EX-99.1 2 d699403dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

 

LOGO

  

Worldwide Headquarters

1200 Willow Lake Boulevard

St. Paul, Minnesota 55110-5101

  

Maximillian Marcy

Investor Relations Contact

651-236-5062

 

NEWS   For Immediate Release    March 26, 2014   

H.B. Fuller Reports First Quarter 2014 Results

First Quarter Adjusted Diluted EPS $0.491;

First Quarter Diluted EPS $0.28

ST. PAUL, Minn. – 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 income1 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 $0.491 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.

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 $0.491, unchanged versus the prior year’s adjusted result of $0.491.

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 margin1 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, inline 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 $1252 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.

 

2


$ 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.

 

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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.

 

4


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, 2014      November 30, 2013      March 2, 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  

 

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H.B. FULLER COMPANY AND SUBSIDIARIES

SEGMENT FINANCIAL INFORMATION

In thousands (unaudited)

 

     13 Weeks Ended     13 Weeks Ended  
     March 1, 2014     March 2, 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:

    

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:

    

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:

    

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:

    

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  
  

 

 

   

 

6


H.B. FULLER COMPANY AND SUBSIDIARIES

SEGMENT FINANCIAL INFORMATION

NET REVENUE GROWTH

(unaudited)

13 Weeks Ended March 1, 2014

 

     Americas
Adhesives
    EIMEA     Asia Pacific     Construction
Products
    Total HBF  

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
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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H.B. FULLER COMPANY AND SUBSIDIARIES

REGULATION G RECONCILIATION

In thousands (unaudited)

 

     13 Weeks Ended     13 Weeks Ended  
     March 1, 2014     March 2, 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 income

     36,246       35,736  

Depreciation expense

     9,164       9,744  

Amortization expense

     5,775       5,507  
  

 

 

   

 

 

 

EBITDA

   $ 51,185     $ 50,987   

EBITDA margin

     10.5     10.6

 

8


H.B. FULLER COMPANY AND SUBSIDIARIES

REGULATION G RECONCILIATION

In thousands (unaudited)

 

     13 Weeks Ended     13 Weeks Ended  
     March 1, 2014     March 2, 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 income

     36,246       35,736  

Depreciation expense

     9,164       9,744  

Amortization expense

     5,775       5,507  
  

 

 

   

 

 

 

EBITDA

   $ 51,185     $ 50,987  

EBITDA margin

     10.5     10.6

 

9


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

 

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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   

 

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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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