Fourth quarter adjusted diluted EPS from continuing operations USD 0.641; fourth quarter diluted EPS from continuing operations USD 0.49; company sets 2013 EPS guidance at USD 2.55 to USD 2.65.
H.B. Fuller Company has reported financial results for the fourth quarter that ended 1 December 2012.
Fourth quarter 2012 highlights included:
* Integration of the acquired Forbo adhesives business remained on or ahead of schedule and on track to fully deliver synergy targets;
* Net revenue was up 28%, organic revenue was up 3% from last year’s fourth quarter, as adjusted to reflect the same number of weeks in each period;
* Gross profit margin improved 120 basis points compared to the prior quarter;
* Regional operating income increased 36% versus last year;
* Adjusted diluted EPS from continuing operations of USD 0.641 was up approximately 23% on a comparable 13-week basis.
Full-year 2012 highlights Included:
* Achieved record levels of net revenue and adjusted diluted earnings per share from continuing operations;
* Completed acquisition of Industrial Adhesives business from the Forbo Group;
* Completed divestiture of Central America Paints business to Grupo Mundial;
* Integration of the acquired Forbo adhesives business remained on schedule and on track to fully deliver synergy targets;
* Organic revenue increased 6% when adjusting for the extra week in the prior year;
* Regional operating income increased 39% year-over-year;
* Adjusted diluted EPS from continuing operations grew 28% year-over-year.
N.B: 2011 fiscal year had 53 weeks of commercial activity, with the extra week in the fourth quarter of 2011, while the 2012 fiscal year was the normal 52 weeks in length.
Net income from continuing operations for the fourth quarter of 2012 was USD 25.0 million, or USD 0.49 per diluted share, versus net income from continuing operations of USD 22.2 million, or USD 0.45 per diluted share, in last year’s fourth quarter. Adjusted total diluted earnings per share from continuing operations in the fourth quarter of 2012 were USD 0.641, up 14% from the prior year’s adjusted result of USD 0.561 and up 23% on a comparable 13-week basis.
Net revenue for the fourth quarter of 2012 was USD 513.3 million, up 27.8% versus the fourth quarter of 2011. Year-over-year growth was approximately 35% when adjusting for the extra week in the prior year. When excluding the incremental revenue from the acquired Forbo business, net revenue was flat, representing 3% organic growth offset by 3 percentage points of unfavourable foreign currency translation. The organic growth was comprised of a 1% increase in price and 2% growth in volume.
“The results we delivered in the final quarter of this fiscal year are impressive, even when comparing to last year’s reported results which included an extra week,” said Jim Owens, H.B. Fuller president and chief executive officer. “Our fourth quarter revenue came in right on target and we exceeded our internal expectations for margin expansion as some business integration benefits were realized earlier than anticipated and the raw material cost environment was generally favourable. Our performance trends are good, our integration plans are on schedule and we have strong momentum as we enter the 2013 fiscal year.”
Gross profit margin from continuing operations was flat compared to the prior year as the margin dilution from the acquired Forbo business was fully offset by benefits from the business integration activities and other margin enhancement initiatives. Sequentially, gross profit margin increased 120 basis points, due to the positive impact of the business integration and the favourable raw material cost environment. Relative to the prior year, Selling, General and Administrative (SG&A) expense from continuing operations increased by 24% to USD 95.4 million, but was down 50 basis points as a percentage of net revenue to 18.6%.
At the end of the fourth quarter of 2012, the company had cash totalling USD 200 million and total debt of USD 520 million. This compares to third quarter levels of USD 208 million and USD 532 million, respectively. Sequentially, net debt was essentially unchanged. Operating cash flow in the fourth quarter was USD 44 million reflecting solid profitability in the core business and better inventory management. Operating cash flow for the full-year was USD 109 million. Capital expenditures were USD 21.0 million in the fourth quarter and USD 39.2 million for the full-year.
“This has been a transformative year for H.B. Fuller,” said Owens. “While working to complete the acquisition of the industrial adhesives business from the Forbo Group and the divestiture of the Central America Paints business, our teams kept the momentum going. EBITDA margin expansion is one of our key financial metrics and in 2012 we delivered. In 2012 we increased our EBITDA margin by 90 basis points relative to the reported level of last year – and this was achieved while integrating the Forbo business that generated about 6% EBITDA margin in the year before the acquisition. The results of our hard work are evident and plans are set to extend these trends in 2013.”
Net income from continuing operations for the 2012 fiscal year was USD 68.3 million, or USD 1.34 per diluted share, versus USD 80.2 million, or USD 1.61 per diluted share, in the 2011 fiscal year. Adjusted total diluted earnings per share from continuing operations in the 2012 fiscal year were USD 2.201, up 28% from the prior year’s adjusted result of USD 1.721.
Net revenue for the 2012 fiscal year was USD 1,886.2 million, up 30.6% versus the 2011 fiscal year. Year-over-year growth was approximately 33% when adjusting for the extra week in the prior year. When excluding the incremental revenue from the acquired Forbo business, net revenue grew 3%, representing 6% organic growth offset by 3%age points of unfavourable foreign currency translation. The organic growth was comprised of a 5% increase in price and 1% growth in volume.
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 company’s adjusted earnings guidance for the 2013 fiscal year is a range of USD 2.55 to USD 2.65 per diluted share. Adjusted earnings per share exclude all special charges related to the ongoing business integration project.
The company expects end-market demand to generally reflect the broad economic conditions in the regions where the company operates. Reported revenue growth is expected to be more than 10% while organic revenue growth is expected to be in the low single digits, the difference reflecting the benefit of a full year of the Forbo business which was acquired at the beginning of the second quarter of 2012. Raw material costs are expected to remain at current levels through the first half of 2013 with some modest inflation possible in the second half of the year. The company anticipates margin expansion in 2013, primarily related to the benefits of the business integration project, driving operating income and EBITDA growth of about 20%. The EBITDA margin goal for 2013 is 12.5%, up approximately 100 basis points relative to the 2012 fiscal year and on track to achieve the 15% margin target for 2015. Capital expenditures will be unusually large in 2013 as a significant portion of the investment for the business integration project is completed. The company’s earlier projections of USD 195 million of aggregate capital expenditures over the three years of the business integration project, or a total of about USD 250 million of capital expenditures over the fiscal years 2012 through 2015, are confirmed.