H.B. Fuller Reports First Quarter 2013 Results

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

First Quarter Diluted EPS from Continuing Operations $0.41;

Company Maintains 2013 EPS guidance of $2.55 to $2.65

27 Mar, 2013, 18:01 ET from H.B. Fuller Company

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 $0.491 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 income2 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 $0.491, up 20 percent from the prior year's adjusted result of $0.411

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:

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:

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:

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:

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 Income

35,736

27,656

Depreciation expense

9,744

6,671

Amortization expense

5,507

2,560

EBITDA

$

50,987

$

36,887

EBITDA margin

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 income

35,736

27,656

Depreciation expense

9,744

6,671

Amortization expense

5,507

2,560

EBITDA

$

50,987

$

36,887

EBITDA margin

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 

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



RELATED LINKS

http://www.hbfuller.com