H.B. Fuller Reports Third Quarter 2011 Results
Q3 EPS $0.47; Operating Income(1) up 43 Percent, EPS up 24 Percent versus Prior Year
ST. PAUL, Minn., Sept. 21, 2011 /PRNewswire/ -- H.B. Fuller Company (NYSE: FUL) today reported financial results for the third quarter that ended August 27, 2011.
(Logo: http://photos.prnewswire.com/prnh/20110215/CG49203LOGO)
Third Quarter 2011 Highlights Included:
- Net revenue increased 15 percent year-over-year;
- Gross profit margin improved 30 basis points sequentially and 50 basis points year-over-year in the face of significant continued raw material cost inflation;
- Selling, General and Administrative (SG&A) expense reduced by 120 basis points as a percent of net revenue year-over-year;
Third Quarter 2011 Results:
Net income for the third quarter of 2011 was $23.2 million, or $0.47 per diluted share, versus $19.0 million, or $0.38 per diluted share, in last year's third quarter. Diluted earnings per share in the third quarter of 2011 increased 24 percent compared to the results of the prior year.
Net revenue for the third quarter of 2011 was $387.8 million, up 14.5 percent versus the third quarter of 2010. Higher average selling prices and favorable foreign currency translation positively impacted net revenue growth by 10.5 and 6.0 percentage points, respectively. Lower volume reduced net revenue growth by 2.0 percentage points. Organic revenue grew by 8.5 percent year-over-year. On a sequential basis, net revenue decreased approximately 2 percent relative to the second quarter of 2011, driven by softer end-market demand, especially in EIMEA.
Gross profit margin was up 50 basis points versus the third quarter of 2010, and 30 basis points versus the previous quarter reflecting the cumulative positive impact of pricing actions, product reformulations and substitutions over the past year. Relative to the prior year, SG&A expense was higher by 8.1 percent, driven in part by foreign currency translation, but was down 120 basis points as a percentage of net revenue. Operating income(1) was $32.4 million, up 43 percent compared to the third quarter of 2010.
Balance Sheet and Cash Flow:
At the end of the third quarter of 2011, the Company had cash totaling $149 million and total debt of $238 million. This compares to second quarter levels of $138 million and $240 million, respectively. Net debt was $89 million at the end of the third quarter, down approximately $13 million from the previous quarter. Cash flow from operations was $28 million in the third quarter. Capital expenditures for the third quarter were $9.6 million.
Year-To-Date:
Net income for the first nine months of 2011 was $62.7 million, or $1.26 per diluted share, versus $48.9 million, or $0.99 per diluted share, in the first nine months of last year. Net income for the first nine months of 2010 included after-tax exit costs and non-cash impairment charges associated with the exiting of the Company's polysulfide insulating glass sealant product line in Europe. After adjusting for these charges, net income for the first nine months of last year was $57.4 million, or $1.16(2) per diluted share. On a comparable basis, diluted earnings per share were up 9 percent from the adjusted results of the prior year.
Net revenue for the first nine months of 2011 was $1,121.0 million, up 12.6 percent versus the first nine months of 2010. Higher average selling prices, favorable foreign currency translation and acquisitions positively impacted net revenue growth by 9.1, 2.8 and 1.1 percentage points, respectively. Lower volume reduced net revenue growth by 0.4 percentage points. Organic revenue grew by 8.7 percent year-over-year in the first nine months of 2011. Operating income(1) was up 15 percent compared to the adjusted results(2) in the first nine months of last year.
Fiscal 2011 Outlook:
"We are pleased with our results for the third quarter and for the entire year thus far," said Jim Owens, H. B. Fuller president and chief executive officer. "In the third quarter raw material inflation continued and end-market demand softened. In the face of these adverse conditions, we increased revenue, improved gross margin and reduced our operating expenses as a percentage of revenue. Despite continuing challenges in end-market conditions, we expect a strong fourth quarter built on further revenue growth and margin expansion."
The following highlights the Company's expectations for several key metrics in its 2011 financial outlook:
- Net revenue of $1,545 million to $1,560 million, up 14 percent to 15 percent relative to 2010;
- Earnings per diluted share of between $1.85 and $1.90, or $0.59 to $0.64 in the fourth quarter;
- Capital expenditures approximately $40 million;
- The Company's effective tax rate, excluding discrete items, is expected to be 31 percent.
As previously disclosed, the 2011 fiscal year for the Company will comprise 53 weeks. This financial outlook includes the impact of the additional week, which will be included in the fourth quarter results.
Conference Call:
The Company will host an investor conference call to discuss third quarter 2011 results on Thursday, September 22, 2011, 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 operating income, operating margin, adjusted diluted 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. 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:
For nearly 125 years, H.B. Fuller has been a leading global adhesives provider focusing on perfecting adhesives, sealants and other specialty chemical products to improve products and lives. Recognized for unmatched technical support and innovation, H.B. Fuller brings knowledge and strength to help its customers find precisely the right formulation for the right performance. With fiscal 2010 net revenue of $1.36 billion, H.B. Fuller serves customers in packaging, hygiene, paper converting, general assembly, woodworking, construction, and consumer businesses. For more information, visit HBFuller.com, HBFullerStrength.com, read our blog or follow GlueTalk on Twitter.
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 March 28, 2011 and June 24, 2011, and 10-K filing for the fiscal year ended November 27, 2010. 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.
Maximillian Marcy
Investor Relations Contact
651-236-5062
H.B. FULLER COMPANY AND SUBSIDIARIES |
||||||||||
CONSOLIDATED FINANCIAL INFORMATION |
||||||||||
In thousands, except per share amounts (unaudited) |
||||||||||
13 Weeks Ended |
Percent of |
13 Weeks Ended |
Percent of |
|||||||
August 27, 2011 |
Net Revenue |
August 28, 2010 |
Net Revenue |
|||||||
Net revenue |
$ |
387,756 |
100.0% |
$ |
338,568 |
100.0% |
||||
Cost of sales |
(275,775) |
(71.1%) |
(242,294) |
(71.6%) |
||||||
Gross profit |
111,981 |
28.9% |
96,274 |
28.4% |
||||||
Selling, general and administrative expenses |
(79,542) |
(20.5%) |
(73,584) |
(21.7%) |
||||||
Other income (expense), net |
1,568 |
0.4% |
1,041 |
0.3% |
||||||
Interest expense |
(2,763) |
(0.7%) |
(2,669) |
(0.8%) |
||||||
Income before income taxes and income from equity method investments |
31,244 |
8.1% |
21,062 |
6.2% |
||||||
Income taxes |
(9,948) |
(2.6%) |
(4,071) |
(1.2%) |
||||||
Income from equity method investments |
2,095 |
0.5% |
1,859 |
0.5% |
||||||
Net income including non-controlling interests |
23,391 |
6.0% |
18,850 |
5.6% |
||||||
Net (income) loss attributable to non-controlling interests |
(171) |
(0.0%) |
128 |
0.0% |
||||||
Net income attributable to H.B. Fuller |
$ |
23,220 |
6.0% |
$ |
18,978 |
5.6% |
||||
Basic income per common share attributable to H.B. Fuller |
$ |
0.47 |
$ |
0.39 |
||||||
Diluted income per common share attributable to H.B. Fuller |
$ |
0.47 |
$ |
0.38 |
||||||
Weighted-average common shares outstanding: |
||||||||||
Basic |
49,000 |
48,595 |
||||||||
Diluted |
49,917 |
49,585 |
||||||||
Dividends declared per common share |
$ |
0.0750 |
$ |
0.0700 |
||||||
Selected Balance Sheet Information (subject to change prior to filing of the Company's Quarterly Report on Form 10-Q) |
|||||||||
August 27, 2011 |
November 27, 2010 |
August 28, 2010 |
|||||||
Cash & cash equivalents |
$ |
149,133 |
$ |
133,277 |
$ |
140,717 |
|||
Trade accounts receivable, net |
242,014 |
221,020 |
209,429 |
||||||
Inventories |
172,946 |
121,621 |
148,464 |
||||||
Trade payables |
138,872 |
102,107 |
118,967 |
||||||
Total assets |
1,285,548 |
1,153,457 |
1,178,669 |
||||||
Total debt |
238,146 |
250,721 |
299,355 |
||||||
H.B. FULLER COMPANY AND SUBSIDIARIES |
||||||||||
CONSOLIDATED FINANCIAL INFORMATION |
||||||||||
In thousands, except per share amounts (unaudited) |
||||||||||
39 Weeks Ended |
Percent of |
39 Weeks Ended |
Percent of |
|||||||
August 27, 2011 |
Net Revenue |
August 28, 2010 |
Net Revenue |
|||||||
Net revenue |
$ |
1,121,026 |
100.0% |
$ |
995,918 |
100.0% |
||||
Cost of sales |
(799,549) |
(71.3%) |
(700,857) |
(70.4%) |
||||||
Gross profit |
321,477 |
28.7% |
295,061 |
29.6% |
||||||
Selling, general and administrative expenses |
(232,803) |
(20.8%) |
(220,324) |
(22.1%) |
||||||
Asset impairment charges |
(332) |
(0.0%) |
(8,785) |
(0.9%) |
||||||
Other income (expense), net |
1,811 |
0.2% |
2,318 |
0.2% |
||||||
Interest expense |
(7,916) |
(0.7%) |
(7,660) |
(0.8%) |
||||||
Income before income taxes and income from equity method investments |
82,237 |
7.3% |
60,610 |
6.1% |
||||||
Income taxes |
(26,217) |
(2.3%) |
(17,152) |
(1.7%) |
||||||
Income from equity method investments |
6,431 |
0.6% |
5,391 |
0.5% |
||||||
Net income including non-controlling interests |
62,451 |
5.6% |
48,849 |
4.9% |
||||||
Net loss attributable to non-controlling interests |
246 |
0.0% |
92 |
0.0% |
||||||
Net income attributable to H.B. Fuller |
$ |
62,697 |
5.6% |
$ |
48,941 |
4.9% |
||||
Basic income per common share attributable to H.B. Fuller |
$ |
1.28 |
$ |
1.01 |
||||||
Diluted income per common share attributable to H.B. Fuller |
$ |
1.26 |
$ |
0.99 |
||||||
Weighted-average common shares outstanding: |
||||||||||
Basic |
49,009 |
48,552 |
||||||||
Diluted |
49,881 |
49,564 |
||||||||
Dividends declared per common share |
$ |
0.2200 |
$ |
0.2080 |
||||||
H.B. FULLER COMPANY AND SUBSIDIARIES |
||||||
REGION FINANCIAL INFORMATION |
||||||
In thousands (unaudited) |
||||||
13 Weeks Ended |
13 Weeks Ended |
|||||
August 27, 2011 |
August 28, 2010 |
|||||
Net Revenue: |
||||||
North America |
$ |
159,531 |
$ |
146,583 |
||
EIMEA |
117,105 |
97,307 |
||||
Latin America |
60,907 |
53,726 |
||||
Asia Pacific |
50,213 |
40,952 |
||||
Total H.B. Fuller |
$ |
387,756 |
$ |
338,568 |
||
Operating Income:(1) |
||||||
North America |
$ |
22,207 |
$ |
18,491 |
||
EIMEA |
6,667 |
2,276 |
||||
Latin America |
1,489 |
1,207 |
||||
Asia Pacific |
2,076 |
716 |
||||
Total H.B. Fuller |
$ |
32,439 |
$ |
22,690 |
||
Depreciation Expense: |
||||||
North America |
$ |
3,189 |
$ |
3,415 |
||
EIMEA |
2,466 |
2,283 |
||||
Latin America |
992 |
1,055 |
||||
Asia Pacific |
1,023 |
829 |
||||
Total H.B. Fuller |
$ |
7,670 |
$ |
7,582 |
||
Amortization Expense: |
||||||
North America |
$ |
2,030 |
$ |
2,009 |
||
EIMEA |
233 |
219 |
||||
Latin America |
7 |
12 |
||||
Asia Pacific |
276 |
261 |
||||
Total H.B. Fuller |
$ |
2,546 |
$ |
2,501 |
||
EBITDA:(3) |
||||||
North America |
$ |
27,426 |
$ |
23,915 |
||
EIMEA |
9,366 |
4,778 |
||||
Latin America |
2,488 |
2,274 |
||||
Asia Pacific |
3,375 |
1,806 |
||||
Total H.B. Fuller |
$ |
42,655 |
$ |
32,773 |
||
Operating Margin:(4) |
||||||
North America |
13.9% |
12.6% |
||||
EIMEA |
5.7% |
2.3% |
||||
Latin America |
2.4% |
2.2% |
||||
Asia Pacific |
4.1% |
1.7% |
||||
Total H.B. Fuller |
8.4% |
6.7% |
||||
EBITDA Margin:(3) |
||||||
North America |
17.2% |
16.3% |
||||
EIMEA |
8.0% |
4.9% |
||||
Latin America |
4.1% |
4.2% |
||||
Asia Pacific |
6.7% |
4.4% |
||||
Total H.B. Fuller |
11.0% |
9.7% |
||||
Net Revenue Growth: |
||||||
North America |
8.8% |
|||||
EIMEA |
20.4% |
|||||
Latin America |
13.4% |
|||||
Asia Pacific |
22.6% |
|||||
Total H.B. Fuller |
14.5% |
|||||
H.B. FULLER COMPANY AND SUBSIDIARIES |
||||||
REGION FINANCIAL INFORMATION |
||||||
In thousands (unaudited) |
||||||
39 Weeks Ended |
39 Weeks Ended |
|||||
August 27, 2011 |
August 28, 2010 |
|||||
Net Revenue: |
||||||
North America |
$ |
454,786 |
$ |
424,752 |
||
EIMEA |
339,602 |
295,893 |
||||
Latin America |
182,760 |
163,758 |
||||
Asia Pacific |
143,878 |
111,515 |
||||
Total H.B. Fuller |
$ |
1,121,026 |
$ |
995,918 |
||
Operating Income:(1) |
||||||
North America |
$ |
57,666 |
$ |
54,537 |
||
EIMEA |
16,691 |
9,680 |
||||
Latin America |
8,516 |
6,317 |
||||
Asia Pacific |
5,801 |
4,203 |
||||
Total H.B. Fuller |
$ |
88,674 |
$ |
74,737 |
||
Depreciation Expense: |
||||||
North America |
$ |
9,643 |
$ |
10,256 |
||
EIMEA |
7,097 |
7,055 |
||||
Latin America |
3,010 |
3,099 |
||||
Asia Pacific |
2,874 |
1,982 |
||||
Total H.B. Fuller |
$ |
22,624 |
$ |
22,392 |
||
Amortization Expense: |
||||||
North America |
$ |
6,026 |
$ |
6,380 |
||
EIMEA |
689 |
1,390 |
||||
Latin America |
21 |
191 |
||||
Asia Pacific |
819 |
364 |
||||
Total H.B. Fuller |
$ |
7,555 |
$ |
8,325 |
||
EBITDA:(3) |
||||||
North America |
$ |
73,335 |
$ |
71,173 |
||
EIMEA |
24,477 |
18,125 |
||||
Latin America |
11,547 |
9,607 |
||||
Asia Pacific |
9,494 |
6,549 |
||||
Total H.B. Fuller |
$ |
118,853 |
$ |
105,454 |
||
Operating Margin:(4) |
||||||
North America |
12.7% |
12.8% |
||||
EIMEA |
4.9% |
3.3% |
||||
Latin America |
4.7% |
3.9% |
||||
Asia Pacific |
4.0% |
3.8% |
||||
Total H.B. Fuller |
7.9% |
7.5% |
||||
EBITDA Margin:(3) |
||||||
North America |
16.1% |
16.8% |
||||
EIMEA |
7.2% |
6.1% |
||||
Latin America |
6.3% |
5.9% |
||||
Asia Pacific |
6.6% |
5.9% |
||||
Total H.B. Fuller |
10.6% |
10.6% |
||||
Net Revenue Growth: |
||||||
North America |
7.1% |
|||||
EIMEA |
14.8% |
|||||
Latin America |
11.6% |
|||||
Asia Pacific |
29.0% |
|||||
Total H.B. Fuller |
12.6% |
|||||
H.B. FULLER COMPANY AND SUBSIDIARIES |
||||||||||
REGION FINANCIAL INFORMATION |
||||||||||
(unaudited) |
||||||||||
13 Weeks Ended August 27, 2011 |
||||||||||
North America |
EIMEA |
Latin America |
Asia Pacific |
Total HBF |
||||||
Price |
10.5% |
12.6% |
11.5% |
4.6% |
10.5% |
|||||
Volume |
(2.2%) |
(6.8%) |
1.9% |
5.1% |
(2.0%) |
|||||
Organic Growth |
8.3% |
5.8% |
13.4% |
9.7% |
8.5% |
|||||
F/X |
0.5% |
14.6% |
0.0% |
12.9% |
6.0% |
|||||
8.8% |
20.4% |
13.4% |
22.6% |
14.5% |
||||||
39 Weeks Ended August 27, 2011 |
||||||||||
North America |
EIMEA |
Latin America |
Asia Pacific |
Total HBF |
||||||
Price |
8.5% |
10.7% |
11.0% |
4.0% |
9.1% |
|||||
Volume |
(1.8%) |
(1.1%) |
0.6% |
5.5% |
(0.4%) |
|||||
Organic Growth |
6.7% |
9.6% |
11.6% |
9.5% |
8.7% |
|||||
F/X |
0.4% |
5.2% |
0.0% |
9.5% |
2.8% |
|||||
Acquisition |
0.0% |
0.0% |
0.0% |
10.0% |
1.1% |
|||||
7.1% |
14.8% |
11.6% |
29.0% |
12.6% |
||||||
H.B. FULLER COMPANY AND SUBSIDIARIES |
||||||
REGULATION G RECONCILIATION |
||||||
In thousands (unaudited) |
||||||
13 Weeks Ended |
13 Weeks Ended |
|||||
August 27, 2011 |
August 28, 2010 |
|||||
Net revenue |
$ |
387,756 |
$ |
338,568 |
||
Cost of sales |
(275,775) |
(242,294) |
||||
Gross profit |
111,981 |
96,274 |
||||
Selling, general and administrative expenses |
(79,542) |
(73,584) |
||||
Operating Income(1) |
32,439 |
22,690 |
||||
Depreciation expense |
7,670 |
7,582 |
||||
Amortization expense |
2,546 |
2,501 |
||||
EBITDA(3) |
$ |
42,655 |
$ |
32,773 |
||
EBITDA Margin(3) |
11.0% |
9.7% |
||||
39 Weeks Ended |
39 Weeks Ended |
|||||
August 27, 2011 |
August 28, 2010 |
|||||
Net revenue |
$ |
1,121,026 |
$ |
995,918 |
||
Cost of sales |
(799,549) |
(700,857) |
||||
Gross profit |
321,477 |
295,061 |
||||
Selling, general and administrative expenses |
(232,803) |
(220,324) |
||||
Operating Income(1) |
88,674 |
74,737 |
||||
Depreciation expense |
22,624 |
22,392 |
||||
Amortization expense |
7,555 |
8,325 |
||||
EBITDA(3) |
$ |
118,853 |
$ |
105,454 |
||
EBITDA Margin(3) |
10.6% |
10.6% |
||||
H.B. FULLER COMPANY AND SUBSIDIARIES |
|||||||||
REGULATION G RECONCILIATION |
|||||||||
In thousands, except per share amounts (unaudited) |
|||||||||
Adjusted |
|||||||||
39 Weeks Ended |
Product Line Exit |
39 Weeks Ended |
|||||||
August 28, 2010 |
Adjustments |
August 28, 2010 |
|||||||
Net revenue |
$ |
995,918 |
$ |
- |
$ |
995,918 |
|||
Cost of sales |
(700,857) |
(1,831) |
(699,026) |
||||||
Gross profit |
295,061 |
(1,831) |
296,892 |
||||||
Selling, general and administrative expenses |
(220,324) |
(752) |
(219,572) |
||||||
Asset impairment charges |
(8,785) |
(8,785) |
- |
||||||
Other income (expense), net |
2,318 |
- |
2,318 |
||||||
Interest expense |
(7,660) |
- |
(7,660) |
||||||
Income before income taxes and income from equity method investments |
60,610 |
(11,368) |
71,978 |
||||||
Income taxes |
(17,152) |
2,928 |
(20,080) |
||||||
Income from equity method investments |
5,391 |
- |
5,391 |
||||||
Net income including non-controlling interests |
48,849 |
(8,440) |
57,289 |
||||||
Net loss attributable to non-controlling interests |
92 |
- |
92 |
||||||
Net income attributable to H.B. Fuller |
$ |
48,941 |
$ |
(8,440) |
$ |
57,381 |
|||
Basic income per common share attributable to H.B. Fuller |
$ |
1.01 |
$ |
(0.17) |
$ |
1.18 |
|||
Diluted income per common share attributable to H.B. Fuller |
$ |
0.99 |
$ |
(0.17) |
$ |
1.16 (2) |
|||
Weighted-average common shares outstanding: |
|||||||||
Basic |
48,552 |
48,552 |
48,552 |
||||||
Diluted |
49,564 |
49,564 |
49,564 |
||||||
(1) |
Operating income is defined as gross profit less SG&A expense. |
|
(2) |
Adjusted diluted earnings per share (EPS) is a non-GAAP financial measure. Second quarter 2010 excludes after-tax exit costs and non-cash impairment charges associated with the exit of the Company's European polysulfide-based insulating glass product line of $1.7 million ($0.03 per diluted share) and $6.7 million ($0.14 per diluted share) respectively. A full reconciliation is provided in the tables above. |
|
(3) |
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 regional basis it is defined as operating income, plus depreciation expense, plus amortization expense. EBITDA margin is defined as EBITDA divided by net revenue. |
|
(4) |
Operating Margin is a non-GAAP financial measure defined as gross profit, less SG&A expense, divided by net revenue. |
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SOURCE H.B. Fuller Company
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