H.B. Fuller Company (H.B. Fuller) has reported net revenues of $1.39 billion for the fiscal 2008, compared with the net revenues of $1.4 billion in the previous year-end. It has also reported a net income of $19.3 million, or $0.37 per diluted share, for the fiscal 2008, compared with the net income of $102.2 million, or $1.68 per diluted share, in the previous year-end.
Fourth Quarter 2008 Results:
In the fourth quarter, the Company recorded a loss from continuing operations of $42.0 million, or $0.86 per diluted share, compared to income from continuing operations of $30.8 million, or $0.51 per diluted share, in the fourth quarter of 2007. The 2008 fourth quarter results include pre-tax non-cash asset impairment charges of $86.9 million. On an after-tax basis, the 2008 fourth quarter impairment charges were $53.5 million, or $1.09 per diluted share. After adjusting for the non-cash impairment charges, fourth quarter 2008 income from continuing operations was $11.6 million, or $0.24 per diluted share.
On a pre-tax basis, $85 million of the non-cash impairment charges reflect the write-off of goodwill in the Specialty Construction component of the North America business segment. Almost all of this goodwill is related to the Roanoke acquisition in 2006. The indicated goodwill impairment charge is an estimate. The final charge will be determined during the first quarter of 2009 and any necessary adjustment recorded at that time. The total amount of goodwill associated with the Specialty Construction business component was $99 million at the end of the third quarter of 2008; therefore, any subsequently determined impairment would not exceed $14 million. In addition, pre-tax non-cash impairment charges of $1.9 million were also taken during the quarter on two of the Company’s venture investments.
The year-over-year decline in adjusted income from continuing operations was primarily driven by lower volumes, corresponding to the sharp decline in global markets, and the ongoing impact of high raw material costs.
Net revenue for the fourth quarter of 2008 was $350.2 million, down 3.0% versus the fourth quarter of 2007. Higher average selling prices positively impacted net revenue growth by 5.5% points and the previously announced acquisition in Egypt added 0.3% points. Lower volume and unfavorable foreign currency translation adversely impacted net revenue growth by 7.4 and 1.4% points, respectively.
Our adjusted fourth quarter results were in line with the preliminary estimates we provided in December, and ended what has been a challenging year, commented CEO Michele Volpi. In the first three quarters of 2008 we focused on managing unprecedented increases in raw material costs and raising prices to maintain profitability. Through this period we were successful in reversing our organic revenue trends to more positive territory despite relatively weak end market conditions. Just as raw material cost pressures were starting to abate we were hit in the fourth quarter with another unprecedented external event and volumes dropped sharply. Despite these challenges we maintained solid profitability in 2008 and, at the same time, have taken steps to make our company stronger and position it for future growth.
Fiscal Year 2008 Results:
When adjusted for non-cash impairment charges, income from continuing operations for fiscal year 2008 was $73.2 million, or $1.41 per diluted share, in line with the preliminary estimate communicated in the press release of December 12, 2008.
Net revenue for fiscal year 2008 was $1.392 billion, down 0.6% versus fiscal year 2007. Higher average selling prices, favorable foreign currency translation, and the acquisition in Egypt, positively contributed 2.4, 3.3, and 0.1% points, respectively, to net revenue growth. Lower volume adversely impacted net revenue growth by 6.4% points.
Balance Sheet and Cash Flow:
At the end of the fourth quarter of 2008 total cash was $80.4 million and total debt was $240.1 million, compared to third quarter levels of $207.1 million and $339.5 million, respectively. The significant changes in these balances from quarter to quarter primarily reflect actions the Company took during the fourth quarter to temporarily pay down debt with excess cash to reduce net financing costs. Cash flow from operations was $8 million in the fourth quarter and $43 million for the full year. Net working capital improved slightly on a sequential basis, down 10 basis points from 15.5% in the third quarter to 15.4% in the fourth quarter.
Fiscal Year 2009 Expectations:
Regarding the Company’s expectations for fiscal year 2009, CEO Michele Volpi made the following comments.
Because of the continuing volatility and uncertainty in the global markets we believe it is not useful to provide full-year earnings per share guidance at this time. It is clear that our first quarter financial performance will be relatively weak, reflecting the typical seasonal pattern of our business and the continuation of the demand disruption that we experienced in the fourth quarter of 2008. We expect significant improvement in subsequent quarters.
We know that 2009 will be a challenging year but we remain confident and committed. In light of the current macro-economic environment we will have to continue to be extremely cost conscious and be ready to execute on our contingency plans if business conditions further deteriorate. Despite the difficult end-market conditions, we have a couple of factors working in our favor — raw material prices are expected to come down, our balance sheet is solid, and we have a strong organization willing and able to capture some of the interesting market opportunities that this kind of market will create. We are already winning new business, regaining ground at some lost accounts and capitalizing on many opportunities that the current competitive environment has created. Several new commercial and technical leaders with long experience in the adhesives industry have joined the H.B. Fuller team in recent weeks. As we continue to augment and improve upon our customer intimacy business model, we are positioning ourselves to win with customers, even in a down market, concluded Volpi.