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H.B. Fuller Reports Second Quarter Results

June 23, 2010
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H.B. Fuller Co. has reported financial results for the second quarter ended May 29, 2010. Net income for the quarter was $11.0 million, or $0.22 per diluted share, compared to $17.6 million, or $0.36 per diluted share, in last year’s second quarter. Net income for the second quarter of 2010 includes exit costs and non-cash impairment charges associated with the exit of the company’s polysulfide insulating glass sealant product line in Europe. Exit costs after tax totaled $1.7 million ($0.03 per diluted share), and non-cash impairment charges after tax were $6.7 million ($0.14 per diluted share). After adjusting for these charges, second quarter 2010 net income was $19.5 million, or $0.39 per diluted share.

Net revenue for the second quarter of 2010 was $347.9 million, up 16.3% compared to the second quarter of 2009. Higher volume, favorable foreign currency translation and acquisitions positively impacted net revenue growth by 13.7, 2.7, and 0.6 percentage points, respectively. Lower average selling prices reduced net revenue growth by 0.7 percentage points. Organic sales grew by 13% year-over-year. Adjusted gross margin of 29.6% was down 30 basis points vs. the second quarter of 2009, despite rising raw material costs. SG&A spending increased year-over-year to $74.5 million on an adjusted basis. The significant increase in year-over-year spending is primarily related to additional investments to generate long-term growth by augmenting customer facing resources.

On a sequential basis, net revenue increased 12.4% compared to the first quarter of 2010. The increase was driven by improved end-market conditions, new customer wins, and normal seasonal factors. Gross margin contracted due to higher raw material cost inflation and a corresponding short-term lag in pricing actions. SG&A expense continued to increase vs. the first quarter as additional talent and training investments were made. However, as a percentage of net revenue, SG&A expense began to decrease as spending was leveraged over a much larger revenue base in the second quarter.

“We are very pleased with our performance in the second quarter and the progress we are making in improving our growth profile. In the second quarter, our organic sales trend continued to strengthen and organic sales expanded twice as fast as in the previous quarter,” said Michele Volpi, H.B. Fuller president and CEO. “H.B. Fuller has not achieved this level of growth in a very long time. After several years of declines in organic sales, we are pleased to be on the path toward generating consistent positive organic growth.”

For more information, visit www.hbfuller.com.

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