St. Paul, MN - H.B. Fuller Company reported financial results for the second quarter that ended June 1, 2013.
Second Quarter 2013 Results:
Net income for the second quarter of 2013 was $25.9 million, or $0.51 per diluted share, versus net income from continuing operations of $5.1 million, or $0.10 per diluted share, in last year's second quarter. Adjusted diluted earnings per share in the second quarter of 2013 were $0.671, up 8 percent from the prior year's adjusted result of $0.621. Net revenue for the second quarter of 2013 was $519.0 million, down 1.5 percent versus the second quarter of 2012. Higher average selling prices positively impacted net revenue growth by 0.2 percentage points. Foreign currency translation and lower volume reduced net revenue growth by 0.3 and 1.4 percentage points, respectively. Organic revenue declined by 1.2 percent year-over-year. Volume was slightly higher relative to last year in each geographic region except the EIMEA region where volume was down about 5 percent.
Net income for the second quarter of 2013 was $25.9 million, or $0.51 per diluted share, versus net income from continuing operations of $5.1 million, or $0.10 per diluted share, in last year's second quarter. Adjusted diluted earnings per share in the second quarter of 2013 were $0.671, up 8 percent from the prior year's adjusted result of $0.621. Net revenue for the second quarter of 2013 was $519.0 million, down 1.5 percent versus the second quarter of 2012. Higher average selling prices positively impacted net revenue growth by 0.2 percentage points. Foreign currency translation and lower volume reduced net revenue growth by 0.3 and 1.4 percentage points, respectively. Organic revenue declined by 1.2 percent year-over-year. Volume was slightly higher relative to last year in each geographic region except the EIMEA region where volume was down about 5 percent.
"We are satisfied with the overall results we delivered this quarter," said Jim Owens, H.B. Fuller president and chief executive officer. "While we did not deliver the organic growth we expected in the quarter, we managed our margins well, took another step toward completion of the business integration plan and reduced discretionary spending to deliver on our commitments. We have initiatives in the pipeline which will generate improved revenue results in the second half. We remain on track to deliver the Forbo synergies, our business integration project in Europe, our EPS commitments for the year and our strategic target of 15 percent EBITDA margin in 2015."Gross profit margin was up approximately 170 basis points compared to the prior year's adjusted result1 reflecting solid operational improvement as a result of the ongoing business integration project. Selling, General and Administrative (SG&A) expense was down versus the prior quarter and relatively flat versus last year's second quarter result.
Balance Sheet and Cash Flow:
At the end of the second quarter of 2013, the Company had cash totaling $161 million and total debt of $496 million. This compares to first quarter 2013 levels of $163 million and $511 million, respectively. Sequentially, net debt was down by approximately $13 million. Capital expenditures were $28 million in the second quarter, with the bulk of this spending related to the Company's ongoing business integration activities. Operating cash flow in the second quarter was $52 million.
At the end of the second quarter of 2013, the Company had cash totaling $161 million and total debt of $496 million. This compares to first quarter 2013 levels of $163 million and $511 million, respectively. Sequentially, net debt was down by approximately $13 million. Capital expenditures were $28 million in the second quarter, with the bulk of this spending related to the Company's ongoing business integration activities. Operating cash flow in the second quarter was $52 million.
Year-To-Date:
Net income for the first half of 2013 was $46.6 million, or $0.91 per diluted share, versus net income from continuing operations of $18.7 million, or $0.37 per diluted share, in the first half of 2012. Adjusted total diluted earnings per share in the first half of 2013 were $1.161, up 13 percent from the prior year's first half adjusted result of $1.031.Net revenue for the first half of 2013 was $998.9 million, up 14.5 percent versus the first half of 2012. Higher average selling prices and acquisitions positively impacted net revenue growth by 0.5 and 14.0 percentage points, respectively. Volume and foreign currency translation had no impact to net revenue growth. Organic revenue increased by 0.5 percent year-over-year.
Net income for the first half of 2013 was $46.6 million, or $0.91 per diluted share, versus net income from continuing operations of $18.7 million, or $0.37 per diluted share, in the first half of 2012. Adjusted total diluted earnings per share in the first half of 2013 were $1.161, up 13 percent from the prior year's first half adjusted result of $1.031.Net revenue for the first half of 2013 was $998.9 million, up 14.5 percent versus the first half of 2012. Higher average selling prices and acquisitions positively impacted net revenue growth by 0.5 and 14.0 percentage points, respectively. Volume and foreign currency translation had no impact to net revenue growth. Organic revenue increased by 0.5 percent year-over-year.
Business Integration and Special Charges
The Company has implemented a comprehensive business integration program to deliver synergies related to the acquisition of the Forbo adhesives business and to improve the performance of the EIMEA operating segment. The table below provides an estimate of the expected one-time costs of executing this multi-year project. In addition, the table lists, for each cost element, the costs incurred in the current quarter, for the fiscal year to date and since the project's inception in the fourth quarter of 2011:
The Company has implemented a comprehensive business integration program to deliver synergies related to the acquisition of the Forbo adhesives business and to improve the performance of the EIMEA operating segment. The table below provides an estimate of the expected one-time costs of executing this multi-year project. In addition, the table lists, for each cost element, the costs incurred in the current quarter, for the fiscal year to date and since the project's inception in the fourth quarter of 2011:
| Expected Costs | ____________Costs Incurred_____________Q2 2013 YTD 2013 Inception | ||||||
| Cost Elements | ($ millions) | ($ millions) | ($ millions) | ($ millions) | |||
| Acquisition and transformation | 35 | 2 | 4 | 30 | |||
| Workforce reduction | 53 | 4 | 4 | 32 | |||
| Facility exit | 17 | 2 | 4 | 5 | |||
| Other | 10 | 2 | 3 | 5 | |||
| Total cash costs | 115 | 10 | 15 | 72 | |||
| Total non-cash costs | 6 | 1 | 1 | 4 | |||
The Company has maintained earnings guidance for the 2013 fiscal year at 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 (no-change) | $2.55 to $2.65 | |
| Core Tax Rate (no-change) | 30% | |
| Capex ( $ millions) (no-change) | $110 | |
| EBITDA ($ millions) (no-change) | $260-$265 |
Conference Call:
The Company will host an investor conference call to discuss second quarter 2013 results on Thursday, June 27, 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.
The Company will host an investor conference call to discuss second quarter 2013 results on Thursday, June 27, 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.
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.
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.
