EX-99.1 2 dex991.htm PRESS RELEASE Press Release

Exhibit 99.1

 

LOGO

Worldwide Headquarters

1200 Willow Lake Boulevard

St. Paul, Minnesota 55110-5101

 

   

 

Steven Brazones

Investor Relations Contact

651-236-5158

 

 

NEWS

 

 

For Immediate Release

 

 

March 30, 2010

 

 

H.B. Fuller Reports Strong First Quarter 2010 Results

Net Revenue Up Over 11 Percent, Diluted EPS Nearly Tripled Year-Over-Year

ST. PAUL, Minn. – H.B. Fuller Company (NYSE: FUL) today reported financial results for the first quarter that ended February 27, 2010.

First Quarter 2010 Highlights Included:

 

   

Volume up 8.3 percent year-over-year, organic sales up 6.1 percent;

 

   

Gross margin 470 basis points higher than comparable quarter last year, and maintained at strong fourth quarter levels;

 

   

EBITDA1 up more than 55 percent year-over-year, driving EBITDA margin1 up 340 basis points to 11.9 percent;

 

   

Diluted EPS nearly tripled versus last year’s first quarter to $0.38;

 

   

Executed agreement to acquire Revertex Finewaters in Malaysia to expand geographic presence in the fast-growing region of Southeast Asia.

First Quarter 2010 Results:

Net income for the first quarter of 2010 was $19.0 million, or $0.38 per diluted share, versus $6.1 million, or $0.13 per diluted share, in last year’s first quarter. Net Income for the first quarter of 2009 included an after-tax non-cash “true-up” for the estimated goodwill impairment charge taken at the end of fiscal year 2008 of $0.5 million, or $0.01 per diluted share. After adjusting for the non-cash “true-up”, first quarter 2009 net income was $6.6 million, or $0.142 per diluted share.

Net revenue for the first quarter of 2010 was $309.4 million, up 11.1 percent versus the first quarter of 2009. Higher volume, favorable foreign currency translation, and acquisitions positively impacted net revenue growth by 8.3, 4.4 and 0.6 percentage points, respectively. Lower average selling prices reduced net revenue growth by 2.2 percentage points. Consequently, organic sales grew by 6.1

 

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percent year-over-year. Gross margin was up 470 basis points versus the first quarter of 2009, primarily due to lower raw material costs and the benefits of reformulation efforts. SG&A spending increased year-over-year to $71.4 million as investments for growth continued throughout the organization. Overall, EBITDA margin1 improved 340 basis points over the prior year.

On a sequential basis, net revenue declined approximately 9 percent compared to the fourth quarter of 2009, reflecting a normal seasonal pattern. Gross margin was maintained at the historically high fourth quarter levels as reformulation efforts and price adjustments offset slightly higher raw material costs. SG&A expense remained flat versus the fourth quarter; however, as a percentage of net revenue, SG&A expense increased more than 200 basis points due to the seasonal sequential decline in net revenue. Overall, EBITDA margin1 declined approximately 200 basis points versus the fourth quarter.

“We are very pleased with our strong first quarter results. The investments we have made to enhance our focus on the customer are not only producing results, but also building momentum within the organization” said Michele Volpi, H.B. Fuller president and chief executive officer. “In the first quarter, our organic growth trend reversal continued and culminated in a return to positive organic growth which, coupled with strong margin management, delivered the highest first quarter earnings per share result in recent history. Certainly, the bold moves that H.B. Fuller has taken over the past few quarters, regarding geographic expansion, raw material cost management, talent acquisition and development, as well as customer satisfaction, have positioned our company for strong results as we move through 2010 and beyond.”

Regional Perspective:

The Company reported that each of the regional operating segments improved its sales trend and every region, except Latin America, achieved positive organic growth in the first quarter. Successful new business development efforts, combined with generally more favorable economic conditions, led to the improved results. Profitability for all the regions also improved significantly year-over-year. Lower raw material costs, benefits from reformulation activities, and higher volumes principally drove the improvement.

In North America, organic sales expanded 5.7 percent year-over-year with Adhesives up nearly 7 percent and Specialty Construction up 1.5 percent. The return to positive organic growth for Specialty Construction was especially impressive given the severe declines in end-market demand that the business has faced for the last several years. EBITDA1 for the region grew more than 40 percent year-over-year, with EBITDA margin1 expanding 450 basis points.

 

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In EIMEA (Europe, India, Middle East, Africa), net revenue was up nearly 20 percent year-over-year, driven by both strong organic growth and favorable foreign currency translation. On an organic basis, sales expanded approximately 8 percent, driven by double-digit volume gains. EIMEA grew EBITDA1 more than 45 percent year-over-year and improved its EBITDA margin 1 by 140 basis points.

In Latin America, the two business units faced significantly different end-market conditions. While organic sales for the region were flat year-over-year, Adhesives was up nearly 5 percent and Paints was down about 5 percent. Adhesives was successful in adding new business; however, Paints was adversely impacted by declines in construction related activities in Central America. Profitability for the region overall improved significantly year-over-year. EBITDA1 for the region grew nearly 85 percent year-over-year and EBITDA margin1 expanded 330 basis points.

The Asia Pacific region posted the strongest revenue growth of the four regions in the first quarter. Net revenue grew more than 30 percent versus last year and organic sales grew 15 percent. Organic growth was driven by new business wins and a rebound in economic activity in the region. Profitability of the region increased sharply, continuing the profit improvement that began in the second half of last year. EBITDA1 for the region grew nearly six-fold year-over-year and EBITDA margin 1 increased 640 basis points. Earlier this month, the company also announced that it agreed to acquire Revertex Finewaters, a leading supplier of adhesives in Malaysia, with a well developed export network throughout Southeast Asia. The acquisition is expected to generate significant growth opportunities.

Balance Sheet and Cash Flow:

At the end of the first quarter of 2010 the Company had cash totaling $149 million and total debt of $279 million. This compares to fourth quarter levels of $100 million and $214 million, respectively. As a result, net debt increased $16 million sequentially. The increase in net debt was primarily attributable to normal seasonal factors. Cash flow from operations was $1.1 million in the first quarter and was essentially flat with the first quarter of 2009.

Fiscal 2010 Outlook:

“We are off to a great start in 2010 and we remain optimistic for the rest of the year,” said Volpi. “Our sales pipeline is expanding as the result of new wins in the market and more stable global economic conditions are leading to improved volumes with customers. We are now generating substantial positive organic growth and we are committed for this trend to continue throughout 2010 and beyond. Our current expectation is that net revenue will increase between 9 percent and 11 percent in 2010 compared to the prior year.

 

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“Although raw material costs were down about 5 percent year-over-year in the first quarter, costs are set to increase approximately 8 percent year-over-year in the second quarter and 6 percent for the full-year. Consequently, gross margin in the second quarter will likely decline from the historically high level achieved in the first quarter and then rebound somewhat in the third and fourth quarters.

“Regarding SG&A expense, our investments to further support and drive consistent profitable growth will continue. Resources to all the customer-centric functions of the business will be enhanced.

“We are encouraged and engaged to deliver strong performance in 2010. We are off to a great start, and we expect a great finish for the year and, more importantly, to position ourselves for growth in future years.”

Expectations for fiscal year 2010 include:

 

   

Net revenue up 9 percent to 11 percent from last year (new guidance);

 

   

Raw material costs up about 6 percent from last year (revised guidance);

 

   

Capital expenditures of approximately $25 million (no change from previous guidance);

 

   

Effective tax rate, excluding discrete items, of approximately 34 percent (no change from previous guidance).

Conference Call:

The Company will host an investor conference call to discuss first quarter 2010 results on Wednesday, March 31, 2010 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 our 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. The Company has included this non-GAAP information to assist in understanding the operating performance of the Company and our 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.

 

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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 2009 net revenue of $1.235 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-K filing, as amended, for the fiscal year ended November 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.

 

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H.B. FULLER COMPANY & SUBSIDIARIES

CONSOLIDATED FINANCIAL INFORMATION

In thousands, except per share amounts (unaudited)

 

     13 Weeks
Ended
February 27, 2010
    13 Weeks
Ended
February 28, 2009
 

Net revenue

   $ 309,442      $ 278,563   

Cost of sales

     (211,763     (203,564
                

Gross profit

     97,679        74,999   

Selling, general and administrative expenses

     (71,448     (62,606

Goodwill and other impairment charges

     —          (790

Other income (expense), net

     (63     (1,052

Interest expense

     (1,948     (2,398
                

Income before income taxes and income from equity investments

     24,220        8,153   

Income taxes

     (7,059     (3,008

Income from equity investments

     1,815        961   
                

Net income including non-controlling interests

   $ 18,976      $ 6,106   

Net (income) loss attributable to non-controlling interests

     (24     10   
                

Net income attributable to H.B. Fuller

   $ 18,952      $ 6,116   
                

Basic income per common share attributable to H.B. Fuller

   $ 0.39      $ 0.13   
                

Diluted income per common share attributable to H.B. Fuller

   $ 0.38      $ 0.13   
                

Weighted-average common shares outstanding:

    

Basic

     48,491        48,288   

Diluted

     49,494        48,924   

Dividends declared per common share

   $ 0.0680      $ 0.06600   

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

 

     February 27, 2010    November 28, 2009    February 28, 2009

Cash & cash equivalents

   $ 148,974    $ 100,154    $ 70,293

Inventories

     132,781      116,907      139,504

Trade accounts receivable, net

     185,511      203,898      180,273

Trade payables

     104,634      109,165      95,306

Total assets

     1,132,552      1,100,445      1,036,235

Total debt

     279,160      214,028      241,837

 

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H.B. FULLER COMPANY & SUBSIDIARIES

CONSOLIDATED FINANCIAL INFORMATION

Common Size Income Statement

 

     13 Weeks
Ended
February 27, 2010
    13 Weeks
Ended
February 28, 2009
 

Net revenue

   100.0   100.0

Cost of sales

   (68.4 )%    (73.1 )% 
            

Gross profit

   31.6   26.9

Selling, general and administrative expenses

   (23.1 )%    (22.5 )% 

Goodwill and other impairment charges

   0.0   (0.3 )% 

Other income (expense), net

   (0.0 )%    (0.3 )% 

Interest expense

   (0.7 )%    (0.9 )% 
            

Income before income taxes and income from equity investments

   7.8   2.9

Income taxes

   (2.3 )%    (1.1 )% 

Income from equity investments

   0.6   0.4
            

Net income including non-controlling interests

   6.1   2.2

Net (income) loss attributable to non-controlling interests

   (0.0 )%    0.0
            

Net income attributable to H.B. Fuller

   6.1   2.2
            

 

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H.B. FULLER COMPANY & SUBSIDIARIES

SEGMENT FINANCIAL INFORMATION

In thousands (unaudited)

 

     13 Weeks
Ended
February 27, 2010
    13 Weeks
Ended
February 28, 2009
 

Net Revenue:

    

North America

   $ 127,067      $ 119,173   

EIMEA

     94,018        78,909   

Latin America

     55,294        55,343   

Asia Pacific

     33,063        25,138   
                

Total H.B. Fuller

   $ 309,442      $ 278,563   
                

Operating Income4:

    

North America

   $ 17,203      $ 9,772   

EIMEA

     4,110        1,884   

Latin America

     2,852        864   

Asia Pacific

     2,066        (127
                

Total H.B. Fuller

   $ 26,231      $ 12,393   
                

Depreciation Expense:

    

North America

   $ 3,423      $ 4,089   

EIMEA

     2,423        2,454   

Latin America

     1,021        1,192   

Asia Pacific

     573        525   
                

Total H.B. Fuller

   $ 7,440      $ 8,260   
                

Amortization Expense:

    

North America

   $ 2,227      $ 2,239   

EIMEA

     615        550   

Latin America

     107        100   

Asia Pacific

     62        55   
                

Total H.B. Fuller

   $ 3,011      $ 2,944   
                

EBITDA1:

    

North America

   $ 22,853      $ 16,100   

EIMEA

     7,148        4,888   

Latin America

     3,980        2,156   

Asia Pacific

     2,701        453   
                

Total H.B. Fuller

   $ 36,682      $ 23,597   
                

Operating Margin3:

    

North America

     13.5     8.2

EIMEA

     4.4     2.4

Latin America

     5.2     1.6

Asia Pacific

     6.2     (0.5 %) 
                

Total H.B. Fuller

     8.5     4.4
                

EBITDA Margin1:

    

North America

     18.0     13.5

EIMEA

     7.6     6.2

Latin America

     7.2     3.9

Asia Pacific

     8.2     1.8
                

Total H.B. Fuller

     11.9     8.5
                

Net Revenue Growth:

    

North America

     6.6  

EIMEA

     19.1  

Latin America

     (0.1 %)   

Asia Pacific

     31.5  
          

Total H.B. Fuller

     11.1  
          

 

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H.B. FULLER COMPANY & SUBSIDIARIES

SEGMENT FINANCIAL INFORMATION

(unaudited)

13 Weeks Ended February 27, 2010

 

     North America     EIMEA     Latin America     Asia Pacific     Total HBF  

Price

   (1.6 )%    (4.6 )%    0.7   (3.3 )%    (2.2 )% 

Volume

   7.3   12.7   (0.8 )%    18.3   8.3
                              

Organic Growth

   5.7   8.1   (0.1 )%    15.0   6.1

F/X

   0.9   8.8   0.0   16.5   4.4

Acquisition

   0.0   2.2   0.0   0.0   0.6
                              
   6.6   19.1   (0.1 )%    31.5   11.1
                              

13 Weeks Ended February 28, 2009

 

     North America     EIMEA     Latin America     Asia Pacific     Total HBF  

Price

   6.8   2.9   7.8   5.8   5.7

Volume

   (16.7 )%    (16.6 )%    (10.7 )%    (6.5 )%    (14.7 )% 
                              

Organic Growth

   (9.9 )%    (13.7 )%    (2.9 )%    (0.7 )%    (9.0 )% 

F/X

   (1.4 )%    (10.7 )%    0.0   (12.4 )%    (5.1 )% 

Acquisition

   0.0   1.4   0.0   0.0   0.4
                              
   (11.3 )%    (23.0 )%    (2.9 )%    (13.1 )%    (13.7 )% 
                              

 

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H.B. FULLER COMPANY & SUBSIDIARIES

REGULATION G RECONCILIATION

In thousands, except per share amounts (unaudited)

 

     13 Weeks
Ended
February 28, 2009
    Impairment
Adjustments
    Adjusted 13 Weeks
Ended
February 28, 2009
 

Net revenue

   $ 278,563      $ —        $ 278,563   

Cost of sales

     (203,564     —          (203,564
                        

Gross profit

     74,999        —          74,999   

Selling, general and administrative expenses

     (62,606     —          (62,606

Goodwill and other impairment charges

     (790     (790     —     

Other income (expense), net

     (1,052     —          (1,052

Interest expense

     (2,398     —          (2,398
                        

Income before income taxes and income from equity investments

     8,153        (790     8,943   

Income taxes

     (3,008     294        (3,302

Income from equity investments

     961        —          961   
                        

Net income including non-controlling interests

   $ 6,106      $ (496   $ 6,602   

Net (income) loss attributable to non-controlling interests

     10        —          10   
                        

Net income attributable to H.B. Fuller

   $ 6,116      $ (496   $ 6,612   
                        

Basic income per common share attributable to H.B. Fuller

   $ 0.13      $ (0.01   $ 0.14   
                        

Diluted income per common share attributable to H.B. Fuller

   $ 0.13      $ (0.01   $ 0.14   
                        

Weighted-average H.B. Fuller common shares outstanding:

      

Basic

     48,288        48,288        48,288   

Diluted

     48,924        48,924        48,924   

 

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H.B. FULLER COMPANY & SUBSIDIARIES

REGULATION G RECONCILIATION

In thousands, (unaudited)

 

     13 Weeks
Ended
February 27, 2010
    13 Weeks
Ended
November 28, 2009
    13 Weeks
Ended
February 28, 2009
 

Net revenue

   309,442      341,573      278,563   

Cost of sales

   211,763      235,093      203,564   
                  

Gross profit

   97,679      106,480      74,999   

Selling, general and administrative expenses

   71,448      71,695      62,606   
                  

Operating Income4

   26,231      34,785      12,393   

Depreciation expense

   7,440      10,261      8,260   

Amortization expense

   3,011      3,056      2,944   
                  

EBITDA1

   36,682      48,102      23,597   

EBITDA margin1

   11.9   14.1   8.5

 

 

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. 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.

2

Adjusted diluted earnings per share (EPS) is a non-GAAP financial measure. First quarter 2009 excludes an after-tax “true-up” for the estimated goodwill impairment charge taken at the end of 2008 of $0.5 million ($0.01 per diluted share). A full reconciliation is provided in the tables above.

3

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

4

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.

 

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