H.B. Fuller Reports First Quarter 2013 Results
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For best results when printing this announcement, please click on the link below: http://pdf.reuters.com/pdfnews/pdfnews.asp?i=43059c3bf0e37541&u=urn:newsml:reuters.com:20130327:nPnCG84686 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 $0.491 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: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