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   September 22, 2009  

 

 

H.B. Fuller Reports Strong Third Quarter 2009 Results

Company Reports Further Improvement in EBITDA Margin and Cash Flow

ST. PAUL, Minn. – H.B. Fuller Company (NYSE: FUL) today reported financial results for the third quarter that ended August 29, 2009.

Third Quarter 2009 Highlights Included:

 

  •  

Net revenue increased 5 percent from the prior quarter;

 

  •  

Gross margin expanded 190 basis points sequentially and 680 basis points year-over-year;

 

  •  

EBITDA margin1 improved to 13.7 percent, nearly restored to long-term target range of 14 to 16 percent;

 

  •  

Cash flow from operations was $59 million, $37 million better than the third quarter last year;

 

  •  

North America continued its strong performance, Asia-Pacific made solid progress in its turnaround efforts

Third Quarter 2009 Results:

Net Income for the third quarter of 2009 was $35.4 million, or $0.72 per diluted share, versus $21.7million, or $0.44 per diluted share, in last year’s third quarter. This year’s third quarter net income included a significant one-time gain related to the settlement of a lawsuit filed against the former owners of the Roanoke Companies Group, a business acquired by the Company in 2006. The settlement totaled $18.8 million on a pre-tax basis and $11.8 million after taxes, or $0.24 per diluted share. Excluding this settlement, net income would have been $0.48 per diluted share versus the reported results of $0.72 per diluted share.

During the third quarter, the North America region announced a restructuring of one of its manufacturing facilities. This realignment of production capacity will result in charges of approximately $3.3 million, of which, $1.1 million was expensed during the third quarter. The balance will be

 

1

expensed in the fourth quarter of 2009 and is largely related to accelerated depreciation. In addition, a discrete tax benefit of $1.3 million was recognized in the third quarter. This discrete tax item reduced the effective tax rate for the quarter by 2.7 percentage points. The Company expects its effective tax rate for the fourth quarter to be approximately 34.5 percent, excluding any significant discrete items. Last year’s third quarter included a discrete tax benefit of $4.3 million related to the valuation of deferred tax assets in Brazil.

Net revenue for the third quarter of 2009 was $315.3 million, down 12.9 percent versus the third quarter of 2008. Higher average selling prices and acquisitions positively impacted net revenue growth by 2.8 and 0.9 percentage points, respectively. Lower volume and unfavorable foreign currency translation adversely impacted net revenue growth by 12.4 and 4.2 percentage points, respectively.

Weak end-market demand continued throughout the third quarter, but the year-over-year decline in volume in the third quarter – down 12.4 percent – was less than the year-over-year decline in the second quarter of 15.1 percent. Gross margin recovery was maintained as efforts to reformulate product lines and actions to reduce raw material costs offset the negative impact of significantly lower volumes year-over-year. SG&A expenses were up versus the prior year due to the timing and magnitude of variable compensation costs, the addition of operating expenses related to businesses acquired in the past year, and the costs associated with investments made in the past several quarters to support future growth. Overall, EBITDA margin1 increased to 13.7 percent, over 300 basis points higher than the third quarter of last year.

On a sequential basis, net revenue increased 5 percent as additional wins with customers led to easing volume declines. Improved volume, benefits from product reformulations, and slightly lower raw material costs, led to an expansion in gross margin of 190 basis points. SG&A expenses increased significantly in the quarter. About two thirds of this increase is due to the timing and magnitude of compensation costs and foreign currency translation rates. The balance of the increase relates to the costs of adding personnel to support growth initiatives and a variety of other factors. Overall, EBITDA margin1 improved 70 basis points versus the second quarter.

“We are very pleased with our third quarter performance. We achieved a sequential increase in net revenue and boosted both operating profit margin and dollars despite the significant end-market challenges that continued during the quarter,” said Michele Volpi, H.B. Fuller president and chief executive officer. “As the global economy continues its recovery we are gaining momentum on the top-line and we expect this to continue as we further invest in the business.”

 

2

Balance Sheet and Cash Flow:

At the end of the third quarter of 2009 total cash was $180 million and total debt was $244 million, compared to second quarter levels of $116 million and $233 million, respectively. Consequently, net debt declined $53 million on a sequential basis. Cash flow from operations was $59 million in the third quarter compared to $22 million in the third quarter of 2008 and $56 million in the second quarter of 2009. The year-over-year improvement in cash flow was driven primarily by improved profitability and reductions in net working capital.

Year-To-Date:

Net Income for the first nine months of 2009 was $59.1 million, or $1.21 per diluted share, versus $61.3 million, or $1.16 per diluted share, in last year’s first nine months. This year’s first quarter net income included a non-cash “true-up” for the estimated goodwill impairment charge taken at the end of fiscal year 2008 of $0.8 million on a pre-tax basis and $0.5 million after taxes, or $0.01 per diluted share. In addition, this year’s third quarter net income included a significant gain related to the settlement of the lawsuit filed against the former owners of the Roanoke Companies Group. This settlement totaled $18.8 million on a pre-tax basis and $11.8 million after taxes, or $0.24 per diluted share. Excluding these items, net income for the first nine months would have been $0.98 per diluted share versus the reported results of $1.21 per diluted share.

Net Revenue for the first nine months of 2009 was $893.1 million, down 14.2 percent versus the first nine months of 2008. Higher average selling prices and acquisitions positively impacted net revenue growth by 4.5 and 0.7 percentage points, respectively. Lower volume and unfavorable foreign currency translation adversely impacted net revenue growth by 14.1 and 5.3 percentage points, respectively. Consequently, organic sales declined by 9.6 percent year-over-year in the first nine months of 2009.

Fourth Quarter Outlook:

“Despite the headwinds we have faced during this economic downturn, H.B. Fuller has been able to deliver solid financial performance while at the same time positioning the company for the future. We are building top line momentum through new business wins and a keen focus on our customers. We expect fourth quarter net revenue to be approximately $330 million and, if achieved, this will mark another sequential improvement in net revenue as we close out this fiscal year,” commented Volpi.

 

3

Conference Call:

The Company will host an investor conference call to discuss third quarter 2009 results on Wednesday, September 23, 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 adjusted earnings per share, 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.

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 July 1, 2009, April 3, 2009 and 10-K filing of January 28, 2009. All forward-looking information

 

4

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.

 

5

H.B. FULLER COMPANY & SUBSIDIARIES

CONSOLIDATED FINANCIAL INFORMATION

In thousands, except per share amounts (unaudited)

 

     13 Weeks
Ended
August 29, 2009		     13 Weeks
Ended
August 30, 2008		  

Net revenue

    $ 315,329      $ 361,986   

Cost of sales

      (214,914 )      (271,533 ) 
                

Gross profit

      100,415        90,453   

Selling, general and administrative expenses

      (68,324 )      (63,757 ) 

Goodwill and other impairment charges

      —          (525 ) 

Other income, net

      18,487        774   

Interest expense

      (1,680 )      (3,872 ) 
                

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

      48,898        23,073   

Income taxes

      (15,113 )      (2,266 ) 

Minority interests in (income) loss of subsidiaries

      (49 )      43   

Income from equity investments

      1,677        866   
                

Net Income

    $ 35,413      $ 21,716   
                

Basic income per common share

    $ 0.73      $ 0.45   
                

Diluted income per common share

    $ 0.72      $ 0.44   
                

Weighted-average common shares outstanding:

     

Basic

      48,343        48,222   

Diluted

      49,242        49,058   

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)

 

     August 29, 2009    November 29, 2008    August 30, 2008

Cash & cash equivalents

    $ 180,136    $ 80,370    $ 207,058

Inventory

      112,452      143,158      150,829

Trade accounts receivable, net

      190,211      205,716      214,573

Trade accounts payable

      96,245      132,937      141,615

Total assets

      1,150,732      1,081,328      1,327,454

Total debt

      243,915      240,134      339,466

 

6

H.B. FULLER COMPANY & SUBSIDIARIES

CONSOLIDATED FINANCIAL INFORMATION

Common Size Income Statement

 

     13 Weeks
Ended
August 29, 2009		     13 Weeks
Ended
August 30, 2008		  

Net revenue

    100.0 %    100.0 % 

Cost of sales

    (68.2 )%    (75.0 )% 
            

Gross profit

    31.8 %    25.0 % 

Selling, general and administrative expenses

    (21.7 )%    (17.6 )% 

Goodwill and other impairment charges

    0.0 %    (0.1 )% 

Other income, net

    5.9 %    0.2 % 

Interest expense

    (0.5 )%    (1.1 )% 
            

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

    15.5 %    6.4 % 

Income taxes

    (4.8 )%    (0.6 )% 

Minority interests in (income) loss of subsidiaries

    (0.0 )%    0.0 % 

Income from equity investments

    0.5 %    0.2 % 
            

Net Income

    11.2 %    6.0 % 
            

 

7

H.B. FULLER COMPANY & SUBSIDIARIES

CONSOLIDATED FINANCIAL INFORMATION

In thousands, except per share amounts (unaudited)

 

     39 Weeks
Ended
August 29, 2009		     39 Weeks
Ended
August 30, 2008		  

Net revenue

    $ 893,086      $ 1,041,399   

Cost of sales

      (628,264 )      (764,206 ) 
                

Gross profit

      264,822        277,193   

Selling, general and administrative expenses

      (192,446 )      (191,549 ) 

Goodwill and other impairment charges

      (790 )      (525 ) 

Other income, net

      16,142        2,887   

Interest expense

      (6,266 )      (10,742 ) 
                

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

      81,462        77,264   

Income taxes

      (26,175 )      (17,819 ) 

Minority interests in loss of subsidiaries

      56        154   

Income from equity investments

      3,744        1,696   
                

Net Income

    $ 59,087      $ 61,295   
                

Basic income per common share

    $ 1.22      $ 1.18   
                

Diluted income per common share

    $ 1.21      $ 1.16   
                

Weighted-average common shares outstanding:

     

Basic

      48,312        51,984   

Diluted

      49,031        52,790   

Dividends declared per common share

    $ 0.2020      $ 0.1965   

 

8

H.B. FULLER COMPANY & SUBSIDIARIES

CONSOLIDATED FINANCIAL INFORMATION

Common Size Income Statement

 

     39 Weeks
Ended
August 29, 2009		     39 Weeks
Ended
August 30, 2008		  

Net revenue

    100.0 %    100.0 % 

Cost of sales

    (70.3 )%    (73.4 )% 
            

Gross profit

    29.7 %    26.6 % 

Selling, general and administrative expenses

    (21.5 )%    (18.4 )% 

Goodwill and other impairment charges

    (0.1 )%    (0.1 )% 

Other income, net

    1.8 %    0.3 % 

Interest expense

    (0.7 )%    (1.0 )% 
            

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

    9.1 %    7.4 % 

Income taxes

    (2.9 )%    (1.7 )% 

Minority interests in loss of subsidiaries

    0.0 %    0.0 % 

Income from equity investments

    0.4 %    0.2 % 
            

Net Income

    6.6 %    5.9 % 
            

 

9

H.B. FULLER COMPANY & SUBSIDIARIES

SEGMENT FINANCIAL INFORMATION

In thousands (unaudited)

 

     13 Weeks
Ended
August 29, 2009		     13 Weeks
Ended
August 30, 2008		  

Net Revenue:

     

North America

    $ 139,353      $ 159,238   

EMEA

      93,983        112,437   

Latin America

      49,635        55,694   

Asia Pacific

      32,358        34,617   
                

Total H.B. Fuller

    $ 315,329      $ 361,986   
                

Operating Income2:

     

North America

    $ 21,469      $ 14,266   

EMEA

      7,198        8,622   

Latin America

      1,448        1,887   

Asia Pacific

      1,976        1,921   
                

Total H.B. Fuller

    $ 32,091      $ 26,696   
                

Depreciation Expense:

     

North America

    $ 4,084      $ 4,158   

EMEA

      2,488        2,635   

Latin America

      1,081        1,184   

Asia Pacific

      547        609   
                

Total H.B. Fuller

    $ 8,200      $ 8,586   
                

Amortization Expense:

     

North America

    $ 2,238      $ 2,248   

EMEA

      664        545   

Latin America

      99        92   

Asia Pacific

      54        46   
                

Total H.B. Fuller

    $ 3,055      $ 2,931   
                

EBITDA3:

     

North America

    $ 27,791      $ 20,672   

EMEA

      10,350        11,802   

Latin America

      2,628        3,163   

Asia Pacific

      2,577        2,576   
                

Total H.B. Fuller

    $ 43,346      $ 38,213   
                

Operating Margin1:

     

North America

      15.4 %      9.0 % 

EMEA

      7.7 %      7.7 % 

Latin America

      2.9 %      3.4 % 

Asia Pacific

      6.1 %      5.5 % 
                

Total H.B. Fuller

      10.2 %      7.4 % 
                

EBITDA Margin3:

     

North America

      19.9 %      13.0 % 

EMEA

      11.0 %      10.5 % 

Latin America

      5.3 %      5.7 % 

Asia Pacific

      8.0 %      7.4 % 
                

Total H.B. Fuller

      13.7 %      10.6 % 
                

Net Revenue Growth:

     

North America

      (12.5 )%   

EMEA

      (16.4 )%   

Latin America

      (10.9 )%   

Asia Pacific

      (6.5 )%   
          

Total H.B. Fuller

      (12.9 )%   
          

 

10

H.B. FULLER COMPANY & SUBSIDIARIES

SEGMENT FINANCIAL INFORMATION

In thousands (unaudited)

 

     39 Weeks
Ended
August 29, 2009		     39 Weeks
Ended
August 30, 2008		  

Net Revenue:

     

North America

    $ 393,820      $ 448,218   

EMEA

      258,442        327,975   

Latin America

      155,502        167,301   

Asia Pacific

      85,322        97,905   
                

Total H.B. Fuller

    $ 893,086      $ 1,041,399   
                

Operating Income2:

     

North America

    $ 51,348      $ 44,590   

EMEA

      15,395        29,045   

Latin America

      4,282        5,585   

Asia Pacific

      1,351        6,424   
                

Total H.B. Fuller

    $ 72,376      $ 85,644   
                

Depreciation Expense:

     

North America

    $ 12,199      $ 12,607   

EMEA

      7,221        7,860   

Latin America

      3,462        3,578   

Asia Pacific

      1,566        1,824   
                

Total H.B. Fuller

    $ 24,448      $ 25,869   
                

Amortization Expense:

     

North America

    $ 6,723      $ 6,820   

EMEA

      1,796        1,610   

Latin America

      299        276   

Asia Pacific

      164        138   
                

Total H.B. Fuller

    $ 8,982      $ 8,844   
                

EBITDA3:

     

North America

    $ 70,270      $ 64,017   

EMEA

      24,412        38,515   

Latin America

      8,043        9,439   

Asia Pacific

      3,081        8,386   
                

Total H.B. Fuller

    $ 105,806      $ 120,357   
                

Operating Margin1:

     

North America

      13.0 %      9.9 % 

EMEA

      6.0 %      8.9 % 

Latin America

      2.8 %      3.3 % 

Asia Pacific

      1.6 %      6.6 % 
                

Total H.B. Fuller

      8.1 %      8.2 % 
                

EBITDA Margin3:

     

North America

      17.8 %      14.3 % 

EMEA

      9.4 %      11.7 % 

Latin America

      5.2 %      5.6 % 

Asia Pacific

      3.6 %      8.6 % 
                

Total H.B. Fuller

      11.8 %      11.6 % 
                

Net Revenue Growth:

     

North America

      (12.1 )%   

EMEA

      (21.2 )%   

Latin America

      (7.1 )%   

Asia Pacific

      (12.9 )%   
          

Total H.B. Fuller

      (14.2 )%   
          

 

11

H.B. FULLER COMPANY & SUBSIDIARIES

SEGMENT FINANCIAL INFORMATION

In thousands (unaudited)

 

13 Weeks Ended August 29, 2009

 

     North America     EMEA     Latin America     Asia Pacific     Total HBF  

Price

    4.1 %    (0.1 )%    3.9 %    4.6 %    2.8 % 

Volume

    (16.1 )%    (8.9 )%    (14.8 )%    (2.7 )%    (12.4 )% 
                              

Organic Growth

    (12.0 )%    (9.0 )%    (10.9 )%    1.9 %    (9.6 )% 

F/X

    (0.5 )%    (10.3 )%    0.0 %    (8.4 )%    (4.2 )% 

Acquisition

    0.0 %    2.9 %    0.0 %    0.0 %    0.9 % 
                              
   (12.5 )%    (16.4 )%    (10.9 )%    (6.5 )%    (12.9 )% 
                              
          

39 Weeks Ended August 29, 2009

 

     North America     EMEA     Latin America     Asia Pacific     Total HBF  

Price

    6.0 %    1.4 %    6.0 %    5.5 %    4.5 % 

Volume

    (17.1 )%    (12.7 )%    (13.1 )%    (6.8 )%    (14.1 )% 
                              

Organic Growth

    (11.1 )%    (11.3 )%    (7.1 )%    (1.3 )%    (9.6 )% 

F/X

    (1.0 )%    (12.0 )%    0.0 %    (11.6 )%    (5.3 )% 

Acquisition

    0.0 %    2.1 %    0.0 %    0.0 %    0.7 % 
                              
   (12.1 )%    (21.2 )%    (7.1 )%    (12.9 )%    (14.2 )% 
                              

 

12

H.B. FULLER COMPANY & SUBSIDIARIES

REGULATION G RECONCILIATION

In thousands (unaudited)

 

     13 Weeks
Ended
August 29, 2009		     Adjustments     Adjusted 13
Weeks Ended
August 29, 2009		  

Net revenue

    $ 315,329      $ —        $ 315,329   

Cost of sales

      (214,914 )      —          (214,914 ) 
                        

Gross profit

      100,415        —          100,415   

Selling, general and administrative expenses

      (68,324 )      —          (68,324 ) 

Goodwill and other impairment charges

      —          —          —     

Other income, net

      18,487        18,750        (263 ) 

Interest expense

      (1,680 )      —          (1,680 ) 
                        

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

      48,898        18,750        30,148   

Income taxes

      (15,113 )      (6,989 )      (8,124 ) 

Minority interests in (income) loss of subsidiaries

      (49 )      —          (49 ) 

Income from equity investments

      1,677        —          1,677   
                        

Net Income

    $ 35,413      $ 11,761      $ 23,652   
                        

Basic income per common share

    $ 0.73      $ 0.24      $ 0.49   
                        

Diluted income per common share

    $ 0.72      $ 0.24      $ 0.48   
                        

Weighted-average common shares outstanding:

       

Basic

      48,343        48,343        48,343   

Diluted

      49,242        49,242        49,242   

 

13

H.B. FULLER COMPANY & SUBSIDIARIES

REGULATION G RECONCILIATION

In thousands (unaudited)

 

     39 Weeks
Ended
August 29, 2009		     Adjustments     Adjusted 39
Weeks Ended
August 29, 2009		  

Net revenue

    $ 893,086      $ —        $ 893,086   

Cost of sales

      (628,264 )      —          (628,264 ) 
                        

Gross profit

      264,822        —          264,822   

Selling, general and administrative expenses

      (192,446 )      —          (192,446 ) 

Goodwill and other impairment charges

      (790 )      (790 )      —     

Other income, net

      16,142        18,750        (2,608 ) 

Interest expense

      (6,266 )      —          (6,266 ) 
                        

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

      81,462        17,960        63,502   

Income taxes

      (26,175 )      (6,695 )      (19,480 ) 

Minority interests in (income) loss of subsidiaries

      56        —          56   

Income from equity investments

      3,744        —          3,744   
                        

Net Income

    $ 59,087      $ 11,265      $ 47,822   
                        

Basic income per common share

    $ 1.22      $ 0.23      $ 0.99   
                        

Diluted income per common share

    $ 1.21      $ 0.23      $ 0.98   
                        

Weighted-average common shares outstanding:

       

Basic

      48,312        48,312        48,312   

Diluted

      49,031        49,031        49,031   

 

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1

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; EBITDA Margin is defined as EBITDA 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

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

 

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