Simpson Manufacturing Inc (SSD) Q4 2020 Earnings Call Transcript

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Simpson Manufacturing Inc (SSD -8.58%)
Q4 2020 Earnings Call
Feb 8, 2021, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Greetings and welcome to Simpson Manufacturing Company's Fourth Quarter and Full Year 2020 Earnings Conference Call.

[Operator Instructions]

I would now like to turn the conference over to your host, Kim Orlando with ADDO Investor Relations. Thank you. You may begin.

Kimberly Orlando -- Managing Director

Good afternoon, ladies and gentlemen and welcome to Simpson Manufacturing Company's Fourth Quarter and Full Year 2020 Earnings Conference Call. Any statements made on this call that are not based on historical facts are forward-looking statements. Such statements are based on certain estimates and expectations and are subject to a number of risks and uncertainties. Actual future results may vary materially from those expressed or implied by the forward-looking statements.

We encourage you to read the risks described in the company's public filings and reports, which are available on the SEC's or the company's corporate website. Except to the extent required by applicable securities laws, we undertake no obligation to update or publicly revise any of the forward-looking statements that we make here today, whether as a result of new information, future events or otherwise. Please note that the company's earnings press release was issued today at approximately 4.15 PM Eastern Time. The earnings press release is available on the Investor Relations page of the company's website at simpsonmfg.com. Today's call is being webcast and a replay will also be available on the Investor Relations page of the company's website.

Now I would like to turn the conference over to Karen Colonias, Simpson's President and Chief Executive Officer.

Karen Colonias -- President and Chief Executive Officer

Thanks, Kim and good afternoon everyone and thank you for joining us today. I'll begin with a summary of our full-year 2020 results before turning to a discussion on our key fourth quarter performance drivers and initiatives. Brian will then walk you through our financials and fiscal 2021 business outlook in greater detail. I am extremely proud of our strong financial and operational performance in 2020 which we delivered in a highly challenging operating environment amid the COVID-19 pandemic. Our net sales improved 11.6% over 2019 to $1.28 billion, the highest in the company's history, driven by strong sales volume. As a result, we generated record earnings of $4.27 per diluted share, up 43.3% over 2019.

These results would not have been possible without the hard work and dedication of all our Simpson employees. Their diligence including strict adherence to protocols to help minimize the spread of COVID-19 has enabled us to continue operating our business with minimal disruptions from the pandemic. On behalf of the entire Simpson management team, we applaud them for their tremendous efforts. The health, safety and well-being of all our employees remains our Number 1 priority and we will strive for continuous improvement to ensure Simpson remains a safe and rewarding place to work.

Our record 2020 results were further supported by our commitment to position Simpson for long-term sustainable and increasingly profitable growth. In October of 2017, we unveiled a three-year 2020 plan with aggressive targets to maximize our operating efficiencies and drive long-term shareholder value. Since then, we've made significant progress against our goal, some of which we updated in July of 2019 to reflect changes in the macroeconomic landscape. While we elected to withdraw these financial targets in April 2020 due to the significant level of uncertainty surrounding COVID-19, we continued to execute based on the same underlying principles, focusing on operating efficiencies and cost savings to guide us through the COVID-19 pandemic. At the same time, we did experience certain tailwinds in our business as a result of the COVID-19 related macroeconomic conditions, namely we had favorable steel prices, temporary reduction in travel and related operating expenses, and an increase in repair and remodel activity. Due to the culmination of these factors, we were able to meet or exceed nearly all of our ambitious 2020 plan objectives. We are very proud of these accomplishments and I'd like to spend a few minutes discussing those with you.

Our first 2020 plan objective was a continued focus on organic growth. Our goal was to achieve a compounded annual growth rate in net sales of approximately 8% from 2016 to 2020. As of the year end of 2020, we had well exceeded this target, achieving a compounded annual growth rate over 10% relative to our 2016 baseline. Milestones that helped support this goal included price increase for the majority of our US wood connector products in the third quarter of 2018, the signing of one of our largest US homebuilding companies onto our builder program resulting in 23 of the Top 25 US builders now engaged on our program, strong repair and remodel trends associated with the COVID-19 pandemic and the return of Lowe's as the home center customer in mid-2020.

Our second objective involved rationalizing our cost structure to improve companywide profitability. We aimed to reduce our total operating expense as a percent of net sales from 31.3% in 2016 to a range of 26% to 27% by the end of 2020. We tackled this through a combination of zero based budgeting, lowering our indirect procurement costs and other cost reduction measures we took in both Europe and in our concrete business. In addition, specifically in 2020, we experienced solid cost savings from our expense management practices as well as one-time benefits from the reduced travel and trade show costs as a result of the COVID-19 restriction. These factors combined with strong topline growth enabled us to exceed our operating expense target. For the full year of 2020, we recorded operating expenses as a percent of net sales of 25.6%, representing 570 [Phonetic] basis points of improvement compared to 2016.

Our next plan was to improve our operating income margin to a range of 16% to 17% by the end of 2020. We exceeded this target as our gross margin significantly benefit from lower material costs and limited spending on operating expenses due to the COVID-19 restrictions. We reported an operating income margin of 19.9% for 2020, a 350 basis point improvement compared to 16.4% in 2016. At the consolidated level, our gross margin improvement was supported by enhanced gross margins in our concrete business, another 2020 plan goal. Following the unveiling of the 2020 plan, we implemented a new concrete strategy in late 2017 by narrowing our concentration to six distinct product categories. By focusing on these higher margin products to increase profitability, we exceeded our goal of improving our global concrete gross margin from 34.7% in 2016 42% in 2020.

Our final profitability goal was to improve our operating income margin in Europe. We've made substantial progress in Europe over the past few years, including rolling out our fastener lines in the Nordic region and in France, the consolidation of our European management team to create efficiencies as well as significant cost cutting initiatives. As a result, we achieved an operating income margin of 7% excluding our SAP costs of approximately $2.5 million in 2020. While this is lower than our original target range of 8% to 9%, we are pleased with the results, which reflect approximately 350 basis points of improvement versus the 2016 numbers. Our third objective focused on improving our working capital management and overall balance sheet discipline. Since the onset of the 2020 plan, we've made headway on this front, primarily through inventory reductions and the implementation of lean principles throughout our operation. We've completed a three-phase SKU reduction program, eliminating upwards of 12,000 non-moving or slow-moving items and converted our customers over to replacement products. In addition, we carried out rapid improvement events at many of our US production facilities, resulting in efficiency enhancements as well as improved management of inventory and purchasing practices. As we move forward, we remain committed to driving continuous cost management and improved efficiencies through our lean initiatives. However, consistent with our strategy, it is critical that we balance our inventory purchases with our liquidity needs in order to maintain our commitment to product availability standards and an exceptional customer service experience.

The final element of our 2020 plan was focused on maximizing shareholder value with the goal of improving our return on invested capital from 10.5% in 2016 to a range of 15% to 16% by the end of 2020. Through our solid operational execution, combined with the enactment of the US Tax Cuts and Jobs Act of 2017, which lowered our effective income tax rate beginning in 2018, we surpassed this target, ending 2020 with the return on invested capital of 20%. Beyond this, we continued to return capital to our shareholders in the form of dividends and share buybacks. In 2020, we returned $116.2 million to our stockholders through the payments of $40 million in dividends and $76.2 million in share repurchases. Since the onset of the 2020 plan, we have returned over 83% of our cash generated by operations to our shareholders, far exceeding our target of 50% I'm extremely proud of all that we've accomplished in these past three years and by executing on the 2020 plan, we achieved solid organic growth, we've rationalized our cost structure to improve companywide profitability and we've improved our working capital management and balance sheet position, in turn creating value for all key Simpson stakeholders. I'd like to once again thank all of our employees for their dedication, hard work to meet these extraordinary achievements.

Now let's turn to a brief information on our fourth quarter results and operating initiatives. Our fourth quarter consolidated net sales grew 12% year-over-year to $293.9 million on significantly higher volume. Gross margin increased to 42.1% from 41.9% in the prior year quarter, primarily related to strength in Europe, where we experienced lower material and warehouse costs. Our solid gross margin combined with effective expense management and reduced costs from travel and other restrictions as a result of the COVID-19 drove a 7.8% year-over-year increase in our income from operations to $39.5 million and earnings of $0.68 per diluted share. The increase in sales volume we experienced in the fourth quarter was primarily related to ongoing momentum in the home center distribution channel, which includes both our home centers and co-op customers. We are continuing to experience a shift in consumer behavior toward home renovations as a result of the pandemic. Sales from home center distribution channels where we see much of our repair and remodel business improved over the prior year period. Growth was supported by our product rollout of our connectors, mechanical anchors and fastener product solutions into all 1737 Lowe stores, which we completed during the fourth quarter.

As a reminder, Lowe's returned to Simpson as a home center customer beginning in the second quarter of 2020. Our sales were further supported by solid US housing starts, as we generally experience a multiple month lag in the demand from the time of the start, in the fourth quarter, we benefited from strong third quarter 2020 housing starts which grew over 11% year-over-year. In addition, while we typically see lower seasonal sales in the fourth quarter related to holiday closures and winter conditions, in 2020, the fourth quarter, we experienced a very mild winter. This enabled construction activity to continue late into the year, further bolstering our net sales.

Turning now to Europe. Sales continued to recover nicely following government-ordered shutdowns to our operations in the United Kingdom and France due to COVID-19 in late March. Sales were assisted by strong demand trends and our ability to meet our customer needs through our solid inventory management practices. We believe our sales benefited in Europe during the fourth quarter as many of our competitors experienced supply chain issues. During this time, we were able to offer customers the important products they required to keep up with demand and to maintain job site on schedule. I'd also like to note that while the United Kingdom has reimplemented shutdowns due to the most recent COVID-19 surge, we have been deemed an essential business and all of our major production and distribution facilities have remained open and operational with remote work being promoted where possible, such as in our corporate offices. In regards to, [Indecipherable] implementation, the rollout continued to progress despite travel limitations related to COVID-19. In the fourth quarter, we completed the SAP rollout at our UK branch and Gallatin, Tennessee locations, both of which are now live. Most recently, we successfully transitioned all of our Canadian-based sales organization over to SAP, thus completing the full SAP rollout in North America, a very important milestone. This year we will continue working on the SAP transition in our European locations and the rest of the world and we currently anticipate a companywide completion in 2022 and we will continue to monitor and update our timeline should circumstances change.

Now I'd like to briefly touch on our capital allocation structure. We are very grateful to be able to operate as a supplier to other essential businesses with only minimal disruptions due to the pandemic. As our business continues to generate strong cash flow, we remain focused on appropriately balancing our growth and stockholder return priorities. We are also very pleased to be in a position to pay off our line of credit borrowing in pool, as well as declare our quarterly dividend as we have done consistently since 2004. While the challenges of the COVID-19 pandemic continue to impact our broader economy, exiting 2020 we feel confident in the bright future that we believe lies ahead for Simpson. With another quarter of strong year-over-year growth in housing starts, which were up over 11% in the fourth quarter of 2020, we believe housing will continue to be a key element of the economic recovery in the coming years ahead and we are well positioned to capitalize on this environment.

At the same time, we continue to pursue our strategy of diversification, positioning our business to be less vulnerable to US housing market through key investments and adjacent products in markets and we also remain focused on growth, including M&A opportunities that would complement our existing product offering, manufacturing footprint or strengthening our software capabilities. Our success in achieving the 2020 plan target has created a very strong foundation for Simpson, successfully positioning our company for long-term sustainable and increasingly profitable growth. But now we are ready for our next chapter. Today, I'm pleased to announce that on Tuesday, March 23, we plan to host a Virtual Analyst and Investor Day to provide more insight and details surrounding the elements of our business strategy in 2021 and beyond. Additional information about this event will be released in the coming days. Thank you very much for your time and attention.

Now I'd like to turn the call over to Brian, who will discuss our fourth quarter financial results and 2021 outlook in greater detail.

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, refer to the fourth quarter of 2020 and all comparisons will be year-over-year comparisons versus the fourth quarter of 2019.

Now turning to our results. As Karen highlighted, our consolidated net sales were strong, increasing 12% to $293.9 million. Within North America segment, net sales increased 9.8% to $249.1 million primarily due to higher sales volumes in our home center distribution channel, which includes our home center and co-op customers. Sales volumes were supported by the return of Lowe's along with increased repair and remodel activity. Our net sales further benefited from other distribution channels, which experienced increased demand from new housing starts and repair and remodel activity. In Europe, net sales increased 24.9% to $41.8 million primarily due to higher sales volumes in local currencies. Europe's sales benefited by approximately $2.5 million of positive foreign currency translations resulting from some Europe currencies strengthening against the United States dollar

Wood construction products represented 85% of total sales compared to 83% and concrete construction products represented 15% of total sales compared to 17% last year. Consolidated gross profit increased by 12.4% to $123.7 million, which resulted in a stronger Q4 gross margin of 42.1% compared to last year. Gross margin increased by 20 basis points, primarily due to lower material and warehouse costs, which were partially offset by higher labor costs. On a segment basis, our gross margin in North America declined to 43.2% compared to 43.9%, while in Europe, gross margin increased to 25.3% compared to 29.9%. From a product perspective, our fourth quarter gross margin on wood products was 41.8% compared to 40.8% in the prior year quarter and was 39.6% for concrete products compared to 43.7% in the prior year quarter. Now turning to our fourth quarter costs and operating expenses. Research and development and engineering expenses increased 10% to $12.9 million primarily due to personnel costs, stock-based compensation, product testing and cash profit sharing expenses. Selling expenses decreased 1.2% to $27.8 million due to lower travel and entertainment and advertising and trade show expenses, partly offset by higher personnel costs, cash profit sharing, sales commissions and stock-based compensation expense.

On a segment basis, selling expenses in North America were down 2.1% and in Europe, they were mostly flat. General and administrative expenses increased 10.9% to $43.6 million primarily due to increases in cash profit sharing, stock-based compensation and software subscriptions and licenses. Total operating expenses were $84.3 million dollars, an increase of $5.1 million or approximately 6.5%. As a percentage of net sales, total operating expenses were 28.7%, an improvement of 150 basis points compared to 30.2%.

Our solid topline performance combined with our stronger Q4 gross margin and diligent management of costs and operating expenses helped drive a 7.8% increase in consolidated income from operations to $39.5 million compared to $36.6 million. In North America, income from operations decreased 1.8% to $36.1 million. In the fourth quarter of 2019 North America income from operations included a $5.6 million gain on the sale of a selling and distribution facility. In Europe, income from operations increased 145.8% to $1.3 million primarily due to increased gross profit. On a consolidated basis, our operating income margin of 13.4% decreased by approximately 50 basis points. Our effective tax rate increased to 25.6% from 22.3% due to the release of foreign valuation allowances in 2019. Accordingly, net income totaled $29.6 million or $0.68 per fully diluted share compared to $28.1 million or $0.63 per fully diluted share.

Now let's turn to our balance sheet and cash flow. Our balance sheet remained healthy with ample liquidity to operate our day-to-day operations. At December 31, cash and cash equivalents totaled $274.6 million, an increase of $44.4 million compared to December 31, 2019 after paying down the remaining $75 million on our revolving credit facility during the quarter. As of December 31, 2020, the full $300 million on our primary line of credit was available for borrowing. Our inventory position of $283.7 million at December 31 increased by $23.6 million from our balance at September 30 as we continue to see higher levels of construction activity along with the unprecedented demand we've experienced through the pandemic. We continue to be highly selective in regard to inventory purchases through careful management and purchasing practices along with maintaining our high level -- high levels of customer service and on-time delivery standards As a result of our improved profitability and effective working capital management, we generated strong cash flow from operations of $77.5 million for the fourth quarter of 2020, an increase of $21.1 million or 37.4%. For the full year of 2020, we generated $207.1 million of cash flow from operations, which increased nearly $1.5 million.

During the fourth quarter, we used approximately $17 million for capital expenditures. For the full year of 2020, capital expenditures were approximately $37.9 million, in line with our reduced expectations as a result of our focus on cash preservation in mid-2020 due to COVID-19. We were also pleased to have paid $40.4 million in dividends in fiscal 2020 including $10.2 million in the fourth quarter. In addition, we repurchased approximately 1.05 million shares of our common stock in 2020 at an average price of $72.33 per share for a total of $76.2 million. This includes approximately 151,000 shares of our common stock that we repurchased during the fourth quarter at an average price of $89.49 per share for a total of $13.5 million. As our authorization for repurchases of common stock expired at year-end, on December 16, our Board of Directors authorized the repurchase of up to $100 million of our common stock, which went into effect on January 1, 2021 and runs through December 31, 2021. In addition, on January 22, our Board of Directors declared a quarterly cash dividend of $0.23 per share, which will be payable on April 22, 2021 to stockholders of record as of April 1, 2021.

Before we turn the call over to questions, I'd like to discuss our 2021 financial outlook. Based on business trends and conditions as of today, February 8, we are initiating guidance for the full year ending December 31, 2021 as follows.

Operating margin is estimated to be in the range of 16.5% to 18.5%. The effective tax rate is estimated to be in the range of 25% to 26% including both federal and state income taxes and capital expenditures are estimated to be in the range of $50 million to $55 million including approximately $10 million to $13 million, which will be used for maintenance capex.

As of today, the magnitude and duration of the COVID-19 pandemic and its impact on general economic conditions remains uncertain. It's important to note that the potential economic impact related to COVID-19 on our operations, raw material costs, consumers, suppliers and vendors may have a material adverse impact on our 2021 financial outlook should conditions materially change from the current environment.

We will continue to monitor the impact of COVID-19 on our operations, which were not significantly impacted in the fourth quarter of 2020. In summary, despite the COVID-19 related challenges in the marketplace and ongoing uncertainty, we were very pleased with our fourth quarter financial results and operating performance. I'd like to once again thank all of our employees who are dedicated to working safely and supporting our customers during these difficult circumstances. Our industry-leading position, geographic reach and diverse product offerings combined with our strong balance sheet and liquidity position gives us confidence in our ability to maintain operational excellence and support current and future demand trends. As Karen mentioned, we look forward to updating you on our go-forward business strategy in 2021 and beyond during our Virtual Analyst and Investor Day on March 23. Thank you for your time and attention today.

At this time, I'd like to open the call up for questions. Operator.

Questions and Answers:

Operator

At this time, we'll be conducting a question-and-answer session.

[Operator Instructions]

Karen Colonias -- President and Chief Executive Officer

Before we go to questions, I need to make a correction in my script, I stated that our 2020 revenue was $1.28 billion. The corrected number is $1.27 billion. Thank you, operator.

Operator

And with that, our first question comes from the line of Daniel Moore with CJS Securities. Proceed with your question.

Daniel Moore -- CJS Securities -- Analyst

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

Karen Colonias -- President and Chief Executive Officer

How are you doing, Dan?

Daniel Moore -- CJS Securities -- Analyst

Let's start with -- just the guidance for '21. The operating margin range implies a fair bit of compression, you clearly signaled some higher G&A investment spend, and a little bit of gross margin. So the direction is not a surprise, but maybe just what level of opex growth do you anticipate this year and can you give us a sense for what type of revenue growth ranges and gross margin ranges are sort of implied or contemplated at the low end or the high end of the range? Thank you.

Brian Magstadt -- Chief Financial Officer and Treasurer

Sure, Dan. So let me walk through some of that. So our guidance does include that gross margin headwind with higher opex relative to 2020. We spoke last quarter there were some growth opportunities we're looking to fund. We do plan on going into further detail on those growth opportunities at that Investor Day. We do have both some gross margin compression and the opex as a percent of revenues increasing to reflect, I guess, both of those conditions. And then looking at SG&A, we're expecting at some point in 2020, that certain activities will resume such as travel, trade show activities such like that, and we'll have some higher opex relative to 2020 in regards to those general categories. And then on revenue, sort of a low to mid-single-digit overall growth rate from a volume perspective.

Karen, was there anything you'd like to add?

Karen Colonias -- President and Chief Executive Officer

No, I think that covers it. Again just to reiterate, we had some savings in our SG&A due to lack of travel, trade shows basically projects and things that were canceled. So I would anticipate that those would pick up somewhat again as we're starting to see a little bit of easing in some of the restrictions around the COVID pandemic. And I think, Brian hit the rest of those elements perfectly.

Daniel Moore -- CJS Securities -- Analyst

Got it. That's helpful. So if we think about mid-single-digits being the higher end of the range, if R&R remains robust and housing activity remains robust and we push through those at the higher end, maybe a little bit of upside to the guide, at least that's what I'm hearing.

Karen Colonias -- President and Chief Executive Officer

Yes, I mean I think, Dan as we -- there is a lot of enthusiasm right now among some of the builders about starts and certainly we've seen an increase in R&R from the standpoint of people staying at home and doing remodels, index and fences and all kinds of projects. We will see if that continues, but I think the three -- sort of mid-to-single digit growth for us seems like pretty reasonable based on what we're seeing.

Daniel Moore -- CJS Securities -- Analyst

Absolutely. Very helpful. And then is it possible to quantify how much of a benefit in ballpark terms reduce travel trade show activity was and part of the reason is -- is it possible that some of that doesn't necessarily come back, whether it's in 2021 or beyond, but just trying to get a sense of the magnitude of that benefit that we had this year.

Brian Magstadt -- Chief Financial Officer and Treasurer

I think that there, so far in the early part of the year, it doesn't seem much different from that perspective, relative to the latter part of 2020 from a travel and those other activities perspective. We would anticipate those to pick up at some point, but a lot of uncertainty right now around when that might be, maybe mid-year, maybe a little earlier, maybe a little bit later. I don't have the specific dollar amount in front of me for the travel and trade. I'll see if I can pull it before the call ends. We did note the -- but I do note that as we put in the release, there were some variable comp elements that did increase but other elements were not really called out yet. So let me see if I can pull that you.

Daniel Moore -- CJS Securities -- Analyst

Okay. And long shot here, but any chance to get any sort of preview on what type of metrics you might be talking about in March, not necessarily the magnitude but, whether they'd be similar or different to your last three plus -- three-year goals that obviously executed on extremely well.

Karen Colonias -- President and Chief Executive Officer

Yes, that's a great question. And we don't want to -- we want to hold our surprises here, but we obviously will be giving you some information on where we believe our growth strategy is in some metrics associated with that, and we'll just wait till that March date to be able to clarify all of that for you.

Daniel Moore -- CJS Securities -- Analyst

All right. I won't spoil the fun. Thank you. Thank you again. I'll circle back with any follow-ups.

Karen Colonias -- President and Chief Executive Officer

Thanks, Dan.

Operator

Our next question comes from the line of Tim Wojs with Baird. Please go with your question.

Tim Wojs -- Baird -- Analyst

Hey everybody. Good evening, good afternoon.

Brian Magstadt -- Chief Financial Officer and Treasurer

Hi, Tim.

Karen Colonias -- President and Chief Executive Officer

Hi, Tim.

Tim Wojs -- Baird -- Analyst

Maybe, hello. Maybe just to start. In your EBIT guidance range what exact and maybe even revenue, what exactly have you factored in for price for steel inflation, if anything?

Brian Magstadt -- Chief Financial Officer and Treasurer

Well, right now with our guide, we do include some assumptions on some steel price increases. We do want to provide more granular -- more detail on that Investor Day as that comes out. So, if you could bear with us until that time, Tim, we'll plan on disclosing more of that information around what we're seeing and planning for as far as looking -- looking to implement as far as the rising steel price and what we would plan to do for that.

Tim Wojs -- Baird -- Analyst

Okay. I guess, so we should take revenue expectations in terms of the low to mid single-digit volume growth we talked about we should layer in some price on top of that, correct?

Brian Magstadt -- Chief Financial Officer and Treasurer

Correct.

Tim Wojs -- Baird -- Analyst

Okay. And then secondly just on the investments -- I know you want to kind of keep the cat in the bag a little bit, but could you just quantify how much incremental investment related to your growth opportunities you're making in '21?

Brian Magstadt -- Chief Financial Officer and Treasurer

There'll be a little bit in opex. But what we'd like to do is on that Investor Day, talk about those growth opportunities and then at the same time, talk about the investment that we'll be making in '21 to move us -- to be able to go after and achieve some of those opportunities.

Tim Wojs -- Baird -- Analyst

Okay. Okay. And I guess, big picture, I mean is there any reason why SG&A shouldn't continue to grow at a slower rate relative to revenue over time?

Brian Magstadt -- Chief Financial Officer and Treasurer

Over time, typically that would be the case 2021 as we'll detail out later, may or may not, but in general over the longer run, then we should definitely see the leverage on the revenue.

Tim Wojs -- Baird -- Analyst

Okay, great. And then, sorry please go ahead.

Karen Colonias -- President and Chief Executive Officer

I would just add. We know we've done a really nice job over the 2020 plan of ensuring that we've looked at all of our SG&A spend very carefully and so we will not get out of that habit, we will continue to very, very closely monitor our SG&A spend.

Tim Wojs -- Baird -- Analyst

Okay, that's great. And then just the last question kind of back on price costs. Has anything changed relative to history in terms of your ability to go out and get price from the customers?

Karen Colonias -- President and Chief Executive Officer

Yes, I think it really hasn't. As we've talked about, there's a lot of information in the market about the rising cost of steel and the availability of steel. We certainly are -- our customers know that that's a key element in our costs and that as we have steel increases, we have to evaluate that and be able to push that off into to our customers. So I don't think anything's really changed there. I think the change is how rapidly it has increased from where we were last year when the pandemic kind of struck us, quite a big difference between that point and what we're seeing now on steel costs.

Tim Wojs -- Baird -- Analyst

Okay. Okay, fair enough. But it's good to hear. I'll hop back in queue, but look forward to March and good luck on the year.

Karen Colonias -- President and Chief Executive Officer

Thank you, Tim.

Brian Magstadt -- Chief Financial Officer and Treasurer

Thanks, Tim. And before we jump to the next question. Travel and entertainment savings for the fiscal -- for the full year 2020 was about $7.5 million, split more in the selling line than the G&A line and other lines. Sorry, operator, can we go back into the queue now.

Operator

Absolutely. Our next question comes from the line of Julio Romero with Sidoti. Proceed with your question.

Julio Romero -- Sidoti -- Analyst

Hey, good afternoon, Karen and Brian.

Brian Magstadt -- Chief Financial Officer and Treasurer

Hi Julio.

Julio Romero -- Sidoti -- Analyst

Hi, so I do want to ask about the approach to growth that you guys have an understanding that you'd like to hold some of the details for the Investor Day, but maybe if you could talk about, I guess what do you think Simpson does exceptionally well that should continue to be part of your approach to growth going forward. Kind of a broad question, but -- the best way you can answer.

Karen Colonias -- President and Chief Executive Officer

I think the things that distinguish us are the complete solution that we supply and that's typically a complete engineered solutions. So we do quite well with building materials that are helping make those building safer and stronger and we do that by not only differentiating our products from the standpoint of its performance, its corrosion resistance, but also the availability. So, as we look to growth markets, we want to be sure that we're not looking into commodity areas, but that we are looking to be able to use that engineering, manufacturing, technology, complete solutions approach into these other markets.

Julio Romero -- Sidoti -- Analyst

Got it and I guess, some of your engineered products, some of the things we've benefited from over the last three or so years is really having that narrowed product focus. I guess is that maybe one aspect of the growth approach that kind of continues since it worked for you so well over the last three to four years.

Karen Colonias -- President and Chief Executive Officer

Yeah, I think when you -- when you say narrow product focus, we look at things and I'll look back at our fasteners, we've talked about this, there's billions of dollars of opportunities in fasteners and we note that our structural fastener market is $750 million, right. So we have really taken a very large market and we've narrowed it down to where we can differentiate and provide an exceptional product that provides exceptional performance versus commodity type of products. So when you, when you look at areas that we grow in, we do look at areas that we can differentiate ourselves, even though it might be a very large market, we want to provide our product and our services in that market that can be differentiated and not commoditized and so I think that's why you start to see as we focus on these narrow markets, we provide a service and a solution. It certainly helps to have that engineered solution that helps us with our gross margin standpoint -- selling -- being able to sell at that higher level.

Julio Romero -- Sidoti -- Analyst

Got it. And just touching on your capex guidance. I guess you did pull your original 2020 capex target once the pandemic hit and but if I go back to that original 2020 guide number. I think you came -- your full-year number you reported today came in about $9 million below what your original goal was for the year. So as I think about your 2021 outlook, right, it's -- is that, how should I think about that as a catch up or is there, or should I consider your annualized growth capex to be kind of higher beyond '21?

Brian Magstadt -- Chief Financial Officer and Treasurer

Good question. Part of it is a catch up for sure, an element rolling over from 2020 into 2021. And then periodically, there will be years where we may have a higher investment amount due to maybe investing in some element that needs to get refreshed every, say four to five years. So there is a bit of that element in 2021 as well. So the number is higher from a guide perspective in 2021, but due to that element that there is some of the things that we didn't do in '20 and some of the things that are more every few years in nature.

Tim Wojs -- Baird -- Analyst

Got it. That's helpful. Thanks for taking my questions and look forward to your Investor Day next month.

Karen Colonias -- President and Chief Executive Officer

[Speech Overlap]

Operator

And our final question comes from the line of Kurt Yinger with DA Davidson. Proceed with your question.

Kurt Yinger -- DA Davidson -- Analyst

Yes, good afternoon everyone and thanks for taking my questions.

Karen Colonias -- President and Chief Executive Officer

Hi, Kurt.

Brian Magstadt -- Chief Financial Officer and Treasurer

Sure Kurt.

Kurt Yinger -- DA Davidson -- Analyst

Yeah, I mean not to belabor the steel and gross margin points, but I just -- just to confirm, it doesn't sound like you guys have taken any action on pricing to date, is that right?

Brian Magstadt -- Chief Financial Officer and Treasurer

Well, right now we are in the initial stages of communicating price increase out due to rising steel costs. So we need to allow that process to occur, where our customers are hearing about it from -- from our folks and our team and then we'll have that greater detail that I mentioned -- when I mentioned in the latter part of March at the Virtual Investor Analyst Day.

Kurt Yinger -- DA Davidson -- Analyst

Okay, got it. That's fair. And then from an inventory standpoint, I mean how far out do you have, I guess, visibility or confidence before some of this inflation that we've seen starts to roll through the P&L, is that something that would really be relegated to the back half of the year or could we see it here in the first half of 2021?

Brian Magstadt -- Chief Financial Officer and Treasurer

Yeah really good question because as we purchase steel and consume it, our of our weighted average cost change based on the ins and outs there and there is a bit of a delay factor just because what we have on hand today versus what we're buying at today. So there is a bit of a delay in steel price increases or decreases for that matter, as they roll through cost of sales just due to the amount that we do have on hand. So, it would be in the latter part of the year and we model that out based on volume assumptions, utilization, how much we're going to produce in a given quarter or period to try to correlate or predict what that gross margin will be based on facts known today, so steel prices known today or the like.

Kurt Yinger -- DA Davidson -- Analyst

Okay, got it. That makes sense. And the revenue performance was very strong relative to at least what you talked about through October and it sounds like the home center customer set was again a big driver of that. I'm curious whether you would view that upside as a load-in benefit associated with gaining back Lowe's or whether that's really indicative of just strong sell-through and the ability to kind of sustain the strength you've seen here in the second half, even without having the load-in benefits and as you lap it in 2021?

Brian Magstadt -- Chief Financial Officer and Treasurer

I don't think there is much if any load-in Q4, it was largely done for the end of Q3, maybe a couple of few stores at the beginning of the quarter. So, largely due to some of the elements that Karen mentioned, more favorable weather, we continued DIY element for -- that trend that has definitely been prevalent in the earlier of Q2, Q3 of 2020. So, as far as on a go-forward basis, definitely a tougher comp, but we have to continue to monitor and follow the DIY R&R trend relative to 2020 to see how strong those this growth elements might be.

Kurt Yinger -- DA Davidson -- Analyst

Got it, OK. And you guys alluded to some share gains in Europe with competitors kind of being I guess cut short on supply and here in the US, just across the building material supply chain, that seems to be really relevant issue as well. I'm curious whether now here in North America you're seeing similar type opportunities or you think that could be a market share gain type opportunity for you guys just given the focus on customer service and inventory and everything like that.

Karen Colonias -- President and Chief Executive Officer

Yeah, Kurt, I think, obviously, as you've stated, our number one goal is the relentless customer focus and we have been able to meet our customers' needs, as I've mentioned, even amazingly as we have many, many people working remote but to ensure that we have the product availability is a big key and as you mentioned there is -- wood is an issue in the building industry, certainly still is now an issue, but I see us really continuing to maintain our customer service levels and our product availability. not seeing so much potential for market share gains as we saw in Europe. And really the reason is in Europe, we have a lot of very small customers and so if they were not able to meet the needs we were able to meet those customers needs versus, in the US we have substantially larger size customers. So little bit different market in both those areas.

Brian Magstadt -- Chief Financial Officer and Treasurer

Hi Karen, you were saying customers, but I believe you were meaning competitors?

Karen Colonias -- President and Chief Executive Officer

Oh, sorry, sorry. Yes, I did mean that. Yeah. In Europe, we have small competitors, who had some problems meeting availability. In the US, we have much more -- much larger competitors. So, much difficult -- much more difficult to get market share because they're also meeting customer needs.

Kurt Yinger -- DA Davidson -- Analyst

Right, right. Okay, that's helpful. And then just last one from me, Karen, I know you kind of alluded to the lag impact between starts and seeing that pull through, but just curious as you sit back and think about I guess the volumes go into more new residential type customers whether there is anything that's surprised you and whether there is any reason why we wouldn't necessarily see that strength in the starts data here in the second half really come through in the first half of 2021 whether there is a geographic issue or any sort of leakage points that you could think of?

Karen Colonias -- President and Chief Executive Officer

Yes, I think there's definitely demand, but I still see some of the same headwinds that we had -- we've talked about material shortage headwinds, but to me the biggest one is still labor. I think the demand has increased, but being able to complete projects is still a function of that limited labor resource that we have in the construction area, that hasn't really picked up and so, I really believe that becomes a limiting factor on the number of starts that you can build.

Kurt Yinger -- DA Davidson -- Analyst

Got it, Okay, that's very helpful. All right. Well, thanks for the details and good luck here in Q1.

Karen Colonias -- President and Chief Executive Officer

Great, thanks, Kurt.

Brian Magstadt -- Chief Financial Officer and Treasurer

Thanks, Kurt.

Operator

[Operator Closing Remarks]

Duration: 56 minutes

Call participants:

Kimberly Orlando -- Managing Director

Karen Colonias -- President and Chief Executive Officer

Brian Magstadt -- Chief Financial Officer and Treasurer

Daniel Moore -- CJS Securities -- Analyst

Tim Wojs -- Baird -- Analyst

Julio Romero -- Sidoti -- Analyst

Kurt Yinger -- DA Davidson -- Analyst

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