ST. PAUL, MINN. -- H.B. Fuller Company today reported financial results for the second quarter that ended May 28, 2011.
Second Quarter 2011 Highlights Included:
Net revenue increased 13 percent year-over-year;
Gross profit margin improved 10 basis points sequentially despite persistent raw material price inflation; Selling, General, and Administrative (SG&A) expense reduced to 19.7 as a percent of net revenue, the lowest level since 2008; Completed the acquisition of the Liquamelt® adhesive business, which provides another advanced technology platform to address customer needs.
Second Quarter 2011 Results:
Net income for the second quarter of 2011 was $25.1 million, or $0.50 per diluted share, versus $11.0 million, or $0.22 per diluted share, in last year's second quarter. Net income for the second quarter of 2010 included exit costs and non-cash impairment charges associated with the exit of the Company's polysulfide insulating glass sealant product line in Europe totaling $8.4 million after-tax. After adjusting for these charges, second quarter 2010 net income was $19.5 million, or $0.39(1) per diluted share. Diluted earnings per share in the second quarter of 2011 increased 28 percent compared to the adjusted results of the prior year.
Net revenue for the second quarter of 2011 was $393.7 million, up 13.2 percent versus the second quarter of 2010. Higher average selling prices, higher volume, favorable foreign currency translation and acquisitions positively impacted net revenue growth by 8.2, 0.3, 3.0 and 1.7 percentage points, respectively. Organic revenue grew by 8.5 percent year-over-year. On a sequential basis, net revenue increased approximately 16 percent relative to the first quarter of 2011, driven by normal seasonal patterns and incremental price increases.
Gross profit margin was down 50 basis points versus the second quarter of 2010, due to the cumulative effect of escalating raw material costs over the past year. Gross profit margin improved by 10 basis points versus the previous quarter as a combination of price increases and product reformulation more than offset raw material cost inflation. Relative to the prior year, SG&A expense was higher by 3.1 percent, but down 190 basis points as a percentage of net revenue.
Balance Sheet and Cash Flow:
At the end of the second quarter of 2011, the Company had cash totaling $138 million and total debt of $240 million. This compares to first quarter levels of $122 million and $239 million, respectively. Sequentially, net debt was down approximately $15 million. Cash flow from operations was $32 million in the second quarter. Capital expenditures for the second quarter were $7.9 million.
Net income for the first half of 2011 was $39.5 million, or $0.79 per diluted share, versus $30.0 million, or $0.60 per diluted share, in the first half of last year. Net income for the first half 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, first half 2010 net income was $38.4 million, or $0.77(1) per diluted share.
Net revenue for the first half of 2011 was $733.3 million, up 11.5 percent versus the first half of 2010. Higher average selling prices, higher volume, favorable foreign currency translation and acquisitions positively impacted net revenue growth by 7.8, 0.9, 1.1 and 1.7 percentage points, respectively. Organic sales increased by 8.7 percent year-over-year in the first half of 2011.
Fiscal 2011 Outlook:
"Our performance this quarter demonstrates our ability to execute with rigor and speed," said Jim Owens, H. B. Fuller president and chief executive officer. "In the face of continued raw material inflation, we performed well against our three key objectives for this year –net revenue grew by double digits both year-over-year and sequentially, gross margin expanded sequentially and SG&A reached its lowest percentage of net revenue since 2008. We are certainly pleased with these results and, although economic improvement remains uncertain, we believe the momentum we have built points to a better year than we originally planned, and we are increasing our EPS guidance by $0.10."
The following highlights the Company's expectations for several key metrics in its 2011 financial outlook:
Net revenue 13 percent to 15 percent higher in 2011 relative to 2010, up from previous guidance of 10 percent to 12 percent;
Earnings per diluted share of between $1.85 and $1.95, up from previous guidance 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 31 percent, down from previous guidance of 32 percent.
The Company will host an investor conference call to discuss second quarter 2011 results on Thursday, June 23, 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.
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.
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