Exhibit 99.1
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| Worldwide Headquarters | | Steven Brazones |
| 1200 Willow Lake Boulevard | | Investor Relations |
| St. Paul, Minnesota 55110-5101 | | 651-236-5158 |
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| NEWS | | For Immediate Release | | June 24, 2008 |
H.B. Fuller Reports EPS From Continuing
Operations Up 2 Percent in the Second Quarter
Reaffirms Earnings Expectation For Fiscal Year 2008
ST. PAUL, Minn. – H.B. Fuller Company (NYSE: FUL) today reported financial results for the second quarter that ended May 31, 2008.
Highlights:
| | • | | Earnings from continuing operations per diluted share up 2 percent from prior year to $0.41 |
| | • | | Achieved sequential improvement in organic sales trend versus the first quarter; net revenue grew 1 percent year over year |
| | • | | SG&A expense declined $6 million, or more than 9 percent year over year, as a result of tight control of discretionary spending |
| | • | | Completed $200 million share repurchase program at an average price of $21.91 |
| | • | | Reaffirmed earnings expectation for fiscal year of between $1.76 and $1.86 per diluted share |
Second Quarter:
Income from continuing operations for the second quarter of 2008 was $21.4 million, or $0.41 per diluted share, versus $24.9 million, or $0.40 per diluted share, in last year’s second quarter. While net revenue for the second quarter totaled $357 million, up 1 percent versus the prior year, lower income was primarily attributable to rising raw materials costs and a lag in selling price increases. Increasing raw material costs were partially offset by lower SG&A expense levels. The lower share count, resulting from the Company’s share repurchase program, led to the year-over-year per share improvement.
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This year’s second quarter net income from continuing operations included two one-time charges that significantly reduced the gross profit margin of the Company’s North American segment. These charges included severance and related expenses associated with the realignment of an adhesive facility in Kentucky as well as channel resetting costs associated with the acquisition of new retail business within the Company’s Specialty Construction business. In total these charges were $2.7 million on a pre-tax basis, or the equivalent of $0.03 per diluted share. Excluding these charges, net income from continuing operations would have been $0.44 per diluted share versus reported results of $0.41 per diluted share.
Net revenue for this year’s second quarter was $357 million, up 1 percent versus the second quarter of 2007. Foreign currency translation favorably contributed 5.4 percentage points to net revenue growth. Higher average selling prices positively impacted net revenue growth by 0.9 percentage points and lower volume adversely impacted net revenue growth by 5.4 percentage points. Organic sales declined by 4.5 percent year over year in the second quarter, a sequential improvement of 310 basis points versus the 7.6 percent decline in the first quarter.
“As we had anticipated, the challenges we faced in the first quarter that resulted from both the sluggish North American economy and also the global inflationary raw material environment continued into the second quarter. On the other hand, we were pleased that despite these continued pressures we were able to manage the business from both an operational and capital perspective in order to maintain per-share profitability levels,” said Michele Volpi, president and chief executive officer. “Raw material costs have continued to escalate and pricing actions naturally lagged. To compensate for the short-term timing delay as we ramped up our pricing execution, we implemented strong cost controls to partially mitigate the correspondent gross margin pressure.”
Year-To-Date:
Income from continuing operations for the first half of 2008 was $39.6 million, or $0.72 per diluted share, versus $43.5 million, or $0.71 per diluted share, in the first half of last year.
Net revenue for the first half of 2008 was $679 million, down 1 percent versus the first half of 2007. Foreign currency translation favorably contributed 5.0 percentage points to net revenue growth. Higher average selling prices positively impacted net revenue growth by 0.7 percentage points and lower volume adversely impacted net revenue growth by 6.8 percentage points. Organic sales declined by 6.1 percent year over year in the first half of the year.
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Fiscal Year 2008 Expectations:
The Company reaffirms its expectation to achieve net income per diluted share in fiscal year 2008 of between $1.76 and $1.86. This expectation continues despite the inflationary pressures and weakening end-market demand. Additionally, the Company now expects capital expenditures to be $20 to $25 million, down from the previous range of $30 to $35 million. For fiscal year 2008, the Company continues to expect depreciation expense to be approximately $35 million, amortization expense to be approximately $12 million, and the effective tax rate to be approximately 29 percent, excluding any future significant discrete items.
“Through our global footprint and continued focus on expense management, we remain confident for fiscal year 2008 despite the challenges we have outlined. Top line improvements are expected to accelerate through the end of the year and EBITDA margin is expected to improve from first half levels as we realize the benefits of pricing actions,” commented Volpi. “At the same time, we intend to continue our discretionary cost controls while we invest for growth in accordance with our five-year plan.”
Conference Call:
The Company will host an investor conference call to discuss second quarter 2008 results on Wednesday, June 25, 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 atwww.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 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 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 atwww.hbfuller.com.
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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 4, 2008 and 10-K filing of January 30, 2008. 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
May 31, 2008 | | | 13 Weeks
Ended
June 2, 2007 | |
Net revenue | | $ | 356,765 | | | $ | 353,704 | |
Cost of sales | | | (261,542 | ) | | | (248,323 | ) |
| | | | | | | | |
Gross profit | | | 95,223 | | | | 105,381 | |
| | |
Selling, general and administrative expenses | | | (62,795 | ) | | | (69,027 | ) |
Gains from sales of assets | | | 26 | | | | 16 | |
Other income, net | | | 818 | | | | 1,267 | |
Interest expense | | | (3,942 | ) | | | (3,181 | ) |
| | | | | | | | |
Income from continuing operations before income taxes, minority interests and income from equity investments | | | 29,330 | | | | 34,456 | |
Income taxes | | | (8,343 | ) | | | (10,029 | ) |
Minority interests in loss of subsidiaries | | | 28 | | | | 22 | |
Income from equity investments | | | 351 | | | | 411 | |
| | | | | | | | |
Income from continuing operations | | | 21,366 | | | | 24,860 | |
Income from discontinued operations | | | — | | | | 2,407 | |
| | | | | | | | |
Net Income | | $ | 21,366 | | | $ | 27,267 | |
| | | | | | | | |
Basic income per common share: | | | | | | | | |
Continuing operations | | $ | 0.42 | | | $ | 0.41 | |
Discontinued operations | | | — | | | | 0.04 | |
| | | | | | | | |
Net income | | $ | 0.42 | | | $ | 0.45 | |
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Diluted income per common share: | | | | | | | | |
Continuing operations | | $ | 0.41 | | | $ | 0.40 | |
Discontinued operations | | | — | | | | 0.04 | |
| | | | | | | | |
Net income | | $ | 0.41 | | | $ | 0.44 | |
| | | | | | | | |
Weighted-average common shares outstanding: | | | | | | | | |
Basic | | | 51,047 | | | | 60,394 | |
Diluted | | | 51,819 | | | | 61,465 | |
| | |
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)
| | | | | | | | | |
| | | May 31, 2008 | | December 1, 2007 | | June 2, 2007 |
Cash & cash equivalents | | $ | 212,478 | | $ | 246,358 | | $ | 201,000 |
Inventory | | | 147,605 | | | 137,564 | | | 124,182 |
Trade accounts receivable, net | | | 215,531 | | | 212,477 | | | 204,737 |
Trade accounts payable | | | 133,923 | | | 156,247 | | | 145,957 |
Total assets | | | 1,350,572 | | | 1,364,602 | | | 1,391,759 |
Total debt | | | 347,830 | | | 172,608 | | | 171,666 |
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H.B. FULLER COMPANY & SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
In thousands, except per share amounts (unaudited)
| | | | | | | | |
| | | 26 Weeks
Ended
May 31, 2008 | | | 26 Weeks
Ended
June 2, 2007 | |
Net revenue | | $ | 679,413 | | | $ | 687,058 | |
Cost of sales | | | (492,673 | ) | | | (482,012 | ) |
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Gross profit | | | 186,740 | | | | 205,046 | |
| | |
Selling, general and administrative expenses | | | (127,792 | ) | | | (140,666 | ) |
Gains from sales of assets | | | 29 | | | | 103 | |
Other income, net | | | 2,084 | | | | 2,635 | |
Interest expense | | | (6,870 | ) | | | (6,789 | ) |
| | | | | | | | |
Income from continuing operations before income taxes, minority interests and income from equity investments | | | 54,191 | | | | 60,329 | |
| | |
Income taxes | | | (15,553 | ) | | | (17,556 | ) |
| | |
Minority interests in (income) loss of subsidiaries | | | 111 | | | | (9 | ) |
| | |
Income from equity investments | | | 830 | | | | 767 | |
| | | | | | | | |
Income from continuing operations | | | 39,579 | | | | 43,531 | |
Income from discontinued operations | | | — | | | | 4,556 | |
| | | | | | | | |
Net Income | | $ | 39,579 | | | $ | 48,087 | |
| | | | | | | | |
Basic income per common share: | | | | | | | | |
Continuing operations | | $ | 0.73 | | | $ | 0.72 | |
Discontinued operations | | | — | | | | 0.08 | |
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Net income | | $ | 0.73 | | | $ | 0.80 | |
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Diluted income per common share: | | | | | | | | |
Continuing operations | | $ | 0.72 | | | $ | 0.71 | |
Discontinued operations | | | — | | | | 0.07 | |
| | | | | | | | |
Net income | | $ | 0.72 | | | $ | 0.78 | |
| | | | | | | | |
Weighted-average common shares outstanding: | | | | | | | | |
Basic | | | 53,865 | | | | 60,164 | |
Diluted | | | 54,655 | | | | 61,339 | |
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Dividends declared per common share | | $ | 0.13050 | | | $ | 0.12700 | |
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H.B. FULLER COMPANY & SUBSIDIARIES
SEGMENT FINANCIAL INFORMATION
In thousands (unaudited)
| | | | | | |
| | | 13 Weeks
Ended
May 31, 2008 | | 13 Weeks
Ended
June 2, 2007 |
Net Revenue: | | | | | | |
North America | | $ | 160,100 | | $ | 172,481 |
Europe | | | 109,332 | | | 104,001 |
Latin America | | | 53,475 | | | 50,021 |
Asia Pacific | | | 33,858 | | | 27,201 |
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Total H.B. Fuller | | $ | 356,765 | | $ | 353,704 |
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Operating Income1: | | | | | | |
North America | | $ | 18,773 | | $ | 23,805 |
Europe | | | 9,629 | | | 10,092 |
Latin America | | | 1,479 | | | 1,209 |
Asia Pacific | | | 2,547 | | | 1,248 |
| | | | | | |
Total H.B. Fuller | | $ | 32,428 | | $ | 36,354 |
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Depreciation Expense: | | | | | | |
North America | | $ | 4,185 | | $ | 4,618 |
Europe | | | 2,658 | | | 2,217 |
Latin America | | | 1,194 | | | 1,478 |
Asia Pacific | | | 614 | | | 641 |
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Total H.B. Fuller | | $ | 8,651 | | $ | 8,954 |
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Amortization Expense: | | | | | | |
North America | | $ | 2,176 | | $ | 2,417 |
Europe | | | 541 | | | 488 |
Latin America | | | 92 | | | 107 |
Asia Pacific | | | 46 | | | 57 |
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Total H.B. Fuller | | $ | 2,855 | | $ | 3,069 |
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EBITDA2: | | | | | | |
North America | | $ | 25,133 | | $ | 30,839 |
Europe | | | 12,828 | | | 12,797 |
Latin America | | | 2,765 | | | 2,795 |
Asia Pacific | | | 3,208 | | | 1,946 |
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Total H.B. Fuller | | $ | 43,934 | | $ | 48,377 |
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H.B. FULLER COMPANY & SUBSIDIARIES
SEGMENT FINANCIAL INFORMATION
In thousands (unaudited)
| | | | | | |
| | | 26 Weeks
Ended
May 31, 2008 | | 26 Weeks
Ended
June 2, 2007 |
Net Revenue: | | | | | | |
North America | | $ | 298,739 | | $ | 329,707 |
Europe | | | 208,930 | | | 199,419 |
Latin America | | | 109,222 | | | 104,939 |
Asia Pacific | | | 62,522 | | | 52,993 |
| | | | | | |
Total H.B. Fuller | | $ | 679,413 | | $ | 687,058 |
| | | | | | |
Operating Income1: | | | | | | |
North America | | $ | 34,540 | | $ | 39,164 |
Europe | | | 17,714 | | | 18,090 |
Latin America | | | 2,704 | | | 4,480 |
Asia Pacific | | | 3,990 | | | 2,646 |
| | | | | | |
Total H.B. Fuller | | $ | 58,948 | | $ | 64,380 |
| | | | | | |
Depreciation Expense: | | | | | | |
North America | | $ | 8,457 | | $ | 9,200 |
Europe | | | 5,217 | | | 4,804 |
Latin America | | | 2,394 | | | 2,684 |
Asia Pacific | | | 1,215 | | | 1,234 |
| | | | | | |
Total H.B. Fuller | | $ | 17,283 | | $ | 17,922 |
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Amortization Expense: | | | | | | |
North America | | $ | 4,572 | | $ | 6,598 |
Europe | | | 1,065 | | | 1,017 |
Latin America | | | 184 | | | 213 |
Asia Pacific | | | 92 | | | 114 |
| | | | | | |
Total H.B. Fuller | | $ | 5,913 | | $ | 7,942 |
| | | | | | |
EBITDA2: | | | | | | |
North America | | $ | 47,569 | | $ | 54,962 |
Europe | | | 23,996 | | | 23,911 |
Latin America | | | 5,282 | | | 7,377 |
Asia Pacific | | | 5,297 | | | 3,994 |
| | | | | | |
Total H.B. Fuller | | $ | 82,144 | | $ | 90,244 |
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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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