FUL
$47.27
H. B. Fuller
$1.98
4.37%
Earnings Details
3rd Quarter August 2019
Wednesday, September 25, 2019 4:05:00 PM
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Summary

H. B. Fuller Misses

H. B. Fuller (FUL) reported 3rd Quarter August 2019 earnings of $0.86 per share on revenue of $725.4 million. The consensus earnings estimate was $0.89 per share on revenue of $753.8 million. The Earnings Whisper number was $0.87 per share. Revenue fell 5.8% compared to the same quarter a year ago.

The company said it expects fiscal 2019 earnings of $2.95 to $3.05 per share. The company's previous guidance was earnings of $3.10 to $3.30 per share and the current consensus earnings estimate is $3.16 per share for the year ending November 30, 2019.

H.B. Fuller Company is a formulator, manufacturer and marketer of adhesives, sealants, paints and other specialty chemical products. The products of Company include H.B. Fuller, Swift, Advantra, Clarity, Sesame, TEC, Foster, Rakoll and Rapidex.

Results
Reported Earnings
$0.86
Earnings Whisper
$0.87
Consensus Estimate
$0.89
Reported Revenue
$725.4 Mil
Revenue Estimate
$753.8 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

H.B. Fuller Reports Third Quarter 2019 Results

ST. PAUL, Minn., Sept. 25, 2019 /PRNewswire/ -- H.B. Fuller Company (NYSE: FUL) today reported financial results for the fiscal third quarter ended on Aug. 31, 2019.

(PRNewsfoto/H.B. Fuller Company)

Items of Note for Third Quarter 2019:

  • Net income was $50 million or $0.97 per diluted share (EPS), and adjusted net income was $44 million1, or $0.861 of EPS;
  • Adjusted EBITDA was $116 million1 and adjusted EBITDA margin of 16%1 increased by 40 basis points year over year;
  • Gross margin was 28.6% and adjusted gross margin of 28.8%4 increased by 40 basis points year over year;
  • $97 million debt paydown in the quarter was more than double the paydown amount in the third quarter of 2018; $151 million year-to-date debt paydown increased $63 million versus last year;
  • Fiscal 2019 debt paydown expectation increased from $200 million at the beginning of the year to approximately $260 million;
  • Announced a 2020 business realignment from five to three operating segments to deliver cost savings and improved organic growth.

Summary of Third Quarter 2019 Results
Net revenue for the quarter of $725 million decreased 5.8% compared with the third quarter of 2018. On a year-over-year basis, foreign currency exchange rates negatively impacted revenues by 1.9% and the sale of the surfactants, thickeners and dispersants business negatively impacted revenues by 0.6%. Organic revenue, which excludes the impact of foreign currency and divestitures, decreased 3.3%. Organic revenue growth in Engineering Adhesives and the Asia Pacific segment was offset by decreased organic revenues in EIMEA and Construction Adhesives, reflecting general economic slowdowns in these areas. Construction Adhesives revenues also were impacted by portfolio repositioning toward more profitable product lines. Americas Adhesives revenues were approximately the same as in the comparable 2018 quarter.

Gross profit margin was 28.6%. Adjusted gross profit margin was 28.8%4, an increase of 40 basis points versus last year, driven by lower raw material costs, favorable product mix, and synergies from the integration of Royal Adhesives. Selling, General and Administrative (SG&A) expenses were $141 million. Adjusted SG&A expenses of $131 million5 decreased approximately 6% compared with the third quarter of 2018, due to expense controls and fluctuations in foreign currency exchange rates. 

As a result of these factors, net income attributable to H.B. Fuller for the third quarter of 2019 was $50 million, or $0.97 per diluted share, compared with $38 million, or $0.72 per diluted share in the same period last year. Adjusted net income attributable to H.B. Fuller was $44 million1, or $0.861 adjusted EPS, compared with $45 million1, or $0.861 adjusted EPS last year. Adjusted EBITDA was $116 million1, compared with $120 million1 in the prior year, and adjusted EBITDA margin of 16%1 increased versus 15.6%1 in the prior year.

"We delivered solid profit performance and strong cash flow in the quarter despite challenging macroeconomic headwinds impacting global industrial production," said Jim Owens, H.B. Fuller president and chief executive officer. "Share gains in Engineering Adhesives and Asia Pacific were offset by weakness across numerous manufactured goods sectors, including automotive, which is reported as part of our Engineering Adhesives segment. We improved margins compared with the prior year by growing our share in strategic markets and by leveraging lower raw material costs, acquisition synergies and expense controls. We doubled our debt paydown versus last year, enabling us to continue to accelerate our deleverage plan, and increase our full year debt paydown target to $260 million from the original target of $200 million. We've also announced a realignment of our reporting segments, which will simplify our business, reduce costs and improve our long-term growth capabilities."

Balance Sheet and Cash Flow
At the end of the third quarter of 2019, the company had cash on hand of $120 million and total debt equal to $2,097 million. This compares to cash and debt levels equal to $100 million and $2,194 million, respectively, at the end of the second quarter of 2019. For the nine-month period, cash flow from operations was $160 million compared with $107 million in the same period last year, and capital expenditures were $47 million, equal to the amount of expenditures in the same period last year.

Company Realignment to Drive Growth and Operating Efficiencies
H.B. Fuller announced today that it will realign its business from five to three operating segments to drive long-term global growth and generate operating efficiencies. This change in operating segments reflects how we will organize the company to make operating decisions and assess business performance. The new structure will be effective with the start of the company's 2020 fiscal year on Dec. 1, 2019, and will be comprised of the following three global business units (GBUs):

  • Engineering Adhesives: This GBU enables engineers and product designers to create and build the newest advances in consumer and durable goods by utilizing our adhesive expertise around the world. While Engineering Adhesives is currently reported as an operating segment, the company's durable assembly business will be combined with the previously-reported Engineering Adhesives segment under the new structure. The Engineering Adhesives team has a strong track record of organic growth resulting from leveraging our know-how and products around the globe for new developments in electronics, solar energy, electrification of automobiles and energy efficient building materials.
  • Hygiene, Health and Consumable Adhesives: This newly formed GBU will address trends in sustainable packaging, beauty care, medical care and hygiene, all of which require advanced adhesive technology and systems. By operating globally instead of regionally, this new GBU will be able to more effectively focus resources on global trends and growth opportunities. The medical and beauty segment has strong growth potential driven by significant changes and advancements in these end markets, and is an area of increased focus for H.B. Fuller.
  • Construction Adhesives: This GBU delivers adhesive solutions that enable architects, builders and construction workers to complete projects in less time, at lower cost and with greater durability. This business focuses on energy efficient and labor saving building practices in commercial roofing, residential and commercial flooring, and utility and infrastructure projects predominantly in the United States. The company expects to deliver organic growth through product innovation and new business development around the world. Construction Adhesives is currently reported as a business segment and will remain a standalone GBU under the new structure.

"Realigning the company into three, global business units will drive higher levels of growth and create cost savings by eliminating the complexity associated with H.B. Fuller's historic structure of both regional and global operating segments," said Owens. "Our company will have clearer global strategic alignment and improved accountability between market segment strategies and financial results under this new structure. Over the last decade, we have added new markets and strengthened our capabilities through numerous acquisitions and investments to reach nearly $3 billion in annual sales. By leveraging the business model that has resulted in tremendous success in Engineering Adhesives, H.B. Fuller now has an opportunity to simplify the management of our entire business to focus on growth and innovation, as well as to aggressively manage our cost structure in this challenging macroeconomic environment."

The company's preliminary target for annualized cost savings potential resulting from this realignment is in the range of $20 to $40 million by 2021, with approximately half of the savings to be realized in 2020. Over the next several weeks, the company will continue to review and refine the cost savings impact of the realignment. Further details will be provided on the company's fiscal fourth quarter analyst call in January 2020, upon completion of its business realignment plans.

Updated Fiscal 2019 Outlook:
Full year organic sales are expected to be down approximately 1% versus last year. Foreign currency exchange is expected to have a full year negative impact on reported revenues of 3% to 4%, and the divestiture of the surfactants business is forecasted to impact sales by approximately 0.5%. Management anticipates annual adjusted EPS in the range of $2.95 to $3.05, and annual adjusted EBITDA in the range of $440 to $445 million. The company's core tax rate, excluding the impact of discrete items, is expected to be between 26% and 28%, and capital expenditures are expected to be approximately $80 million.

This guidance excludes approximately $20 million of pre-tax expenses required to integrate the Royal Adhesives business and other restructuring activities, approximately $8 million of pre-tax expenses related to ERP development costs, and a gain of $14 million on the divestiture of the surfactants, thickeners and dispersants business. This guidance also excludes approximately $2 million of pre-tax expenses that have been incurred to date related to the changes associated with the realignment of our business from five operating segments to three global business units as well as additional expenses associated with these changes that are expected to be incurred in the fourth quarter that cannot be estimated at this time. The company's guidance could be impacted by further rule-making relative to U.S. Tax Reform. A complete reconciliation of the non-GAAP financial information contained in our 2019 guidance is not being provided in accordance with the "unreasonable efforts" exception of Item 10(e)(1)(i)(B) of Regulation S-K of the Securities and Exchange Commission.

Conference Call:
The company will host an investor conference call to discuss third quarter results on Thursday, Sept. 26, 2019, at 10:30 a.m. Eastern U.S. time. The conference call audio and accompanying presentation slides will be available to interested parties via a simultaneous webcast accessible on the company's website at https://investors.hbfuller.com/calendar. The slides will be made available on its website approximately one hour prior to the start of the call. Participants should access the webcast prior to the start of the call to register for the event, and install and test any necessary software. The webcast and presentation will be archived on the company's website. A telephone replay of the conference call will be available approximately one hour after the conclusion of the call and through Oct. 3, 2019. To access the telephone replay dial 1-877-344-7529 or 1-412-317-0088 and enter passcode 10134752.

Certain amounts presented in this release and the accompanying financial statements and data are preliminary and are subject to change in the company's Quarterly Report on Form 10-Q for the period ended Aug. 31, 2019, when it is filed with the Securities and Exchange Commission.

Regulation G:
The information presented in this earnings release regarding segment operating income, adjusted gross profit, adjusted gross profit margin, adjusted selling, general and administrative expense, adjusted income before income taxes and income from equity investments, adjusted income taxes, adjusted effective tax rate, adjusted net income, adjusted diluted earnings per share and adjusted 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 and its operating segments as well as the comparability of results to the results of other companies. 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 "Regulation G Reconciliation" tables in this press release with the exception of our forward-looking non-GAAP measures contained in our fiscal 2019 outlook, which the company cannot reconcile to forward-looking GAAP results without unreasonable effort. The footnotes in the text of this press release refer to the footnotes in these tables.

About H.B. Fuller:
Since 1887, 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. With fiscal 2018 net revenue of over $3 billion, H.B. Fuller's commitment to innovation brings together people, products and processes that answer and solve some of the world's biggest challenges. Our reliable, responsive service creates lasting, rewarding connections with customers in electronics, disposable hygiene, medical, transportation, aerospace, clean energy, packaging, construction, woodworking, general industries and other consumer businesses. And, our promise to our people connects them with opportunities to innovate and thrive. For more information, visit us at https://www.hbfuller.com/.

Safe Harbor for Forward-Looking Statements:
Certain statements in this press release may be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to various risks and uncertainties, including but not limited to the following: the Royal Adhesives transaction may involve unexpected costs or liabilities; our business or stock price may suffer as a results of uncertainty surrounding the transaction; the substantial amount of debt we have incurred to finance our acquisition of Royal, our ability to repay or refinance it or incur additional debt in the future, our need for a significant amount of cash to service and repay the debt and to pay dividends on our common stock, and the effect of restrictions contained in our debt agreements that limit the discretion of management in operating the business or ability to pay dividends; various risks to stockholders of not receiving dividends and risks to our ability to pursue growth opportunities if we continue to pay dividends according to the current dividend policy; we may be unable to achieve expected synergies and operating efficiencies from the transaction within the expected time frames or at all; we may be unable to successfully integrate Royal's operations into our own, or such integration may be more difficult, time consuming or costly than expected; the ability to effectively implement Project ONE; political and economic conditions; product demand; competitive products and pricing; costs of and savings from restructuring initiatives; geographic and product mix; availability and price of raw materials; the company's relationships with its major customers and suppliers; changes in tax laws and tariffs; devaluations and other foreign exchange rate fluctuations; the impact of litigation and environmental matters; the effect of new accounting pronouncements and accounting charges and credits; and similar matters. Further information about the various risks and uncertainties can be found in the company's SEC 10-K filing for the fiscal year ended December 1, 2018. All forward-looking information represents management's best judgment as of this date based on information currently available that in the future may prove to have been inaccurate. Additionally, the variety of products sold by the company and the regions where the company does business make it difficult to determine with certainty the increases or decreases in net revenue resulting from changes in the volume of products sold, currency impact, changes in product mix, and selling prices. However, managements' best estimate of these changes as well as changes in other factors have been included.

 

H.B. FULLER COMPANY AND SUBSIDIARIES

CONSOLIDATED FINANCIAL INFORMATION

In thousands, except per share amounts (unaudited)












Three Months Ended


Percent of


Three Months Ended


Percent of


August 31, 2019


Net Revenue


September 1, 2018


Net Revenue

Net revenue

$

725,376


100.0%


$

770,107


100.0%

Cost of sales


(518,055)


(71.4%)



(555,077)


(72.1%)

Gross profit


207,321


28.6%



215,030


27.9%











Selling, general and administrative expenses


(140,615)


(19.4%)



(147,739)


(19.2%)





















Other income (expense), net


22,762


3.1%



2,469


0.3%

Interest expense


(25,607)


(3.5%)



(27,858)


(3.6%)

Interest income


3,115


0.4%



2,934


0.4%

Income before income taxes and income from equity method
investments


66,976


9.2%



44,836


5.8%











Income tax (expense) benefit


(19,321)


(2.7%)



(9,300)


(1.2%)











Income from equity method investments


2,075


0.3%



2,200


0.3%

Net income including non-controlling interests


49,730


6.9%



37,736


4.9%











Net (loss) income attributable to non-controlling interests


(12)


(0.0%)



(6)


(0.0%)

Net income attributable to H.B. Fuller

$

49,718


6.9%


$

37,730


4.9%











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

$

0.98




$

0.75



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

$

0.97




$

0.72













Weighted-average common shares outstanding:










Basic


50,939





50,632



Diluted


51,502





52,138













Dividends declared per common share

$

0.160




$

0.155



 

Selected Balance Sheet Information (subject to change prior to filing of the Company's Quarterly Report on Form 10-Q)











August 31, 2019


December 1, 2018


September 1, 2018

Cash & cash equivalents

$

119,776


$

150,793


$

150,084

Trade accounts receivable, net


485,688



495,008



465,942

Inventories


373,609



348,461



413,625

Trade payables


272,554



273,378



256,042

Total assets


4,032,683



4,176,314



4,302,311

Total debt


2,097,122



2,247,527



2,364,237

 

H.B. FULLER COMPANY AND SUBSIDIARIES

CONSOLIDATED FINANCIAL INFORMATION

In thousands, except per share amounts (unaudited)












Nine Months Ended


Percent of


Nine Months Ended


Percent of


August 31, 2019


Net Revenue


September 1, 2018


Net Revenue

Net revenue

$

2,157,894


100.0%


$

2,272,573


100.0%

Cost of sales


(1,552,189)


(71.9%)



(1,651,844)


(72.7%)

Gross profit


605,705


28.1%



620,729


27.3%











Selling, general and administrative expenses


(432,407)


(20.0%)



(447,335)


(19.7%)











Other income (expense), net


29,113


1.3%



15,120


0.7%

Interest expense


(79,354)


(3.7%)



(83,420)


(3.7%)

Interest income


9,191


0.4%



8,769


0.4%

Income before income taxes and income from equity method investments


132,248


6.1%



113,863


5.0%











Income (taxes) benefit


(38,902)


(1.8%)



9,844


0.4%











Income from equity method investments


5,273


0.2%



6,160


0.3%

Income (loss) from continuing operations


98,619


4.6%



129,867


5.7%

Net income (loss) including non-controlling interests


98,619


4.6%



129,867


5.7%











Net income attributable to non-controlling interests


(16)


(0.0%)



(4)


(0.0%)

Net income (loss)  attributable to H.B. Fuller

$

98,603


4.6%


$

129,863


5.7%





















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










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

$

1.94




$

2.57













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










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

$

1.90




$

2.50













Weighted-average common shares outstanding:










Basic


50,864





50,551



Diluted


51,836





51,961













Dividends declared per common share

$

0.475




$

0.460













a Income per share amounts may not add due to rounding



 

H.B. FULLER COMPANY AND SUBSIDIARIES

REGULATION G RECONCILIATION

In thousands, except per share amounts (unaudited)

















Three Months Ended


Nine Months Ended



August 31, 2019


September 1, 2018


August 31, 2019



September 1, 2018















Net income attributable to H.B. Fuller


$

49,718


$

37,730


$

98,603



$

129,863















Adjustments:














Acquisition project costs



1,535



1,545



2,158




2,216

Tonsan call option agreement



-



110



-




(2,059)

Organizational realignment



(684)



883



1,110




2,367

Royal restructuring and integration



(9,132)



5,160



(1,150)




14,421

Tax reform



-



(802)



55




(36,138)

Project ONE



1,130



1,922



3,179




4,329

Other



1,660



(1,882)



3,427




(5,603)

Adjusted net income attributable to H.B. Fuller1



44,227



44,666



107,382




109,396















Add:














Interest expense



25,607



27,750



79,354




83,156

Interest income



(3,115)



(2,934)



(9,191)




(8,769)

Income taxes



14,798



14,664



37,219




35,962

Depreciation and amortization expense A



34,606



36,123



105,403




108,436

Adjusted EBITDA1



116,123



120,269



320,167




328,181















Diluted Shares



51,502



52,138



51,836




51,961

Adjusted diluted income per common share attributable to H.B. Fuller1


$

0.86


$

0.86


$

2.07



$

2.11

Revenue


$

725,376


$

770,107


$

2,157,894



$

2,272,573

Adjusted EBITDA margin1



16.0%



15.6%



14.8%




14.4%


_______________


1 Adjusted net income attributable to H.B. Fuller, adjusted diluted income per common share attributable to H.B. Fuller, adjusted EBITDA and adjusted EBITDA margin are non-GAAP financial measures. Adjusted net income attributable to H.B. Fuller is defined as net income before the specific adjustments shown above. Adjusted diluted income per common share is defined as adjusted net income attributable to H.B. Fuller divided by the number of diluted common shares. Adjusted EBITDA is defined as net income before interest, income taxes, depreciation, amortization and the specific adjustments shown above. Adjusted EBITDA margin is defined as adjusted EBITDA divided by net revenue. The table above provides a reconciliation of adjusted net income attributable to H.B. Fuller, adjusted diluted income per common share attributable to H.B. Fuller, adjusted EBITDA and adjusted EBITDA margin to net income attributable to H.B. Fuller, the most directly comparable financial measure determined and reported in accordance with GAAP.

A Depreciation and amortization expense added back for Adjusted EBITDA is adjusted for amounts already included in Adjusted net income attributable to H.B. Fuller totaling $174 and $1,135 for the three and nine months ended August 31, 2019, respectively, and $361 and $726 for the three and nine months ended September 1, 2018, respectively. 

 


H.B. FULLER COMPANY AND SUBSIDIARIES


SEGMENT FINANCIAL INFORMATION


In thousands (unaudited)














Three Months Ended


Nine Months Ended


August 31, 2019


September 1, 2018


August 31, 2019


September 1, 2018

Net Revenue:












Americas Adhesives

$

259,758


$

268,736


$

761,408


$

785,931

EIMEA


154,278



171,505



476,244



522,658

Asia Pacific


65,624



65,960



200,109



206,990

Construction Adhesives


107,920



123,977



301,619



345,125

Engineering Adhesives


137,796



139,929



418,514



411,869

Total H.B. Fuller

$

725,376


$

770,107


$

2,157,894


$

2,272,573













Segment Operating Income:












Americas Adhesives

$

28,263


$

31,474


$

70,472


$

72,793

EIMEA


6,458



6,199



18,454



22,714

Asia Pacific


6,114



3,677



15,651



11,005

Construction Adhesives


7,380



11,907



11,148



24,410

Engineering Adhesives


18,491



14,034



57,573



42,472

Total H.B. Fuller

$

66,706


$

67,291


$

173,298


$

173,394













Adjusted EBITDA1












Americas Adhesives

$

42,312


$

47,437


$

111,658


$

117,643

EIMEA


17,112



16,597



47,861



54,451

Asia Pacific


8,993



6,572



24,391



19,806

Construction Adhesives


17,441



24,699



44,239



60,481

Engineering Adhesives


29,400



24,145



88,102



70,907

Corporate unallocated


865



819



3,916



4,893

Total H.B. Fuller

$

116,123


$

120,269


$

320,167


$

328,181













Adjusted EBITDA Margin1












Americas Adhesives


16.3%



17.7%



14.7%



15.0%

EIMEA


11.1%



9.7%



10.0%



10.4%

Asia Pacific


13.7%



10.0%



12.2%



9.6%

Construction Adhesives


16.2%



19.9%



14.7%



17.5%

Engineering Adhesives


21.3%



17.3%



21.1%



17.2%

Corporate unallocated


0.1%



0.1%



0.2%



0.2%

Total H.B. Fuller


16.0%



15.6%



14.8%



14.4%













 

H.B. FULLER COMPANY AND SUBSIDIARIES

REGULATION G RECONCILIATION

In thousands, except per share amounts (unaudited)









Three Months Ended


Nine Months Ended


August 31, 2019


September 1, 2018


August 31, 2019


September 1, 2018













Income before income taxes and income from equity method investments

$

66,976


$

44,836


$

132,248


$

113,863













Adjustments:












Acquisition project costs


1,871



2,101



2,641



3,108

Tonsan call option agreement


-



110



-



(2,059)

Organizational realignment


(1,345)



1,035



885



2,297

Royal restructuring and integration


(12,131)



6,490



(1,591)



20,473

Tax reform


-



-



75



-

Project ONE


1,378



2,564



3,982



6,266

Other


213



-



1,105



(4,745)

Adjusted income before income taxes and income from equity method investments2 

$

56,962


$

57,136


$

139,345


$

139,203


_______________
























2 Adjusted income before income taxes and income from equity investments is a non-GAAP financial measure. Adjusted income before income taxes and income from equity investments is defined as income before income taxes and income from equity investments before the specific adjustments shown above. The table above provides a reconciliation of adjusted income before income taxes and income from equity investments to income before income taxes and income from equity investments, the most directly comparable financial measure determined and reported in accordance with GAAP.

 

H.B. FULLER COMPANY AND SUBSIDIARIES

REGULATION G RECONCILIATION

In thousands, except per share amounts (unaudited)














Three Months Ended


Nine Months Ended


August 31, 2019


September 1, 2018


August 31, 2019


September 1, 2018













Income Taxes

$

(19,321)


$

(9,300)


$

(38,902)


$

9,844













Adjustments:












Acquisition project costs


(336)



(556)



(482)



(892)

Organizational realignment


660



(151)



225



70

Royal restructuring and integration


2,999



(1,331)



441



(6,052)

Tax reform


-



(802)



(20)



(36,138)

Project ONE


(247)



(641)



(803)



(1,937)

Other


1,447



(1,883)



2,322



(857)

Adjusted income taxes3

$

(14,798)


$

(14,664)


$

(37,219)


$

(35,962)













Adjusted income before income taxes and income from equity method investments

$

56,962


$

57,136


$

139,345


$

139,203

Adjusted effective income tax rate3 


26.0%



25.7%



26.7%



25.8%


_______________
























3 Adjusted income taxes and adjusted effective income tax rate are non-GAAP financial measures. Adjusted income taxes is defined as income taxes before the specific adjustments shown above. Adjusted effective income tax rate is defined as income taxes divided by adjusted income before income taxes and income from equity method investments. The table above provides a reconciliation of adjusted income taxes and adjusted effective income tax rate to income taxes, the most directly comparable financial measure determined and reported in accordance with GAAP.

 


H.B. FULLER COMPANY AND SUBSIDIARIES

REGULATION G RECONCILIATION

In thousands (unaudited)















Three Months Ended


Nine Months Ended


August 31, 2019


September 1, 2018


August 31, 2019



September 1, 2018














Net revenue


725,376



770,107



2,157,894




2,272,573














Gross profit

$

207,321


$

215,030


$

605,705



$

620,729

Gross profit margin


28.6%



27.9%



28.1%




27.3%














Adjustments:













   Acquisition project costs


-



1,823



-




1,996

   Organizational realignment


(367)



621



(124)




1,298

   Royal restructuring and integration


1,741



1,389



4,250




2,216

   Other


(5)



-



(9)




-

Adjusted gross profit4

$

208,690


$

218,863


$

609,822



$

626,239

Adjusted gross profit margin4


28.8%



28.4%



28.3%




27.6%


_______________


4 Adjusted gross profit and adjusted gross profit margin are non-GAAP financial measures. Adjusted gross profit and adjusted gross profit margin is defined as gross profit and gross profit margin excluding the specific adjustments shown above. The table above provides a reconciliation of adjusted gross profit and gross profit margin to gross profit and gross profit margin, the most directly comparable financial measure determined and reported in accordance with GAAP. 

 














H.B. FULLER COMPANY AND SUBSIDIARIES

REGULATION G RECONCILIATION

In thousands (unaudited)















Three Months Ended


Nine Months Ended


August 31, 2019


September 1, 2018


August 31, 2019


September 1, 2018














Selling, general and administrative expenses

$

(140,615)


$

(147,739)


$

(432,407)



$

(447,335)














Adjustments:













  Acquisition project costs


1,871



279



2,641




1,114

  Tonsan call option agreement


-



2



-




(2,323)

  Organizational realignment


2,937



413



4,551




998

  Royal restructuring and integration


2,737



5,101



10,747




18,256

  Tax reform


-



-



75




-

  Project ONE


1,378



2,564



3,982




6,266

  Other


242



-



1,134




27

Adjusted selling, general and administrative expenses5 

$

(131,450)


$

(139,380)


$

(409,277)



$

(422,997)


_______________

















5 Adjusted selling, general and administrative expenses is a non-GAAP financial measure. Adjusted selling, general and administrative expenses is defined as selling, general and administrative expenses excluding the specific adjustments shown above. The table above provides a reconciliation of adjusted selling, general and administrative expenses to selling, general and administrative expenses, the most directly comparable financial measure determined and reported in accordance with GAAP.

 

H.B. FULLER COMPANY AND SUBSIDIARIES

REGULATION G RECONCILIATION

In thousands (unaudited)





























Americas





Asia


Construction


Engineering





Corporate


H.B. Fuller




Adhesives


EIMEA


Pacific


Adhesives


Adhesives


Total


Unallocated


Consolidated


Three Months Ended

August 31, 2019


$

30,239


$

7,086


$

6,155


$

8,065


$

18,573


$

70,118


$

(20,400)


$

49,718


Net income attributable to H.B. Fuller




















































Adjustments:


























       Acquisition project costs



694



451



257



209



260



1,871



(336)



1,535


       Organizational realignment



1,258



1,519



155



(552)



188



2,568



(3,252)



(684)


       Royal restructuring and integration



1,294



1,178



219



469



1,320



4,480



(13,612)



(9,132)


       Project ONE



519



337



171



157



195



1,379



(249)



1,130


       Other



143



93



-



-



-



236



1,424



1,660


Adjusted net income attributable to H.B. Fuller1



34,147



10,664



6,957



8,348



20,536



80,652



(36,425)



44,227




























Add:


























       Interest expense



-



-



-



-



-



-



25,607



25,607


       Interest income



-



-



-



-



-



-



(3,115)



(3,115)


       Income taxes



-



-



-



-



-



-



14,798



14,798


       Depreciation and amortization expense



8,165



6,448



2,036



9,093



8,864



34,606



-



34,606


Adjusted EBITDA1

$


42,312


$

17,112


$

8,993


$

17,441


$

29,400


$

115,258


$

865


$

116,123





Americas





Asia


Construction


Engineering





Corporate


H.B. Fuller




Adhesives


EIMEA


Pacific


Adhesives


Adhesives


Total


Unallocated


Consolidated


Nine Months Ended

August 31, 2019


$

76,398


$

20,400


$

15,773


$

13,205


$

57,826


$

183,602


$

(84,999)


$

98,603


Net income attributable to H.B. Fuller




















































Adjustments:


























       Acquisition project costs



984



639



352



297



369



2,641



(483)



2,158


       Organizational realignment



3,073



1,062



188



(122)



226



4,427



(3,317)



1,110


       Royal restructuring and integration



3,339



4,317



1,290



3,420



2,628



14,994



(16,144)



(1,150)


       Tax reform



28



18



10



9



10



75



(20)



55


       Project ONE



1,500



974



492



452



562



3,980



(801)



3,179


       Other



914



215



-



-



-



1,129



2,298



3,427


Adjusted net income attributable to H.B. Fuller1



86,236



27,625



18,105



17,261



61,621



210,848



(103,466)



107,382




























Add:


























       Interest expense



-



-



-



-



-



-



79,354



79,354


       Interest income



-



-



-



-



-



-



(9,191)



(9,191)


       Income taxes



-



-



-



-



-



-



37,219



37,219


       Depreciation and amortization expense



25,422



20,236



6,286



26,978



26,481



105,403



-



105,403


Adjusted EBITDA1

$


111,658


$

47,861


$

24,391


$

44,239


$

88,102


$

316,251


$

3,916


$

320,167





























Note: Adjusted EBITDA is a non-GAAP financial measure. The tables above provide a reconciliation of adjusted EBITDA for each segment to net income attributable to H.B. Fuller for each segment, the most directly comparable financial measure determined and reported in accordance with U.S. GAAP.


 

H.B. FULLER COMPANY AND SUBSIDIARIES

REGULATION G RECONCILIATION

In thousands (unaudited)





























Americas





Asia


Construction


Engineering





Corporate


H.B. Fuller




Adhesives


EIMEA


Pacific


Adhesives


Adhesives


Total


Unallocated


Consolidated




























Three Months Ended September 1, 2018


$

33,335


$

7,132


$

3,714


$

12,735


$

14,219


$

71,135


$

(33,405)


$

37,730


Net income attributable to H.B. Fuller




















































Adjustments:


























Acquisition project costs



2,037



26



12



13



13



2,101



(556)



1,545


Tonsan call option agreement



-



-



-



-



2



2



108



110


Organizational realignment



8



623



2



399



2



1,034



(151)



883


Royal Restructuring



2,171



1,272



418



1,871



759



6,491



(1,331)



5,160


Tax Reform



-



-



-



-



-



-



(802)



(802)


Project ONE



1,008



631



298



302



325



2,564



(642)



1,922


Other



-



-



-



-



-



-



(1,882)



(1,882)


Adjusted net income attributable to H.B. Fuller1



38,559



9,684



4,444



15,320



15,320



83,327



(38,661)



44,666




























Add:


























Interest expense



-



-



-



-



-



-



27,750



27,750


Interest income



-



-



-



-



-



-



(2,934)



(2,934)


Income taxes



-



-



-



-



-



-



14,664



14,664


Depreciation and amortization expense



8,878



6,913



2,128



9,379



8,825



36,123



-



36,123


Adjusted EBITDA1

$


47,437


$

16,597


$

6,572


$

24,699


$

24,145


$

119,450


$

819


$

120,269
























































Americas





Asia


Construction


Engineering







H.B. Fuller




Adhesives


EIMEA


Pacific


Adhesives


Adhesives


Total


Unallocated


Consolidated




























Nine Months Ended September 1, 2018


$

78,378


$

25,589


$

11,117


$

26,893


$

43,029


$

185,006


$

(55,143)


$

129,863


Net income attributable to H.B. Fuller




















































Adjustments:


























Acquisition project costs



2,883



72



34



35



83



3,107



(891)



2,216


Tonsan call option agreement



-



-



-



-



(2,323)



(2,323)



264



(2,059)


Organizational realignment



188



1,341



5



758



5



2,297



70



2,367


Royal Restructuring



7,315



4,545



1,483



4,338



2,793



20,474



(6,053)



14,421


Tax Reform



-



-



-



-



-



-



(36,138)



(36,138)


Project ONE



2,463



1,542



727



739



795



6,266



(1,937)



4,329


Other



21



1



1



1



1



25



(5,628)



(5,603)


Adjusted net income attributable to H.B. Fuller1



91,248



33,090



13,367



32,764



44,383



214,852



(105,456)



109,396




























Add:


























Interest expense



-



-



-



-



-



-



83,156



83,156


Interest income



-



-



-



-



-



-



(8,769)



(8,769)


Income taxes



-



-



-



-



-



-



35,962



35,962


Depreciation and amortization expense



26,395



21,361



6,439



27,717



26,524



108,436



-



108,436


Adjusted EBITDA1

$


117,643


$

54,451


$

19,806


$

60,481


$

70,907


$

323,288


$

4,893


$

328,181




Note: Adjusted EBITDA is a non-GAAP financial measure. The tables above provide a reconciliation of adjusted EBITDA for each segment to net income attributable to H.B. Fuller for each segment, the most directly comparable financial measure determined and reported in accordance with U.S. GAAP.

 

H.B. FULLER COMPANY AND SUBSIDIARIES

SEGMENT FINANCIAL INFORMATION

NET REVENUE

(unaudited)
















Three Months Ended


Nine Months Ended












August 31, 2019


August 31, 2019












Total


Total










Price


(0.6%)


1.5%










Volume


(2.7%)


(2.7%)










Organic Growth (Decline)


(3.3%)


(1.2%)










M&A


(0.6%)


(0.2%)










F/X


(1.9%)


(3.7%)
























Total H.B. Fuller net revenue


(5.8%)


(5.1%)








































Three Months Ended



Nine Months Ended



August 31, 2019



August 31, 2019



Net Revenue


F/X


Organic Growth (Decline)



Net Revenue


F/X


Organic Growth (Decline)















Americas Adhesives


(3.3%)


(1.7%)


0.1%



(3.1%)


(3.0%)


0.5%

EIMEA


(10.0%)


(2.7%)


(7.3%)



(8.9%)


(6.5%)


(2.4%)

Asia Pacific


(0.6%)


(1.6%)


1.0%



(3.3%)


(3.9%)


0.6%

Construction Adhesives


(13.0%)


(0.6%)


(12.4%)



(12.6%)


(0.8%)


(11.8%)

Engineering Adhesives


(1.5%)


(2.4%)


0.9%



1.6%


(3.7%)


5.3%

Total H.B. Fuller


(5.8%)


(1.9%)


(3.3%)



(5.1%)


(3.7%)


(1.2%)















 

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SOURCE H.B. Fuller Company