H.B. Fuller Reports First Quarter 2015 Results

First Quarter Adjusted Diluted EPS $0.30¹; First Quarter Diluted EPS $0.19; Fiscal Year 2015 Adjusted Diluted EPS Plan Maintained at $2.60

ST. PAUL, Minn., March 25, 2015 (GLOBE NEWSWIRE) -- H.B. Fuller Company (NYSE:FUL) today reported financial results for the first quarter that ended February 28, 2015.

Items of Note for the First Quarter of 2015:

• Constant currency revenue increased 1.4 percent compared to the prior year, led by over 20 percent growth in Construction Products;
• Selling, General and Administrative (SG&A) expenses were tightly controlled, down 2 percent versus the prior year's first quarter;
• Financial results of international operations reduced due to strength of the US dollar; some regions experiencing margin pressure from US dollar based costs;
• Benefit from lower raw material costs beginning to be realized;
• Completed anticipated acquisition of Tonsan Adhesive in China.

First Quarter 2015 Results:

Net income for the first quarter of 2015 was $9.7 million, or $0.19 per diluted share, versus net income of $14.6 million, or $0.28 per diluted share, in last year's first quarter. Adjusted diluted earnings per share in the first quarter of 2015 were $0.30¹, down versus the prior year's adjusted result of $0.49¹.

Net revenue for the first quarter of 2015 was $470.7 million, down 3.2 percent versus the first quarter of 2014. Higher volume and higher average selling prices positively impacted net revenue growth by 1.0 and 0.4 percentage points, respectively. Foreign currency translation negatively impacted net revenue growth by 4.6 percentage points. Constant currency revenue grew by 1.4 percent year-over-year.

Gross profit margin was down versus the prior year's result primarily due to excess costs associated with the business integration project in Europe and negative impacts of foreign exchange rate changes in several regions. SG&A expense was well controlled, down 2 percent versus the prior year's first quarter.

"We are off to a solid start to our 2015 fiscal year," said Jim Owens, H.B. Fuller president and chief executive officer. "We completed the acquisition of the Tonsan adhesive business in China in early February and welcomed the Tonsan team to H.B. Fuller. Our Construction Products segment was very active finalizing the integration of the ProSpec acquisition that we completed last fall and preparing for the launch of a significant new volume of business with a key customer. Clearly, the significant and broad-based strengthening of the US dollar against most foreign currencies that continued through the first quarter had a negative impact on our business and lowered our reported financial results. We anticipate offsetting this impact by capitalizing on the opportunity for lower raw material costs in some product lines that has developed due to lower petrochemical costs and a more favorable supply and demand environment. Overall we remain committed to achieving our full year adjusted EPS target of $2.60, though the path to achieve that result has been adjusted in response to the changing global environment."

Balance Sheet and Cash Flow:

At the end of the first quarter of 2015, we had cash totaling $72 million and total debt of $764 million. This compares to fourth quarter 2014 cash and debt levels of $78 million and $575 million, respectively. Sequentially, net debt was up by $195 million, which was primarily related to the  additional debt drawn to complete the acquisition of Tonsan. Cash flow from operations was positive $74 million in the first quarter. Capital expenditures were $28 million in the first quarter.

Fiscal 2015 Outlook:

The current global operating environment is very dynamic so we are making adjustments to our operating plan to mitigate the negative trends and take advantage of other emerging opportunities. At the beginning of the year we communicated an adjusted diluted EPS target of $2.60 for 2015 and we are confirming the EPS target of $2.60 at this time. Although the full-year earnings target remains unchanged, we have updated our plan to achieve this result. The most meaningful changes in our outlook today relative to our original plan include: (1) the US dollar is significantly stronger than we had originally forecast and this is negatively impacting the translation of our international results and in some cases creating margin pressure in regions where US dollar-denominated costs are matched against revenue in non-US dollar currencies; (2) the recovery in our European business is moving forward at a slightly slower pace than we anticipated; (3) we expect our constant currency revenue growth to be slightly lower than originally planned, primarily due to the slow start we experienced in the first quarter of this year in our Americas and EIMEA operating segments; (4) we are now expecting some benefits from raw materials to impact this year's results in certain product lines and market segments and (5) the acquisition of Tonsan is now complete and we expect some modest EPS accretion from this business over the remainder of the year.

We now anticipate that revenue for the full year will be about $2,150 million, up about 2 percent versus the prior year. The reduced revenue outlook relative to our original guidance is primarily driven by expectations for continued strength of the US dollar and, based on today's rates, we expect a full-year negative currency impact of 6 percent. We completed the acquisition of Tonsan in February 2015. We expect Tonsan to contribute about $80 million in revenue in the 2015 fiscal year and should add about $0.05 to our adjusted diluted EPS. The expected results of the Tonsan acquisition are now included in our financial guidance for 2015. Finally, we now anticipate that our core tax rate for the full year will be about 31 percent, slightly higher than our original projections, due to changes in the expected geographic mix of our pre-tax income.

Conference Call:

The Company will host an investor conference call to discuss first quarter 2015 results on Thursday, March 26, 2015, 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.

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. With fiscal 2014 net revenue of $2.1 billion, H.B. Fuller's commitment to innovation brings together people, products and processes that answer and solve some of the world's biggest challenges. Our reliable, responsive service creates lasting, rewarding connections with customers in packaging, hygiene, general assembly, electronic and assembly materials, paper converting, woodworking, construction, automotive and consumer businesses. And our promise to our people connects them with opportunities to innovate and thrive.  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 29, 2014. 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.

¹ Adjusted diluted earnings per share (EPS) is a non-GAAP financial measure and excludes items listed on the adjusted earnings per share reconciliation table above which excludes: special charges associated the "business integration" and acquisition project costs.

² 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.

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 segment basis it is defined as operating income, plus depreciation expense, plus amortization expense. EBITDA margin is defined as EBITDA divided by net revenue.

⁴ Segment operating margin is a non-GAAP financial measure defined as gross profit, less SG&A expense, divided by net revenue.

⁵ Adjusted EBITDA and adjusted EBITDA margin are non-GAAP financial measures and exclude items listed on the adjusted earnings per share reconciliation table above.