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First Quarter Diluted EPS $0.29,
First Quarter Adjusted Diluted EPS $0.481;
Confirm Fiscal Year 2017 Adjusted Diluted EPS Guidance $2.57 to $2.77
ST. PAUL, Minn. – H.B. Fuller Company (NYSE: FUL) today reported financial results for the first quarter that ended March 4, 2017.
Items of Note for the First Quarter of 2017:
First Quarter 2017 Results:
Net income for the first quarter of 2017 was $14.8 million, or $0.29 per diluted share, versus net income of $18.9 million, or $0.37 per diluted share, in last year’s first quarter. Adjusted diluted earnings per share in the first quarter of 2017 were $0.481, up 12 percent versus the prior year’s adjusted result of $0.431. Adjusted EBITDA3 was $58.9 million in the first quarter, or 11.7 percent of net revenue.
Net revenue for the first quarter of 2017 was $503.3 million, up 6.1 percent versus the first quarter of 2016. Higher volume and acquisitions positively impacted net revenue growth offset by negative mix and negative foreign currency translation. Constant currency revenue4 grew by 9.6 percent year over year. Organic revenue, defined as constant currency revenue, less the impact from acquisitions, was up 6 percent.
Gross profit margin was 27.6 percent. Adjusted gross profit margin2 was 28.6 percent, in line with expectations and a decrease of 80 basis points versus the prior year. During the quarter, margins declined slightly year over year due to increasing raw material costs relative to pricing, partially offset by an improvement in manufacturing efficiencies. Selling, General and Administrative (SG&A) expense was $112.9 million. Adjusted SG&A expense5 was $104.1 million, up by approximately 5 percent versus last year, primarily driven by acquisitions, variable compensation and strategic investments for growth offset by discretionary expense management and restructuring actions.
”We are off to a strong start for the year with good progress on both the top and bottom lines,” said Jim Owens, H.B. Fuller president and chief executive officer. “We drove solid volume improvements with exceptional growth in the Engineering Adhesives and Asia Pacific segments, and 5 percent growth in our Americas segment while successfully completing the synergistic acquisition of Wisdom Adhesives. Profitability remains strong despite raw material increases which we will offset with strategic pricing initiatives in the second quarter. We expect 2017 to provide another strong positive step forward in delivering our 2020 strategic commitments for growth, profit and cash flow performance.”
Balance Sheet and Cash Flow:
At the end of the first quarter of 2017, we had cash totaling $117 million and total debt of $805 million. This compares to fourth quarter 2016 cash and debt levels of $142 million and $703 million, respectively. Sequentially, net debt was up approximately $127 million due to the purchase price of Wisdom Adhesives, which was completed at the end of January. Cash flow from operations was positive $16 million reflecting continued strength in the cash flow performance of the business, offset by inventory building ahead of raw material increases and restructuring charges. Capital expenditures were $20 million in the first quarter of 2017.
Fiscal 2017 Guidance:
We are affirming our adjusted EPS guidance range at $2.57 to $2.77 for fiscal year 2017. We have increased our 2017 adjusted EBITDA guidance to $300 million. Constant currency growth, on a comparable 52-week basis, is now expected to be around 8 percent for 2017 versus the 2016 fiscal year, which will be offset by approximately 3 percentage points of negative foreign currency translation. Our core tax rate, excluding the impact of discrete items, is unchanged and is expected to be about 30 percent. We still expect to invest approximately $60 million in capital items in 2017.
This guidance excludes approximately $30 million, pre-tax, of previously announced restructuring charges, as well as acquisition related costs and Project ONE development costs.
The Company will host an investor conference call to discuss first quarter results on Thursday, March 30, 2017, 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 information presented in this earnings release regarding segment operating income, adjusted gross profit, adjusted selling, general and administrative expense, adjusted diluted earnings per share, earnings before interest, taxes, depreciation, and amortization (EBITDA) and constant currency revenue 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 with the exception of our forward looking non-GAAP measures contained in our fiscal 2017 outlook, which are unknown or have not yet occurred.
About H.B. Fuller Company:
For 130 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 2016 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 electronics, disposable hygiene, medical, transportation, clean energy, packaging, construction, woodworking, general industries and other 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 December 3, 2016. 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.
H.B. Fuller Company
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