repair, protect and strengthen structures from wood-frame homes and multi-stor y buildings to roads and bridges. With our expanding lines of high-performance products, full-service engineering and field suppor t, product testing and training, and on-time product delivery, we are committed to giving our customers worldwide the power to build. 2014 Annual Report | 1 MESSAGE TO OUR STOCKHOLDERS To our stockholders, customers and employees: In late 2014, we lost our beloved founder, Barclay Simpson. He was 93 years old. Barc will be greatly missed and always remembered for his optimism and enthusiasm, his generosity and the values he instilled in our company. A few years ago, we asked Barc to share his inspiring Nine Principles of Business in a video. (The video is available on our YouTube channel: youtube.com/strongtie.) All of Barc's principles focus on the value and contributions of each and every employee. He said the success of a great company depends on its people. \"Everybody in a company is important. Everybody. ... There are no big shots, no parking places. It's always been first names. Nobody's Mr. or Ms. You're Joe or Carol or Pete or Barc. We're all working together toward the same goal; we rely on each other to be successful.\" Barc's words are as true today as ever. We at Simpson Manufacturing Co., Inc., through our subsidiary Simpson Strong-Tie Company Inc., are all working toward the same goals and seeing positive results from our efforts as the construction industry continues to experience balanced growth. We remain committed to our global strategy of strengthening our core business, seizing new business areas and taking our products worldwide. We believe this continued focus on our long-term strategy and our mission of providing exceptional customer service are key factors in our success and future growth. Our growing product offering - which includes structural connectors, lateral systems, fasteners, fastening systems, anchors, truss plates and software, and concrete repair, protection and strengthening systems - has enabled us to diversify and expand our presence in the residential, industrial, commercial and infrastructure construction markets. Today, we are providing complete product solutions to give our customers the power to build. 2 | Simpson Manufacturing Co., Inc. In 2014, we launched 20 new products. Our commitment to product design and innovation, as well as new product software and apps, is integral to increasing sales and maintaining and defending our strong market presence. We also continue to strengthen our presence internationally by increasing our connector market share and expanding our fiber-reinforced polymer (FRP) materials in Europe. Our sales were up more than 6% in 2014. Development of new products and expansion of our product offerings for concrete applications were factors contributing to the increase. Our balance sheet is strong, and our quarterly dividend is $0.14 per share. As we further refine and execute our strategy in 2015, we will continue to implement initiatives to improve efficiency and reduce costs across all our operations, as well as look for new opportunities to enhance growth. Our strong culture and talented and dedicated employees remain integral to the success of our business. We invite you to take a closer look at our brand leadership, our product solutions and the many ways we continue to create value for our customers and investors. Sincerely, Karen Colonias Tom Fitzmyers President and Chief Executive Officer Vice Chairman FINANCIAL HIGHLIGHTS 2014 2013 % Change Net Sales $752,148\t$705,322 6.6% Income from Operations Net Sales Stockholders' Equity Earnings per Share 900,000 2.00 $99,276 $81,478\t21.8% 800,000 1.80 Net Income $63,531 $50,971\t24.6% 700,000 Diluted Earnings per Share $1.29 600,000 Total Assets $1.05\t22.9% 48,966,159\t48,712,467 Number of Employees 1.20 1.00 400,000 $863,465\t$841,279 2.6% Common Shares Outstanding 1.40 500,000 $973,065\t$956,525 1.7% Stockholders' Equity 1.60 2,434 2,295\t6.1% 0.80 300,000 Dollars in thousands except per-share amounts. Factories, offices and warehouses in Asia, Australia, Canada, Chile, China, Czech Republic, Denmark, France, Germany, Netherlands, Poland, Portugal, Scotland, Switzerland, Taiwan, UK and USA. 0.5% 0.60 200,000 0.40 100,000 2010 2011 2012 2013 2014 0.20 2010 2011 2012 2013 2014 Distribution in Australia, Canada, Chile, China, parts of Eastern Europe, Western Europe, Japan, Korea, Mexico, parts of the Middle East, New Zealand, South Africa, Taiwan and other Asian countries, UK and USA. 2014 Annual Report | 3 4 | Simpson Manufacturing Co., Inc. CONNECTORS ARE JUST THE BEGINNING Simpson Strong-Tie pioneered the connector industry, and we remain focused on innovation. Our ever-expanding line of product solutions give engineers, designers and builders everything they need to build safer, stronger structures. T h ro u g h c o n s t a n t re s e a rc h, te s ti n g a n d engineering, our products are solving construction challenges and providing the strength to make powerful connections. CONNECTORS ARE JUST THE BEGINNING THE POWER TO BUILD HOMES Our lines of connectors, fasteners and truss products do more than increase the structural integrity of homes against the forces of nature. For builders, they enhance efficiency, while upholding the highest performance standards. For homeowners, they help protect lives. Together, Simpson Strong-Tie is giving our customers the products, resources and power to build homes that last. 2014 Annual Report | 9 THE POWER TO BUILD M U LT I - S T O R Y B U I L D I N G S Simpson Strong-Tie offers the industry's largest selection of lateral-force resisting systems, providing advanced design flexibility and durability for multi-stor y, wood-frame construction. Designed to bear the brunt of a seismic event, our new Strong Frame special moment frame helps buildings resist collapse. And our prefabricated wood and steel Strong-Wall shearwalls deliver high load values and versatility for a wide range of applications all to give our customers the power to build multi-story buildings. 10 | Simpson Manufacturing Co., Inc. 2014 Annual Report | 11 12 | Simpson Manufacturing Co., Inc. THE POWER TO BUILD STEEL BUILDINGS We p rov i d e e n g i n e e r s a n d b u i l d e r s w i th complete structural solutions for cold-formed s te e l c o n s tr u c ti o n f ro m s te e l-to -s te e l connections to full-scale lateral solutions and curtain wall connectors. With decades of product design, testing and manufacturing experience, we are dedicated to developing innovative solutions that give our customers the power to build strong steel buildings. 2014 Annual Report | 13 THE POWER TO BUILD ROADS AND BRIDGES To help contractors build long-lasting concrete structures, Simpson Strong-Tie offers a full array of anchoring systems for residential, comme rcial, inf rastr ucture a nd industr ial markets. Our adhesives and wide assortment of mechanical anchors provide high-strength performance in concrete. Together, they give our customers the power to build roads, bridges and other concrete structures. 14 | Simpson Manufacturing Co., Inc. 2014 Annual Report | 15 16 | Simpson Manufacturing Co., Inc. THE POWER TO B U I L D A N D R E PA I R For the structural repair of concrete structures, our Repair, Protection and Strengthening Systems help protect against deterioration. From custom-manufactured fiberglass jackets to underwater epoxies, we offer a broad range of tested and proven products that deliver long-term solutions giving our customers the power to build and repair. 2014 Annual Report | 17 THE POWER TO BUILD WITH EASE With more than 20 web, mobile and desktop software apps and an educational video library, we do more than simplify the selection and installation of Simpson Strong-Tie products, we help drive customer sales. By providing unlimited access to our literature, drawing software, estimators and calculators, we help engineers and builders maintain a competitive edge, saving them design time and costs. Whether our customers need to select the right connector or locate one of our dealers, our software gives them the power to build with ease. 18 | Simpson Manufacturing Co., Inc. 2014 Annual Report | 19 20 | Simpson Manufacturing Co., Inc. THE POWER TO BUILD WITH CONFIDENCE Barclay Simpson founded our company on a simple philosophy let's help customers solve problems. That belief permeates everything we do. So whether we're developing a new product, manufacturing tried-and-true products, providing technical or field support, or leading a training workshop, we're constantly thinking about the needs of our customers. It's our people that give our customers the power to build with confidence and trust. 2014 Annual Report | 21 CORE BUILD PIONEER TRUST DRIVE 22 | Simpson Manufacturing Co., Inc. CO INNOVATE EXPA STRENGTH ONNECT THE POWER TO BUILD E V E RY W H E R E As an international company, we continue to strengthen our market presence fur ther expanding our product lines, distribution areas and support worldwide to give our customers the power to build everywhere. E AND 2014 Annual Report | 23 Office Street Address | 5956 W. Las Positas Boulevard, Pleasanton, CA 94588, USA | (800) 925-5099 Mailing Address | P.O. Box 10789, Pleasanton, CA 94588 2015 Officers Karen Colonias President and Chief Executive Officer Roger Dankel President, North American Sales Simpson Strong-Tie Company Inc. Ricardo M. Arevalo Chief Operating Officer Simpson Strong-Tie Company Inc. Brian J. Magstadt Chief Financial Officer, Treasurer and Secretary Jeffrey E. Mackenzie Vice President 2015 Board of Directors Peter N. Louras, Jr.(1)(2)(4)(5) Chairman Group Vice President (retired), The Clorox Company Karen Colonias(4)(5) President and Chief Executive Officer Thomas J Fitzmyers(4)(5) Vice Chairman James S. Andrasick(2)(3)(4)(5) Chairman (retired), Matson Navigation Jennifer A. Chatman(1)(2)(3)(5) Paul J. Cortese Distinguished Professor of Management Haas School of Business, University of California, Berkeley Gary M. Cusumano(4)(5) Chairman (retired) The Newhall Land and Farming Company Celeste Volz Ford(1)(4)(5) Founder and Chief Executive Officer Stellar Solutions, Inc. Robin Greenway MacGillivray(2)(3)(4)(5) Senior Vice President - One AT&T Integration (retired) AT&T (1) \u0007 ember of Compensation and Leadership Development Committee M (2) Member of Audit Committee (3) Member of Governance and Nominating Committee (4) Member of Acquisitions and Strategy Committee (5) Member of Growth Committee 24 | Simpson Manufacturing Co., Inc. Annual Meeting The annual meeting of stockholders will take place at 2:00 p.m., Pacific Daylight Time, on Tuesday, April 21, 2015, at the Company's home office located at 5956 W. Las Positas Boulevard, Pleasanton, California. Stock Listing Simpson Manufacturing Co., Inc.'s (the \"Company's\") common stock is traded on the New York Stock Exchange under the ticker \"SSD.\" Quarterly Stock Data The table below shows the per-share closing price range of the Company's common stock for the last two years as quoted on the New York Stock Exchange. 2014 2013 High Low Close High Low Close 4Q $34.98\t$29.04\t$34.60 $37.23 $30.58 $36.73 3Q $36.90\t$29.15\t$29.15 $33.34 $29.47 $32.57 2Q $36.94\t$31.91\t$36.36 $31.86 $27.87 $29.42 1Q $36.25\t$31.32\t$35.33 $33.87 $28.01 $30.61 Form 10-K The Company's annual report on Form 10-K (which is included in this report) and its quarterly and current reports on Forms 10-Q and 8-K are filed with the Securities and Exchange Commission and are available upon request. These reports are also available on the Company's website at www.simpsonmfg.com. Investor Relations Thomas J Fitzmyers Simpson Manufacturing Co., Inc. 5956 W. Las Positas Boulevard, Pleasanton, California 94588 (925) 560-9030 For an investor information package, please call (925) 560-9097. Transfer Agent and Registrar P.O. Box 30170, College Station, Texas 77842 For stockholder inquiries, please call (877) 282-1168 or visit www.computershare.com. Independent Registered Public Accountants PricewaterhouseCoopers LLP Three Embarcadero Center, San Francisco, CA 94111-4004 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2014 OR 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) Delaware (State or other jurisdiction of incorporation or organization) 94-3196943 (I.R.S. Employer Identification No.) 5956 W. Las Positas Blvd., Pleasanton, CA 94588 (Address of principal executive offices) Registrant's telephone number, including area code: (925) 560-9000 Securities registered pursuant to Section 12(b) of the Act: Common Stock, par value $0.01 (Title of each class) New York Stock Exchange, Inc. (Name of each exchange on which registered) Securities registered pursuant to Section 12(g) of the Act: None (Title of class) Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes No 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 No 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 No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] 25 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. Large accelerated filer Non-accelerated filer (Do not check if a smaller reporting company) Accelerated filer Smaller reporting company Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No As of June 30, 2014, there were outstanding 48,973,019 shares of the registrant's common stock, par value $0.01, which is the only outstanding class of common or voting stock of the registrant. The aggregate market value of the shares of common stock held by nonaffiliates of the registrant (based on the closing price for the common stock on the New York Stock Exchange on June 30, 2014) was approximately $1,502,313,863. As of February 26, 2015, 49,295,157 shares of the registrant's common stock were outstanding. Documents Incorporated by Reference The information called for by Part III is incorporated by reference to the definitive Proxy Statement for the Annual Meeting of Stockholders of the Company to be held April 21, 2015, which will be filed with the Securities and Exchange Commission not later than 120 days after December 31, 2014. 26 This document contains forward-looking statements, based on numerous assumptions and subject to risks and uncertainties, such as statements regarding sales, gross profit margin, stock-based compensation, capital expenditures, amortization or effective tax rates at any future time or for any future period. Although the Company believes that the forward-looking statements are reasonable, it does not and cannot give any assurance that its beliefs and expectations will prove to be correct. Many factors could significantly affect the Company's operations and cause the Company's actual results to be substantially different from the Company's expectations. Those factors include, but are not limited to: (i) general economic and construction business conditions; (ii) customer acceptance of the Company's products; (iii) relationships with key customers; (iv) materials and manufacturing costs; (v) the financial condition of customers, competitors and suppliers; (vi) technological developments; (vii) increased competition; (viii) changes in capital and credit markets; (ix) governmental and business conditions in countries where the Company's products are manufactured and sold; (x) changes in trade regulations; (xi) the effect of acquisition activity; (xii) changes in the Company's plans, strategies, objectives, expectations or intentions; and (xiii) other risks and uncertainties indicated from time to time in the Company's filings with the Securities and Exchange Commission. Actual results might differ materially from results suggested by any forward-looking statements in this report. The Company does not have an obligation to publicly update any forward-looking statements, whether as a result of the receipt of new information, the occurrence of future events or otherwise. See \"Item 1A Risk Factors.\" PART I Item 1. Business. Background Simpson Manufacturing Co., Inc., a Delaware corporation, (the \"Company\"), through its subsidiary, Simpson Strong-Tie Company Inc. (\"Simpson Strong-Tie\" or \"SST\"), designs, engineers and is a leading manufacturer of wood construction products, including connectors, truss plates, fastening systems, fasteners and pre-fabricated lateral systems used in light-frame construction, and concrete construction products used for concrete, masonry, steel and for concrete repair, protection and strengthening, including adhesives, chemicals, mechanical anchors, carbide drill bits, powder actuated tools and fiber reinforced materials. SST markets its products to the residential construction, light industrial and commercial construction, remodeling and do-it-yourself (\"DIY\") markets. The Company believes that SST benefits from strong brand name recognition among architects and engineers who frequently specify in building plans the use of SST products. SST has continuously manufactured structural connectors since 1956. The Company is organized into three operating segments consisting of the North America, Europe and Asia/Pacific segments. The North America segment includes operations primarily in the United States and Canada. The Europe segment includes operations primarily in France, the United Kingdom, Germany, Denmark, Switzerland, Portugal and Poland. The Asia/Pacific segment includes operations primarily in China, Hong Kong, Thailand, Australia, New Zealand, South Africa and the Middle East. These segments are similar in several ways, including similarities in the products manufactured and distributed, the types of materials used, the production processes, the distribution channels and the product applications. See Note 13 to the Company's Consolidated Financial Statements for information regarding the assets and performance of each of the Company's operating segments. Also see \"Item 1A Risk Factors.\" Simpson Strong-Tie's wood construction products are typically made of steel and are used primarily to strengthen, support and connect wood joints in residential and commercial construction and DIY projects. SST's wood construction products enhance the safety and durability of the structures in which they are installed and can save time and labor costs. SST's wood construction products contribute to structural integrity and resistance to seismic, wind and other forces. Applications range from commercial and residential building, to deck construction, to DIY projects. SST produces and markets over 13,000 standard and custom wood construction products. Simpson Strong-Tie's concrete construction products are composed of various materials including steel, chemicals and carbon fiber. They are used primarily to strengthen, anchor, support, repair and connect joints in residential and commercial construction and DIY projects used to repair, protect and strengthen concrete, brick or mortar structures. SST's concrete construction products enhance the safety and durability of the structures in which they are installed, can save time and labor costs and contribute to structural integrity and resistance to seismic, wind and other forces. Applications range from industrial, commercial, infrastructure and residential structures, to DIY projects. SST produces and markets over 2,000 standard and custom concrete construction products. Simpson Strong-Tie emphasizes continuous new product development and often obtains patent protection for its new products. SST's products are marketed in all 50 states of the United States and in Europe, Canada, Asia, Australia, New Zealand, Mexico and several countries in Central and South America, Africa and the Middle East. SST's products are distributed to home centers, through wholesale distributors, to contractors, to dealers and to original equipment manufacturers (\"OEMs\"). SST 27 operates manufacturing, warehouse, sales and sourcing or quality assurance facilities in California, Arizona, Texas, Ohio, Florida, Connecticut, Illinois, Washington, Tennessee, Minnesota, North Carolina, Maryland, Massachusetts, Missouri, British Columbia, Ontario, England, France, Denmark, Germany, Scotland, Poland, Czech Republic, Switzerland, Portugal, The Netherlands, Austria, Hong Kong, Australia, Dubai, China, Taiwan, Thailand, New Zealand, Vietnam, South Africa and Chile. Simpson Strong-Tie has developed and uses automated manufacturing processes. Its innovative manufacturing systems and techniques have allowed it to control manufacturing costs, while developing both new products and products that meet customized requirements and specifications. SST's development of specialized manufacturing processes has also permitted increased operating flexibility and enhanced product design innovation. The Company has 22 manufacturing locations in the United States, Canada, France, Denmark, Germany, Switzerland, Poland, Portugal, China and England. Industry and Market Trends Based on trade periodicals, participation in trade and professional associations and communications with governmental and quasi-governmental organizations and with customers and suppliers, Simpson Strong-Tie believes that a variety of events and trends have resulted in significant developments in the markets that SST serves. SST's products are designed to respond to increasing demand resulting from these trends. Some of these events and trends are discussed below. In the United States, the market has been increasingly influenced by growing awareness that the devastation caused by seismic, wind and other disasters can be reduced through improved building codes and construction practices. In addition, environmental concerns contribute to the increasing cost and reduced availability of wood, which has led to an increase in use of engineered wood products, concrete, brick and mortar and other alternatives such as cold-formed steel. Most SST products are listed by recognized building standards agencies as complying with model building codes and are specified by architects and engineers for use in projects they are designing. The engineered wood products industry continues to develop in response to concerns about the availability of wood, and the Company believes that SST is the leading supplier of connectors for use with engineered wood products. Natural disasters throughout the world have focused attention on safety concerns relating to the structural integrity of homes and other buildings. The 2011 earthquake in Fukushima, Japan, and the resulting tsunami, the 2011 earthquake in Christchurch, New Zealand, the 2010 earthquakes off the coast of Chile and in Haiti, the 1995 earthquake in Kobe, Japan, the 1994 earthquake in Northridge, California, the 1989 Loma Prieta earthquake in Northern California, hurricanes Hugo in 1989 and Andrew in 1992, a series of hurricanes in 2004 and 2005, including Katrina, in the southeastern United States, the 2011 Joplin, Missouri, tornado, Hurricane Sandy in the Northeast in 2012 and other cataclysmic natural disasters damaged and destroyed innumerable homes and other buildings, resulting in heightened consciousness of the fragility of some of those structures. In the face of such disasters in recent years, architects, engineers, model code agencies, contractors, building inspectors and legislators have continued efforts to improve the structural integrity and safety of homes and other buildings. Based on ongoing participation in trade and professional associations and communications with governmental and quasi-governmental regulatory agencies, SST believes that building codes are being more uniformly applied and their enforcement is becoming more rigorous. Recently, there has been consolidation among several of Simpson Strong-Tie's customer groups. The industry has experienced increased complexity in some home design, and builders are more aggressively trying to reduce their costs. SST has responded to these trends by marketing its products as systems, in addition to individual parts. In some cases, SST uses sophisticated software to facilitate the design and marketing of its SST product systems. The requirements of the Endangered Species Act, the Federal Lands Policy Management Act and the National Forest Management Act have reduced the amount of timber available for harvest from public lands. Over the past several years, this and other factors have led to the increased use of engineered wood products. Engineered wood products, which substitute for strong, clear-grained lumber historically obtained from logging older, large-diameter trees, have been developed to conserve lumber. Engineered wood products frequently require specialized connectors and fasteners. Sales of SST's engineered wood connector and fastener products have contributed significant revenues over the past several years. Simpson Strong-Tie continues to support its distribution through home centers throughout the United States. Compared to previous years, SST's sales to home centers increased in 2014 but declined in 2013 and 2012. See \"Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations.\" Simpson Strong-Tie's principal markets are in the building construction industry. That industry is subject to significant volatility due to real estate market cycles, fluctuations in interest rates, the availability, or lack thereof, of credit to builders, developers and consumers, inflation rates, weather, and other factors and trends. The world-wide recession and the decline in residential construction that began in 2007 reduced the demand for SST's products. In recent years, there has been a slow economic recovery with corresponding increases in residential construction. See \"Item 1A Risk Factors.\" 28 Business Strategy Simpson Strong-Tie designs, manufactures and sells products that are of high quality and performance, easy to use and costeffective for customers. SST provides rapid delivery of its products and prompt engineering and sales support. SST intends to continue efforts to increase market share in both the wood construction and concrete construction product groups by maintaining frequent contact with customers, as well as private organizations that provide information to building code officials, both to inform them regarding the quality, proper installation, capabilities and value of SST's products and to update them about product modifications and new products that may be useful or necessary. To attract new customers, SST also intends to continue to sponsor seminars to inform architects, engineers, contractors and building officials on appropriate use, proper installation and identification of SST's products and to continue to invest in mobile and web applications for customers, utilizing social media, blog posts and videos to connect and engage with customers and to help them do their jobs more efficiently. Through acquisitions and product development, using industry knowledge and customer information, Simpson Strong-Tie continues to diversify its product offering to be less dependent on residential housing, regardless of market ups and downs. Based on its communications with customers, engineers, architects, contractors and other industry participants, SST believes it has strong brand-name recognition, which will assist in the acceptance of new products in current and new markets, both domestic and international. Simpson Strong-Tie seeks to expand its product and distribution coverage through several channels: Distributors. Simpson Strong-Tie regularly evaluates its distribution coverage and service levels provided by its distributors and from time to time modifies its distribution strategy and implements changes to address weaknesses and opportunities. SST has various programs to evaluate distributor product mix and conducts promotions to encourage distributors to add SST products that complement the mix of product offerings in their markets. Through its efforts to increase specifications by architects and engineers, and through increasing the number of products sold to particular contractors, Simpson Strong-Tie seeks to increase sales to channels that serve building contractors. SST continuously seeks to expand the number of contractors served by each distributor through such sales efforts as demonstrations of product cost-effectiveness and information programs. Home Centers. Simpson Strong-Tie intends to increase penetration of the DIY markets by soliciting home centers and increasing product offerings. SST's sales force maintains on-going contact with home centers to work with them in a broad range of areas including inventory levels, retail display maintenance, and product knowledge training. To satisfy specialized requirements of the home center market, SST has developed extensive bar coding and merchandising aids and has devoted a portion of its research efforts to the development of DIY products. Dealers. In some markets, Simpson Strong-Tie sells its products directly to lumber dealers and cooperatives. OEM Relationships. Simpson Strong-Tie works closely with manufacturers of engineered wood products and OEMs in developing and expanding the application and sales of its engineered wood connector and fastener products. SST has relationships with several of the largest manufacturers of engineered wood products. While Simpson Strong-Tie is expanding its established facilities outside of the United States to increase its presence and sales in these markets, sales of some products may relate primarily to certain regions. For example, sales of SST's line of shearwalls and steel moment frames are concentrated mostly in the western region of the United States, because their use is primarily intended to resist the effects of seismic forces. Since 1993, SST has established operations in the United Kingdom, opened manufacturing, warehouse and distribution facilities in western Canada, and the Midwest, Northeast, and eastern seaboard regions of the United States, purchased anchor products manufacturers in Illinois, eastern Canada and France and connector product manufacturers in France, Denmark, Germany and Canada, acquired the assets of a leading manufacturer and distributor of screw fastening systems and collated screws with manufacturing and distribution operations in Tennessee and distribution in Canada, Europe, Australia and New Zealand, and acquired a manufacturer in Germany, acquired a manufacturer and distributor of stainless steel fasteners in Maryland, and consolidated its operations into the Company's Tennessee facility, 29 built a manufacturing facility in China and opened sales offices in Hong Kong, Beijing, Shanghai and Dubai for distribution in Asia and the Middle East, acquired a software company that licenses deck design and estimation software, acquired software assets used by the Company's customers in designing and engineering residential structures, acquired a manufacturer of truss plates in North Carolina, acquired a Maryland manufacturer of construction products and systems to repair, protect and strengthen concrete, acquired a manufacturer of engineered materials for repair, strengthening and restoration of concrete, asphalt and masonry construction with manufacturing and sales offices in Switzerland, Poland and Portugal and sales offices in Austria, Germany and The Netherlands, and acquired manufacturing assets used by the Company to produce shear walls. Simpson Strong-Tie's European investments have established a presence in the European Community through acquisition of companies with existing customer bases and through servicing United States-based customers operating in Europe. SST also distributes connector, anchor and epoxy products in Mexico, Chile, Australia, New Zealand, Asia, South Africa and the Middle East. SST intends to continue to pursue and expand operations both inside and outside of the United States (see Note 13 to the Company's Consolidated Financial Statements). A Simpson Strong-Tie goal is to manufacture and warehouse its products in geographic proximity to its markets to provide availability and rapid delivery of products to customers and prompt response to customer requests for specially designed products and services. With respect to the DIY and dealer markets, SST's strategy is to keep the customer's retail stores continuously stocked with adequate supplies of the full line of SST's products that those stores carry. In some cases, SST manages its inventory to help assure continuous product availability. Most customer orders are filled within a few days. High levels of manufacturing automation and flexibility allow SST to maintain its quality standards while continuing to provide prompt delivery. The Company's long-term strategy is to develop, acquire or invest in product lines or businesses that have the potential to increase the Company's earnings per share over time and that complement SST's existing product lines, can be marketed through SST's existing distribution channels, might benefit from use of SST's brand names and expertise, are responsive to needs of SST's customers, expand SST's markets geographically and reduce SST's dependence on the United States residential construction market. Products Simpson Strong-Tie manufactures and markets building products and is a recognized brand name in residential and commercial applications. The product lines historically have encompassed connectors, anchors, fasteners and lateral resistive systems. More recently, Simpson Strong-Tie has entered into the truss plate market and acquired repair and strengthening product lines for the marine, industrial and transportation markets. The wood construction products include connectors, truss plates, fastening systems and lateral systems. Connectors are prefabricated metal products that attach wood, concrete, masonry or steel together. The metal connectors for wood can join solid sawn lumber, glue-laminated beams, engineered wood, structural composite lumber and plated trusses. Specialty structural connectors have also been developed for cold-formed steel construction. Connectors are essential for tying construction elements together and create safer and stronger buildings. Integrated Component Systems is the name of Simpson Strong-Tie's line of truss connector plates and software. Truss plates are toothed metal plates that join wood members together to form a truss. SST is developing sophisticated software for building component manufacturers to model and design trusses and then select the appropriate SST truss plates to work with the design. The fastener line includes coated or stainless steel hand drive nails and screws in addition to stainless steel collated nails and staples. SST also offers a line of proprietary structural screws used to join plies of wood together or metal connectors to wood. Complimenting these products is the Quik Drive auto-feed screw driving system used in numerous applications such as decking, subfloors, drywall and roofing. SST's lateral resistive systems are assemblies used to resist earthquake or wind forces and include Strong-Wall Shearwalls, ShearBrace, Anchor Tiedown Systems (\"ATS\"), Uplift Restraint Systems (\"URS\"), and Ordinary and Special steel moment frames. Simpson Strong-Tie's concrete construction products are used for concrete, masonry and steel construction and for concrete repair, protection and strengthening. SST's concrete construction anchor products include adhesives, mechanical anchors, carbide drill bits and powder-actuated pins and tools used for numerous applications of anchoring or attaching elements onto concrete, brick, masonry and steel. SST's concrete construction repair, protection and strengthening products include grouts, 30 coatings, sealers, mortars, fiberglass and fiber-reinforced polymer systems and asphalt products. These products are sold in all segments of the Company worldwide. Most Simpson Strong-Tie products are approved by building code evaluation agencies. To achieve such approvals, SST conducts extensive product testing, which is witnessed and certified by independent testing laboratories. The tests also provide the basis of load ratings for the SST structural products. This test and load information is used by architects, engineers, contractors, building officials and homeowners and is useful across all applications of SST's products, ranging from the deck constructed by a homeowner to a multi-story structure designed by an architect or engineer. New Product and Software Development Simpson Strong-Tie commits substantial resources to new product development. The majority of SST's products have been developed through its internal research and development program. SST's research and development expense for the three years ended December 31, 2014, 2013 and 2012, was $11.2 million, $10.7 million, and $11.5 million, respectively. SST believes it is the only United States manufacturer with the capability to test multi-story wall systems, thus enabling full scale testing rather than analysis alone to prove system performance. SST engineering, sales, product management, and marketing teams work together with architects, engineers, building inspectors, code officials and customers in the new product development process. Simpson Strong-Tie's product research and development is based largely on needs that customers communicate to SST and on SST's strategic initiatives to develop new markets or product lines. SST's strategy is to develop new products on a proprietary basis, to patent them when appropriate and to rely on trade secret protection for others. SST typically develops 15 to 25 new products each year. Simpson Strong-Tie expanded its wood construction product offering for 2015 by adding: new joist hangers, including one that can be installed onto a wood beam or stud wall over two layers of drywall, post bases and fasteners like the Strong Drive Timber-Hex HDG screw for wood-to-wood connections suitable for use in heavy-duty marine and coastal applications, and the Strong Drive XL Large-Head Metal Screw line for attaching steel roof decking to steel roof frame members with our SST Quik Drive installation system. SST has also launched the Deck Drive DCU COMPOSITE Screw for the attachment of composite decking material to wood. Simpson Strong-Tie continues to focus on its product lines for concrete construction. The Company improved its Anchor Designer software for ACI 318, ETAG and CSA by adding baseplate design functionality to its best in class design aid. Also released in 2014 for the anchor line was a new line of battery dispensing tools for cartridge dispensing, expanded chemical resistance testing for anchoring adhesives and a new code listing for the line of Blue Banger Hanger cast-in-place, internallythreaded inserts. For the Company's line of products to repair, protect and strengthen structures, a new offering of carbon fiber fabric and carbon fiber laminates was introduced. To complete the system, a new epoxy saturant and epoxy paste were also introduced. This tested system for strengthening structures is complimented by an industry leading offering of comprehensive engineering services which includes design of the strengthening solution, including sealed drawings. Simpson Strong-Tie redesigned several existing wood and concrete construction products to increase load capacity and reduce installation costs. SST intends to continue to expand its product offering for multi-family homes and light commercial and manufacturing buildings. Sales and Marketing Simpson Strong-Tie's sales and marketing programs are implemented through its branch system. SST currently maintains branches in Northern and Southern California, Texas, Ohio, Canada, England, France, Germany, Denmark, Switzerland, Poland, Czech Republic, Portugal, Austria, The Netherlands, China, Australia, Hong Kong, Dubai, New Zealand, Thailand, South Africa and Chile. Each branch is served by its own sales force, warehouse and office facilities, while some branches have their own manufacturing facilities. Each branch is responsible for setting and executing sales and marketing strategies that are consistent both with the markets in the geographic area that the branch serves and with the goals of SST. The North America branches closely integrate their manufacturing activities to enhance product availability. Branch sales forces in North America are supported by marketing managers in the home office in Pleasanton, California. The home office also coordinates issues affecting customers that operate in multiple regions. The sales force maintains close working relationships with customers, develops new business, calls on architects, engineers and building officials and participates in a range of educational seminars. Simpson Strong-Tie sells its products through an extensive distribution system comprising dealer distributors supplying thousands of retail locations nationwide, contractor distributors, home centers, lumber dealers, manufacturers of engineered wood products, and specialized contractors such as roof framers. In recent years, home centers have been one of SST's 31 important distribution channels, and SST's sales to The Home Depot exceeded 10% of the Company's consolidated net sales in 2012 (see \"Item 1A Risk Factors,\" \"Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations,\" and Note 13 to the Company's Consolidated Financial Statements). SST's DIY and dealer products are used to build projects such as decks, patio covers and garage organization systems. Simpson Strong-Tie dedicates substantial resources to customer service. SST produces numerous publications and point-of-sale marketing aids to serve specifiers, distributors, retailers and users for the various markets that it serves. These publications include general catalogs, as well as various specific catalogs, such as those for its fastener products. The catalogs and publications describe the products and provide load and installation information. SST also maintains several linked websites centered on www.strongtie.com, which include catalogs, product and technical information, code reports and other general information related to SST's product lines and promotional programs. Simpson Strong-Tie's engineers not only design and test products, but also provide engineering support for customers. For example, this support might range from the discussion of a load value in a catalog to testing the suitability of an existing product in a unique application. SST's sales force communicates with customers in each of its marketing channels, through its publications, seminars and frequent sales calls. Based on its communications with customers, Simpson Strong-Tie believes that its products are important to its customers' businesses, and it is SST's policy to ship products within a few days of receiving the order, with many of the orders shipped the same day. Many of SST's customers serve contractors that require rapid delivery of needed products. Home centers and dealers also require superior service because of fluctuating demand and to serve the needs of a broad base of customers. To satisfy these requirements, SST maintains appropriate inventory levels, has redundant manufacturing capability and some multiple dies to produce the same parts. SST maintains information systems that provide sales and inventory control and forecasting capabilities throughout its network of factories and warehouses. SST has special programs for contractors intended to ensure the prompt manufacture and delivery of custom products. Simpson Strong-Tie believes that dealer and home center sales of SST products are significantly greater when the bins and racks at dealer and home center locations are adequately stocked with appropriate products. Various retailers carry varying numbers of SST products. SST's sales force is engaged in ongoing efforts to inform retailers about SST's merchandising programs and the appeal of the SST brand. Manufacturing Process Simpson Strong-Tie designs and manufactures most of its standard products. SST has concentrated on making its manufacturing processes as efficient as possible without compromising the quality or flexibility necessary to serve the needs of its customers. SST has developed and uses automated manufacturing processes. SST's innovative manufacturing systems and techniques have allowed it to control manufacturing costs, even while developing both new products and products that meet customized requirements and specifications. SST's development of specialized manufacturing processes has also permitted increased operating flexibility and enhanced product design innovation. As part of ongoing continuous improvement processes in its factories, SST's major North American and European manufacturing facilities initiated lean manufacturing practices to improve efficiency and customer service. SST sources some products from third-party vendors, both domestically and internationally. Simpson Strong-Tie is committed to helping people build safer structures economically through designing, engineering and manufacturing structural connectors, pre-fabricated lateral systems, anchors, fasteners and related products. With the support and involvement of management, SST has developed a quality system that manages defined procedures to ensure consistent product quality and also meets the requirements of product evaluation reports of the International Code Council (ICC) and the International Association of Plumbers and Mechanical Officials Uniform Evaluation Services (IAPMO-UES). SST is recognized in its industry as a manufacturer of high quality products. Since 1996, SST's quality system has been registered under ISO 9001, an internationally recognized set of quality-assurance standards. The Company believes that ISO registration is a valuable tool for maintaining and promoting its high quality standards. As SST establishes new business locations through expansion or acquisitions, projects are established to integrate SST's quality systems and achieve ISO 9001 registration. In addition, SST has six testing laboratories accredited to ISO standard 17025, an internationally accepted standard that provides requirements for the competence of testing and calibration laboratories. SST implements testing requirements through systematic control of its processes, enhancing SST's standard for quality products, whether produced by SST or purchased from others. Most of Simpson Strong-Tie's wood construction products are produced with a high level of automation. For example, its connector products are produced using progressive dies run in automatic presses making parts from coiled sheet steel at rates that often exceed 100 strokes per minute. SST has significant press capacity and has multiple dies for some of its high volume products to enable production of these products close to the customer and to provide back-up capacity. SST also has smaller 32 specialty production facilities, which primarily use batch production with some automated lines. For example, in Gallatin, Tennessee, SST produces non-ferrous and collated fasteners using automated batch production. The balance of production is accomplished through a combination of manual, blanking and numerically controlled (NC) processes that include robotic welders, lasers and turret punches. This capability allows SST to produce products with little redesign or set-up time, facilitating rapid turnaround for customers. New tooling is also highly automated. Dies are designed and produced using computer aided design (CAD) and computer aided machining (CAM) systems. CAD/CAM capability enables SST to create multiple dies quickly and design them to high standards. SST is constantly reviewing its product line to reduce manufacturing costs, increase automation, and take advantage of new types of materials. Simpson Strong-Tie manufactures its concrete construction products at its facilities in Zhangziajong, China, Addison, Illinois, Baltimore, Maryland, Cardet, France, Seewen, Switzerland, Malbork, Poland, and Elvas, Portugal. The mechanical anchor products are produced with a high level of automation. Some products, such as epoxy and adhesive anchors, are mixed in batches and are then loaded into one-part or two-part dispensers, which mix the product on the job site because set-up times are usually very short. In addition, SST purchases a number of products, powder actuated pins, tools and accessories and certain of its mechanical anchoring products, from various sources around the world. These purchased products undergo inspections on a sample basis for conformance with ordered specifications and tolerances before being distributed. Regulation Simpson Strong-Tie's product lines are subject to federal, state, county, municipal and other governmental and quasigovernmental regulations that affect product development, design, testing, analysis, load rating, application, marketing, sales, exportation, installation and use. A substantial portion of SST products have been evaluated and are recognized by governmental and product evaluation agencies. Some of the entities that recognize SST products include the International Code Council Uniform Evaluation Service (ICC-ES), IAPMO-UES, the City of Los Angeles (LARR's), California Division of the State Architect, the State of Florida, Underwriters Laboratory (UL), Factory Mutual (FM) and state departments of transportation. In Europe, Simpson Strong-Tie's structural products meet ETA (European Technical Agreement) regulations. These entities require that products be evaluated to applicable code requirements, design standards and test procedures. If the current code does not provide applicable testing and design standards for a product, these entities may develop their own product acceptance or evaluation criteria, which must be followed to obtain the product's recognition and listing. Simpson Strong-Tie considers product evaluation, recognition and listing to the building code as a significant tool that facilitates and expedites the use of SST's products by design professionals, building officials, inspectors, builders, home centers and contractors. Industry members are more likely to use building products that have the appropriate recognition and listing than products that lack this acceptance. SST devotes considerable time and testing resources to obtaining and maintaining appropriate listings for its products. SST actively participates in industry related professional associations and building code committees both to keep abreast of regulatory changes and to provide comments and expertise to these regulatory agencies. Competition Simpson Strong-Tie faces a variety of competition in all of the markets in which it participates. This competition ranges from subsidiaries of large national or international corporations to small regional manufacturers. While price is an important factor, SST also competes on the basis of quality, breadth of product line, proprietary technology, technical support, availability of inventory, service (including custom design and manufacturing), field support and product innovation. As a result of differences in structural design and building practices and codes, SST's markets tend to differ by region. Within these regions, SST competes with companies of varying size, several of which also distribute their products nationally or internationally. See \"Item 1A Risk Factors.\" Raw Materials The principal raw material used by Simpson Strong-Tie is steel, including stainless steel. SST generally orders steel to specific American Society of Testing and Materials (\"ASTM\") standards. SST also uses materials such as carbon fiber, epoxies and acrylics in the manufacture of its chemical anchoring and reinforcing products. SST purchases raw materials from a variety of commercial sources. SST's practice is to seek cost savings and enhanced quality by purchasing from a limited number of suppliers. The steel industry is highly cyclical and prices for Simpson Strong-Tie's raw materials are influenced by numerous factors beyond SST's control, including general economic conditions, competition, labor costs, foreign exchange rates, import duties, raw material shortages and trade restrictions. The steel market continues to be dynamic, with a high degree of uncertainty about future pricing trends. Market steel prices were fairly stable during 2014 with a decrease in market prices in December 2014. Based on current estimates the Company expects steel prices to remain relatively stable during the first quarter of 2015. 33 Numerous factors may cause steel prices to increase in the future. In addition to increases in steel prices, mills may add surcharges for zinc, energy and freight in response to increases in their costs. These and other factors could adversely affect SST's cost and access to steel. If steel prices increase and SST is not able to maintain its prices or increase them sufficiently, SST's margins could deteriorate. See \"Item 1A Risk Factors\" and \"Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations.\" The Company historically has not attempted to hedge against changes in prices of steel or other raw materials. Patents and Proprietary Rights Simpson Strong-Tie has United States and foreign patents, the majority of which cover products that SST currently manufactures and markets. These patents, and applications for new patents, cover various design aspects of SST's products, as well as processes used in their manufacture. SST continues to develop new potentially patentable products, product enhancements and product designs. Although SST does not intend to apply for additional foreign patents covering existing products, SST has developed an international patent program to protect new products that it may develop. In addition to seeking patent protection, SST relies on unpatented proprietary technology to maintain its competitive position. See \"Item 1A Risk Factors.\" Acquisitions and Expansion into New Markets The Company's growth potential depends, to some extent, on its ability to penetrate new markets, both domestically and internationally. See \"Industry and Market Trends\" and \"Business Strategy.\" Therefore, the Company may in the future pursue acquisitions of product lines or businesses. See \"Item 1A Risk Factors\" and \"Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations.\" In January 2012, the Company purchased the equity of S&P Clever Reinforcement Company AG and S&P Clever International AG (collectively, \"S&P Clever\") for $58.1 million. S&P Clever manufactures and sells engineered materials for repair, strengthening and restoration of concrete, asphalt and masonry construction and has operations throughout Europe. In December 2012, the Company completed a transaction with Keymark Enterprises LLC (\"Keymark\"). In 2011, the Company had purchased various software assets from Keymark and had engaged Keymark to perform software development for the Company, for which the Company had agreed to compensate Keymark at rates equal to a multiple of Keymark's costs. In the December 2012 transaction, the Company paid Keymark $9.1 million, hired thirty-nine Keymark employees to perform the development work that Keymark had previously been engaged to perform and purchased from Keymark various assets needed for that work. The December 2012 transaction also included termination of the Company's 2011 software development agreement with Keymark, and the Company is entitled to certain software license revenue that was previously received by Keymark. In February 2013, the Company purchased certain assets relating to the TJ ShearBrace (\"ShearBrace\") product line of Weyerhaeuser NR Company (\"Weyerhaeuser\"), a Washington corporation, for $5.3 million in cash. The ShearBrace is a line of pre-fabricated shearwalls that complement the Company's Strong-Wall shearwall, and is sold throughout North America. The Company's measurement of assets acquired included goodwill of $0.9 million that has been assigned to the North America segment and intangible assets of $3.6 million, both of which are subject to tax-deductible amortization. Inventory and equipment accounted for the balance of the purchase price. In November 2013, Company purchased certain assets related to a connector line from Bierbach GmbH & Co. KG (\"Bierbach\"), a Germany corporation, for $1.2 million in cash and contingent consideration with an estimated fair value of $0.8 million. Bierbach manufactured and sold a line of connectors primarily in Germany. The Company's measurement of assets acquired included goodwill of $0.5 million, which was assigned to the Europe segment, and intangible assets of $0.6 million, both of which are subject to tax-deductible amortization. Inventory and tool and dies accounted for the balance of the purchase price. Seasonality and Cyclicality Simpson Strong-Tie's sales are seasonal and cyclical. Operating results vary from quarter to quarter and with economic cycles. SST maintains high inventory levels and typically ship orders as they are received, and therefore operate with little backlog. SST's sales are also dependent, to a large degree, on the North American residential home construction industry. See \"Item 1A Risk Factors\" and \"Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations.\" 34 Environmental, Health and Safety Matters The Company is subject to environmental laws and regulations governing emissions into the air, discharges into water, and generation, handling, storage, transportation, treatment and disposal of waste materials. The Company is also subject to other federal and state laws and regulations regarding health and safety matters. The Company believes that it has obtained all material licenses and permits required by environmental, health and safety laws and regulations in connection with the Company's operations and that its policies and procedures comply in all material respects with existing environmental, health and safety laws and regulations. See \"Item 1A Risk Factors.\" Employees and Labor Relations As of December 31, 2014, th