St. Paul, MN – H.B. Fuller Company reported financial results for the first quarter that ended March 1, 2014.
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 O.N.E.
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.