Quantcast
Last updated on April 20, 2014 at 14:04 EDT

H.B. Fuller Reports First Quarter 2013 Results

March 27, 2013

First Quarter Adjusted Diluted EPS from Continuing Operations $0.49 (1);

ST. PAUL, Minn., March 27, 2013 /PRNewswire/ — H.B. Fuller Company (NYSE: FUL) today reported financial results for the first quarter that ended March 2, 2013.

(Logo: http://photos.prnewswire.com/prnh/20110215/CG49203LOGO)

First Quarter 2013 Highlights Included:

  • Business integration project remains on track;
  • Adjusted diluted EPS from continuing operations of $0.49(1) was up 20 percent versus last year;
  • Net revenue was up 39 percent, organic revenue was up 3 percent from last year’s first quarter;
  • Selling, General and Administrative (SG&A) expense was down 140 basis points as a percentage of net revenue versus last year;
  • Regional operating income(2) increased 29 percent versus last year.

First Quarter 2013 Results:
Net income from continuing operations for the first quarter of 2013 was $20.8 million, or $0.41 per diluted share, versus net income from continuing operations of $13.6 million, or $0.27 per diluted share, in last year’s first quarter. Adjusted diluted earnings per share from continuing operations in the first quarter of 2013 was $0.49(1), up 20 percent from the prior year’s adjusted result of $0.41(1).

Net revenue for the first quarter of 2013 was $479.8 million, up 38.9 percent versus the first quarter of 2012. When excluding the incremental revenue from the acquired Forbo business, net revenue growth was 3.6 percent, representing 3.2 percent organic growth and 0.4 percentage points of favorable foreign currency translation. The organic growth was comprised of a 1.1 percent increase in price and 2.1 percent growth in volume.

“We are off to a solid start to a very important year for H.B. Fuller,” said Jim Owens, H.B. Fuller president and chief executive officer. “We grew our business in the quarter and achieved our plans for operating profit despite a lackluster economic environment in most parts of the world. Our business integration project remains on track to deliver the committed benefits on time and on budget. Our guidance remains unchanged for the fiscal year and we are on target to deliver another successful year in 2013.”

Gross profit margin from continuing operations was down approximately 190 basis points compared to the prior year primarily due to the inclusion of the lower margin Forbo business. Relative to the prior year, Selling, General and Administrative (SG&A) expense from continuing operations increased by 30 percent, but was down 140 basis points as a percentage of net revenue to 20.3 percent.

Balance Sheet and Cash Flow:
At the end of the first quarter of 2013, the Company had cash totaling $163 million and total debt of $511 million. This compares to fourth quarter 2012 levels of $200 million and $520 million, respectively. Sequentially, net debt was up by approximately $28 million. Capital expenditures were $20 million in the first quarter, with the bulk of this spending related to the Company’s ongoing business integration activities. Operating cash flow in the first quarter was negative $11 million. Inventory balances increased about $21 million relative to the prior quarter. This increase reflects a normal seasonal building of inventory in advance of the expected higher volume levels in the second quarter and also the increased inventory requirements to support product transfers and facility closures related to the business integration.

Business Integration and Special Charges
The Company has implemented a comprehensive business integration program to deliver synergies related to the acquisition of the Forbo adhesives business and to improve the performance of the EIMEA operating segment. The table below provides an estimate of the expected one-time costs of executing this multi-year project. In addition, the table lists, for each cost element, the costs incurred in the current quarter and since the project’s inception in the fourth quarter of 2011:

                                   Expected Costs          Costs Incurred

                                                      Q1 2013             Total
                                                                To-Date
                                                       -------------------------

    Cost Elements                   ($ millions)            ($ millions)         ($ millions)
    -------------

    Acquisition and transformation                 35                          2               28

    Workforce reduction                            53                          0               28

    Facility exit                                  17                          2                3

    Other                                          10                          1                3
                                                  ---                        ---              ---

    Total cash costs                              115                          5               62

    Total non-cash costs                            6                          0                3
                                                                             ---              ---

Fiscal 2013 Outlook:
The Company’s earnings guidance for the 2013 fiscal year remains a range of $2.55 to $2.65 per diluted share. Guidance is based on adjusted earnings per share, which exclude all special charges related to the business integration project which is ongoing.

The table below shows each of the elements of the Company’s 2013 guidance. All amounts shown are presented on the basis described above.

                                          Expected Full-Year
                                          ------------------

    Earnings per Diluted
     Share                                          $2.55 to $2.65

    Core Tax Rate                                               30%

    Capex ( $ millions)                                       $110

    EBITDA ($ millions)                                  $260-$265

Conference Call:
The Company will host an investor conference call to discuss first quarter 2013 results on Thursday, March 28, 2013, at 9:30 a.m. Central U.S. time (10:30 a.m. Eastern U.S. time). The conference call audio and accompanying presentation slides will be available to all interested parties via a simultaneous webcast at www.hbfuller.com under the Investor Relations section. The event is scheduled to last one hour. For those unable to listen live, an audio replay of the event along with the accompanying presentation will be archived on the Company’s website.

Regulation G:
The information presented in this earnings release regarding regional operating income, regional operating margin, adjusted diluted earnings per share from continuing operations and earnings before interest, taxes, depreciation, and amortization (EBITDA) does not conform to generally accepted accounting principles (GAAP) and should not be construed as an alternative to the reported results determined in accordance with GAAP. Management has included this non-GAAP information to assist in understanding the operating performance of the Company and its operating segments as well as the comparability of results. The non-GAAP information provided may not be consistent with the methodologies used by other companies. All non-GAAP information is reconciled with reported GAAP results in the tables below.

About H.B. Fuller Company:
For over 125 years, H.B. Fuller has been a leading global adhesives provider focusing on perfecting adhesives, sealants and other specialty chemical products to improve products and lives. Recognized for unmatched technical support and innovation, H.B. Fuller brings knowledge and expertise to help its customers find precisely the right formulation for the right performance. With fiscal 2012 net revenue of $1.9 billion, H.B. Fuller serves customers in packaging, hygiene, general assembly, paper converting, woodworking, construction, automotive and consumer businesses. For more information, visit us at www.hbfuller.com and subscribe to our blog.

Safe Harbor for Forward-Looking Statements:
Certain statements in this document may be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to various risks and uncertainties, including but not limited to the following: the Company’s ability to effectively integrate and operate acquired businesses; political and economic conditions; product demand; competitive products and pricing; costs of and savings from restructuring initiatives; geographic and product mix; availability and price of raw materials; the Company’s relationships with its major customers and suppliers; changes in tax laws and tariffs; devaluations and other foreign exchange rate fluctuations; the impact of litigation and environmental matters; the effect of new accounting pronouncements and accounting charges and credits; and similar matters. Further information about the various risks and uncertainties can be found in the Company’s SEC 10-K filing for the fiscal year ended December 1, 2012. All forward-looking information represents management’s best judgment as of this date based on information currently available that in the future may prove to have been inaccurate. Additionally, the variety of products sold by the Company and the regions where the Company does business make it difficult to determine with certainty the increases or decreases in net revenue resulting from changes in the volume of products sold, currency impact, changes in product mix, and selling prices. However, management’s best estimates of these changes as well as changes in other factors have been included.

                                                    H.B. FULLER COMPANY AND SUBSIDIARIES

                                                     CONSOLIDATED FINANCIAL INFORMATION

                                             In thousands, except per share amounts (unaudited)

                                    13 Weeks Ended                        Percent of               13 Weeks Ended             Percent of

                                    March 2, 2013                        Net Revenue               March 3, 2012              Net Revenue
                                    -------------                      -----------              -------------              -----------

    Net revenue                                        $479,842                      100.0%                       $345,453                 100.0%

    Cost of sales                                      (346,466)                    (72.2%)                       (242,766)               (70.3%)
                                                       --------                     ------                        --------                ------

    Gross profit                                        133,376                       27.8%                        102,687                  29.7%

    Selling, general and
     administrative expenses                            (97,640)                    (20.3%)                        (75,031)               (21.7%)

    Special charges, net                                 (5,333)                     (1.1%)                         (6,482)                (1.9%)

    Other income (expense), net                             378                        0.1%                            418                   0.1%

    Interest expense                                     (5,327)                     (1.1%)                         (2,618)                (0.8%)
                                                         ------                      -----                          ------                 -----

    Income from continuing
     operations before income taxes
     and income from equity method
     investments                                         25,454                        5.3%                         18,974                   5.5%

    Income taxes                                         (7,120)                     (1.5%)                         (7,563)                (2.2%)

    Income from equity method
     investments                                          2,440                        0.5%                          2,196                   0.6%
                                                          -----                        ---                           -----                   ---

    Income from continuing
     operations                                          20,774                        4.3%                         13,607                   3.9%

    Income from discontinued
     operations, net of tax                      -                      0.0%                              1,723                     0.5%
                                               ---                      ---                               -----                     ---

    Net income including non-
     controlling interests                               20,774                        4.3%                         15,330                   4.4%

    Net income attributable to non-
     controlling interests                                  (97)                     (0.0%)                            (25)                (0.0%)
                                                            ---                      -----                             ---                 -----

    Net income
     attributable to
     H.B. Fuller                                        $20,677                        4.3%                        $15,305                   4.4%
                                                        =======                        ===                         =======                   ===

    Basic income per common share
     attributable to H.B. Fuller

       Income from continuing
        operations                            0.42                                                         0.28

       Income from discontinued
        operations                               -                                                         0.03
                                               ---                                                         ----

                                                          $0.42                                                      $0.31
                                                          =====                                                      =====

    Diluted income per common share
     attributable to H.B. Fuller

       Income from continuing
        operations                            0.41                                                         0.27

       Income from discontinued
        operations                               -                                                         0.03
                                               ---                                                         ----

                                                          $0.41                                                      $0.30
                                                          =====                                                      =====

    Weighted-average common shares
     outstanding:

    Basic                                   49,817                                                       49,365

    Diluted                                 51,027                                                       50,253

    Dividends declared
     per common share                                    $0.085                                                     $0.075

    Selected Balance Sheet Information (subject to change prior to filing of the Company's Quarterly Report on Form 10-Q)
    --------------------------------------------------------------------------------------------------------------------

                                   March 2, 2013                               December 1,
                                                                                   2012                       March 3, 2012
                                   -------------                              ------------                    -------------

    Cash & cash
     equivalents                                                    $163,131                                             $200,436  $148,377

    Trade accounts
     receivable,
     net                                                             308,343                                              320,152   220,482

    Inventories                                                      229,442                                              208,531   143,364

    Trade payables                                                   167,926                                              163,062   126,445

    Total assets                                                   1,765,410                                            1,786,320 1,255,657

    Total debt                                                       510,981                                              520,225   227,603

                             H.B. FULLER COMPANY AND SUBSIDIARIES

                                 REGION FINANCIAL INFORMATION

                                   In thousands (unaudited)

                                      13 Weeks Ended              13 Weeks Ended

                                      March 2, 2013               March 3, 2012
                                      -------------               -------------

    Net Revenue:

    North America                                       $206,293                 $150,526

    EIMEA                                                177,501                  110,724

    Latin America                                         35,469                   35,587

    Asia Pacific                                          60,579                   48,616
                                                          ------                   ------

    Total H.B.
     Fuller                                             $479,842                 $345,453
                                                        ========                 ========

    Regional Operating Income:2

    North America                                        $24,838                  $18,063

    EIMEA                                                  6,473                    6,438

    Latin America                                          2,451                    2,402

    Asia Pacific                                           1,974                      753
                                                           -----                      ---

    Total H.B.
     Fuller                                              $35,736                  $27,656
                                                         =======                  =======

    Depreciation Expense:

    North America                                         $4,417                   $3,098

    EIMEA                                                  3,711                    2,148

    Latin America                                            370                      389

    Asia Pacific                                           1,246                    1,036
                                                           -----                    -----

    Total H.B.
     Fuller                                               $9,744                   $6,671
                                                          ======                   ======

    Amortization Expense:

    North America                                         $3,107                   $2,012

    EIMEA                                                  1,865                      277

    Latin America                                             62                        3

    Asia Pacific                                             473                      268
                                                             ---                      ---

    Total H.B.
     Fuller                                               $5,507                   $2,560
                                                          ======                   ======

    EBITDA:3

    North America                                        $32,362                  $23,173

    EIMEA                                                 12,049                    8,863

    Latin America                                          2,883                    2,794

    Asia Pacific                                           3,693                    2,057
                                                           -----                    -----

    Total H.B.
     Fuller                                              $50,987                  $36,887
                                                         =======                  =======

    Regional Operating Margin:4

    North America                                           12.0%                    12.0%

    EIMEA                                                    3.6%                     5.8%

    Latin America                                            6.9%                     6.7%

    Asia Pacific                                             3.3%                     1.5%
                                                             ---                      ---

    Total H.B. Fuller                                        7.4%                     8.0%
                                                             ===                      ===

    EBITDA Margin:3

    North America                                           15.7%                    15.4%

    EIMEA                                                    6.8%                     8.0%

    Latin America                                            8.1%                     7.9%

    Asia Pacific                                             6.1%                     4.2%
                                                             ---                      ---

    Total H.B. Fuller                                       10.6%                    10.7%
                                                            ====                     ====

    Net Revenue Growth:

    North America                                           37.0%

    EIMEA                                                   60.3%

    Latin America                                          (0.3%)

    Asia Pacific                                            24.6%
                                                            ----

    Total H.B. Fuller                                       38.9%
                                                            ====

                                            H.B. FULLER COMPANY AND SUBSIDIARIES

                                                REGION FINANCIAL INFORMATION

                                                     NET REVENUE GROWTH

                                                         (unaudited)

                                                13 Weeks Ended March 2, 2013
                                           ----------------------------

                     North America       EIMEA                          Latin America       Asia Pacific      Total HBF
                     -------------       -----                          -------------       ------------      ---------

    Price                           1.2%          2.5%                               (0.6%)            (1.2%)            1.1%

    Volume                          1.8%          2.8%                               (1.8%)              4.4%            2.1%
                                    ---           ---                                -----               ---             ---

      Organic Growth                3.0%          5.3%                               (2.4%)              3.2%            3.2%

    F/X                             0.1%          0.5%                                 0.0%              1.3%            0.4%

    Acquisition                    33.9%         54.5%                                 2.1%             20.1%           35.3%
                                   ----          ----                                  ---              ----            ----

                                   37.0%         60.3%                               (0.3%)             24.6%           38.9%
                                   ====          ====                                =====              ====            ====

                  H.B. FULLER COMPANY AND SUBSIDIARIES

                       REGULATION G RECONCILIATION

                        In thousands (unaudited)

                            13 Weeks Ended             13 Weeks Ended

                            March 2, 2013              March 3, 2012
                            -------------              -------------

     Net
     income
     including
     non-
     controlling
     interests                                $20,774                         $15,330

    Income
     (loss) from
     discontinued
     operations                          -                            (1,723)

    Income from
     equity
     method
     investments                               (2,440)                         (2,196)

    Income taxes                                7,120                           7,563

    Interest
     expense                                    5,327                           2,618

    Other income
     (expense),
     net                                         (378)                           (418)

    Special
     charges                                    5,333                           6,482

    Regional
     Operating
     Income2                                   35,736                          27,656

    Depreciation
     expense                                    9,744                           6,671

    Amortization
     expense                                    5,507                           2,560
                                                -----                           -----

    EBITDA3                                   $50,987                         $36,887

    EBITDA
     margin3                                     10.6%                           10.7%

                               H.B. FULLER COMPANY AND SUBSIDIARIES

                                    REGULATION G RECONCILIATION

                                     In thousands (unaudited)

                                         13 Weeks Ended               13 Weeks Ended

                                         March 2, 2013                March 3, 2012
                                         -------------                -------------

    Net revenue                                             $479,842                 $345,453

    Cost of sales                                           (346,466)                (242,766)
                                                            --------                 --------

    Gross profit                                             133,376                  102,687

    Selling, general and
     administrative expenses                                 (97,640)                 (75,031)
                                                             -------                  -------

    Regional operating income2                                35,736                   27,656

    Depreciation expense                                       9,744                    6,671

    Amortization expense                                       5,507                    2,560
                                                               -----                    -----

    EBITDA3                                                  $50,987                  $36,887

    EBITDA margin3                                              10.6%                    10.7%

                                                              H.B. FULLER COMPANY AND SUBSIDIARIES

                                                                  REGULATION G RECONCILIATION

                                                       In thousands, except per share amounts (unaudited)

                                                                                                                                   Adjusted

                                                                     13 Weeks Ended                            13 Weeks Ended

                                                                     March 2, 2013               Adjustments    March 2, 2013
                                                                     -------------               -----------    -------------

    Net revenue                                                                        $479,842              $                  -            $479,842

    Cost of sales                                                                      (346,466)                                -            (346,466)
                                                                                       --------                               ---            --------

    Gross profit                                                                        133,376                                 -             133,376

    Selling, general and administrative expenses                                        (97,640)                                -             (97,640)

    Acquisition and
     transformation related
     costs                                                   (2,282)

    Workforce reduction costs                                  (484)

    Facility exit costs                                      (1,789)

    Other related costs                                        (778)
                                                               ----

    Special charges, net                                                                 (5,333)                           (5,333)                  -

    Other income (expense), net                                                             378                                 -                 378

    Interest expense                                                                     (5,327)                                -              (5,327)
                                                                                         ------                               ---              ------

    Income from continuing operations before income
     taxes and income from equity method investments                                     25,454                            (5,333)             30,787

    Income taxes                                                                         (7,120)                            1,099              (8,219)

    Income from equity method
     investments                                                                          2,440                                 -               2,440
                                                                                          -----                               ---               -----

    Net income from continuing
     operations                                                                          20,774                            (4,234)             25,008

    Net (income) loss attributable to non-controlling
     interests                                                                              (97)                                -                 (97)
                                                                                            ---                               ---                 ---

    Net income attributable to H.B. Fuller                                              $20,677                           $(4,234)            $24,911
                                                                                        =======                           =======             =======

    Basic income (loss) from continuing operations per
     common share attributable to H.B. Fuller                                             $0.42                            $(0.08)              $0.50
                                                                                          =====                            ======               =====

    Diluted income (loss) from continuing operations
     per common share attributable to H.B. Fuller                                         $0.41                            $(0.08)         $  0.49  1
                                                                                          =====                            ======        ===  =======

    Weighted-average common shares outstanding:

    Basic                                                                                49,817                            49,817              49,817

    Diluted                                                                              51,027                            51,027              51,027

                                                                     H.B. FULLER COMPANY AND SUBSIDIARIES

                                                                         REGULATION G RECONCILIATION

                                                              In thousands, except per share amounts (unaudited)

                                                                                                                                   Adjusted

                                                                                      13 Weeks Ended                            13 Weeks Ended

                                                                                      March 3, 2012                Adjustments  March 3, 2012
                                                                                      -------------                -----------  -------------

    Net revenue                                                       $345,453                                   $                             $345,453

    Cost of sales                                                     (242,766)                                                                (242,766)
                                                                      --------                                                                 --------

    Gross profit                                                       102,687                                               -                  102,687

    Selling, general and administrative
     expenses                                                          (75,031)                                                                 (75,031)

    Acquisition and
     transformation
     related costs                                          (1,943)

    Workforce reduction
     costs                                                  (3,955)

    Facility exit costs                                       (343)

    Other related costs                                       (241)
                                                              ----

    Special charges, net                                                (6,482)                                         (6,482)                       -

    Other income (expense), net                                            418                                               -                      418

    Interest expense                                                    (2,618)                                              -                   (2,618)
                                                                        ------                                             ---                   ------

    Income from continuing operations before
     income taxes and income from equity
     method investments                                                 18,974                                          (6,482)                  25,456

    Income taxes                                                        (7,563)                                           (371)                  (7,192)

    Income from equity method investments                                2,196                                               -                    2,196
                                                                         -----                                             ---                    -----

    Net income from continuing operations                               13,607                                          (6,853)                  20,460

    Income from discontinued operations                                  1,723                                               -                    1,723

    Net income including non-controlling
     interests                                                          15,330                                          (6,853)                  22,183

    Net (income) loss attributable to non-
     controlling interests                                                 (25)                                              -                      (25)

    Net income attributable to H.B. Fuller                             $15,305                                         $(6,853)                 $22,158
                                                                       =======                                         =======                  =======

    Basic income per common share
     attributable to H.B. Fullera

       Income from continuing operations                                  0.28                                           (0.14)                    0.41

       income from discontinued operations                                0.03                                               -                     0.03
                                                                          ----                                             ---                     ----

                                                                         $0.31                                          $(0.14)                   $0.45
                                                                         =====                                          ======                    =====

    Diluted income per common share
     attributable to H.B. Fuller

       Income from continuing operations                                  0.27                                           (0.14)                0.41 (1)

       income from discontinued operations                                0.03                                               -                     0.03
                                                                          ----                                             ---                     ----

                                                                         $0.30                                          $(0.14)                   $0.44
                                                                         =====                                          ======                    =====

    Weighted-average common shares
     outstanding:

    Basic                                                               49,365                                          49,365                   49,365

    Diluted                                                             50,253                                          50,253                   50,253

    a  Income per share amounts may not add due to rounding

            1   Adjusted diluted earnings per share
                (EPS) from continuing operations
                is a non-GAAP financial measure.
                First quarters of 2013 and 2012
                exclude special charges associated
                with two previously announced
                events: the EIMEA business
                transformation project and the
                expenses associated with the Forbo
                acquisition integration project,
                which have been combined and are
                now referred to as the "business
                integration". Special charges, net
                amounted to $5.3 million and $6.5
                million on a pre-tax basis ($0.08
                and $0.14 per diluted share) in Q1
                2013 and Q1 2012, respectively.

            2    Regional operating income is
                  defined as gross profit less SG&A
                  expense.  Items that are reported
                  on the special charges line of the
                  income statement are excluded from
                  the regional operating income
                  calculation. In Q1 2013, special
                  charges, net totaled $5.3 million.
                  In Q1 2012, special charges, net
                  totaled $6.5 million.

          (3)    EBITDA is a non-GAAP financial
                  measure defined on a consolidated
                  basis as gross profit, less SG&A
                  expense, plus depreciation
                  expense, plus amortization
                  expense. On a regional basis it is
                  defined as operating income, plus
                  depreciation expense, plus
                  amortization expense. EBITDA
                  margin is defined as EBITDA
                  divided by net revenue.

            4   Regional operating margin is a non-
                GAAP financial measure defined as
                gross profit, less SG&A expense,
                divided by net revenue.

Maximillian Marcy
Investor Relations Contact
651-236-5062

SOURCE H.B. Fuller Company


Source: PR Newswire