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Simpson Manufacturing Inc (NYSE:SSD)
Q4 2019 Earnings Call
Feb 3, 2020, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Greetings. Welcome to Simpson Manufacturing Company Inc. Fourth Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note, this conference is being recorded.

I will now turn the conference over to your host, Kim Orlando with Addo Investor Relations. Thank you, you may begin.

Kim Orlando -- Investor Relations

Good afternoon, ladies and gentlemen, and welcome to Simpson Manufacturing Company's fourth quarter and full year 2019 earnings conference call.

On this call, the company may discuss forward-looking statements such as future plans and events. Forward-looking statements like any prediction of future events involve risks, uncertainties and assumptions that could cause actual results to differ materially from these days. Some of these factors and cautionary statements are discussed in the company's public filings and reports are available on the SEC's or the company's corporate website. 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 www.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 Colonias, Simpson's President and Chief Executive Officer.

Karen Colonias -- President and Chief Executive Officer

Thanks, Kim and good afternoon everyone. I'm pleased to discuss our results with you today. I'd like to begin by reiterating our commitment positioning Simpson for long-term sustainable and increasingly profitable growth. To that end, we made significant progress, both operationally and financially throughout 2019.

Our net sales improved 5.4% over 2018 to $1.14 billion, driven by higher sales volume despite the adverse weather conditions experienced in the first half of the year and lapping the benefit of higher sales prices following the price increases we implemented in mid 2018. This combined with our focus on rationalizing our cost structure resulted in 100 basis point improvement in our total operating expenses as a percent of net sales to 27.9% versus last year, in line with our expected range.

In addition, our tax rate decreased 24.9% from 26.4% last year. As a result, we generated strong earnings of $2.98 per diluted share, up 9.6% over 2018. Importantly, we continue to make progress toward the aggressive targets we unveiled as part of our 2020 plan in order to maximize operating efficiencies and drive long-term stockholder value. Accordingly, by the end of the year we expect to do the following, achieve an organic net sales compounded annual growth rate of 8%, reduce our total operating expenses as a percent of net sales to a range of 26% to 27%, resulting in an operating income margin of approximately 16% to 17%, improve our return on invested capital to a range of 15% to 16%, improve our company business gross margin to approximately 42%, and finally, improve our European operating income margin to be within the range of 8% to 9%, excluding SAP, severance and goodwill impairment. As a testament to our confidence and execution against the 2020 plan, we were pleased to have returned $101.1 million to our stockholders in 2019 through share repurchases and dividends.

I'd now like to spend a few minutes discussing highlights from our fourth quarter financial results as well as an update on our operational initiatives. Fourth quarter net sales increased 8.5% year-over-year to $262.5 million, primarily due to both higher sales volume and average unit price. Compared to the third quarter of 2019, our net sales were down primarily due to reduced shipping volume related to the typical Q4 seasonality we experienced as a result of fewer shipping days from holiday related closures and a slowdown in construction activity due to the winter months, partially offsetting the seasonal impact was the volume that shifted into the fourth quarter following the resolution of the labor strike we experienced in most of September at our Stockton facility.

US housing starts grew 20% in the fourth quarter versus the comparable period last year, notably in the west and south, where we provide a meaningful amount of content into homes, starts grew 27% and 16% respectively year-over-year. As a reminder, US housing starts are a leading indicator for approximately 60% of our business. That said, our results of operations, do not typically reflect the impact from trends in housing starts until at least three months to four months later. Looking ahead into the first quarter, it is also important to remember that our volume will be impacted by the typical Q1 seasonality we experienced as a result of slowdown in construction activity during the winter month. Although US housing starts experienced double digit growth in Q4 over a lighter fourth quarter last year, for 2020 we continue to expect low single-digit growth in US housing starts.

Our fourth quarter gross margin of 41.9% remained under pressure as such our 2019 full year gross margin of 42.3% was slightly lower than anticipated. Aside from the factors impacting gross margin in 2019, included increased material, labor, factory, and overhead costs and to a lesser extent sales mix. We continue to hold one of the highest margin profiles in the industry. We do this by continuing to effectively manage elements within our control, including maintaining the best-in-class customer experience, high quality trusted products and deep industry relationships. As Brian will discuss more in a moment, we expect our gross margin will range between 43.5% to 44.5% for the full year of 2020.

I'd now like to update on our key operating initiatives, which focused on growing our market share, rationalizing our cost structure in an effort to improve our profitability without sacrificing our competitive edge. And improving our technologies and systems to continue providing exceptional service to our customers.

In Europe, our 2019 net sales of $155.1 million, decreased 2.4% year-over-year. Primarily as a result of the negative $9.2 million impact from foreign currency translation. In local currency, Europe's, net sales increased 3.5% over 2018, primarily through a combination volume improvements and higher selling prices.

Throughout the course of 2019, we also made substantial progress on our lean initiatives and three phase new reduction program to right size our product offering. To date since year-end of 2016, we have removed over 7,000 SKUs. As of December 31, 2019 our inventory balance was $251.9 million, down $24.2 million or 8.8% compared to levels at December 31, 2018. When looking at the decrease in pounds on hand, we've reduced our product inventory in North America, which is the bulk of our total inventory by almost 5% in terms of pounds on hand, including finished goods, which have come down by approximately 8%. Comparing to December 31, 2016, we make progress as aggregate inventory pounds on hand in North America have decreased by nearly 8%, including finished goods, which come down over 17%, while dollars have increased approximately 5%.

Inventory turns for our company has improved to almost 2.5 as we continue to focus on improving our inventory balance through careful inventory management, and purchasing practices.

As it relates to improvements to our technologies and system, our SAP rollout has continued on plan. Our remaining North America branches are scheduled to be on-boarded by the end of the first half of 2020 at which time approximately 85% of our revenue will have been transitioned. We have been enjoying various positive benefits of the SAP implementation, including stronger forecasting tools, and overall enhanced production efficiency. We are working toward a companywide completion around the end of 2021.

In summary, 2019 was a year of solid operational execution, helping us to achieve organic growth, enhancing operating efficiencies and improved profitability. Through our efforts, we are excited to be delivering even more value to our stockholders.

Before I wrap up, I'd like to thank all of our employees for their passion and commitment to our customer service and safety. At Simpson we value the safety of all employees and continually work to minimize employee exposure to any potential risk.

I'd now like to turn the call over to Brian to discuss our fourth quarter financial results as well as our 2020 outlook in detail.

Brian Magstadt -- Chief Financial Officer and Treasurer

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 will be referring to the fourth quarter of 2019. And all comparisons will be year-over-year comparison versus the fourth quarter of 2018.

Now turning to our results. Total net sales were strong increasing 8.5%, to $265 million. Within the North America segment net sales were up 11% to $26.8 million due to both increased sales volume and higher average product prices.

In Europe, net sales decreased 4% to $33.5 million, mainly due to the impact of negative foreign currency translations resulting from Europe currencies weakening against the United States dollar. In local currency, Europe net sales were down only slightly for the quarter. Wood Construction products represented 83% of total net sales compared to 84% and Concrete Construction products represented 17% of total net sales compared to 16%.

Gross profit increased by 12% to $110.1 million, resulting in a gross margin of 41.9%. Our gross margin increased by 130 basis points, primarily due to lower factory and overhead costs on increased production along with a slight decrease in raw material costs.

On a segment basis, our gross margin in North America improved to 43.9% compared to 42.2%, while in Europe our gross margin declined to 293.9% versus 31.7%. From a product perspective, our gross margin in wood products slightly decreased to 40.8% compared to 41.1%. However, our concrete products gross margin increased substantially to 44% compared to 31.7%, due primarily to the impact of a price increase we implemented in August on certain of our products in the US. To a lesser extent, concrete gross margin benefited from lower material costs as well as lower factory and tooling and labor costs.

Now turning to our fourth quarter costs and operating expenses. Research and development and engineering expenses increased 15% to $11.8 million, primarily due to increased personnel costs, due partially to the shift of employees from general and administrative expenses into R&D.

Selling expenses increased 7% to $28.1 million, primarily due to higher personnel, advertising and promotional costs. On a segment basis, selling expenses in North America were up 6% and in Europe they increased 11%, due primarily to advertising and promotion.

General and administrative expenses decreased 13% to $39.3 million, primarily due to reduced legal and professional fees including the settlement of a pending legal matter in 2018 as well as a reduction in amortization expense. These decreases were partially offset by higher personnel expenses and bad debt reserve. On a segment level, general and administrative expenses in North America decreased 13%. In Europe, G&A decreased by 10%.

As Karen highlighted, we're pleased with the progress we've been seeing as a result of our continued focus on cost control. Total operating expenses were $79.2 million, a decrease of $2.3 million or approximately 2.8%. As a percentage of net sales, total operating expenses were 30.2%, an improvement of 350 basis points compared to 33.7% last year. Included in our fourth quarter operating expenses were SAP implementation and support costs of $3.8 million compared to $2.1 million in the prior year quarter. Since the project inception, we've capitalized $19.3 million in total and expense $25.8 million, of the costs associated with the SAP project as of December 31, 2018. As we progress further into the SAP implementation, we are now expensing more of our costs versus primarily capitalized income.

Income from operations increased 94% to $36.6 million compared to $18.8 million. Income from operations for the fourth quarter of 2019, included a $5.6 million gain on the sale of a selling and distribution facility. In the fourth quarter of 2018, income from operations included an $8.8 million gain on the sale of a facility as well as a goodwill impairment charge of $6.7 million, related to the Europe segment. In North America, income from operations increased 138% to $6.8 million, due to the higher net sales, lower operating expenses and the sale of the aforementioned facility. In Europe, loss from operations was $2.8 million. In the fourth quarter of 2018, Europe loss from operations was $8.7 million, which included $6.7 million goodwill impairment charge.

On a consolidated basis, our operating income margin increased by approximately 610 basis points to 15.9%. The effective tax rate decreased to 22.3% from 29.3%. And as a result, net income totaled $28.1 million or $0.63 per fully diluted share compared to $12.8 million or $0.28 per fully diluted share.

Now turning to our balance sheet and cash flow. At December 31, 2019 cash and cash equivalents were $230.2 million, an increase of $70 million, compared to our levels at December 31, 2018. We remain debt-free with only a small amount of capital leases. As a result of our improved profitability and effective working capital management, we generated cash flow from operations of $56.4 million for the fourth quarter of 2019, an increase of 8%. For the full year of 2019, we generated $205.7 [Phonetic] million in cash flow from operations, which increased nearly $45.6 million or 28% compared to 2018.

Our fourth quarter capital expenditures were approximately $8.2 million, which included a minimal amount from our ongoing SAP implementation project. For the full year of 2019, capital expenditures were approximately $32.7 million, in line with our expectation.

As we have stated since mid-2016, we have been committed to returning a minimum of 50% of our cash flow from operations on an annual basis to our stockholders in the form of share repurchases and dividends. Since then, we have returned over 75% of our cash flow from operations to stockholders, far exceeding that threshold. In 2019 specifically, we were pleased to have paid $40.2 million in dividends, including $10.2 million in the fourth quarter. In addition, we repurchased 972,337 shares of our common stock in 2019 at an average price of $62.55 per share for a total of $60.8 million. This includes approximately 118,000 shares that we repurchased during the fourth quarter of 2019, at an average price of $79.49 per share for a total of $9.4 million.

As our authorization for repurchases of common stock expired at year-end, on December 9 our Board of Directors authorized the repurchase of up to $100 million of our common stock, which went into effect on January 1, 2020 and runs through December 31, 2020. In addition, I'm also pleased to announce that on January 21, 2020 our Board of Directors declared a quarterly cash dividend of $0.23 per share. The dividend will be payable on April 23, 2020 to stockholders of record as of April 2, 2020.

Finally, I'd like to discuss our 2020 financial outlook. For the full year ending December 31, 2020 we are initiating guidance as follows. We expect our consolidated gross profit margin to be in the range of 43.5% to 44.5%, given our current expectations regarding material costs and housing starts. The effective tax rate to be in the range of 25% to 26%, including both federal and state income taxes. Depreciation and amortization expenses to be in the range of $39 million to $41 million of which $33 million to $35 million is for depreciation of fixed assets and capital expenditures to be in the range of $40 million to $43 million, including approximately 35%, which will be used for maintenance capex.

In summary, we made significant progress in 2019 through execution on our strategic, operational, and financial objectives to position Simpson for long-term sustainable growth. We strongly believe in the value proposition of our company and believe our efforts through our 2020 plan toward even more efficient operations will help deliver enhanced value for the benefit of all our key stakeholders.

Thank you for your time and attention today. Now, I'd like to turn the call back to Karen for closing remarks.

Karen Colonias -- President and Chief Executive Officer

Thanks, Brian. Before we turn it over to Q&A, I'd like to extend my thanks to Ricardo Arevalo, for his 20 years of service to Simpson, including his most recent role as Chief Operating Officer, as he will be retiring in mid-February. We are in the midst of a formal search for Ricardo's permanent successor as COO. We thank Ricardo for all his many contributions to Simpson over the years and wish him the very best in his retirement.

Operator, you may now open the floor for question.

Questions and Answers:

Operator

Thank you. At this time we will be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Daniel Moore with CJS Securities. Please do with your question.

Daniel Moore -- CJS Securities, Inc. -- Analyst

Karen and Brian, good afternoon. Thank you for taking the questions.

Karen Colonias -- President and Chief Executive Officer

Hi Dan.

Brian Magstadt -- Chief Financial Officer and Treasurer

Hi Dan.

Daniel Moore -- CJS Securities, Inc. -- Analyst

Wanted to focus, I guess first on gross margin and the outlook. Finished the year of gross margins in the low -- 43.3% somewhere in that ballpark, a little below expectations as you described the guidance as essentially flat to up 100 bps roughly. I'm just wondering why you wouldn't expect to see a little bit more recovery. Are you expecting incremental steel price pressures. Any changes in mix or just kind of simply be conservative as we start the year?

Karen Colonias -- President and Chief Executive Officer

There's a couple of pieces, Dan. Certainly as we've talked about -- we'll start getting into a little bit better steel and we have seen in the last part of the year, steel prices go down and now we're seeing steel prices go up again. So really we're just basing on what we got from a steel inventory standpoint and what we're looking at from those low single digit housing starts. Those are really the main elements that are impacting that gross margin. Certainly we're very comfortable with labor factory tooling, but those two elements are really the ones that are driving it.

Daniel Moore -- CJS Securities, Inc. -- Analyst

Got it. And then as it relates to those housing starts and the outlook for 2020 of low single-digit, you alluded earlier to -- kind of the easy comp you had, tough weather in the first half of '19, creating -- and that should set up for a little bit easier comp and stronger starts to exit late in Q4 of '19. So is there upside to that guide as we look out for the next quarter or two from your expectations or would you expect that to be relatively flat over the course of the year?

Karen Colonias -- President and Chief Executive Officer

No, I think that guidance is -- would be pretty flat over the course of the year based on just what we're getting from lot of market information, I think this low single digit is pretty consistent. I mean we -- we certainly had a nice bump in the Q4 comparables, but again that was a very -- a very, very soft 2018 [Phonetic]. Weather is looking a little bit better than it was at this time last year. So that might help us, but I think it's too early to make any adjustments beyond that, low single-digit.

Daniel Moore -- CJS Securities, Inc. -- Analyst

All right. So no major delta as far as the cadence over the quarters is concerned?

Karen Colonias -- President and Chief Executive Officer

That's correct.

Daniel Moore -- CJS Securities, Inc. -- Analyst

Okay. Maybe sneak one more in. Obviously return to healthy amounts, over $100 million to shareholders in fiscal '19, including over $60 million of buybacks, if stock stays in and around current levels, would you expect a similar amount of share repurchase activity next year? Just any commentary there would be helpful, thank you.

Brian Magstadt -- Chief Financial Officer and Treasurer

Dan, it's Brian. So we review our capital allocation strategy on a regular basis with our Board. And as of now, we don't have any changes to announce, but we'll be reporting any updates as we go through the year. As we've talked in the past we do have that goal to return 50% of the cash flow from operations to shareholders. However, we've been utilizing a bit of a mix of trying to be opportunistic as well as meeting that 50% number, looking at the current price and the return that we get at various levels and we'll continue those analysis. So don't have -- have much more other than that, but you're right, with the current prices as it is today and that far exceeds the average price that we were able to acquire stock back in 2019, we'll have to look at that, but we are mindful of the return at the current price. And as I mentioned, we'll continue to have those capital allocation discussions with the Board and see if we make any adjustments there, but those are -- those are ongoing.

Daniel Moore -- CJS Securities, Inc. -- Analyst

Very helpful color. High-class problem, either way. I'll jump back in queue with any follow-up. Thanks.

Karen Colonias -- President and Chief Executive Officer

Thanks Dan.

Operator

Our next question comes from the line of Josh Chan with Baird. Please do with your question.

Josh Chan -- Robert W. Baird & Co. -- Analyst

Hi, good afternoon Karen and Brian.

Brian Magstadt -- Chief Financial Officer and Treasurer

Hi Josh.

Josh Chan -- Robert W. Baird & Co. -- Analyst

Hi. Just a question on the housing starts. So am I right in interpreting that you talked about the strong starts in Q4 that you haven't quite seen it fully impact your numbers yet? And would it then makes sense that Q1 would be off to a better start just because you're starting to see those housing starts number flow through?

Karen Colonias -- President and Chief Executive Officer

Yeah, we talk a lot about this sort of the lag between the housing start number and when we might start to see our product again, some of it is going to go into the concrete foundation and then the majority of it into framing. And we typically discussed that there could be anywhere between a 3 month to 4 month lag just depends on how well the particular areas prep for all the infrastructure, plumbing, electrical, and all those sorts of things. So certainly it was encouraging numbers in Q4, but I think we have to remember that increase was against really, really soft 2018. But yes, I would anticipate we should see some of that in the upcoming months.

Josh Chan -- Robert W. Baird & Co. -- Analyst

All right. And then a question on your kind of long-term guidance for 2020. Do you expect to achieve basically every element of that -- of the guidance, because there are certain elements that you may not need to achieve in order to -- and you can still hit the overall EBIT margin target for example. So you might not have to hit the European margin or even the opex reduction. So I was just wondering if you can clarify for us are you expecting to hit every element or would some elements be easier than others?

Karen Colonias -- President and Chief Executive Officer

Yeah, we put the target out in the third quarter of 2017 with the full intent of being able to hit all those targets. I think they are very important for the growth of the company as well as the profitability of the company. So as we stated in this earnings release, we're working extremely hard to be sure that we can still hit all of those targets. As you mentioned we might be able to hit targets without hitting others, but that's not our -- our goal is to be sure that we put the people and the resources in place to try and hit all those targets.

Josh Chan -- Robert W. Baird & Co. -- Analyst

All right. Yeah. That's helpful. And then last question for me, maybe on inventories. So kind of decent improvement in inventory turns over the last couple of years. Any thought in terms of where that could potentially go in 2020?

Karen Colonias -- President and Chief Executive Officer

Yeah, as we mentioned, we've -- our inventory has gone from 2 turns to 2.5 turns, and more importantly from a pretty significant reduction in our pounds of finished good. Certainly, our manufacturing branches are working at is still being able to bring that bounce down to be more efficient. And if we get some normalization and steel, we would also be able to work on bringing down our raw material inventory. So we don't have a target set for 2020, but we do have all of our manufacturing group working continually everyday to be the most efficient they can be and when those things go in place, we'll start to see that target increase.

Josh Chan -- Robert W. Baird & Co. -- Analyst

Okay, great. Thanks for your time and good luck in the first quarter.

Karen Colonias -- President and Chief Executive Officer

Thanks Josh.

Brian Magstadt -- Chief Financial Officer and Treasurer

Thanks Josh.

Operator

[Operator Instructions] Our next question comes from the line of Julio Romero with Sidoti. Please do with your question.

Julio Romero -- Sidoti & Company, LLC -- Analyst

Hey, good afternoon everyone.

Brian Magstadt -- Chief Financial Officer and Treasurer

Hello, Julio.

Julio Romero -- Sidoti & Company, LLC -- Analyst

So my first question is on the North American segment. So pretty significant lower operating expense year-over-year. Is there may be a more recent reduction you've done there or maybe something unusual you lap from the prior year quarter. You did mention the G&A in that segment was lower by 13%. I mean is there something kind of unusual there and maybe how much more runway for cost reduction in that segment do you kind of foresee going forward?

Brian Magstadt -- Chief Financial Officer and Treasurer

Julio, it's Brian. So in '18 we had recorded a settlement for a legal matter. And we also had success based fees for management consultant that didn't -- neither of those repeated in '19 so there is there -- those are the primary drivers that we're seeing in the North America comparisons and we're going to continue to focus on green lighting projects and initiatives that utilize SG&A costs, G&A costs and the like, but I don't know how much more significant reductions we'll be looking at because we did have those 2018 items that I mentioned that did not repeat in 2019.

Julio Romero -- Sidoti & Company, LLC -- Analyst

Got it, understood. And on the European segment, pulled out relatively flat sales year-over-year -- on a constant currency basis, but can you just maybe talk about you know maybe price, volume, mix, I think -- was there increase in one and a decrease in the other one. Any color there would help?

Karen Colonias -- President and Chief Executive Officer

Yes, as we've mentioned I think on -- on local currency, they were up 3.5% for the year. Europe tends to do a cadence of a couple of price increases. So typically, there is some January and June type of things. So, that was helpful. Also, I think the change in management there had put in some price increases that may be had been delayed a little bit. So that was certainly helpful. And I think we're starting to move a little bit more of our fastener volume on that standpoint.

Julio Romero -- Sidoti & Company, LLC -- Analyst

Helpful. And maybe last one for me here is on the capex of $40 million to $43 million for 2020, I think it implies a little bit more growth capex for this year. I mean can you talk maybe about some of the initiatives you have planned for the year?

Brian Magstadt -- Chief Financial Officer and Treasurer

Not to go into specifics, but there are some growth projects in there that are not necessarily the maintenance type capex or that kind of annual run rate that we've had. Historically, I think if I recall the last few years, we've been calling out capex in that call it $32 million, $33 million range for the last few years. So yes, we've got a couple -- additional projects in there that we'll be looking to initiate this year that are more on the growth side.

Julio Romero -- Sidoti & Company, LLC -- Analyst

Understood. Appreciate you taking the questions and best of luck in 2020.

Karen Colonias -- President and Chief Executive Officer

Thank you.

Operator

Our next question comes from the line of Steve Chercover with D.A. Davidson. Please do with your question.

Steven Chercover -- D.A. Davidson Co. -- Analyst

Thanks. I was not good on [Indecipherable] in the star one, but just a couple of questions. And they are somewhat follow-ons. So it does sound Brian like there is going to be some nuance to the repo because I mean there was 27% difference between what you paid in Q4 and what you paid for the full year. So it's not just automatic, right?

Brian Magstadt -- Chief Financial Officer and Treasurer

Correct. Correct, not at this time. As I mentioned that's the conversations that we have with our Board around looking to utilize both opportunistic versus just share reduction count mix and looking to continue that until we've pivoted off of that position.

Steven Chercover -- D.A. Davidson Co. -- Analyst

And you know what is it that could -- I mean push you off, presumably not returning the target 50% of cash flow to shareholders, but I mean presumably you're filtering it through some sort of return on capital lens, what are other items could rise to the front?

Brian Magstadt -- Chief Financial Officer and Treasurer

I think you touched on it. The current screening, if you will, or the evaluation is the returns at today's price for those -- for that capital and not to say that we're doing this but -- versus looking to reduce share count regardless of price and finding if there is a different balance to those two elements today. We very much utilize the return lens as we're looking at the share repurchase and as you noted it's at a much higher price today than what we saw as an average through the year in 2019. So again -- continuing to evaluate the return obviously the return for the 2019 repurchases would be much better than they would be at today's level and just making sure we're taking that lens into account.

Steven Chercover -- D.A. Davidson Co. -- Analyst

Do you have any capital projects that would be significantly large enough to soak up some of that capital that could percolate to the top or I mean is your property, plant and equipment, pretty much how you want it to be and where you want it to be?

Brian Magstadt -- Chief Financial Officer and Treasurer

That's a good question. And as I noted to on the question a moment ago, the capex is planned to be a little bit higher in 2020 and in 2019. Although I would -- we're generating a fair amount of cash to be able to fund those with internal -- internally generated cash. With the manufacturing footprint, we noted that -- and we just sold one of our smaller facilities, but I don't know that there would be any significant change to our real estate portfolio mix from where it stands today, but as we evaluate an operation and if they -- they need something that's different than what they have today we evaluate the buy new -- buy again versus leasing and take those on a case-by-case basis. But today we are generating the cash to be able to beat those additional capex projects. We'd like to find some larger areas where we can invest in that create returns that enhance our shareholder value. And that's always the goal is putting that cash to use for improving the business with the dividend and then the share repurchase as the other elements are in capital allocation.

Steven Chercover -- D.A. Davidson Co. -- Analyst

But that said, as you may be contemplate M&A for bolt-on, we've already gone through that over the years and I can't imagine what it would take for that to be, to really move up the hierarchy, so if you kind of refine your focus on wood and concrete, is that fair?

Brian Magstadt -- Chief Financial Officer and Treasurer

Think that's fair, but we also want to make sure that there is -- we have a push to find fastener acquisition that would help our US domestic North American business. But you're right in that as part of the 2020 Plan we scaled back some of the areas that we are looking to invest in with M&A, particularly around concrete, repair type products, but with product line extensions or intellectual property or other assets that could enhance our business and we want to make sure we're taking a look at those. We've not done anything of size really recently, but we're constantly looking for things that can help us in our strategic initiatives.

Steven Chercover -- D.A. Davidson Co. -- Analyst

Okay. And I might have missed it, but is the SAP project coming toward its conclusion?

Brian Magstadt -- Chief Financial Officer and Treasurer

We have got another major facility in the US that we're expecting to come online here early in the year and then a couple of smaller operations here in North America. And then that will complete North America, which is about -- about 85% of our revenues, but we still have Europe and Asia-Pac to do so. We anticipate by around the end of 2021 to have the rest of those locations completed.

Steven Chercover -- D.A. Davidson Co. -- Analyst

Okay. And final one, just like walking back a couple of elements, it looks like you've come pretty close to achieving your 2020 target. So I've -- it goes without saying you're probably thinking of some 2023 or five-year plans. Will you share those with us in due course?

Karen Colonias -- President and Chief Executive Officer

Yes, Steve that's been a really common question. I think the key is to not take our eye off the ball. We still have quite a bit of work and we want to be sure everybody -- employees are engaged in meeting our 2020 goals. There are still quite some aggressive things that we're working on. But as you can imagine from the management team and the Board standpoint, we're already looking at what some three year to five year strategies that will be and will most likely get those of refined a bit more and probably be sharing them I would imagine around third or fourth quarter.

Steven Chercover -- D.A. Davidson Co. -- Analyst

All right. We look forward to having you. Okay, thank you both.

Brian Magstadt -- Chief Financial Officer and Treasurer

Thank you.

Operator

We do have a follow-up question from the line of Daniel Moore with CJS Securities. Please stay with your question.

Daniel Moore -- CJS Securities, Inc. -- Analyst

Thank you. Again just mostly housekeeping, but I missed the cash flow from operations number for the full year, Brian?

Brian Magstadt -- Chief Financial Officer and Treasurer

That was $205.6 million for 2019.

Daniel Moore -- CJS Securities, Inc. -- Analyst

Perfect. And then the SAP implementation costs, let's say is Q4 a reasonable run rate to think about for the next few quarters?

Brian Magstadt -- Chief Financial Officer and Treasurer

That's a really good question. I would say the -- as we shift from North America to focusing on rest of world -- that might be in the ballpark. I mean we continue to refine the plan on who is going where and using local consultants and the like to complement our existing team. So maybe it is a little to early to call on that one right now. I mean, we're really focused on getting that those remaining locations that I referred to just a moment ago, we expect those to be done in the first half of this year. And there's been a lot of focus on prepping and getting ready for those sites. So in Q4, might be a decent run rate quarter.

Daniel Moore -- CJS Securities, Inc. -- Analyst

Helpful. And lastly, you called out the $5.6 million non-recurring gain in the quarter. Any other facilities or assets that you might consider monetizing over the next year or so?

Brian Magstadt -- Chief Financial Officer and Treasurer

No, nothing -- nothing in the plan right now.

Daniel Moore -- CJS Securities, Inc. -- Analyst

Helpful. Thank you again.

Karen Colonias -- President and Chief Executive Officer

Thanks Dan.

Brian Magstadt -- Chief Financial Officer and Treasurer

Thank you, Dan.

Operator

[Operator Closing Remarks]

Duration: 46 minutes

Call participants:

Kim Orlando -- Investor Relations

Karen Colonias -- President and Chief Executive Officer

Brian Magstadt -- Chief Financial Officer and Treasurer

Daniel Moore -- CJS Securities, Inc. -- Analyst

Josh Chan -- Robert W. Baird & Co. -- Analyst

Julio Romero -- Sidoti & Company, LLC -- Analyst

Steven Chercover -- D.A. Davidson Co. -- Analyst

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