H.B. FULLER COMPANY 
By ST. PAUL, Minn., March 26, 2014 /PRNewswire/ -- H.B. Fuller Company (NYSE: FUL) today reported financial results for the first quarter that ended March 1, 2014.
Items of Note for the First Quarter of 2014:
-- Organic revenue increased by 2 percent compared to the prior year;
-- Organic revenue increased 17 percent in Construction Products and 11
percent in Asia Pacific compared to prior year;
-- Adjusted segment operating income(1) increased 5 percent versus prior
year;
-- Selling, General and Administrative (SG&A) expenses were tightly
controlled, about 1 percent, or 40 basis points as a percentage of net
revenue, lower than the prior year's first quarter;
-- Adjusted diluted EPS of $0.49(1) was unchanged versus last year;
-- On track to substantially complete business integration by the end of
the third quarter 2014;
-- Project ONE remains on time and on budget.
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First Quarter 2014 Results:
Net income for the first quarter of 2014 was $14.6 million, or $0.28 per diluted share, versus net income of $20.7 million, or $0.41 per diluted share, in last year's first quarter. Adjusted diluted earnings per share in the first quarter of 2014 were $0.49(1), unchanged versus the prior year's adjusted result of $0.49(1).
Net revenue for the first quarter of 2014 was $486.0 million, up 1.3 percent versus the first quarter of 2013. Higher volume positively impacted net revenue growth by 2.0 percentage points, while foreign currency translation negatively impacted net revenue growth by 0.7 percentage points. Organic revenue grew by 2.0 percent year-over-year.
Adjusted gross profit margin(1) was essentially unchanged versus the prior year's result. Selling, General and Administrative (SG&A) expense was down by 1 percent, or 40 basis points as a percentage of net revenue, versus the prior year's first quarter.
"During the first quarter, we hit a number of key milestones on our transformation programs and we remain on track toward hitting our goal of 15 percent EBITDA margin in 2015, while still delivering the expected level of EPS during this quarter," said Jim Owens, H.B. Fuller president and chief executive officer. "Organic revenue growth of 2 percent was below last quarter's results with strong revenue in Asia and Construction Products offset by weak revenue in Europe and slower than expected organic sales growth in the Americas through December, January and February. We are pleased with our ability to adapt and deliver bottom line results in the quarter as we manage significant internal projects and numerous external factors."
Balance Sheet and Cash Flow:
At the end of the first quarter of 2014, the Company had cash totaling $113 million and total debt of $534 million. This compares to fourth quarter 2013 levels of $155 million and $493 million, respectively. Sequentially, net debt was up by $83 million primarily due to normal seasonal cash flow requirements and the business integration project outlays. Cash flow from operations was negative $17 million in the first quarter, in line with normal seasonal patterns. Capital expenditures were $51 million in the first quarter, with the bulk of this spending related to the Company's ongoing business integration activities and to support Project ONE.
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. At the inception of the project we estimated the total costs associated with this project to be $125(2) million. We currently expect our total project costs will exceed the estimates by an immaterial amount, primarily due to delays in completing the European portion of the project. The summary below lays out the estimated project costs, the costs expensed in the current quarter and the total costs incurred to date.
$ Millions Original
Estimate of
Costs Q1 2014 Since Inception
Acquisition and
transformation 35 2 36
--------------- --- --- ---
Workforce Reduction 46 2 40
Facility Exit 17 4 17
------------- --- --- ---
Other 17 3 13
--- --- ---
Total cash costs 115 11 106
---------------- --- --- ---
Total non-cash costs 10 1 11
-------------------- --- --- ---
Fiscal 2014 Outlook:
We are maintaining 2014 fiscal year guidance as provided in January of this year in the prior quarter's earnings release.
Conference Call:
The Company will host an investor conference call to discuss first quarter 2014 results on Thursday, March 27, 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, adjusted diluted earnings per share 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-K filing for the fiscal year ended November 30, 2013. 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
March 1, 2014 Net Revenue March 2, 2013 Net Revenue
------------- ----------- ------------- -----------
Net revenue $485,981 100.0% $479,842 100.0%
Cost of sales (352,936) (72.6%) (346,466) (72.2%)
-------- ------ -------- ------
Gross profit 133,045 27.4% 133,376 27.8%
Selling, general
and
administrative
expenses (96,799) (19.9%) (97,640) (20.3%)
Special charges,
net (11,734) (2.4%) (5,333) (1.1%)
Other income
(expense), net (1,050) (0.2%) 378 0.1%
Interest expense (4,126) (0.8%) (5,327) (1.1%)
------ ----- ------ -----
Income before
income taxes and
income from
equity method
investments 19,336 4.0% 25,454 5.3%
Income taxes (6,541) (1.3%) (7,120) (1.5%)
Income from equity
method
investments 1,854 0.4% 2,440 0.5%
----- --- ----- ---
Net income
including non-
controlling
interests 14,649 3.0% 20,774 4.3%
Net income
attributable to
non-controlling
interests (78) (0.0%) (97) (0.0%)
--- ----- --- -----
Net income
attributable
to H.B.
Fuller $14,571 3.0% $20,677 4.3%
======= === ======= ===
Basic income
per common
share
attributable
to H.B.
Fuller $0.29 $0.42
===== =====
Diluted
income per
common
share
attributable
to H.B.
Fuller $0.28 $0.41
===== =====
Weighted-average
common shares
outstanding:
Basic 49,910 49,817
Diluted 51,255 51,027
Dividends
declared
per common
share $0.100 $0.085
Selected Balance Sheet Information (subject to change prior to filing of the Company's Quarterly
Report on Form 10-Q)
------------------------------------------------------------------------------------------------
March 1, November 30, 2013 March 2,
2014 2013
--------- ----------------- ---------
Cash &
cash
equivalents $113,047 $155,121 $163,131
Trade
accounts
receivable,
net 327,314 331,125 308,343
Inventories 260,763 221,537 229,442
Trade
payables 208,099 201,575 167,926
Total
assets 1,909,107 1,873,028 1,765,410
Total
debt 533,697 492,904 510,981
H.B. FULLER COMPANY AND SUBSIDIARIES
SEGMENT FINANCIAL INFORMATION
In thousands (unaudited)
13 13
Weeks Weeks
Ended Ended
March March
1, 2,
2014 2013
------ ------
Net Revenue:
Americas Adhesives $209,666 $207,731
EIMEA 171,559 177,501
Asia Pacific 65,047 60,579
Construction Products 39,709 34,031
------ ------
Total H.B. Fuller $485,981 $479,842
====== ======
Segment Operating Income:3
Americas Adhesives $25,206 $25,925
EIMEA 8,440 6,473
Asia Pacific 1,788 1,974
Construction Products 812 1,364
--- -----
Total H.B. Fuller $36,246 $35,736
======= =======
Depreciation Expense:
Americas Adhesives $3,800 $3,955
EIMEA 3,255 3,711
Asia Pacific 1,261 1,246
Construction Products 848 832
--- ---
Total H.B. Fuller $9,164 $9,744
====== ======
Amortization Expense:
Americas Adhesives $1,391 $1,245
EIMEA 1,936 1,865
Asia Pacific 495 473
Construction Products 1,953 1,924
----- -----
Total H.B. Fuller $5,775 $5,507
====== ======
EBITDA:4
Americas Adhesives $30,397 $31,125
EIMEA 13,631 12,049
Asia Pacific 3,544 3,693
Construction Products 3,613 4,120
----- -----
Total H.B. Fuller $51,185 $50,987
======= =======
Segment Operating Margin:5
Americas Adhesives 12.0% 12.5%
EIMEA 4.9% 3.6%
Asia Pacific 2.7% 3.3%
Construction Products 2.0% 4.0%
--- ---
Total H.B. Fuller 7.5% 7.4%
=== ===
EBITDA Margin:4
Americas Adhesives 14.5% 15.0%
EIMEA 7.9% 6.8%
Asia Pacific 5.4% 6.1%
Construction Products 9.1% 12.1%
--- ----
Total H.B. Fuller 10.5% 10.6%
==== ====
Net Revenue Growth:
Americas Adhesives 0.9%
EIMEA (3.3%)
Asia Pacific 7.4%
Construction Products 16.7%
----
Total H.B. Fuller 1.3%
===
H.B. FULLER COMPANY AND SUBSIDIARIES
SEGMENT FINANCIAL INFORMATION
NET REVENUE GROWTH
(unaudited)
13 Weeks Ended March 1, 2014
----------------------------
Americas EIMEA Asia Pacific Construction Total HBF
Adhesives Products
--------- --------
Price (0.6%) 0.8% 1.4% (2.5%) 0.0%
Volume 2.1% (4.0%) 9.4% 19.2% 2.0%
--- ------ --- ---- ---
Organic Growth 1.5% (3.2%) 10.8% 16.7% 2.0%
F/X (0.6%) (0.1%) (3.4%) 0.0% (0.7%)
0.9% (3.3%) 7.4% 16.7% 1.3%
=== ====== === ==== ===
H.B. FULLER COMPANY AND SUBSIDIARIES
REGULATION G RECONCILIATION
In thousands (unaudited)
13 13
Weeks Weeks
Ended Ended
March March
1, 2,
2014 2013
------ ------
Net income including non-
controlling interests $14,649 $20,774
Income from equity method
investments (1,854) (2,440)
Income taxes 6,541 7,120
Interest expense 4,126 5,327
Other income (expense), net 1,050 (378)
Special charges 11,734 5,333
Segment operating income3 36,246 35,736
Depreciation expense 9,164 9,744
Amortization expense 5,775 5,507
----- -----
EBITDA4 $51,185 $50,987
EBITDA margin4 10.5% 10.6%
H.B. FULLER COMPANY AND SUBSIDIARIES
REGULATION G RECONCILIATION
In thousands (unaudited)
13 Weeks 13 Weeks
Ended Ended
March 1, March 2,
2014 2013
-------- ---------
Net revenue $485,981 $479,842
Cost of sales (352,936) (346,466)
------- -------
Gross profit 133,045 133,376
Selling, general and
administrative expenses (96,799) (97,640)
------- -------
Segment operating income3 36,246 35,736
Depreciation expense 9,164 9,744
Amortization expense 5,775 5,507
----- -----
EBITDA4 $51,185 $50,987
EBITDA margin4 10.5% 10.6%
H.B. FULLER COMPANY AND SUBSIDIARIES
REGULATION G RECONCILIATION
In thousands, except per share amounts (unaudited)
Adjusted
13 Weeks Ended 13 Weeks Ended
March 1, 2014 Adjustments March 1, 2014
------------- ----------- -------------
Net revenue $485,981 $ - $485,981
Cost of sales (352,936) (1,340) (351,596)
-------- ------ --------
Gross profit 133,045 (1,340) 134,385
Selling, general and
administrative expenses (96,799) - (96,799)
Acquisition and
transformation
related costs (1,708)
Workforce
reduction
costs (2,059)
Facility exit
costs (5,126)
Other related
costs (2,841)
------
Special
charges, net (11,734) (11,734) -
Other income
(expense), net (1,050) - (1,050)
Interest
expense (4,126) - (4,126)
------ --- ------
Income before income taxes and
income from equity method
investments 19,336 (13,074) 32,410
Income taxes (6,541) 2,618 (9,159)
Income from
equity method
investments 1,854 - 1,854
----- --- -----
Net income including non-
controlling interests 14,649 (10,456) 25,105
Net income attributable to
non-controlling interests (78) - (78)
--- --- ---
Net income attributable to
H.B. Fuller $14,571 $(10,456) $25,027
======= ======== =======
Basic income (loss) per common
share attributable to H.B.
Fuller $0.29 $(0.21) $0.50
===== ====== =====
Diluted income (loss) per
common share attributable to
H.B. Fullera $0.28 $(0.20) $0.49(1)
===== ====== =======
Weighted-average common
shares outstanding:
Basic 49,910 49,910 49,910
Diluted 51,255 51,255 51,255
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
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 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 including non-
controlling interests 20,774 (4,234) 25,008
Net income attributable to
non-controlling interests (97) - (97)
--- --- ---
Net income attributable to
H.B. Fuller $20,677 $(4,234) $24,911
======= ======= =======
Basic income (loss) per
common share attributable
to H.B. Fuller $0.42 $(0.08) $0.50
===== ====== =====
Diluted income (loss) 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
(1) Adjusted
diluted
earnings
per share
(EPS) is a
non-GAAP
financial
measure and
excludes
the
following
items.
During the
first
quarter of
2014, the
Company
recorded a
negative
impact on
the gross
profit
margin line
of the
income
statement
as the
result of
business
integration
costs not
classified
as special
charges. On
a pre-tax
basis,
these costs
amounted to
$1.3
million
($0.02 per
diluted
share).
First
quarters of
2014 and
2013
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
$11.7
million and
$5.3
million on
a pre-tax
basis
($0.18 and
$0.08 per
diluted
share) in
Q1 2014 and
Q1 2013,
respectively.
(2) The original
cost
estimate
for special
charges was
$121
million.
During the
third and
fourth
quarters of
2013, the
Company
revised the
estimate
upward to
$125
million to
reflect
higher non-
cash items
and a
revision of
the total
spend in
each of the
categories.
(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 Q1 2014
and Q1
2013,
special
charges,
net totaled
$11.7
million and
$5.3
million,
respectively.
4 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.
5 Segment
operating
margin is a
non-GAAP
financial
measure
defined as
gross
profit,
less SG&A
expense,
divided by
net
revenue.
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SOURCE H.B. Fuller Company
