H. B. Fuller Company · NYSE:FUL
H. B. Fuller — Q4 2017 Earnings Presentation
24 slides from H. B. Fuller's earnings presentation, Jan 24, 2018
Slide 1: Fourth Quarter and Full Year 2017 Conference Call
Fourth Quarter and Full Year 2017 Conference Call Investor Presentation St. Paul, MN January 24, 2018
Slide 2: Safe Harbor & Regulation G
2 Safe Harbor & Regulation G Safe Harbor Statement Certain matters discussed today may include 'forward looking statements' as that term is defined under the Private Securities Litigation Reform Act of 1995. Since such statements reflect our current expectations, actual results may differ as they ar
Slide 3: Business Summary
3 Business Summary Q4 Items of Note 2017 Focus Areas • Closed Royal transaction; • Implemented further price began integration process increases, reformulations and • Strong organic revenue product substitutions growth • Improved Construction • Adjusted EPS growth of 9%, Products EBITDA margin to ex
Slide 4: Royal Adhesives Overview
4 Royal Adhesives Overview • Completed transaction on October 20, 2017 • Royal is very cash flow generative and operates in highly specified market segments • In 2017, generated revenue of $658 million and adjusted EBITDA of $133 million • Expands Engineering Adhesives presence into Aerospace and ot
Slide 5: 2018 Guidance
5 2018 Guidance • Over 30% revenue growth; 6-7% versus proforma 2017 • Continued expansion of EBITDA to approximately $465 million − ~15% EBITDA margin − Pricing offsets raw material cost increases − Operational improvements across businesses − Royal synergy delivery of ~$15 million − Year-over-year
Slide 6: Raw Material Dynamics
6 Raw Material Dynamics • Raw materials began to increase early in 2017 − Implemented prices in spring/summer − Expected raw materials to remain at elevated levels • Hurricane Harvey caused supply outages and spikes in raw material costs − Expected costs to decline in Q4 − Costs did not decline due
Slide 7: FY 2017 Segment Summary
7 FYBetter 2017 Segment Summary accountability Stronger teamwork Global vision EIMEA • CC Revenue Growth +9% YOY • Adjusted EBITDA 11.4% Americas Adhesives Asia Pacific • Organic volume +6% YOY • CC Revenue Growth +13% YOY • Adjusted EBITDA margin 15.1% • Adjusted EBITDA margin 10% • Organic volume
Slide 8: Royal Integration
8 Royal Integration • Initial expectation of $22 million in savings by 2020 fiscal year • More opportunities identified, primarily through indirect spend Procurement • Currently expect $25 million by end of 2019 Synergies • Initial expectation of $9 million in savings by 2020 and no facility closure
Slide 9: Q4 & FY 2017 Financial Results Summary
9 Q4 & FY 2017 Financial Results Summary • On a comparable basis, organic revenue growth was 8% in Q4 • 2% price; 6% Volume • Organic volume growth was 6% for FY 2017 vs FY 2016 • Adjusted gross margin declined versus prior year driven by increased raw material costs • Adjusted SG&A flat year-on-yea
Slide 10: Fiscal Year 2018 Guidance
10 Fiscal Year 2018 Guidance • Net revenue growth of ~30% − 6-7% growth on a proforma combined basis − +1% impact from foreign exchange, at current rates − Pricing, volume growth and carryover benefit from acquisitions contribute to growth • Adjusted EBITDA of ~$465 million,13% growth on proforma ba
Slide 11: Wrap-Up
11 Wrap-Up • Progress made on key 2017 initiatives • Delivered volume growth in Americas • Drove exceptional growth in Engineering Adhesives • Improved Construction Products EBITDA margin • Integration of Royal well underway; synergies validated • On track to deliver $600 million of EBITDA in 2020 a
Slide 12: H.B. Fuller
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Slide 13: Regulation G – Q4 2017 Proforma P&L
Regulation G – Q4 2017 Proforma P&L Less Adjusted Adjusted Adjusted Excluding Royal % of 13 Weeks Ended Add 13 Weeks Ended Royal 13 Weeks Ended Net December 2, 2017 Adjustments December 2, 2017 Results December 2, 2017 Revenue Net revenue $ 678,200 $ - $ 678,200 $ 77,034 $ 601,166 100.0% Cost of sal
Slide 14: Regulation G – Q4 2016 Proforma P&L
Regulation G – Q4 2016 Proforma P&L % of Adjusted % of 14 Weeks Ended Net 14 Weeks Ended Net December 3, 2016 Revenue Adjustments December 3, 2016 Revenue Net revenue $ 574,907 100.0% $ - $ 574,907 100.0% Cost of sales (407,086) (70.8%) (543) (406,543) (70.7%) Gross profit 167,821 29.2% 543 168,364
Slide 15: Regulation G – FY 2017 Proforma P&L
Regulation G – FY 2017 Proforma P&L Less Adjusted Adjusted Adjusted Excluding Royal % of 52 Weeks Ended Add 52 Weeks Ended Royal 52 Weeks Ended Net December 2, 2017 Adjustments December 2, 2017 Results December 2, 2017 Revenue Net revenue $ 2,306,043 $ - $ 2,306,043 $ 77,034 $ 2,229,009 100.0% Cost
Slide 16: Regulation G – FY 2016 Proforma P&L
Regulation G – FY 2016 Proforma P&L % of Adjusted % of 53 Weeks Ended Net 53 Weeks Ended Net December 3, 2016 Revenue Adjustments December 3, 2016 Revenue Net revenue $ 2,094,605 100.0% $ - $ 2,094,605 100.0% Cost of sales (1,484,802) (70.9%) (4,442) (1,480,360) (70.7%) Gross profit 609,803 29.1% 4,
Slide 17: Regulation G – EPS Adjustments
17 Regulation G –EPS Adjustments 13 Weeks ended December 2, 2017 14 Weeks ended December 3, 2016 Income Income before Income Diluted before Income Diluted Income Tax Taxes EPS Income Tax Taxes EPS GAAP Earnings $ (24,650) $ (17,092) $ (0.15) $ 54,007 $ 14,873 $ 0.76 Acquisition project costs b 15,29
Slide 18: Regulation G – Q4 Segment Information
18 Regulation G – Q4 Segment Information 13 Weeks Ended 14 Weeks Ended December 2, 2017 December 3, 2016 Net Revenue Americas Adhesives $ 234,887 $ 217,639 EIMEA 151,765 150,328 Asia Pacific 74,107 70,361 Construction Products 58,634 64,235 Engineering Adhesives 81,773 72,344 Royal Adhesives 77,034
Slide 19: Regulation G – FY Segment Information
19 Regulation G – FY Segment Information 52 Weeks Ended 53 Weeks Ended December 2, 2017 December 3, 2016 Net Revenue Americas Adhesives $ 888,552 $ 806,062 EIMEA 548,439 545,135 Asia Pacific 264,191 241,827 Construction Products 238,513 256,346 Engineering Adhesives 289,314 245,235 Royal Adhesives 7
Slide 20: Revenue Growth Components
20 Revenue Growth Components 13 Weeks Ended December 2, 2017 Americas Construction Engineering Adhesives EIMEA Asia Pacific Products Adhesives Total HBF Price 0.9% 5.4% 0.5% 0.1% 0.5% 1.9% Volume 5.0% 4.0% 10.4% (1.7%) 19.3% 6.5% Mix 0.1% 0.6% 0.2% (0.4%) (0.7%) 0.1% Acquisition 8.8% - - - - 3.3% Co
Slide 21: Regulation G – Q4 EBITDA Reconciliation
21 Regulation G – Q4 EBITDA Reconciliation 13 Weeks Ended 14 Weeks Ended December 2, 2017 December 3, 2016 Net income (loss) including non-controlling interests $ (7,544) $ 39,227 Income from equity method investments (2,228) (2,221) Income taxes (17,092) 14,873 Interest expense 19,073 7,645 Other i
Slide 22: Regulation G – FY EBITDA Reconciliation
22 Regulation G – FY EBITDA Reconciliation 52 Weeks Ended 53 Weeks Ended December 2, 2017 December 3, 2016 Net income including non-controlling interests $ 58,290 $ 124,382 Income from equity method investments (8,677) (7,393) Income taxes 9,086 50,436 Interest expense 43,701 27,359 Other income (ex
Slide 23: Proforma H.B. Fuller + Royal – FY 2017
23 Proforma H.B. Fuller + Royal – FY 2017 Royal Royal Royal H.B. Fuller Proforma 52 weeks ended 12/4/16 - 10/20/17 - - Standalone Combined2 10/19/17 12/2/17 December 2017 December 2017 December 2017 Net income (loss) $17,565 $(31,486) $(13,921) $89,777 $75,856 Income from equity method investments -
Slide 24: Regulation G – Operating Cash Flow Reconciliation
24 Regulation G – Operating Cash Flow Reconciliation 13 Weeks Ended 52 Weeks Ended December 2, 2017 December 2, 2017 Cash Flow from Operations $65,532 $136,337 Remove Royal Impact (8,900) (8,900) Other Cash Acquisition Impact 13,555 12,926 Accrued Interest Payable (2,791) (2,791) Make-whole cost on