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 | | 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 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 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.
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 | ) |
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Gross profit | | | 90,453 | | | | 106,334 | |
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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 | ) |
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Income from continuing operations before income taxes, minority interests and income from equity investments | | | 23,073 | | | | 36,960 | |
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Income taxes | | | (2,266 | ) | | | (10,537 | ) |
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Minority interests in loss of subsidiaries | | | 43 | | | | 28 | |
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Income from equity investments | | | 866 | | | | 392 | |
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Income from continuing operations | | | 21,716 | | | | 26,843 | |
Income from discontinued operations | | | — | | | | 1,523 | |
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Net Income | | $ | 21,716 | | | $ | 28,366 | |
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Basic income per common share: | | | | | | | | |
Continuing operations | | $ | 0.45 | | | $ | 0.44 | |
Discontinued operations | | | — | | | | 0.03 | |
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Net income | | $ | 0.45 | | | $ | 0.47 | |
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Diluted income per common share: | | | | | | | | |
Continuing operations | | $ | 0.44 | | | $ | 0.44 | |
Discontinued operations | | | — | | | | 0.02 | |
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Net income | | $ | 0.44 | | | $ | 0.46 | |
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Weighted-average common shares outstanding: | | | | | | | | |
Basic | | | 48,222 | | | | 60,370 | |
Diluted | | | 49,058 | | | | 61,357 | |
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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)
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| | | 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)
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| | | 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 | ) |
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Gross profit | | | 277,193 | | | | 311,380 | |
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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 | ) |
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Income from continuing operations before income taxes, minority interests and income from equity investments | | | 77,264 | | | | 97,289 | |
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Income taxes | | | (17,819 | ) | | | (28,093 | ) |
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Minority interests in loss of subsidiaries | | | 154 | | | | 19 | |
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Income from equity investments | | | 1,696 | | | | 1,159 | |
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Income from continuing operations | | | 61,295 | | | | 70,374 | |
Income from discontinued operations | | | — | | | | 6,079 | |
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Net Income | | $ | 61,295 | | | $ | 76,453 | |
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Basic income per common share: | | | | | | | | |
Continuing operations | | $ | 1.18 | | | $ | 1.17 | |
Discontinued operations | | | — | | | | 0.10 | |
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Net income | | $ | 1.18 | | | $ | 1.27 | |
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Diluted income per common share: | | | | | | | | |
Continuing operations | | $ | 1.16 | | | $ | 1.15 | |
Discontinued operations | | | — | | | | 0.10 | |
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Net income | | $ | 1.16 | | | $ | 1.25 | |
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Weighted-average common shares outstanding: | | | | | | | | |
Basic | | | 51,984 | | | | 60,232 | |
Diluted | | | 52,790 | | | | 61,345 | |
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Dividends declared per common share | | $ | 0.19650 | | | $ | 0.19150 | |
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H.B. FULLER COMPANY & SUBSIDIARIES
SEGMENT FINANCIAL INFORMATION
In thousands (unaudited)
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| | | 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 |
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Total H.B. Fuller | | $ | 361,986 | | $ | 352,253 |
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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 |
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Total H.B. Fuller | | $ | 26,171 | | $ | 38,884 |
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Depreciation Expense: | | | | | | |
North America | | $ | 4,162 | | $ | 4,589 |
Europe | | | 2,631 | | | 2,859 |
Latin America | | | 1,184 | | | 1,250 |
Asia Pacific | | | 609 | | | 623 |
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Total H.B. Fuller | | $ | 8,586 | | $ | 9,321 |
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Amortization Expense: | | | | | | |
North America | | $ | 2,248 | | $ | 2,376 |
Europe | | | 545 | | | 501 |
Latin America | | | 92 | | | 98 |
Asia Pacific | | | 46 | | | 52 |
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Total H.B. Fuller | | $ | 2,931 | | $ | 3,027 |
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EBITDA2: | | | | | | |
North America | | $ | 22,088 | | $ | 31,049 |
Europe | | | 10,585 | | | 13,086 |
Latin America | | | 2,512 | | | 4,526 |
Asia Pacific | | | 2,503 | | | 2,571 |
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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 |
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Total H.B. Fuller | | $ | 1,041,399 | | $ | 1,039,311 |
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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 |
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Total H.B. Fuller | | $ | 85,119 | | $ | 103,264 |
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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 |
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Total H.B. Fuller | | $ | 25,869 | | $ | 27,243 |
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Amortization Expense: | | | | | | |
North America | | $ | 6,820 | | $ | 8,974 |
Europe | | | 1,610 | | | 1,518 |
Latin America | | | 276 | | | 311 |
Asia Pacific | | | 138 | | | 166 |
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Total H.B. Fuller | | $ | 8,844 | | $ | 10,969 |
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EBITDA2: | | | | | | |
North America | | $ | 69,656 | | $ | 86,010 |
Europe | | | 34,581 | | | 36,998 |
Latin America | | | 7,794 | | | 11,903 |
Asia Pacific | | | 7,801 | | | 6,565 |
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Total H.B. Fuller | | $ | 119,832 | | $ | 141,476 |
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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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