EX-99.1 2 dex991.htm PRESS RELEASE Press Release

Exhibit 99.1

 

LOGO   
Worldwide Headquarters    Steven Brazones
1200 Willow Lake Boulevard    Investor Relations Contact
St. Paul, Minnesota 55110-5101    651-236-5158

 

 

 

NEWS   For Immediate Release   June 23, 2009

 

 

H.B. Fuller Reports Second Quarter 2009 Results

Controllable Items Managed, End-Market Demand Still Challenged

ST. PAUL, Minn. – H.B. Fuller Company (NYSE: FUL) today reported financial results for the second quarter that ended May 30, 2009.

Second Quarter 2009 Highlights Included:

 

   

Gross margin expanded by approximately 300 basis points both year-over-year and sequentially primarily due to lower raw material costs.

 

   

Selling, General, and Administrative (SG&A) expenses were slightly down versus the year-ago period and sequentially.

 

   

Operating margin1 increased both year-over-year and sequentially, despite the ongoing challenges in this business environment.

 

   

Cash flow from operations increased $54 million versus the first quarter, on improved profitability and reductions in inventory, leading to a $55 million reduction in net debt.

Second Quarter 2009 Results:

Net income for the second quarter of 2009 was $17.6 million, or $0.36 per diluted share, versus $21.4 million, or $0.41 per diluted share, in last year’s second quarter. Last year’s second quarter included two one-time charges in the company’s North America segment. These charges totaled $2.7 million on a pre-tax basis or $0.03 per diluted share.

Net revenue for the second quarter of 2009 was $299.2 million, down 16.1 percent versus the second quarter of 2008. Higher average selling prices and acquisitions positively impacted net revenue growth by 5.0 and 0.6 percentage points, respectively. Lower volume and unfavorable foreign currency translation adversely impacted net revenue growth by 15.1 and 6.6 percentage points, respectively (see table below).

 

1


The global economic recession continued to negatively impact the Company’s financial performance versus the prior year. Although gross margin recovered during the second quarter, primarily due to lower raw material costs, the effect of lower volumes led to a decline in gross profit dollars of $5.8 million year-over-year. The Company’s SG&A expenses were down slightly from last year but not enough to offset the drop in gross profit, resulting in lower operating income2 and EPS year-over-year.

On a sequential basis, net revenue increased due to normal seasonal factors, pricing was relatively stable, and raw material costs were reduced. This led to a significant improvement in gross profit, with gross margin expanding 300 basis points and gross profit dollars increasing nearly 20 percent over the first quarter. Combined with slightly lower SG&A expenses, operating margin1 more than doubled to 9.3 percent from 4.4 percent in the first quarter.

“We achieved a significant improvement in financial performance sequentially and actually exceeded the operating margin1 of the same period last year, notwithstanding the extremely difficult demand environment we endured during the second quarter,” said Michele Volpi, H.B. Fuller president and chief executive officer. “Our efforts to maintain pricing discipline in this environment while continuing to add value to our customers, together with the success we realized in managing our raw material costs and driving efficiencies in our plants, helped us to mitigate the impact of sharply lower end-market demand.”

Balance Sheet and Cash Flow:

At the end of the second quarter of 2009 total cash was $116 million and total debt was $233 million, compared to first quarter levels of $70 million and $242 million, respectively. Consequently, net debt declined nearly $55 million on a sequential basis. Cash flow from operations was $56 million in the second quarter compared to $28 million in the second quarter of 2008 and $2 million in the first quarter of 2009. The sequential improvement in cash flow was driven primarily by improved profitability and significant reductions in inventory.

Year-To-Date:

Net Income for the first half of 2009 was $23.7 million, or $0.48 per diluted share, versus $39.6 million, or $0.72 per diluted share, in the first half of last year.

Net Revenue for the first half of 2009 was $577.8 million, down 15.0 percent versus the first half of 2008. Higher average selling prices and acquisitions positively impacted net revenue growth by 5.7 and 0.5 percentage points, respectively. Lower volume and unfavorable foreign currency translation adversely impacted net revenue growth by 15.3 and 5.9 percentage points, respectively. Consequently, organic sales declined by 9.6 percent year-over-year in the first half of 2009.

 

2


Second Half Outlook:

“We are pleased with our first half performance and grateful to our associates, especially in light of the external economic challenges we have faced. We expect these external challenges to persist through the remainder of our fiscal year and, therefore, we expect our net revenue to decline 10 to 12 percent for the full year, in-line with our prior guidance. This outlook is based upon our expectation for a gradual improvement in the second half of the year resulting from both an end to the inventory de-stocking cycle and the benefit of new business already landed with key customers,” commented Volpi. “From a profitability perspective, we were able to restore our gross margin in the second quarter to a more appropriate level. For the second half of the year, we will strive to maintain our gross margin at this level while we invest in additional resources to accelerate growth and position ourselves for the long term.”

Conference Call:

The Company will host an investor conference call to discuss second quarter 2009 results on Wednesday, June 24, 2009 at 9:30 a.m. central time (10:30 a.m. eastern 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 operating income, operating margin, 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. 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.

 

3


About H.B. Fuller Company:

H.B. Fuller Company is a leading worldwide manufacturer and marketer of adhesives, sealants, paints and other specialty chemical products, with fiscal 2008 net revenue of $1.4 billion. Its common stock is traded on the New York Stock Exchange under the symbol FUL. For more information, please visit the website at www.hbfuller.com.

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; 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-Q filing of April 3, 2009 and 10-K filing of January 28, 2009. 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.

 

4


H.B. FULLER COMPANY & SUBSIDIARIES

CONSOLIDATED FINANCIAL INFORMATION

In thousands, except per share amounts (unaudited)

 

     13 Weeks
Ended
May 30, 2009
    13 Weeks
Ended
May 31, 2008
 

Net revenue

   $ 299,193      $ 356,765   

Cost of sales

     (209,785     (261,542
                

Gross profit

     89,408        95,223   

Selling, general and administrative expenses

     (61,516     (62,795

Other income (expense), net

     (1,293     844   

Interest expense

     (2,188     (3,942
                

Income before income taxes, minority interests and income from equity investments

     24,411        29,330   

Income taxes

     (8,054     (8,343

Minority interests in loss of subsidiaries

     95        28   

Income from equity investments

     1,106        351   
                

Net Income

   $ 17,558      $ 21,366   
                

Basic income per common share

   $ 0.36      $ 0.42   
                

Diluted income per common share

   $ 0.36      $ 0.41   
                

Weighted-average common shares outstanding:

    

Basic

     48,305        51,047   

Diluted

     48,927        51,819   

Dividends declared per common share

   $ 0.0680      $ 0.0660   

Selected Balance Sheet Information (subject to change prior to filing of the Company’s Quarterly Report on Form 10-Q)

 

     May 30, 2009    November 29, 2008    May 31, 2008

Cash & cash equivalents

   $ 116,104    $ 80,370    $ 212,478

Inventory

     117,816      143,158      147,605

Trade accounts receivable, net

     186,851      205,716      215,531

Trade accounts payable

     86,959      132,937      133,923

Total assets

     1,091,896      1,081,328      1,350,572

Total debt

     233,020      240,134      347,830

 

5


H.B. FULLER COMPANY & SUBSIDIARIES

CONSOLIDATED FINANCIAL INFORMATION

Common Size Income Statement

 

     13 Weeks
Ended
May 30, 2009
    13 Weeks
Ended
May 31, 2008
 

Net revenue

   100.0   100.0

Cost of sales

   (70.1 )%    (73.3 )% 
            

Gross profit

   29.9   26.7

Selling, general and administrative expenses

   (20.6 )%    (17.6 )% 

Other income (expense), net

   (0.4 )%    0.2

Interest expense

   (0.7 )%    (1.1 )% 
            

Income before income taxes, minority interests and income from equity investments

   8.2   8.2

Income taxes

   (2.7 )%    (2.3 )% 

Minority interests in loss of subsidiaries

   0.0   0.0

Income from equity investments

   0.4   0.1
            

Net Income

   5.9   6.0
            

 

6


H.B. FULLER COMPANY & SUBSIDIARIES

CONSOLIDATED FINANCIAL INFORMATION

In thousands, except per share amounts (unaudited)

 

     26 Weeks
Ended
May 30, 2009
    26 Weeks
Ended
May 31, 2008
 

Net revenue

   $ 577,757      $ 679,413   

Cost of sales

     (413,350     (492,673
                

Gross profit

     164,407        186,740   

Selling, general and administrative expenses

     (124,122     (127,792

Goodwill impairment charges

     (790     —     

Other income (expense), net

     (2,345     2,113   

Interest expense

     (4,586     (6,870
                

Income before income taxes, minority interests and income from equity investments

     32,564        54,191   

Income taxes

     (11,062     (15,553

Minority interests in loss of subsidiaries

     105        111   

Income from equity investments

     2,067        830   
                

Net Income

   $ 23,674      $ 39,579   
                

Basic income per common share

   $ 0.49      $ 0.73   
                

Diluted income per common share

   $ 0.48      $ 0.72   
                

Weighted-average common shares outstanding:

    

Basic

     48,297        53,865   

Diluted

     48,926        54,655   

Dividends declared per common share

   $ 0.1340      $ 0.1305   

 

7


H.B. FULLER COMPANY & SUBSIDIARIES

CONSOLIDATED FINANCIAL INFORMATION

Common Size Income Statement

 

     26 Weeks
Ended
May 30, 2009
    26 Weeks
Ended
May 31, 2008
 

Net revenue

   100.0   100.0

Cost of sales

   (71.5 )%    (72.5 )% 
            

Gross profit

   28.5   27.5

Selling, general and administrative expenses

   (21.5 )%    (18.8 )% 

Goodwill and other impairment charges

   (0.1 )%    0.0

Other income (expense), net

   (0.4 )%    0.3

Interest expense

   (0.8 )%    (1.0 )% 
            

Income before income taxes, minority interests and income from equity investments

   5.6   8.0

Income taxes

   (1.9 )%    (2.3 )% 

Minority interests in loss of subsidiaries

   0.0   0.0

Income from equity investments

   0.4   0.1
            

Net Income

   4.1   5.8
            

 

8


H.B. FULLER COMPANY & SUBSIDIARIES

SEGMENT FINANCIAL INFORMATION

In thousands (unaudited)

 

     13 Weeks
Ended
May 30, 2009
    13 Weeks
Ended
May 31, 2008
 

Net Revenue:

    

North America

   $ 135,294      $ 154,708   

EMEA

     85,550        113,056   

Latin America

     50,524        54,648   

Asia Pacific

     27,825        34,353   
                

Total H.B. Fuller

   $ 299,193      $ 356,765   
                

Operating Income2 :

    

North America

   $ 20,107      $ 16,417   

EMEA

     6,313        11,222   

Latin America

     1,970        1,956   

Asia Pacific

     (498     2,833   
                

Total H.B. Fuller

   $ 27,892      $ 32,428   
                

Depreciation Expense:

    

North America

   $ 4,027      $ 4,181   

EMEA

     2,278        2,662   

Latin America

     1,189        1,194   

Asia Pacific

     494        614   
                

Total H.B. Fuller

   $ 7,988      $ 8,651   
                

Amortization Expense:

    

North America

   $ 2,246      $ 2,176   

EMEA

     582        541   

Latin America

     100        92   

Asia Pacific

     55        46   
                

Total H.B. Fuller

   $ 2,983      $ 2,855   
                

EBITDA3 :

    

North America

   $ 26,380      $ 22,773   

EMEA

     9,173        14,425   

Latin America

     3,259        3,243   

Asia Pacific

     51        3,493   
                

Total H.B. Fuller

   $ 38,863      $ 43,934   
                

Operating Margin1 :

    

North America

     14.9     10.6

EMEA

     7.4     9.9

Latin America

     3.9     3.6

Asia Pacific

     (1.8 )%      8.2
                

Total H.B. Fuller

     9.3     9.1
                

EBITDA Margin3 :

    

North America

     19.5     14.7

EMEA

     10.7     12.8

Latin America

     6.5     5.9

Asia Pacific

     0.2     10.2
                

Total H.B. Fuller

     13.0     12.3
                

Net Revenue Growth:

    

North America

     (12.5 )%   

EMEA

     (24.3 )%   

Latin America

     (7.5 )%   

Asia Pacific

     (19.0 )%   
          

Total H.B. Fuller

     (16.1 )%   
          

 

9


H.B. FULLER COMPANY & SUBSIDIARIES

SEGMENT FINANCIAL INFORMATION

In thousands (unaudited)

 

     26 Weeks
Ended
May 30, 2009
    26 Weeks
Ended
May 31, 2008
 

Net Revenue:

    

North America

   $ 254,467      $ 288,980   

EMEA

     164,459        215,538   

Latin America

     105,867        111,607   

Asia Pacific

     52,964        63,288   
                

Total H.B. Fuller

   $ 577,757      $ 679,413   
                

Operating Income2 :

    

North America

   $ 29,879      $ 30,324   

EMEA

     8,197        20,423   

Latin America

     2,834        3,698   

Asia Pacific

     (625     4,503   
                

Total H.B. Fuller

   $ 40,285      $ 58,948   
                

Depreciation Expense:

    

North America

   $ 8,116      $ 8,449   

EMEA

     4,734        5,225   

Latin America

     2,381        2,394   

Asia Pacific

     1,019        1,215   
                

Total H.B. Fuller

   $ 16,250      $ 17,283   
                

Amortization Expense:

    

North America

   $ 4,484      $ 4,572   

EMEA

     1,132        1,065   

Latin America

     200        184   

Asia Pacific

     110        92   
                

Total H.B. Fuller

   $ 5,926      $ 5,913   
                

EBITDA3 :

    

North America

   $ 42,479      $ 43,345   

EMEA

     14,063        26,713   

Latin America

     5,415        6,276   

Asia Pacific

     504        5,810   
                

Total H.B. Fuller

   $ 62,461      $ 82,144   
                

Operating Margin1 :

    

North America

     11.7     10.5

EMEA

     5.0     9.5

Latin America

     2.7     3.3

Asia Pacific

     (1.2 )%      7.1
                

Total H.B. Fuller

     7.0     8.7
                

EBITDA Margin3 :

    

North America

     16.7     15.0

EMEA

     8.6     12.4

Latin America

     5.1     5.6

Asia Pacific

     1.0     9.2
                

Total H.B. Fuller

     10.8     12.1
                

Net Revenue Growth:

    

North America

     (11.9 )%   

EMEA

     (23.7 )%   

Latin America

     (5.1 )%   

Asia Pacific

     (16.3 )%   
          

Total H.B. Fuller

     (15.0 )%   
          

 

10


H.B. FULLER COMPANY & SUBSIDIARIES

SEGMENT FINANCIAL INFORMATION

In thousands (unaudited)

 

13 Weeks Ended May 30, 2009   
     North America     EMEA     Latin America     Asia Pacific     Total HBF  

Price

   7.1   1.2   6.1   6.0   5.0

Volume

   (18.4 )%    (12.6 )%    (13.6 )%    (11.0 )%    (15.1 )% 
                              

Organic Growth

   (11.3 )%    (11.4 )%    (7.6 )%    (4.9 )%    (10.1 )% 

F/X

   (1.2 )%    (14.9 )%    0.0   (14.1 )%    (6.6 )% 

Acquisition

   0.0   1.9   0.0   0.0   0.6
                              
   (12.6 )%    (24.3 )%    (7.6 )%    (19.0 )%    (16.1 )% 
                              
26 Weeks Ended May 30, 2009   
     North America     EMEA     Latin America     Asia Pacific     Total HBF  

Price

   7.0   3.1   7.2   5.9   5.7

Volume

   (17.7 )%    (15.6 )%    (12.3 )%    (8.9 )%    (15.3 )% 
                              

Organic Growth

   (10.7 )%    (12.5 )%    (5.1 )%    (3.0 )%    (9.6 )% 

F/X

   (1.3 )%    (12.9 )%    0.0   (13.3 )%    (5.9 )% 

Acquisition

   0.0   1.7   0.0   0.0   0.5
                              
   (11.9 )%    (23.7 )%    (5.1 )%    (16.3 )%    (15.0 )% 
                              

 

11


H.B. FULLER COMPANY & SUBSIDIARIES

REGULATION G RECONCILIATION

 

     13 Weeks
Ended
May 30, 2009
    13 Weeks
Ended
February 28, 2009
    13 Weeks
Ended
May 31, 2008
 

Net revenue

   $ 299,193      $ 278,563      $ 356,765   

Cost of sales

     (209,785     (203,564     (261,542
                        

Gross profit

     89,408        74,999        95,223   

Selling, general and administrative expenses

     (61,516     (62,606     (62,795
                        

Operating Income

     27,892        12,393        32,428   
                        

Depreciation Expense

     7,988        8,260        8,651   

Amortization Expense

     2,983        2,944        2,855   
                        

EBITDA

     38,863        23,597        43,934   
                        

Operating Profit Margin [Operating Income/Net Revenue]

     9.3     4.4     9.1

EBITDA Margin [EBITDA/Net Revenue]

     13.0     8.5     12.3

 

 

1

Operating Margin is a non-GAAP financial measure defined as gross profit, less SG&A expense, divided by net revenue

2

Management evaluates the performance of each of the Company’s operating segments based on operating income, which is defined as gross profit less SG&A expense for the segments

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 and defined on a segment basis as operating income, plus depreciation expense, plus amortization expense

 

12