H.B. Fuller Q4 net income up 20% year-over-year to US$26.4M as revenues rise 21% to US$436.5M on higher average selling prices, favorable currency translation

ST. PAUL, Minnesota , January 18, 2012 (press release) – H.B. Fuller Company (NYSE: FUL) today reported financial results for the fourth quarter that ended December 3, 2011.

Note that the 2011 fiscal year had 53 weeks of commercial activity while fiscal years 2010 and 2012 are each the normal 52 weeks in length. The fourth quarter of 2011 had 14 weeks while the fourth quarters of 2010 and 2012 are each the normal 13 weeks in length. Year-over-year comparisons are provided on an as reported basis and also are presented to reflect the estimated result as if both periods contained the same number of weeks of commercial activity.

Fourth Quarter 2011 Highlights Included:

Net revenue increased 21 percent year-over-year or 13 percent when adjusting for the extra week;
Gross profit margin improved 50 basis points year-over-year despite ongoing raw material cost inflation and was essentially unchanged from the prior quarter;
Operating Income(2) was up 36 percent from the prior year, and up 27 percent after adjusting for the extra week.

Full-Year 2011 Highlights Included:

Net revenue increased by nearly 15 percent year-over-year, or nearly 13 percent after adjusting for the extra week;
Year-over year growth in Selling, General and Administrative (SG&A) expense was less than 7 percent when adjusted for the extra week; SG&A as a percent of net revenue declined 120 basis points in 2011 to 20.4 percent;
Operating Income(2) increased nearly 24 percent year-over-year, or 21 percent after adjusting for the extra week;
Adjusted diluted EPS(1) grew 19 percent year-over-year.



Fourth Quarter 2011 Results:
Net income for the fourth quarter of 2011 was $26.4 million, or $0.53 per diluted share, versus $21.9 million, or $0.44 per diluted share, in last year's fourth quarter. Two previously announced events negatively impacted net income in the quarter. The pre-tax cost directly associated with the EIMEA transformation plan and the pending acquisition of the Industrial Adhesives business from the Forbo Group totaled $7.5 million, or $0.12 per diluted share. After adjusting for these special charges, net income for the fourth quarter of 2011 was $0.65(1) per diluted share. Therefore, adjusted diluted earnings per share in the fourth quarter of 2011 increased 48 percent compared to the results of the prior year.

Net revenue for the fourth quarter of 2011 was $436.5 million, up 21.2 percent versus the fourth quarter of 2010, or up 13 percent when adjusted for the extra week. Higher average selling prices, favorable foreign currency translation, and higher volume inclusive of an extra week positively impacted net revenue growth by 11.0, 2.6 and 7.6 percentage points, respectively. Organic revenue grew by 18.6 percent year-over-year.

Gross profit margin was up 50 basis points versus the fourth quarter of 2010, and essentially flat 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 up 17.6 percent, or 9.2 percent after adjusting for the extra week. SG&A expense was down 60 basis points as a percentage of net revenue compared to the prior year. Operating income(2) was up 36 percent compared to the fourth quarter of 2010, or up 27 percent when adjusted for the extra week.

Balance Sheet and Cash Flow:
At the end of the fourth quarter of 2011, the Company had cash totaling $156 million and total debt of $232 million. This compares to third quarter levels of $149 million and $238 million, respectively. Net debt was $76 million at the end of the fourth quarter, down approximately $13 million from the previous quarter. Cash flow from operations was $40 million in the fourth quarter and $102 million for the full year. Capital expenditures for the fourth quarter were $12.4 million and $36 million for the full year.

Fiscal Year 2011 Results:
Net income for the 2011 fiscal year was $89.1 million, or $1.79 per diluted share, versus $70.9 million, or $1.43 per diluted share, in the 2010 fiscal year. The pre-tax cost associated with the EIMEA transformation plan and the pending acquisition of the Industrial Adhesives business from the Forbo Group totaled $7.5 million, or $0.11 per diluted share. Excluding these charges, net income for the 2011 fiscal year was $94.9 million, or $1.90(1) per diluted share. Net income for the 2010 fiscal year included 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 2010 fiscal year was $79.3 million, or $1.60(1) per diluted share. On an adjusted basis, diluted earnings per share were up 19 percent from the prior year.

Net revenue for the 2011 fiscal year was $1,557.6 million, up 14.9 percent versus the 2010 fiscal year, or up nearly 13 percent when adjusted for the extra week. Higher average selling prices, favorable foreign currency translation, acquisitions, and higher volume inclusive of an extra week positively impacted net revenue growth by 9.7, 2.7, 0.8 and 1.7 percentage points, respectively. Organic revenue grew by 11.4 percent year-over-year.

Gross profit margin was down 60 basis points versus the gross profit margin in 2010, primarily reflecting the impact of raw material cost escalation of nearly 20 percent in the 2011 fiscal year. Relative to the prior year, SG&A expense was higher by less than 9 percent, or less than 7 percent when adjusting for the extra week, and was down 120 basis points as a percentage of net revenue. Operating income(2) was up nearly 24 percent in 2011, or 21 percent when adjusting for the extra week, compared to the 2010 fiscal year.

Fiscal 2012 Outlook:
"We are very pleased with our results for the fourth quarter and the 2011 fiscal year," said Jim Owens, H. B. Fuller president and chief executive officer. "The business delivered a second consecutive year of strong organic growth, displayed a positive trend in gross margin progression throughout the year in the face of continued raw material cost escalation and we leveraged our investments to drive SG&A as a percent of net revenue down by over 100 basis points. We expect a strong 2012 fiscal year and steady progress towards the long-term financial goals that we laid out in July of 2011. The addition of Forbo's Industrial Adhesive business will further strengthen our business as it is integrated and we realize the potential of the combined businesses."

The following highlights the Company's expectations for several key metrics in its 2012 financial outlook:

Net revenue up 4 to 7 percent relative to 2011, or 6 to 9 percent growth when adjusted for the extra week in 2011;
Earnings per diluted share of between $2.05 and $2.15;
Key foreign exchange translation rate assumption is one dollar and 38 cents per euro;
Capital expenditures of approximately $40 million;
The Company's effective tax rate, excluding discrete items, is expected to be 31 percent.



This guidance excludes certain non-recurring costs associated with the EIMEA transformation project and non-recurring costs related to the proposed acquisition of the Industrial Adhesive business from the Forbo Group. This guidance will be adjusted to include the impact of the pending acquisition once the transaction closes.

Conference Call:
The Company will host an investor conference call to discuss fourth quarter 2011 results on Thursday, January 19, 2012, 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.
 

 

H.B. FULLER COMPANY AND SUBSIDIARIES

CONSOLIDATED FINANCIAL INFORMATION

In thousands, except per share amounts (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

14 Weeks Ended

 

Percent of

 

13 Weeks Ended

 

Percent of

 

December 3, 2011

 

Net Revenue

 

November 27, 2010

 

Net Revenue

 

 

 

 

 

 

 

 

 

 

Net revenue

$

436,526

 

100.0%

 

$

360,243

 

100.0%

Cost of sales

 

(310,913)

 

(71.2%)

 

 

(258,123)

 

(71.7%)

 

 

 

 

 

 

 

 

 

 

Gross profit

 

125,613

 

28.8%

 

 

102,120

 

28.3%

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

(85,243)

 

(19.5%)

 

 

(72,512)

 

(20.1%)

Special charges

 

(7,499)

 

(1.7%)

 

 

-

 

0.0%

Other income (expense), net

 

2,779

 

0.6%

 

 

254

 

0.1%

Interest expense

 

(2,895)

 

(0.7%)

 

 

(2,754)

 

(0.8%)

 

 

 

 

 

 

 

 

 

 

Income before income taxes and income from equity method investments

 

32,755

 

7.5%

 

 

27,108

 

7.5%

 

 

 

 

 

 

 

 

 

 

Income taxes

 

(8,734)

 

(2.0%)

 

 

(8,155)

 

(2.3%)

 

 

 

 

 

 

 

 

 

 

Income from equity method investments

 

2,575

 

0.6%

 

 

2,617

 

0.7%

 

 

 

 

 

 

 

 

 

 

Net income including non-controlling interests

 

26,596

 

6.1%

 

 

21,570

 

6.0%

 

 

 

 

 

 

 

 

 

 

Net (income) loss attributable to non-controlling interests

 

(188)

 

(0.1%)

 

 

366

 

0.1%

 

 

 

 

 

 

 

 

 

 

Net income attributable to H.B. Fuller

$

26,408

 

6.0%

 

$

21,936

 

6.1%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

$

0.54

 

 

 

$

0.45

 

 

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

$

0.53

 

 

 

$

0.44

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

48,937

 

 

 

 

48,740

 

 

Diluted

 

49,821

 

 

 

 

49,740

 

 

 

 

 

 

 

 

 

 

 

 

Dividends declared per common share

$

0.075

 

 

 

$

0.070

 

 

 

 

 

 

 

 

 

 

 

 


 

 

About H.B. Fuller Company:
For 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 2011 net revenue of $1.6 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.

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