Consumables

H.B. Fuller Reports Fourth Quarter and Fiscal Year 2010 Results

Wednesday 12. January 2011 - Fourth Quarter EPS $0.44; Full Year Adjusted EPS1 Up 9 Percent Year-Over-Year

H.B. Fuller Company (NYSE: FUL) today reported financial results for the fourth quarter and fiscal year that ended November 27, 2010.
Fourth Quarter 2010 Highlights Included:
Net revenue increased 5.5 percent year-over-year;
Gross profit margin was essentially unchanged relative to the prior quarter as price adjustments offset further raw material cost escalation;
EBITDA margin2 improved sequentially driven by lower Selling, General and Administrative expense;
Cash flow from operations was $47 million reflecting solid profitability and effective working capital management.
Full-Year 2010 Highlights Included:
Net revenue increased by nearly 10 percent year-over-year, driven primarily by volume gains;
Adjusted gross profit margin3 of 29.4 percent was only 70 basis points below last year’s record level, despite persistent raw material inflation throughout the year;
Adjusted diluted EPS1 grew 9 percent year-over-year;
Portfolio adjustments made to improve future performance and profitability of the Company included the acquisition of Revertex Finewaters in Malaysia and the exit of the European polysulfide based insulating glass product line.
Fourth Quarter 2010 Results:
Net income for the fourth quarter of 2010 was $21.9 million, or $0.44 per diluted share, versus $24.6 million, or $0.50 per diluted share, in last year’s fourth quarter. Two previously announced events negatively impacted net income in the quarter. The pre-tax impact of the September fire at the Company’s Mindelo, Portugal facility was $0.9 million and the pre-tax costs associated with the departure of the Company’s CEO were $2.5 million, or taken together, $0.05 per diluted share.
Net revenue for the fourth quarter of 2010 was $360.2 million, up 5.5 percent versus the fourth quarter of 2009. Higher average selling prices, higher volume, and acquisitions positively impacted net revenue growth by 4.8, 0.8, and 1.5 percentage points, respectively. Foreign currency translation reduced net revenue growth by 1.6 percentage points. Organic sales grew by 5.6 percent year-over-year. Gross profit margin was down 290 basis points versus the fourth quarter of 2009, primarily due to the cumulative effect of escalating raw material costs over the past year. Selling, General, and Administrative expense was slightly higher on an absolute basis, but was down nearly 100 basis points as a percentage of net revenue.
On a sequential basis, net revenue increased over 6 percent relative to the third quarter. Gross profit margin was essentially flat quarter-to-quarter. However, the fire at the company’s Mindelo, Portugal facility caused one-time additional costs which reduced gross profit margin by 25 basis points. Selling, General and Administrative expense declined by over $1 million in the fourth quarter and by 160 basis points relative to net revenue.
Balance Sheet and Cash Flow:
At the end of the fourth quarter of 2010 the Company had cash totaling $133 million and total debt of $251 million. This compares to third quarter levels of $141 million and $299 million, respectively. Sequentially, net debt declined by approximately $40 million. Cash flow from operations was $47 million in the fourth quarter. The strong cash flow from operations and corresponding decline in net debt was primarily driven by solid profitability combined with effective working capital management, especially with respect to inventory.
Fiscal Year 2010:
On an adjusted (comparable) basis, diluted EPS1 increased 9 percent in 2010 relative to the prior year. Net income for fiscal year 2010 was $70.9 million, or $1.43 per diluted share, versus $83.7 million, or $1.70 per diluted share, in 2009. This year’s net income included charges related to the exit of the polysulfide based insulating glass product line in Europe. The combined non-recurring charges reduced net income by $8.4 million, or $0.17 per diluted share. Excluding these items, net income for the full year would have been $79.3 million or $1.60 per diluted share versus the reported results of $1.43 per diluted share. In addition, last year’s net income included a net gain primarily related to the settlement of a lawsuit against the former owners of the Roanoke Companies Group. Excluding this net gain, fiscal year 2009 net income was $72.4 million, or $1.47 per diluted share.
Net revenue for fiscal year 2010 was $1.356 billion, up 9.8 percent versus fiscal year 2009. Higher volume, higher average selling prices, favorable foreign currency translation and acquisitions positively impacted net revenue growth by 7.4, 1.2, 0.1 and 1.1 percentage points, respectively. Consequently, organic sales improved by 8.6 percent year-over-year in 2010.
Fiscal 2011 Outlook:
“Our focus in 2011 will be on accelerating the execution of our current business strategy and leveraging key investments made over the last two years,” said Jim Owens, H.B. Fuller president and chief executive officer. “The growth momentum that started in 2010 should carry over to 2011. In addition, past and current pricing actions should enhance our margins. Raw material costs are expected to increase modestly in the first half of the year compared to the fourth quarter 2010 levels. Overall, we forecast that our net revenue will increase by 8 to 10 percent and our net income will be between $1.75 and $1.85 per diluted share in 2011.”
The following highlights the Company’s expectations for several key metrics in its 2011 financial outlook:
Net revenue 8 to 10 percent higher in 2011 relative to 2010;
Earnings per diluted share of between $1.75 and $1.85;
Capital expenditures approximately $40 million;
The Company’s effective tax rate, excluding discrete items, is expected to be 32 percent.