EX-99.1 2 dex991.htm PRESS RELEASE Press Release

Exhibit 99.1

 

LOGO  

Worldwide Headquarters

  

Steven Brazones

1200 Willow Lake Boulevard

  

Investor Relations

St. Paul, Minnesota 55110-5101

   651-236-5158

 

 

NEWS   For Immediate Release   September 23, 2008

 

H.B. Fuller Reports Third Quarter Results

Organic Sales Trend Improves Amidst Challenging Environment

ST. PAUL, Minn. – H.B. Fuller Company (NYSE: FUL) today reported financial results for the third quarter that ended August 30, 2008.

Highlights:

 

  •  

Organic sales trend improved despite ongoing weakness in end markets

 

  •  

Pricing actions raised average selling price by 2.6 percent, nearly three times the second quarter increase

 

  •  

SG&A reduced year-over-year on continued cost controls and limits on discretionary spending

 

  •  

Net working capital improved sequentially, down 60 basis points from the second quarter

 

  •  

Enhanced leadership team with addition of Jim Owens as senior vice president of North America and announcement of Barry Snyder as chief technology officer

 

  •  

Expanded geographic presence in the Middle East with announcement of the acquisition of Egymelt in Egypt

Third Quarter:

Income from continuing operations for the third quarter of 2008 was $21.7 million, or $0.44 per diluted share, versus $26.8 million, or $0.44 per diluted share, in last year’s third quarter. This year’s third quarter income from continuing operations included a significant one-time tax benefit related to the valuation of deferred tax assets in Brazil. This discrete tax item totaled $4.3 million on an after-tax basis, or the equivalent of $0.09 per diluted share. Excluding this favorable tax item, income from continuing operations would have been $0.35 per diluted share versus reported results of $0.44 per diluted share. Rapidly rising raw material costs and a lag in realized selling price increases principally led to the decline in profitability year-over-year. Tight expense controls and limits on discretionary spending continued and partially offset the impact of rising raw material costs.

 

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Net revenue for this year’s third quarter was $362 million, up 2.8 percent versus the third quarter of 2007. Foreign currency translation favorably contributed 4.8 percentage points to net revenue growth. Higher average selling prices positively impacted net revenue growth by 2.6 percentage points and lower volume adversely impacted net revenue growth by 4.6 percentage points. Organic sales declined by 2.0 percent year over year in the third quarter, a sequential improvement of 250 basis points versus the 4.5 percent decline in the second quarter.

“Raw material cost inflation accelerated in the third quarter. Our pricing actions were significantly more effective in the third quarter, but we still lost ground,” said Michele Volpi, president and chief executive officer. “While disappointed, we believe the situation is temporary and we intend to further recover our raw material cost increases through more appropriate pricing actions in the quarters ahead.”

Year-To-Date:

Income from continuing operations for the first nine months of 2008 was $61.3 million, or $1.16 per diluted share, versus $70.4 million, or $1.15 per diluted share, in the first nine months of last year.

Net revenue for the first nine months of 2008 was $1.04 billion, up 0.2 percent versus the first nine months of 2007. Foreign currency translation favorably contributed 4.9 percentage points to net revenue growth. Higher average selling prices positively impacted net revenue growth by 1.4 percentage points and lower volume adversely impacted net revenue growth by 6.1 percentage points. Organic sales declined by 4.7 percent year over year in the first nine months of the year.

Fourth Quarter and Fiscal 2008 Expectations:

For the fourth quarter of 2008, the Company maintains the guidance provided earlier this month and continues to expect to report net revenue of between $380 and $390 million and income from continuing operations per diluted share of between $0.40 and $0.45. In addition, the Company continues to expect an effective tax rate of approximately 29 percent for the fourth quarter, excluding any future significant discrete items.

For fiscal year 2008, the Company maintains its expectation for depreciation expense to be approximately $35 million and amortization expense to be approximately $12 million. However, the Company now expects capital expenditures to be approximately $20 million, at the low end of the previous range of between $20 and $25 million.

 

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Conference Call:

The Company will host an investor conference call to discuss third quarter 2008 results on Wednesday, September 24, 2008 at 9:30 a.m. central daylight time (10:30 a.m. eastern daylight 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 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 segment information is reconciled with reported GAAP results in segment financials provided 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 2007 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 its 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 filings of April 4, 2008 and July 2, 2008 and 10-K filing of January 30, 2008. All forward-looking information

 

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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
August 30, 2008		     13 Weeks
Ended
September 1, 2007		  

Net revenue

    $ 361,986     $ 352,253  

Cost of sales

      (271,533 )     (245,919 )
                

Gross profit

      90,453       106,334  

Selling, general and administrative expenses

      (64,282 )     (67,450 )

Gains from sales of assets

      15       4  

Other income, net

      759       940  

Interest expense

      (3,872 )     (2,868 )
                

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

      23,073       36,960  

Income taxes

      (2,266 )     (10,537 )

Minority interests in loss of subsidiaries

      43       28  

Income from equity investments

      866       392  
                

Income from continuing operations

      21,716       26,843  

Income from discontinued operations

      —         1,523  
                

Net Income

    $ 21,716     $ 28,366  
                

Basic income per common share:

     

Continuing operations

    $ 0.45     $ 0.44  

Discontinued operations

      —         0.03  
                

Net income

    $ 0.45     $ 0.47  
                

Diluted income per common share:

     

Continuing operations

    $ 0.44     $ 0.44  

Discontinued operations

      —         0.02  
                

Net income

    $ 0.44     $ 0.46  
                

Weighted-average common shares outstanding:

     

Basic

      48,222       60,370  

Diluted

      49,058       61,357  

Dividends declared per common share

    $ 0.06600     $ 0.06450  

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

 

     August 30, 2008    December 1, 2007    September 1, 2007

Cash & cash equivalents

    $ 207,058    $ 246,358    $ 219,440

Inventory

      150,829      137,564      128,889

Trade accounts receivable, net

      214,573      212,477      204,179

Trade accounts payable

      141,615      156,247      148,022

Total assets

      1,327,454      1,364,602      1,401,530

Total debt

      339,466      172,608      171,928

 

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H.B. FULLER COMPANY & SUBSIDIARIES

CONSOLIDATED FINANCIAL INFORMATION

In thousands, except per share amounts (unaudited)

 

     39 Weeks
Ended
August 30, 2008		     39 Weeks
Ended
September 1, 2007		  

Net revenue

    $ 1,041,399     $ 1,039,311  

Cost of sales

      (764,206 )     (727,931 )
                

Gross profit

      277,193       311,380  

Selling, general and administrative expenses

      (192,074 )     (208,116 )

Gains from sales of assets

      44       107  

Other income, net

      2,843       3,575  

Interest expense

      (10,742 )     (9,657 )
                

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

      77,264       97,289  

Income taxes

      (17,819 )     (28,093 )

Minority interests in loss of subsidiaries

      154       19  

Income from equity investments

      1,696       1,159  
                

Income from continuing operations

      61,295       70,374  

Income from discontinued operations

      —         6,079  
                

Net Income

    $ 61,295     $ 76,453  
                

Basic income per common share:

     

Continuing operations

    $ 1.18     $ 1.17  

Discontinued operations

      —         0.10  
                

Net income

    $ 1.18     $ 1.27  
                

Diluted income per common share:

     

Continuing operations

    $ 1.16     $ 1.15  

Discontinued operations

      —         0.10  
                

Net income

    $ 1.16     $ 1.25  
                

Weighted-average common shares outstanding:

     

Basic

      51,984       60,232  

Diluted

      52,790       61,345  

Dividends declared per common share

    $ 0.19650     $ 0.19150  

 

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H.B. FULLER COMPANY & SUBSIDIARIES

SEGMENT FINANCIAL INFORMATION

In thousands (unaudited)

 

     13 Weeks
Ended
August 30, 2008		    13 Weeks
Ended
September 1, 2007

Net Revenue:

      

North America

    $ 163,947    $ 172,210

Europe

      109,573      100,114

Latin America

      54,334      50,920

Asia Pacific

      34,132      29,009
             

Total H.B. Fuller

    $ 361,986    $ 352,253
             

Operating Income1:

      

North America

    $ 15,678    $ 24,084

Europe

      7,409      9,726

Latin America

      1,236      3,178

Asia Pacific

      1,848      1,896
             

Total H.B. Fuller

    $ 26,171    $ 38,884
             

Depreciation Expense:

      

North America

    $ 4,162    $ 4,589

Europe

      2,631      2,859

Latin America

      1,184      1,250

Asia Pacific

      609      623
             

Total H.B. Fuller

    $ 8,586    $ 9,321
             

Amortization Expense:

      

North America

    $ 2,248    $ 2,376

Europe

      545      501

Latin America

      92      98

Asia Pacific

      46      52
             

Total H.B. Fuller

    $ 2,931    $ 3,027
             

EBITDA2:

      

North America

    $ 22,088    $ 31,049

Europe

      10,585      13,086

Latin America

      2,512      4,526

Asia Pacific

      2,503      2,571
             

Total H.B. Fuller

    $ 37,688    $ 51,232
             

 

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H.B. FULLER COMPANY & SUBSIDIARIES

SEGMENT FINANCIAL INFORMATION

In thousands (unaudited)

 

     39 Weeks
Ended
August 30, 2008		    39 Weeks
Ended
September 1, 2007

Net Revenue:

      

North America

    $ 462,686    $ 501,917

Europe

      318,503      299,533

Latin America

      163,556      155,859

Asia Pacific

      96,654      82,002
             

Total H.B. Fuller

    $ 1,041,399    $ 1,039,311
             

Operating Income1:

      

North America

    $ 50,217    $ 63,248

Europe

      25,123      27,816

Latin America

      3,940      7,658

Asia Pacific

      5,839      4,542
             

Total H.B. Fuller

    $ 85,119    $ 103,264
             

Depreciation Expense:

      

North America

    $ 12,619    $ 13,788

Europe

      7,848      7,664

Latin America

      3,578      3,934

Asia Pacific

      1,824      1,857
             

Total H.B. Fuller

    $ 25,869    $ 27,243
             

Amortization Expense:

      

North America

    $ 6,820    $ 8,974

Europe

      1,610      1,518

Latin America

      276      311

Asia Pacific

      138      166
             

Total H.B. Fuller

    $ 8,844    $ 10,969
             

EBITDA2:

      

North America

    $ 69,656    $ 86,010

Europe

      34,581      36,998

Latin America

      7,794      11,903

Asia Pacific

      7,801      6,565
             

Total H.B. Fuller

    $ 119,832    $ 141,476
             

 

1

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

2

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

 

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