H.B. Fuller Reports Fourth Quarter and Fiscal Year 2013 Results

Fourth Quarter Adjusted Diluted EPS $0.68(1); Fourth Quarter Diluted EPS $0.43; Company Sets 2014 Adjusted EPS Guidance at $3.00 to $3.15

15 Jan, 2014, 17:44 ET from H.B. Fuller Company

ST. PAUL, Minn., Jan. 15, 2014 /PRNewswire/ -- H.B. Fuller Company (NYSE: FUL) today reported financial results for the fourth quarter that ended November 30, 2013 and guidance for 2014:

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

Items of Note for 2014 Guidance:

  • Adjusted diluted EPS projected at between $3.00 and $3.15, an increase of 16 to 22 percent over 2013;
  • EBITDA margin improves to 14 percent, up 150 basis points from the prior year;
  • Business continues to be on track to deliver 2015 strategic targets;
  • Company will launch important information technology project and complete business integration;
  • Core tax rate 30 percent.

Items of Note for the Fourth Quarter of 2013:

  • Organic revenue increased by 3.6 percent compared to the prior year, the highest quarterly organic growth rate of the year;
  • Contribution margin was strong and consistent with prior quarters, but additional non-recurring manufacturing costs totaling about $4 million in the fourth quarter, primarily in facilities involved in the business integration project, caused gross profit margin to fall below the recent trend line;
  • Selling, General and Administrative (SG&A) expenses were tightly controlled, in line with internal plans, and about 3 percent lower than the prior year's fourth quarter;
  • Adjusted diluted EPS of $0.681 was up 6 percent versus last year.

Items of Note for the Full-Year 2013:

  • Achieved record levels of net revenue, operating income and adjusted diluted EPS;
  • Organic revenue increased about 2 percent, despite ongoing weakness in European end-markets;
  • Adjusted EBITDA margin1,2 of 12.5 percent was 80 basis points above last year and in line with the Company's strategic plan to achieve 15 percent EBITDA margin in 2015;
  • Adjusted segment operating income1,3 increased 19 percent year-over-year;
  • Adjusted diluted EPS1 grew 17 percent year-over-year and, since 2010 our adjusted diluted EPS has increased at a compound annual rate of 17 percent.

Fiscal 2014 Outlook: Our 2014 fiscal year represents the fourth year of our current, transformational five-year plan.  We expect to take further significant steps toward our 2015 goals this year, following on the success of the prior three years. Our key long-term financial objectives remain unchanged: achieve organic revenue growth of between 5 and 8 percent per annum, increase our EBITDA margin to 15 percent by 2015, grow EPS by 15 percent per annum and increase Return on Invested Capital (ROIC) to 15 percent by 2015. 

In 2014, we expect revenue growth at the low end of our long-term growth targets of 5 to 8 percent.  We expect our recent momentum in the Asia Pacific and Construction Products operating segments to lead our growth this year. Our gross profit margin is expected to increase in 2014, primarily driven by the cost benefits that will be realized upon the completion of the business integration project in Europe. SG&A expenses should increase at a rate below the increase in net revenue. Overall, we expect our EBITDA margin2 to be about 14 percent for the full year, about 150 basis points higher than the level in the 2013 fiscal year. Our core tax rate should remain steady at about 30 percent, excluding the impact of discrete items. Finally, our adjusted diluted EPS for the year is expected to fall within a range of $3.00 and $3.15 per diluted share, representing an increase of between 16 and 22 percent over 2013. We expect our financial performance to improve as the fiscal year progresses and anticipate that our first quarter adjusted diluted EPS will be about $0.50 per share.

Our core capital expenditures to fund ongoing operations will be about $45 million, representing about 2 percent of net revenue and in line with our long-term strategic cash generation model. We expect capital expenditures for Project ONE, which is described later in this release, to be about $20 million in 2014, and the completion of the business integration project to add $40 million to our capital expenditure plan, bringing the total 2014 capital spend to $105 million. In 2015, our capital expenditures should move toward normal levels, or about 2 percent of net revenue plus any residual capital requirements for Project ONE.

Fiscal 2013 Performance Compared to Initial Guidance and Prior Year: "We are pleased with our 2013 financial results which demonstrate solid operational improvement and another step towards our 2015 targets," said Jim Owens, H. B. Fuller president and chief executive officer. "In the midst of a major business integration and weaker than expected end-market conditions in some key markets, our team delivered solid results. We delivered record revenue and grew organically for the fourth year in a row with stronger organic growth at the end of the year. We significantly improved our EBITDA margin toward our strategic target of 15 percent and delivered another year of record earnings per share. We are still gaining momentum as we complete our business integration in EIMEA, which we anticipate to finish by the middle of the 2014 fiscal year.  Our 2014 fiscal year guidance indicates that we are on track to achieve the key performance metrics established in our five-year plan." 

At the beginning of the 2013 fiscal year we communicated an aggressive plan, along with financial projections (guidance), for several key financial metrics.  These projections were provided in our quarterly earnings press releases, quarterly conference calls and during our investor conference held in February of 2013.  The table below shows our actual results in 2013 relative to our original projections and guidance and the prior year.

Metric

2012

2013 Actual

2013 Projected

Revenue

(Organic Revenue Growth)

$1,886 million

$2,047 million

(Up 1.6%)

$2,074-$2,115 million

(Up 3% to 5%)

Adjusted EBITDA1,2

$220.3 million

$255.4 million

$260 - $265 million

Adjusted EBITDA Margin1,2

11.7%

12.5%

12.5%

Adjusted Diluted EPS1

$2.20

$2.58

$2.55 to $2.65

EIMEA Q4 EBITDA Margin2

9.4%

11.5%

12%

Core Tax Rate

30%

30%

30%

Capex

$39 million

$124 million

$110 million

Our actual performance in the year tracked very closely to our original projections and is in-line with our current five-year plan and the related 2015 financial targets. The most significant variance from our original projections is that our organic revenue growth was lower than expected, primarily due to weak end-market conditions in Europe. Despite lower than expected revenue growth we achieved our target for adjusted EBITDA margin1,2 for the year at 12.5 percent. The fourth quarter EBITDA margin in our EIMEA segment of 11.5 percent was up 210 basis points relative to the prior year but was a bit short of our 12 percent target, mostly due to temporarily higher than expected non-recurring manufacturing costs in the fourth quarter related to the business integration project. Our capital expenditures were slightly higher than the original forecast, due to the ramp up of our information technology project that we call Project ONE, which is described later in this release, and was not included in our original guidance.

Fourth Quarter 2013 Results: Income from continuing operations for the fourth quarter of 2013 was $22.0 million, or $0.43 per diluted share, versus income from continuing operations of $25.0 million, or $0.49 per diluted share, in last year's fourth quarter. Adjusted diluted earnings per share in the fourth quarter of 2013 were $0.681, up 6 percent from the prior year's adjusted result of $0.641

Net revenue for the fourth quarter of 2013 was $533.5 million, up 4.0 percent versus the fourth quarter of 2012. Higher volume and positive foreign currency translation positively impacted net revenue growth by 4.2 and 0.4 percentage points, respectively. Lower average selling prices negatively impacted net revenue growth by 0.6 percentage points. Organic revenue grew by 3.6 percent year-over-year.

Gross profit margin was down approximately 100 basis points from the prior quarter's adjusted result1. The drop in gross profit margin was the primary reason the operating earnings and adjusted diluted EPS fell short of the guidance the Company provided at the end of the third quarter. About $4 million of additional and non-recurring manufacturing costs were incurred in the quarter, primarily in facilities involved in the business integration project, and this accounted for essentially all of the gross profit margin shortfall. Contribution margin (defined as net revenue less the cost of raw materials, containers and delivery expense) in the quarter was essentially flat relative to the prior quarter and full-year average and in line with internal expectations. Also, Selling, General and Administrative (SG&A) expense was in line with the Company's expectations for the quarter, down by 3 percent, or 120 basis points as a percentage of net revenue, versus the prior years fourth quarter.

Balance Sheet and Cash Flow: At the end of the fourth quarter of 2013, the Company had cash totaling $155 million and total debt of $493 million. This compares to third quarter 2013 levels of $160 million and $493 million, respectively. Sequentially, net debt was up by approximately $5 million. Capital expenditures were $42 million in the fourth quarter and $124 million for the year, with the bulk of this spending related to the Company's ongoing business integration activities. Operating cash flow in the fourth quarter was $43 million.

Fiscal Year 2013 Results: Income from continuing operations for the 2013 fiscal year was $96.0 million, or $1.87 per diluted share, versus income from continuing operations of $68.3 million, or $1.34 per diluted share, in the 2012 fiscal year. Adjusted total diluted earnings per share from continuing operations in 2013 were $2.581, up 17 percent from the prior year's result of $2.201.

Net revenue for the 2013 fiscal year was $2,047.0 million, up 8.5 percent versus the 2012 fiscal year. Higher volume, higher average selling prices, positive foreign currency translation and acquisitions positively impacted net revenue growth by 1.5, 0.1, 0.4 and 6.5 percentage points, respectively. Organic revenue grew by 1.6 percent year-over-year.

Adjusted Gross profit margin1 was up approximately 30 basis points relative to last year, benefitting from generally favorable raw material cost development and savings from the business integration activity. Selling, General and Administrative (SG&A) expense was up by 6 percent, but down 50 basis points as a percentage of net revenue versus the prior year, approaching the Company's long-term target level of 18 percent.

Business Integration and Special Charges: We have been working on a comprehensive business integration project since March of 2012 to fully assimilate the Forbo industrial adhesives business and to improve the operating performance of our legacy EIMEA operating segment. We expect to complete the bulk of this project in the summer of 2014. The table below shows the expected costs for the business integration project that we communicated at the inception of the project and our current cost estimates related to the project. Our estimate of the total cash costs to execute the project has not changed. However, we now expect to spend slightly less on workforce reduction, offset by slightly higher spending in our "other" category. The non-cash costs have been revised upward by about $4 million. All of the figures below represent our best estimate of the costs to be incurred through the completion of the project. 

Initial Expected Costs

Current Expected Costs

____       Actual Costs Incurred________  

Q4 2013 

FY 2013

Inception

Cost Elements

($ millions)

($ millions)

($ millions)

($ millions)

($ millions)

Acquisition and transformation

35

35

3

8

34

Workforce reduction

53

46

2

10

38

Facility exit

17

17

5

12

13

Other

10

17

3

9

11

Total cash costs

115

115

13

39

96

Total non-cash costs

6

10

3

6

9

 

Project ONE: Following the acquisition of the Forbo industrial adhesives business we formed a team to evaluate our existing information technology platforms in order to develop a more efficient infrastructure to support our integrated business in the future. As a result, our Board of Directors has approved a multi-year project to replace and enhance our existing core information technology platforms with SAP application software. The scope for this project includes most of the basic transaction processing for the company, including customer orders, procurement, manufacturing, and financial reporting.  The project envisions harmonized business processes for all of our operating segments supported with one standard software configuration. The execution of this project, which we will refer to as "Project ONE", is being supported by consulting services provided by Accenture. The key metrics and milestones for the project include:

  • The project will be completed by the end of fiscal year 2016;
  • Total capital expenditures over the life of the project are estimated at $60 million, of which $22 million has been spent to date; $4 million in project expense was absorbed in 2013, and we anticipate a similar amount of project expense in 2014;
  • Roll out of the new platform will be accomplished in four waves generally aligned to geographic regions; the first "go live" will be in the USA and Canada geography of our Americas Adhesives operating segment before the end of June 2014;
  • We anticipate obtaining significant tangible and intangible benefits following the completion of this project in 2016. We expect cost savings in the areas of procurement, processing of transactions and support of our information technology infrastructure. In addition, the system will enable us to manage inventory more efficiently. Overall, the project is expected to earn a return on investment well in excess our internal hurdle rates.

Conference Call: The Company will host an investor conference call to discuss fourth quarter 2013 results on Thursday, January 16, 2014, 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 segment operating income, segment 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 2013 net revenue of over $2 billion, H.B. Fuller serves customers in packaging, hygiene, general assembly, electronic materials and 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; the ability to effectively implement Project ONE; 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-Q filings of September 27, June 28 and March 29, 2013 and 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.

Maximillian Marcy Investor Relations Contact 651-236-5062

 

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

November 30, 2013

Net Revenue

December 1, 2012

Net Revenue

Net revenue

$

533,531

100.0%

$

513,255

100.0%

Cost of sales

(387,859)

(72.7%)

(369,541)

(72.0%)

Gross profit

145,672

27.3%

143,714

28.0%

Selling, general and administrative expenses

(92,619)

(17.4%)

(95,395)

(18.6%)

Special charges, net

(16,136)

(3.0%)

(9,204)

(1.8%)

Asset impairment charges

-

0.0%

(846)

(0.2%)

Other income (expense), net

(1,269)

(0.2%)

759

0.1%

Interest expense

(4,330)

(0.8%)

(5,476)

(1.1%)

Income from continuing operations before income taxes and income from equity method investments

31,318

5.9%

33,552

6.5%

Income taxes

(11,675)

(2.2%)

(11,191)

(2.2%)

Income from equity method investments

2,360

0.4%

2,651

0.5%

Income from continuing operations

22,003

4.1%

25,012

4.9%

Income from discontinued operations, net of tax

-

0.0%

182

0.0%

Net income including non-controlling interests

22,003

4.1%

25,194

4.9%

Net income attributable to non-controlling interests

(117)

(0.0%)

(82)

(0.0%)

Net income attributable to H.B. Fuller

$

21,886

4.1%

$

25,112

4.9%

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

   Income from continuing operations

0.44

0.50

   Income from discontinued operations

-

0.00

$

0.44

$

0.51

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

   Income from continuing operations

0.43

0.49

   Income from discontinued operations

-

0.00

$

0.43

$

0.49

Weighted-average common shares outstanding:

Basic

49,909

49,640

Diluted

51,236

50,798

Dividends declared per common share

$

0.010

$

0.085

 

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

November 30, 2013

December 1, 2012

December 3, 2011

Cash & cash equivalents

$

155,121

$

200,436

$

154,649

Trade accounts receivable, net

331,125

320,152

217,424

Inventories

221,537

208,531

116,443

Trade payables

201,575

163,062

104,418

Total assets

1,873,028

1,786,320

1,227,709

Total debt

492,904

520,225

232,296

a Income per share amounts may not add due to rounding

 

H.B. FULLER COMPANY AND SUBSIDIARIES

CONSOLIDATED FINANCIAL INFORMATION

In thousands, except per share amounts (unaudited)

52 Weeks Ended

Percent of

52 Weeks Ended

Percent of

November 30, 2013

Net Revenue

December 1, 2012

Net Revenue

Net revenue

$

2,046,968

100.0%

$

1,886,239

100.0%

Cost of sales

(1,476,797)

(72.1%)

(1,368,963)

(72.6%)

Gross profit

570,171

27.9%

517,276

27.4%

Selling, general and administrative expenses

(374,669)

(18.3%)

(354,735)

(18.8%)

Special charges

(45,087)

(2.2%)

(52,467)

(2.8%)

Asset impairment charges

-

0.0%

(1,517)

(0.1%)

Other income (expense), net

(3,751)

(0.2%)

784

0.0%

Interest expense

(19,120)

(0.9%)

(19,793)

(1.0%)

Income from continuing operations before income taxes and income from equity method investments

127,544

6.2%

89,548

4.7%

Income taxes

(39,949)

(2.0%)

(30,479)

(1.6%)

Income from equity method investments

8,380

0.4%

9,218

0.5%

Income from continuing operations

95,975

4.7%

68,287

3.6%

Income from discontinued operationsa

1,211

0.1%

57,568

3.1%

Net income including non-controlling interests

97,186

4.7%

125,855

6.7%

Net (income) loss attributable to non-controlling interests

(425)

(0.0%)

(233)

(0.0%)

Net income attributable to H.B. Fuller

$

96,761

4.7%

$

125,622

6.7%

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

   Income from continuing operations

1.92

1.37

   Income from discontinued operations

0.02

1.16

$

1.94

$

2.53

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

   Income from continuing operations

1.87

1.34

   Income from discontinued operations

0.02

1.14

$

1.89

$

2.48

Weighted-average common shares outstanding:

Basic

49,893

49,571

Diluted

51,136

50,618

Dividends declared per common share

$

0.385

$

0.330

a Fiscal 2012 includes the gain on sale of discontinued operations of $51,060, net of tax of $15,119

 

H.B. FULLER COMPANY AND SUBSIDIARIES

SEGMENT FINANCIAL INFORMATION

In thousands (unaudited)

The Company has realigned its regional reporting to reflect the current organization structure and management accountability. Reconciliations are provided on pages 19 and 20.

13 Weeks Ended

13 Weeks Ended

November 30, 2013

December 1, 2012

Net Revenue:

Americas Adhesives

$

232,554

$

223,179

Construction Products

40,754

37,317

EIMEA

189,763

190,336

Asia Pacific

70,460

62,423

Total H.B. Fuller

$

533,531

$

513,255

Segment Operating Income:

Americas Adhesives

$

30,644

$

29,853

Construction Products

2,260

3,415

EIMEA

16,709

12,181

Asia Pacific

3,440

2,870

Total H.B. Fuller

$

53,053

$

48,319

Depreciation Expense:

Americas Adhesives

$

4,267

$

4,184

Construction Products

852

807

EIMEA

3,165

3,850

Asia Pacific

1,181

1,228

Total H.B. Fuller

$

9,465

$

10,069

Amortization Expense:

Americas Adhesives

$

1,425

$

1,301

Construction Products

1,935

1,919

EIMEA

1,921

1,799

Asia Pacific

481

471

Total H.B. Fuller

$

5,762

$

5,490

EBITDA:

Americas Adhesives

$

36,336

$

35,338

Construction Products

5,047

6,141

EIMEA

21,795

17,830

Asia Pacific

5,102

4,569

Total H.B. Fuller

$

68,280

$

63,878

Segment Operating Margin:

Americas Adhesives

13.2%

13.4%

Construction Products

5.5%

9.2%

EIMEA

8.8%

6.4%

Asia Pacific

4.9%

4.6%

Total H.B. Fuller

9.9%

9.4%

EBITDA Margin:

Americas Adhesives

15.6%

15.8%

Construction Products

12.4%

16.5%

EIMEA

11.5%

9.4%

Asia Pacific

7.2%

7.3%

Total H.B. Fuller

12.8%

12.4%

Net Revenue Growth:

Americas Adhesives

4.2%

Construction Products

9.2%

EIMEA

(0.3%)

Asia Pacific

12.9%

Total H.B. Fuller

4.0%

 

H.B. FULLER COMPANY AND SUBSIDIARIES

SEGMENT FINANCIAL INFORMATION

In thousands (unaudited)

The Company has realigned its regional reporting to reflect the current organization structure and management accountability. Reconciliations are provided on pages 19 and 20.

52 Weeks Ended

52 Weeks Ended

November 30, 2013

December 1, 2012

Net Revenue:

Americas Adhesives

$

902,573

$

838,615

Construction Products

158,576

147,080

EIMEA

733,211

672,423

Asia Pacific

252,608

228,121

Total H.B. Fuller

$

2,046,968

$

1,886,239

Segment Operating Income:

Americas Adhesives

$

123,265

$

112,368

Construction Products

10,940

8,334

EIMEA

51,526

34,483

Asia Pacific

9,771

7,356

Total H.B. Fuller

$

195,502

$

162,541

Depreciation Expense:

Americas Adhesives

$

15,481

$

15,126

Construction Products

3,296

3,352

EIMEA

12,910

12,746

Asia Pacific

4,600

4,563

Total H.B. Fuller

$

36,287

$

35,787

Amortization Expense:

Americas Adhesives

$

5,351

$

3,726

Construction Products

7,725

7,649

EIMEA

7,510

5,653

Asia Pacific

1,922

1,675

Total H.B. Fuller

$

22,508

$

18,703

EBITDA:

Americas Adhesives

$

144,097

$

131,220

Construction Products

21,961

19,335

EIMEA

71,946

52,882

Asia Pacific

16,293

13,594

Total H.B. Fuller

$

254,297

$

217,031

Segment Operating Margin:

Americas Adhesives

13.7%

13.4%

Construction Products

6.9%

5.7%

EIMEA

7.0%

5.1%

Asia Pacific

3.9%

3.2%

Total H.B. Fuller

9.6%

8.6%

EBITDA Margin:

Americas Adhesives

16.0%

15.6%

Construction Products

13.8%

13.1%

EIMEA

9.8%

7.9%

Asia Pacific

6.4%

6.0%

Total H.B. Fuller

12.4%

11.5%

Net Revenue Growth:

Americas Adhesives

7.6%

Construction Products

7.8%

EIMEA

9.0%

Asia Pacific

10.7%

Total H.B. Fuller

8.5%

* Numbers are not adjusted to remove the one-time negative impact of the fair value step-up on the inventory acquired with the Forbo business of $3.3 million in the second quarter of 2012 or the negative impact as the result of a review of custom duties of $1.1 million in the third quarter of 2013.

 

H.B. FULLER COMPANY AND SUBSIDIARIES

SEGMENT FINANCIAL INFORMATION

NET REVENUE GROWTH

(unaudited)

13 Weeks Ended November 30, 2013

Americas Adhesives

Construction Products

EIMEA

Asia Pacific

Total HBF

Price

(1.1%)

(3.2%)

0.8%

(1.7%)

(0.6%)

Volume

5.7%

12.4%

(3.2%)

16.5%

4.2%

  Organic Growth

4.6%

9.2%

(2.4%)

14.8%

3.6%

F/X

(0.4%)

0.0%

2.1%

(1.9%)

0.4%

4.2%

9.2%

(0.3%)

12.9%

4.0%

52 Weeks Ended November 30, 2013

Americas Adhesives

Construction Products

EIMEA

Asia Pacific

Total HBF

Price

(0.3%)

(1.1%)

1.5%

(1.8%)

0.1%

Volume

1.9%

8.9%

(3.0%)

8.3%

1.5%

  Organic Growth

1.6%

7.8%

(1.5%)

6.5%

1.6%

F/X

(0.2%)

0.0%

1.5%

(0.1%)

0.4%

Acquisition

6.2%

0.0%

9.0%

4.3%

6.5%

7.6%

7.8%

9.0%

10.7%

8.5%

 

H.B. FULLER COMPANY AND SUBSIDIARIES

REGULATION G RECONCILIATION

In thousands (unaudited)

13 Weeks Ended

13 Weeks Ended

November 30, 2013

December 1, 2012

Net income including non-controlling interests

$

22,003

$

25,194

Income from discontinued operations

-

(182)

Income from equity method investments

(2,360)

(2,651)

Income taxes

11,675

11,191

Interest expense

4,330

5,476

Other income (expense), net

1,269

(759)

Asset impairment charges

-

846

Special charges

16,136

9,204

Segment Operating Income

53,053

48,319

Depreciation expense

9,465

10,069

Amortization expense

5,762

5,490

EBITDA

$

68,280

$

63,878

EBITDA margin2

12.8%

12.4%

52 Weeks Ended

52 Weeks Ended

November 30, 2013

December 1, 2012

Net income including non-controlling interests

$

97,186

$

125,855

Income from discontinued operations

(1,211)

(57,568)

Income from equity method investments

(8,380)

(9,218)

Income taxes

39,949

30,479

Interest expense

19,120

19,793

Other income (expense), net

3,751

(784)

Asset impairment charges

-

1,517

Special charges

45,087

52,467

Segment Operating Income

195,502

162,541

Depreciation expense

36,287

35,787

Amortization expense

22,508

18,703

EBITDA

$

254,297

$

217,031

EBITDA margin

12.4%

11.5%

* Numbers are not adjusted to remove the one-time negative impact of the fair value step-up on the inventory acquired with the Forbo business of $3.3 million in the second quarter of 2012 or the negative impact as the result of a review of custom duties of $1.1 million in the third quarter of 2013.

 

H.B. FULLER COMPANY AND SUBSIDIARIES

REGULATION G RECONCILIATION

In thousands (unaudited)

13 Weeks Ended

13 Weeks Ended

November 30, 2013

December 1, 2012

Net revenue

$

533,531

$

513,255

Cost of sales

(387,859)

(369,541)

Gross profit

145,672

143,714

Selling, general and administrative expenses

(92,619)

(95,395)

Segment operating income

53,053

48,319

Depreciation expense

9,465

10,069

Amortization expense

5,762

5,490

EBITDA

$

68,280

$

63,878

EBITDA margin

12.8%

12.4%

52 Weeks Ended

52 Weeks Ended

November 30, 2013

December 1, 2012

Net revenue

$

2,046,968

$

1,886,239

Cost of sales

(1,476,797)

(1,368,963)

Gross profit

570,171

517,276

Selling, general and administrative expenses

(374,669)

(354,735)

Segment operating income

195,502

162,541

Depreciation expense

36,287

35,787

Amortization expense

22,508

18,703

EBITDA

$

254,297

$

217,031

EBITDA margin

12.4%

11.5%

* Numbers are not adjusted to remove the one-time negative impact of the fair value step-up on the inventory acquired with the Forbo business of $3.3 million in the second quarter of 2012 or the negative impact as the result of a review of custom duties of $1.1 million in the third quarter of 2013.

 

H.B. FULLER COMPANY AND SUBSIDIARIES

REGULATION G RECONCILIATION

In thousands, except per share amounts (unaudited)

Adjusted

13 Weeks Ended

13 Weeks Ended

November 30, 2013

Adjustments

November 30, 2013

Net revenue

$

533,531

$

-

$

533,531

Cost of sales

(387,859)

-

(387,859)

Gross profit

145,672

-

145,672

Selling, general and administrative expenses

(92,619)

-

(92,619)

Acquisition and transformation related costs

(2,890)

Workforce reduction costs

(2,391)

Facility exit costs

(7,695)

Other related costs

(3,160)

Special charges, net

(16,136)

(16,136)

-

Other income (expense), net

(1,269)

-

(1,269)

Interest expense

(4,330)

-

(4,330)

Income from continuing operations before income taxes and income from equity method investments

31,318

(16,136)

47,454

Income taxes

(11,675)

3,183

(14,858)

Income from equity method investments

2,360

-

2,360

Net income from continuing operations

22,003

(12,953)

34,956

Net income including non-controlling interests

22,003

(12,953)

34,956

Net income attributable to non-controlling interests

(117)

-

(117)

Net income attributable to H.B. Fuller

$

21,886

$

(12,953)

$

34,839

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

   Income (loss) from continuing operations

0.44

(0.26)

0.70

$

0.44

$

(0.26)

$

0.70

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

   Income (loss) from continuing operations

0.43

(0.25)

 0.68

$

0.43

$

(0.25)

$

0.68

Weighted-average common shares outstanding:

Basic

49,909

49,909

49,909

Diluted

51,236

51,236

51,236

 

H.B. FULLER COMPANY AND SUBSIDIARIES

REGULATION G RECONCILIATION

In thousands, except per share amounts (unaudited)

Adjusted

13 Weeks Ended

13 Weeks Ended

December 1, 2012

Adjustments

December 1, 2012

Net revenue

$

513,255

$

-

$

513,255

Cost of sales

(369,541)

-

(369,541)

Gross profit

143,714

-

143,714

Selling, general and administrative expenses

(95,395)

-

(95,395)

Special charges, net

(9,204)

(9,204)

-

Asset impairment charges

(846)

-

(846)

Other income (expense), net

759

-

759

Interest expense

(5,476)

-

(5,476)

Income from continuing operations before income taxes and income from equity method investments

33,552

(9,204)

42,756

Income taxes

(11,191)

1,701

(12,892)

Income from equity method investments

2,651

-

2,651

Net income from continuing operations

25,012

(7,503)

32,515

Income from discontinued operations

182

-

182

Net income including non-controlling interests

25,194

(7,503)

32,697

Net income attributable to non-controlling interests

(82)

-

(82)

Net income attributable to H.B. Fuller

$

25,112

$

(7,503)

$

32,615

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

   Income (loss) from continuing operations

0.50

(0.15)

0.65

   income from discontinued operations

0.00

-

0.00

$

0.51

$

(0.15)

$

0.66

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

   Income (loss) from continuing operations

0.49

(0.15)

 0.64

   income from discontinued operations

0.00

-

0.00

$

0.49

$

(0.15)

$

0.64

Weighted-average common shares outstanding:

Basic

49,640

49,640

49,640

Diluted

50,798

50,798

50,798

a  Income per share amounts may not add due to rounding

 

H.B. FULLER COMPANY AND SUBSIDIARIES

REGULATION G RECONCILIATION

In thousands, except per share amounts (unaudited)

Adjusted

52 Weeks Ended

52 Weeks Ended

November 30, 2013

Adjustments

November 30, 2013

Net revenue

$

2,046,968

$

-

$

2,046,968

Cost of sales

(1,476,797)

(1,098)

(1,475,699)

Gross profit

570,171

(1,098)

571,269

Selling, general and administrative expenses

(374,669)

-

(374,669)

Acquisition and transformation related costs

(8,698)

Workforce reduction costs

(9,784)

Facility exit costs

(17,869)

Other related costs

(8,736)

Special charges, net

(45,087)

(45,087)

-

Other income (expense), net

(3,751)

-

(3,751)

Interest expense

(19,120)

-

(19,120)

Income from continuing operations before income taxes and income from equity method investments

127,544

(46,185)

173,729

Income taxes

(39,949)

10,012

(49,961)

Income from equity method investments

8,380

-

8,380

Income from continuing operations

95,975

(36,173)

132,148

Income from discontinued operations

1,211

-

1,211

Net income including non-controlling interests

97,186

(36,173)

133,359

Net income attributable to non-controlling interests

(425)

-

(425)

Net income attributable to H.B. Fuller

$

96,761

$

(36,173)

$

132,934

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

   Income (loss) from continuing operations

1.92

(0.73)

2.64

   Income from discontinued operations

0.02

-

0.02

$

1.94

$

(0.73)

$

2.66

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

   Income (loss) from continuing operations

1.87

(0.71)

 2.58

   Income from discontinued operations

0.02

-

0.02

$

1.89

$

(0.71)

$

2.60

Weighted-average common shares outstanding:

Basic

49,893

49,893

49,893

Diluted

51,136

51,136

51,136

a Income per share amounts may not add due to rounding

 

H.B. FULLER COMPANY AND SUBSIDIARIES

REGULATION G RECONCILIATION

In thousands, except per share amounts (unaudited)

Adjusted

52 Weeks Ended

52 Weeks Ended

December 1, 2012

Adjustments

December 1, 2012

Net revenue

$

1,886,239

$

-

$

1,886,239

Cost of sales

(1,368,963)

(3,314)

(1,365,649)

Gross profit

517,276

(3,314)

520,590

Selling, general and administrative expenses

(354,735)

-

(354,735)

Special charges

(52,467)

(52,467)

-

Asset impairment charges

(1,517)

-

(1,517)

Other income (expense), net

784

-

784

Interest expense

(19,793)

-

(19,793)

Income from continuing operations before income taxes and income from equity method investments

89,548

(55,781)

145,329

Income taxes

(30,479)

12,534

(43,013)

Income from equity method investments

9,218

-

9,218

Income from continuing operations

68,287

(43,247)

111,534

Income from discontinued operations

57,568

-

57,568

Net income including non-controlling interests

125,855

(43,247)

169,102

Net loss attributable to non-controlling interests

(233)

-

(233)

Net income attributable to H.B. Fuller

$

125,622

$

(43,247)

$

168,869

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

   Income (loss) from continuing operations

1.37

(0.87)

2.25

   Income from discontinued operations

1.16

-

1.16

$

2.53

$

(0.87)

$

3.41

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

   Income (loss) from continuing operations

1.34

(0.85)

2.20

   Income from discontinued operations

1.14

-

1.14

$

2.48

$

(0.85)

$

3.34

Weighted-average common shares outstanding:

Basic

49,571

49,571

49,571

Diluted

50,618

50,618

50,618

a  Income per share amounts may not add due to rounding

 

H.B. FULLER COMPANY AND SUBSIDIARIES REVISED REGIONAL/SEGMENT REPORTING STRUCTURE In thousands, except per share amounts (unaudited)

Old Regional Structure

New Segment Structure

Net Revenue

Q4 2013

Q3 2013

Q2 2013

Q1 2013

Net Revenue

Q4 2013

Q3 2013

Q2 2013

Q1 2013

North America Adhesives

185,396

190,082

190,641

172,262

Americas Adhesives

232,554

233,515

228,773

207,731

Construction Products

40,754

40,857

42,934

34,031

Construction Products

40,754

40,857

42,934

34,031

North America

226,150

230,939

233,575

206,293

EIMEA

189,763

180,753

185,194

177,501

EIMEA

189,763

180,753

185,194

177,501

Asia Pacific

70,460

59,454

62,115

60,579

Latin America Adhesives

47,158

43,433

38,132

35,469

Total H.B. Fuller

533,531

514,579

519,016

479,842

Asia Pacific

70,460

59,454

62,115

60,579

Total H.B. Fuller

533,531

514,579

519,016

479,842

Operating Income

Q4 2013

Q3 2013

Q2 2013

Q1 2013

Operating Income

Q4 2013

Q3 2013

Q2 2013

Q1 2013

North America Adhesives

26,408

32,171

28,448

23,474

Americas Adhesives

30,644

34,871

31,825

25,925

Construction Products

2,260

3,269

4,047

1,364

Construction Products

2,260

3,269

4,047

1,364

North America

28,668

35,440

32,495

24,838

EIMEA

16,709

14,199

14,145

6,473

EIMEA

16,709

14,199

14,145

6,473

Asia Pacific

3,440

1,564

2,793

1,974

Latin America Adhesives

4,236

2,700

3,377

2,451

Total H.B. Fuller

53,053

53,903

52,810

35,736

Asia Pacific

3,440

1,564

2,793

1,974

Total H.B. Fuller

53,053

53,903

52,810

35,736

Operating Margin

Q4 2013

Q3 2013

Q2 2013

Q1 2013

Operating Margin

Q4 2013

Q3 2013

Q2 2013

Q1 2013

North America Adhesives

14.2%

16.9%

14.9%

13.6%

Americas Adhesives

13.2%

14.9%

13.9%

12.5%

Construction Products

5.5%

8.0%

9.4%

4.0%

Construction Products

5.5%

8.0%

9.4%

4.0%

North America

12.7%

15.3%

13.9%

12.0%

EIMEA

8.8%

7.9%

7.6%

3.6%

EIMEA

8.8%

7.9%

7.6%

3.6%

Asia Pacific

4.9%

2.6%

4.5%

3.3%

Latin America Adhesives

9.0%

6.2%

8.9%

6.9%

Total H.B. Fuller

9.9%

10.5%

10.2%

7.4%

Asia Pacific

4.9%

2.6%

4.5%

3.3%

Total H.B. Fuller

9.9%

10.5%

10.2%

7.4%

Depreciation & Amortization

Q4 2013

Q3 2013

Q2 2013

Q1 2013

Depreciation & Amortization

Q4 2013

Q3 2013

Q2 2013

Q1 2013

North America Adhesives

5,045

4,511

4,447

4,769

Americas Adhesives

5,692

5,097

4,842

5,201

Construction Products

2,787

2,749

2,729

2,755

Construction Products

2,787

2,749

2,729

2,755

North America

7,832

7,260

7,176

7,524

EIMEA

5,086

4,937

4,821

5,576

EIMEA

5,086

4,937

4,821

5,576

Asia Pacific

1,662

1,602

1,539

1,719

Latin America Adhesives

647

586

395

432

Total H.B. Fuller

15,227

14,385

13,931

15,251

Asia Pacific

1,662

1,602

1,539

1,719

Total H.B. Fuller

15,227

14,385

13,931

15,251

EBITDA

Q4 2013

Q3 2013

Q2 2013

Q1 2013

EBITDA

Q4 2013

Q3 2013

Q2 2013

Q1 2013

North America Adhesives

31,453

36,682

32,895

28,243

Americas Adhesives

36,336

39,968

36,667

31,126

Construction Products

5,047

6,018

6,776

4,119

Construction Products

5,047

6,018

6,776

4,119

North America

36,500

42,700

39,671

32,362

EIMEA

21,795

19,136

18,966

12,049

EIMEA

21,795

19,136

18,966

12,049

Asia Pacific

5,102

3,166

4,332

3,693

Latin America Adhesives

4,883

3,286

3,772

2,883

Total H.B. Fuller

68,280

68,288

66,741

50,987

Asia Pacific

5,102

3,166

4,332

3,693

Total H.B. Fuller

68,280

68,288

66,741

50,987

EBITDA Margin

Q4 2013

Q3 2013

Q2 2013

Q1 2013

EBITDA Margin

Q4 2013

Q3 2013

Q2 2013

Q1 2013

North America Adhesives

17.0%

19.3%

17.3%

16.4%

Americas Adhesives

15.6%

17.1%

16.0%

15.0%

Construction Products

12.4%

14.7%

15.8%

12.1%

Construction Products

12.4%

14.7%

15.8%

12.1%

North America

16.1%

18.5%

17.0%

15.7%

EIMEA

11.5%

10.6%

10.2%

6.8%

EIMEA

11.5%

10.6%

10.2%

6.8%

Asia Pacific

7.2%

5.3%

7.0%

6.1%

Latin America Adhesives

10.4%

7.6%

9.9%

8.1%

Total H.B. Fuller

12.8%

13.3%

12.9%

10.6%

Asia Pacific

7.2%

5.3%

7.0%

6.1%

Total H.B. Fuller

12.8%

13.3%

12.9%

10.6%

* Numbers are not adjusted to remove the one-time negative impact as the result of a review of custom duties of $1.1 million in the third quarter of 2013.

 

H.B. FULLER COMPANY AND SUBSIDIARIES REVISED REGIONAL/SEGMENT REPORTING STRUCTURE In thousands, except per share amounts (unaudited)

Old Regional Structure

New Segment Structure

Net Revenue

Q4 2012

Q3 2012

Q2 2012

Q1 2012

Net Revenue

Q4 2012

Q3 2012

Q2 2012

Q1 2012

North America Adhesives

181,269

190,234

193,382

118,096

Americas Adhesives

223,179

229,806

231,937

153,693

Construction Products

37,317

37,590

39,679

32,494

Construction Products

37,317

37,590

39,679

32,494

North America

218,586

227,824

233,061

150,590

EIMEA

190,336

177,493

193,943

110,651

EIMEA

190,336

177,493

193,943

110,651

Asia Pacific

62,423

55,646

61,436

48,616

Latin America Adhesives

41,910

39,572

38,555

35,597

Total H.B. Fuller

513,255

500,535

526,995

345,454

Asia Pacific

62,423

55,646

61,436

48,616

Total H.B. Fuller

513,255

500,535

526,995

345,454

Operating Income

Q4 2012

Q3 2012

Q2 2012

Q1 2012

Operating Income

Q4 2012

Q3 2012

Q2 2012

Q1 2012

North America Adhesives

26,061

30,478

25,115

17,495

Americas Adhesives

29,853

33,788

28,844

19,882

Construction Products

3,415

1,299

3,148

472

Construction Products

3,415

1,299

3,148

472

North America

29,476

31,777

28,263

17,967

EIMEA

12,181

6,269

9,485

6,548

EIMEA

12,181

6,269

9,485

6,548

Asia Pacific

2,870

1,613

2,118

755

Latin America Adhesives

3,792

3,310

3,729

2,387

Total H.B. Fuller

48,319

42,969

43,595

27,657

Asia Pacific

2,870

1,613

2,118

755

Total H.B. Fuller

48,319

42,969

43,595

27,657

Operating Margin

Q4 2012

Q3 2012

Q2 2012

Q1 2012

Operating Margin

Q4 2012

Q3 2012

Q2 2012

Q1 2012

North America Adhesives

14.4%

16.0%

13.0%

14.8%

Americas Adhesives

13.4%

14.7%

12.4%

12.9%

Construction Products

9.2%

3.5%

7.9%

1.5%

Construction Products

9.2%

3.5%

7.9%

1.5%

North America

13.5%

13.9%

12.1%

11.9%

EIMEA

6.4%

3.5%

4.9%

5.9%

EIMEA

6.4%

3.5%

4.9%

5.9%

Asia Pacific

4.6%

2.9%

3.4%

1.6%

Latin America Adhesives

9.0%

8.4%

9.7%

6.7%

Total H.B. Fuller

9.4%

8.6%

8.3%

8.0%

Asia Pacific

4.6%

2.9%

3.4%

1.6%

Total H.B. Fuller

9.4%

8.6%

8.3%

8.0%

Depreciation & Amortization

Q4 2012

Q3 2012

Q2 2012

Q1 2012

Depreciation & Amortization

Q4 2012

Q3 2012

Q2 2012

Q1 2012

North America Adhesives

4,922

4,709

4,760

2,461

Americas Adhesives

5,485

5,355

5,239

2,787

Construction Products

2,726

2,752

2,736

2,773

Construction Products

2,726

2,752

2,736

2,773

North America

7,648

7,461

7,496

5,234

EIMEA

5,649

5,111

5,352

2,287

EIMEA

5,649

5,111

5,352

2,287

Asia Pacific

1,699

1,550

1,686

1,303

Latin America Adhesives

563

646

479

326

Total H.B. Fuller

15,559

14,768

15,013

9,150

Asia Pacific

1,699

1,550

1,686

1,303

Total H.B. Fuller

15,559

14,768

15,013

9,150

EBITDA

Q4 2012

Q3 2012

Q2 2012

Q1 2012

EBITDA

Q4 2012

Q3 2012

Q2 2012

Q1 2012

North America Adhesives

30,983

35,187

29,875

19,956

Americas Adhesives

35,338

39,143

34,083

22,669

Construction Products

6,141

4,051

5,884

3,245

Construction Products

6,141

4,051

5,884

3,245

North America

37,124

39,238

35,759

23,201

EIMEA

17,830

11,380

14,837

8,835

EIMEA

17,830

11,380

14,837

8,835

Asia Pacific

4,569

3,163

3,804

2,058

Latin America Adhesives

4,355

3,956

4,208

2,713

Total H.B. Fuller

63,878

57,737

58,608

36,807

Asia Pacific

4,569

3,163

3,804

2,058

Total H.B. Fuller

63,878

57,737

58,608

36,807

EBITDA Margin

Q4 2012

Q3 2012

Q2 2012

Q1 2012

EBITDA Margin

Q4 2012

Q3 2012

Q2 2012

Q1 2012

North America Adhesives

17.1%

18.5%

15.4%

16.9%

Americas Adhesives

15.8%

17.0%

14.7%

14.7%

Construction Products

16.5%

10.8%

14.8%

10.0%

Construction Products

16.5%

10.8%

14.8%

10.0%

North America

17.0%

17.2%

15.3%

15.4%

EIMEA

9.4%

6.4%

7.7%

8.0%

EIMEA

9.4%

6.4%

7.7%

8.0%

Asia Pacific

7.3%

5.7%

6.2%

4.2%

Latin America Adhesives

10.4%

10.0%

10.9%

7.6%

Total H.B. Fuller

12.4%

11.5%

11.1%

10.7%

Asia Pacific

7.3%

5.7%

6.2%

4.2%

Total H.B. Fuller

12.4%

11.5%

11.1%

10.7%

* Numbers are not adjusted to remove the one-time negative impact of the fair value step-up on the inventory acquired with the Forbo business of $3.3 million in the second quarter of 2012.

1

Adjusted diluted earnings per share (EPS) from continuing operations is a non-GAAP financial measure. During the third quarter of 2013, the Company recorded a negative impact on the gross profit margin line of the income statement as the result of a review of custom duties owed for the years 2000 – 2008 in Argentina. On a pre-tax basis, this item amounted to $1.1 million ($0.02 per diluted share). First, second, third and fourth 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 $16.1 million, $12.8 million, $10.8 million, $5.3 million, $9.2 million $4.7 million, $32.1 million and $6.5 million on a pre-tax basis ($0.25, $0.19, $0.16, $0.08, $0.15, $0.05, $0.52 and $0.14 per diluted share) in Q4 2013, Q3 2013, Q2 2013, Q1 2013, Q4 2012, Q3 2012, Q2 2012 and Q1 2012, respectively. During the second quarter of 2012, the Company recorded a one-time negative impact of the fair value step-up on the inventory acquired with the Forbo business on the gross profit margin line of the income statement. On a pre-tax basis, this "step-up" amounted to $3.3 million dollars ($0.05 per diluted share).

2

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 segment basis it is defined as operating income, plus depreciation expense, plus amortization expense. EBITDA margin is defined as EBITDA divided by net revenue.

3

Segment 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 segment operating income calculation. In Q4 2013, Q3 2013, Q2 2013, Q1 2013, Q4 2012, Q3 2012, Q2 2012 and Q1 2012, special charges, net totaled $16.1 million, $12.8 million, $10.8 million, $5.3 million, $9.2 million $4.7 million, $32.1 million and $6.5 million, respectively.

4

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

 

SOURCE H.B. Fuller Company



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http://www.hbfuller.com