EX-99.1 2 ex_170088.htm EXHIBIT 99.1 ex_170088.htm

Worldwide Headquarters

1200 Willow Lake Boulevard

St. Paul, Minnesota 55110-5101

Exhibit 99.1


  Barbara Doyle

 Investor Relations contact

 651-236-5023
   
NEWS January 22, 2020

 

H.B. Fuller Reports Fourth Quarter and Fiscal Year 2019 Results

 

Debt pay down of $268 million in 2019 exceeded $200 million target

Diluted FY19 EPS of $2.52; Adjusted diluted FY19 EPS of $2.96, within company’s guidance range

Completed previously announced business realignment to 3 global segments

Announced Fiscal Year 2020 Adjusted Diluted EPS Guidance of $3.15 to $3.35

 

ST. PAUL, Minn. – H.B. Fuller Company (NYSE: FUL) today reported financial results for the fourth quarter and fiscal year ended Nov. 30, 2019.

 

Items of Note for Fourth Quarter 2019

 

■

Higher full year 2019 operating cash flow of $269 million enabled debt pay down of $268 million, exceeding the company’s initial 2019 paydown target of $200 million by 34%, and also exceeding its updated outlook of $260 million, as provided during its Sept. 25, 2019 analyst call;
 

■

Integration of Royal Adhesives on target with $15 million of incremental cost synergies realized in fiscal 2019;
 

■

Organic revenue was down 0.9% versus the fourth quarter of 2018, with improved volume trends sequentially versus the third quarter of 2019;
 

■

Net income was $32 million or $0.61 of earnings per diluted share (EPS). Adjusted net income was $46 million1, or $0.881 adjusted EPS. Adjusted EPS decreased 2% versus the same period last year, and would have increased approximately 4% excluding unfavorable impacts from foreign currency exchange and the divestiture of the surfactants, thickeners and dispersants business;
 

■

Completed the previously announced strategic realignment of our business into three new global business units as of Dec. 1, 2019.

 

1
 

 

Items of Note for 2020 Guidance

 

■

Adjusted diluted EPS of $3.15 to $3.35; up approximately 10% at the midpoint;
 

■

Adjusted EBITDA of $440 to $460 million; up approximately 4% at the midpoint;
 

■

Organic revenue growth of 1 to 2% from new business wins and share gains, even as challenging global macroeconomic conditions are assumed to continue in manufacturing sectors in 2020;
 

■

Approximately $20 million of cost savings resulting from the company’s business realignment drives additional earnings growth;
 

■

Debt repayment of approximately $200 million, on-track to accelerate the company’s 2020 deleveraging and exceed the three-year target by more than 10%.

 

Summary of Fourth Quarter 2019 Results

Net revenue of $739 million decreased 3.8% compared with the fourth quarter of 2018. Foreign currency exchange rates negatively impacted revenues by 2.1%, and the sale of the surfactants, thickeners and dispersants business negatively impacted revenues by 0.8%. Organic revenue, which excludes impacts from foreign currency and divestitures, was down 0.9% versus last year. Organic revenue growth in Americas Adhesives, Asia Pacific and Engineering Adhesives was offset by organic revenue declines in Construction Adhesives and EIMEA, primarily reflecting general industry and economic slowdowns in these areas.

 

Gross profit margin was 27.2%. Adjusted gross profit margin of 27.6%4 was down 20 basis points versus last year, driven by lower revenues and temporary higher manufacturing and inventory write off costs at certain former Royal Adhesives factories in the quarter, partially offset by favorable raw material costs. Selling, General and Administrative (SG&A) expense was $149 million. Adjusted SG&A expense of $133 million5 was roughly flat compared with the fourth quarter of 2018.

 

As a result of these factors, net income attributable to H.B. Fuller for the fourth quarter of 2019 was $32 million, or $0.61 per diluted share. Adjusted net income attributable to H.B. Fuller was $46 million1, or $0.881 of adjusted EPS, versus $47 million1, or $0.901 of adjusted EPS last year. Adjusted EPS decreased 2% versus the same period last year, and would have increased approximately 4% excluding unfavorable impacts from foreign currency exchange and the divestiture of the surfactants, thickeners and dispersants business.

 

2
 

 

“In the fourth quarter, we continued to gain share in strategic businesses including Engineering Adhesives and Hygiene, and our organic revenue trends improved sequentially compared with the third quarter,” said Jim Owens, president and chief executive officer. “For the full year, adjusted EPS was within our guidance range of $2.95 to $3.05 and adjusted earnings and EBITDA improved year-over-year on a constant currency basis. These results were achieved in a weak external environment which impacted organic growth. Our cash flow conversion remained very strong as a result of solid earnings and working capital management and we significantly exceeded our debt paydown target.”

 

Full Year 2019 Summary
Net revenue for fiscal 2019 of $2,897 million decreased 4.7% compared with fiscal 2018. Foreign currency exchange rates negatively impacted full year revenues by 3.3%, and the divestiture negatively impacted revenues by 0.3%. Organic full year revenue decreased by 1.1% year-over-year, due to lower revenues in Construction Adhesives and EIMEA partially offset by growth in Engineering Adhesives, Americas Adhesives and Asia Pacific.

 

Gross profit margin was 27.9%. Adjusted gross profit margin of 28.1%4 increased 50 basis points versus last year on lower raw material cost, favorable pricing and cost synergies from the integration of Royal Adhesives. Net income attributable to H.B. Fuller for fiscal 2019 was $131 million, or $2.52 per diluted share. Adjusted net income attributable to H.B. Fuller was $154 million1, or $2.961 per diluted share, compared with $1561 million, or $3.001 per diluted share, in fiscal 2018. Adjusted EPS would have increased approximately 6% compared with fiscal 2018 excluding the unfavorable impacts of foreign currency exchange and the divestiture of the surfactants and thickeners business. Adjusted EBITDA was $432 million1, compared with $449 million1 in the prior year period, and would have modestly increased year-over-year excluding unfavorable impacts from foreign currency and the divestiture.

 

Balance Sheet and Cash Flow

At the end of the fourth quarter of 2019, the Company had cash on hand of $112 million and total debt equal to $1,979 million. This compares to cash and debt levels equal to $151 million and $2,248 million, respectively, at the end of the fourth quarter of 2018. Cash flow from operations for the full year increased to $269 million from $253 million in 2018. Capital expenditures were $62 million in 2019, compared with $68 million in 2018.

 

3
 

 

Update on Business Realignment

Effective Dec. 1, 2019, H.B. Fuller completed the realignment of its business from five to three operating segments. Aligning our resources around the three new global business units (GBUs) – Engineering Adhesives, Hygiene, Health and Consumable Adhesives, and Construction Adhesives – better positions us to quickly identify trends and utilize our vast adhesives portfolio to deliver new solutions targeted to evolving trends. In addition, the new organizational structure enabled a simplification of our business processes and elimination of more than 150 redundant positions, globally, leading to reduced costs.

 

“We are entering the new year with a strategically focused and realigned business poised for growth and beginning to see areas of positive trends on the top line,” said Owens. “We win with customers by solving their adhesive problems better and faster than competitors. By organizing into global business units, we benefit from reduced complexity, enhanced collaboration, and increased speed to market. Our new global teams and expanded utilization of our shared services model are in place, and our entire organization is focused on capturing new market share at greater profitability in 2020, and in the years ahead.”

 

The company updated the range of its previously disclosed cost savings target from this realignment to $25 to $35 million by 2021, with approximately two thirds of the savings to be realized in 2020. In its Nov. 13, 2019 filing on Form 8-K with the Securities and Exchange Commission, the company announced approximately $9 to $11 million of restructuring costs associated with this initiative to be recognized across the next several fiscal quarters. The company incurred $9 million of restructuring costs in the quarter ended Nov. 30, 2019.

 

Financial Guidance

For fiscal year 2020, the company anticipates adjusted EPS of $3.15 to $3.35 and adjusted EBITDA of $440 to $460 million. Full year organic revenue growth is expected to be 1 to 2% compared with 2019, with net revenue growth impacted by an estimated unfavorable impact from foreign currency exchange rates of 0.5% and an unfavorable 0.5% impact from the divestiture of the surfactants business resulting in net revenue growth between 0 and 1%. The company’s core tax rate, excluding the impact of discrete items, is expected to be between 26% and 28%. H.B. Fuller expects to invest approximately $85 million in capital items in 2020.

 

4
 

 

“In 2020, we are focused on executing the growth drivers and cost savings that are enabled by our GBU realignment and the synergies provided by the Royal Adhesives acquisition,” Owens said. “Our plan delivers organic growth in a continued challenging global manufacturing environment forecasted for 2020. In addition, we are reducing costs to support 10% earnings growth and increased cash flow. As a result of profit margin and working capital improvements, high cash flow conversion rates and our focused capital management programs, we remain on track to significantly exceed our committed $600 million in debt paydown by the end of 2020.”

 

This guidance excludes estimated pre-tax expenses of $6 to $10 million related to the company’s global business realignment and completion of the integration of the Royal business, and pre-tax expenses of $12 to $15 million related to ERP development costs. The company’s guidance could be impacted by further rule making relative to U.S. Tax Reform as well as potential tax law changes in other countries where we do business. A complete reconciliation of the non-GAAP financial information contained in our 2020 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 fourth quarter results on Thursday, Jan. 23, 2020, at 10:30 a.m. EST. The conference call audio and accompanying presentation slides will be available to interested parties via a simultaneous webcast, and may be accessed from the company's website at https://investors.hbfuller.com/calendar. 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 1 hour after the conclusion of the call, through Jan. 30, 2020. To access the telephone replay dial 1-877-344-7529 or 1-412-317-0088 and enter access code 10137645.

 

Certain amounts presented in this release and the accompanying financial statements and data are preliminary and are subject to change in the company’s Annual Report on Form 10-K for the year ended Nov. 30, 2019 when it is filed with the Securities and Exchange Commission.

 

5
 

 

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 2019 net revenue of $2.9 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/.

 

6
 

 

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, cost savings and operating efficiencies from the Royal transaction or the business realignment 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.

 

7
 

 

H.B. FULLER COMPANY AND SUBSIDIARIES

CONSOLIDATED FINANCIAL INFORMATION

In thousands, except per share amounts (unaudited)

 

   

13 Weeks Ended

    

Percent of

    

13 Weeks Ended

    

Percent of

  
   

November 30, 2019

    

Net Revenue

    

December 1, 2018

    

Net Revenue

  

Net revenue

   $ 739,106       100.0%     $ 768,429       100.0%  

Cost of sales

     (537,889 )     (72.8% )     (561,000 )     (73.0% )

Gross profit

     201,217       27.2       207,429       27.0%  
                                 

Selling, general and administrative expenses

     (148,521 )     (20.1% )     (142,932 )     (18.6% )

Other expense, net

     8,830       1.2%       2,935       0.4%  

Interest expense

     (23,933 )     (3.2% )     (27,574 )     (3.6% )

Interest income

     2,987       0.4%       3,005       0.4%  

Income (loss) before income taxes and income from equity method investments

     40,580       5.5%       42,863       5.6%  
                                 

Income taxes

     (10,506 )     (1.4% )     (3,488 )     (0.5% )
                                 

Income from equity method investments

     2,151       0.3%       1,990       0.3%  

Net income including non-controlling interests

     32,225       4.4%       41,365       5.4%  
                                 

Net income attributable to non-controlling interests

     (11 )     (0.0% )     (20 )     (0.0% )

Net income attributable to H.B. Fuller

   $ 32,214       4.4%     $ 41,345       5.4%  
                                 

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

   $ 0.63             $ 0.82          

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

   $ 0.61             $ 0.79          
                                 

Weighted-average common shares outstanding:

                                

Basic

     51,089               50,712          

Diluted

     52,423               52,017          
                                 

Dividends declared per common share

   $ 0.160             $ 0.155          

 

 

 

 

 

 

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

 

   

November 30, 2019

    

December 1, 2018

    

December 2, 2017

  

Cash & cash equivalents

   $ 112,191     $ 150,793     $ 194,398  

Trade accounts receivable, net

     493,181       495,008       473,700  

Inventories

     337,267       348,461       372,102  

Trade payables

     298,869       273,378       268,467  

Total assets

     3,985,734       4,176,314       4,373,243  

Total debt

     1,979,116       2,247,527       2,451,910  

 

8
 

 

H.B. FULLER COMPANY AND SUBSIDIARIES

CONSOLIDATED FINANCIAL INFORMATION

In thousands, except per share amounts (unaudited)

 

   

52 Weeks Ended

    

Percent of

    

52 Weeks Ended

    

Percent of

  
   

November 30, 2019

    

Net Revenue

    

December 1, 2018

    

Net Revenue

  

Net revenue

   $ 2,897,000       100.0%     $ 3,041,002       100.0%  

Cost of sales

     (2,090,078 )     (72.1% )     (2,212,844 )     (72.8% )

Gross profit

     806,922       27.9%       828,158       27.2%  
                                 

Selling, general and administrative expenses

     (580,928 )     (20.1% )     (590,267 )     (19.4% )
                                 

Other income (expense), net

     37,943       1.3%       18,055       0.6%  

Interest expense

     (103,287 )     (3.6% )     (110,994 )     (3.6% )

Interest income

     12,178       0.4%       11,774       0.4%  

Income from continuing operations before income taxes and income from equity method investments

     172,828       6.0%       156,726       5.2%  
                                 

Income taxes

     (49,408 )     (1.7% )     6,356       0.2%  
                                 

Income from equity method investments

     7,424       0.3%       8,150       0.3%  

Net income including non-controlling interests

     130,844       4.5%       171,232       5.6%  
                                 

Net income attributable to non-controlling interests

     (27 )     (0.0% )     (24 )     (0.0% )

Net income attributable to H.B. Fuller

   $ 130,817       4.5%     $ 171,208       5.6%  
                                 
                                 

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

   $ 2.57             $ 3.38          

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

   $ 2.52             $ 3.29          
                                 

Weighted-average common shares outstanding:

                                

Basic

     50,920               50,591          

Diluted

     51,983               51,975          
                                 

Dividends declared per common share

   $ 0.635             $ 0.615          
                                 

a Income per share amounts may not add due to rounding

                  

 

9
 

 

H.B. FULLER COMPANY AND SUBSIDIARIES

REGULATION G RECONCILIATION

In thousands, except per share amounts (unaudited)

 

   

13 Weeks Ended

    

52 Weeks Ended

  
   

November 30, 2019

    

December 1, 2018

    

November 30, 2019

    

December 1, 2018

  
                                 

Net income attributable to H.B. Fuller

   $ 32,214     $ 41,345     $ 130,817     $ 171,208  
                                 

Adjustments:

                                

Acquisition project costs

     45       616       2,204       2,833  

Tonsan call option agreement

     -       3,555       -       1,496  

Organizational realignment

     6,535       469       7,647       2,836  

Royal restructuring and integration

     1,957       5,930       787       20,351  

Tax reform

     76       (7,138 )     132       (43,276 )

Project One

     937       451       4,115       4,780  

Other

     4,520       1,336       7,964       (4,266 )

Adjusted net income attributable to H.B. Fuller1

     46,284       46,564       153,666       155,962  
                                 

Add:

                                

Interest expense

     23,933       27,468       103,287       110,624  

Interest income

     (2,987 )     (3,005 )     (12,178 )     (11,774 )

Income taxes

     10,246       13,580       47,465       49,541  

Depreciation and amortization expenseA

     34,702       35,964       140,105       144,400  

Adjusted EBITDA1

     112,178       120,571       432,345       448,753  
                                 

Diluted Shares

     52,423       52,017       51,983       51,975  

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

   $ 0.88     $ 0.90     $ 2.96     $ 3.00  
                                 

Revenue

   $ 739,106     $ 768,429     $ 2,897,000     $ 3,041,002  

Adjusted EBITDA margin1

     15.2%       15.7%       14.9%       14.8%  
                                 

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 $34 and ($1,101) for the three and twelve months ended November 30, 2019, respectively, and $0 and ($726) for the three and twelve months ended December 1, 2018, respectively.

  

 

10
 

 

H.B. FULLER COMPANY AND SUBSIDIARIES

SEGMENT FINANCIAL INFORMATION

In thousands (unaudited)

 

   

13 Weeks Ended

    

52 Weeks Ended

  
   

November 30, 2019

    

December 1, 2018

    

November 30, 2019

    

December 1, 2018

  

Net Revenue

                                

Americas Adhesives

   $ 261,366     $ 265,434     $ 1,022,775     $ 1,051,365  

EIMEA

     164,669       174,790       640,913       697,448  

Asia Pacific

     71,476       71,172       271,585       278,162  

Construction Adhesives

     93,294       106,921       394,912       452,046  

Engineering Adhesives

     148,301       150,112       566,815       561,981  

Total H.B. Fuller

   $ 739,106     $ 768,429     $ 2,897,000     $ 3,041,002  
                                 

Segment Operating Income

                                

Americas Adhesives

   $ 21,723     $ 26,173     $ 92,195     $ 98,966  

EIMEA

     3,802       6,875       22,256       29,589  

Asia Pacific

     6,514       6,737       22,165       17,742  

Construction Adhesives

     823       6,008       11,971       30,418  

Engineering Adhesives

     19,834       18,704       77,407       61,176  

Total H.B. Fuller

   $ 52,696     $ 64,497     $ 225,994     $ 237,891  
                                 

Adjusted EBITDA1

                                

Americas Adhesives

   $ 36,834     $ 42,263     $ 148,492     $ 159,907  

EIMEA

     18,159       18,702       66,020       73,153  

Asia Pacific

     10,044       9,295       34,435       29,101  

Construction Adhesives

     12,457       17,980       56,696       78,461  

Engineering Adhesives

     31,152       32,516       119,255       103,423  

Corporate unallocated

     3,532       (185 )     7,447       4,708  

Total H.B. Fuller

   $ 112,178     $ 120,571     $ 432,345     $ 448,753  
                                 

Adjusted EBITDA Margin1

                                

Americas Adhesives

     14.1%       15.9%       14.5%       15.2%  

EIMEA

     11.0%       10.7%       10.3%       10.5%  

Asia Pacific

     14.1%       13.1%       12.7%       10.5%  

Construction Adhesives

     13.4%       16.8%       14.4%       17.4%  

Engineering Adhesives

     21.0%       21.7%       21.0%       18.4%  

Corporate unallocated

     0.5%       (0.0% )     0.3%       0.2%  

Total H.B. Fuller

     15.2%       15.7%       14.9%       14.8%  
                                 

 

11
 

 

H.B. FULLER COMPANY AND SUBSIDIARIES

REGULATION G RECONCILIATION

In thousands, except per share amounts (unaudited)

 

   

13 Weeks Ended

    

52 Weeks Ended

  
   

November 30,

2019

    

December 1,

2018

    

November 30,

2019

    

December 1,

2018

  

Income before income taxes and income from equity method investments

   $ 40,580     $ 42,863     $ 172,828     $ 156,726  
                                 

Adjustments:

                                

Acquisition project costs

     63       848       2,703       3,957  

Tonsan call option agreement

     -       3,555       -       1,496  

Organizational realignment

     9,280       544       10,168       2,840  

Royal restructuring and integration

     2,327       8,094       713       28,566  

Tax reform

     106       305       180       305  

Project One

     1,293       601       5,275       6,867  

Other

     741       1,364       1,867       (3,380 )
                                 

Adjusted income before income taxes and income from equity method investments2

   $ 54,390     $ 58,174     $ 193,734     $ 197,377  
                                 

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)

 

   

13 Weeks Ended

    

52 Weeks Ended

  
   

November 30,

2019

    

December 1,

2018

    

November 30,

2019

    

December 1,

2018

  

Income Taxes

   $ (10,506 )   $ (3,488 )   $ (49,408 )   $ 6,356  
                                 

Adjustments:

                                

Acquisition project costs

     (17 )     (232 )     (500 )     (1,124 )

Organizational realignment

     (2,746 )     (75 )     (2,521 )     (4 )

Royal restructuring and integration

     (371 )     (2,164 )     74       (8,215 )

Tax reform

     (29 )     (7,444 )     (49 )     (43,582 )

Project One

     (356 )     (150 )     (1,159 )     (2,087 )

Other

     3,779       (27 )     6.098       (885 )

Adjusted income taxes3

   $ (10,246 )   $ (13,580 )   $ (47,465 )   $ (49,541 )
                                 

Adjusted income before income taxes and income from equity method investments

   $ 54,390     $ 58,174     $ 193,734     $ 197,377  

Adjusted effective income tax rate3

     18.8 %     23.3 %     24.5 %     25.1 %
                                 

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 adjusted 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.

  

 

12
 

 

H.B. FULLER COMPANY AND SUBSIDIARIES

REGULATION G RECONCILIATION

In thousands (unaudited)

 

   

13 Weeks Ended

    

52 Weeks Ended

  
   

November 30,

2019

    

December 1,

2018

    

November 30,

2019

    

December 1,

2018

  
                                 

Net revenue

   $ 739,106     $ 768,429     $ 2,897,000     $ 3,041,002  
                                 

Gross profit

   $ 201,217     $ 207,429     $ 806,922     $ 828,158  

Gross profit margin

     27.2%       27.0%       27.9%       27.2%  
                                 

Adjustments:

                                

Acquisition project costs

     -       526       -       2,522  

Organizational realignment

     506       235       381       1,533  

Royal restructuring and integration

     2,065       2,810       6,316       5,026  

Other

     199       2,407       191       2,407  

Adjusted gross profit4

   $ 203,987     $ 213,407     $ 813,810     $ 839,646  

Adjusted gross profit margin4

     27.6%       27.8%       28.1%       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)

 

   

13 Weeks Ended

    

52 Weeks Ended

  
   

November 30,

2019

    

December 1,

2018

    

November 30,

2019

    

December 1,

2018

  
                                 

Selling, general and administrative expenses

   $ (148,521 )   $ (142,932 )   $ (580,928 )   $ (590,267 )
                                 

Adjustments:

                                

Acquisition project costs

     63       323       2,703       1,437  

Tonsan call option agreement

     -       3,450       -       1,127  

Organizational realignment

     8,746       309       13,300       1,307  

Royal restructuring and integration

     4,551       5,114       15,296       23,370  

Tax reform

     105       305       180       305  

Project ONE

     1,293       601       5,275       6,867  

Other

     363       380       1,497       407  

Adjusted selling, general and administrative expenses5

   $ (133,400 )   $ (132,450 )   $ (542,677 )   $ (555,447 )
                                 

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.

  

 

13
 

 

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

  

13 Weeks Ended

November 30, 2019

                                                                

Net income attributable to H.B. Fuller

   $ 23,703     $ 4,352     $ 6,555     $ 1,536     $ 19,908     $ 56,054     $ (23,840 )   $ 32,214  
                                                                 

Adjustments:

                                                                

Acquisition project costs

     16       10       25       5       6       62       (17 )     45  

Organizational realignment

     2,866       3,827       852       778       929       9,252       (2,717 )     6,535  

Royal restructuring and integration

     1,242       2,678       390       840       1,465       6,615       (4,658 )     1,957  

Tax reform

     40       26       13       12       15       106       (30 )     76  

Project One

     493       314       159       146       181       1,293       (356 )     937  

Other

     199       363       -       -       -       562       3,958       4,520  
                                                                 

Adjusted net income attributable to H.B. Fuller1

     28,559       11,570       7,994       3,317       22,504       73,944       (27,660 )     46,284  
                                                                 

Add:

                                                                

Interest expense

     -       -       -       -       -       -       23,933       23,933  

Interest income

     -       -       -       -       -       -       (2,987 )     (2,987 )

Income taxes

     -       -       -       -       -       -       10,246       10,246  

Depreciation and amortization expense

     8,275       6,589       2,050       9,140       8,648       34,702       -       34,702  

Adjusted EBITDA1

   $ 36,834     $ 18,159     $ 10,044     $ 12,457     $ 31,152     $ 108,646     $ 3,532     $ 112,178  

 

   

Americas

            

Asia

    

Construction

    

Engineering

            

Corporate

    

H.B. Fuller

  
   

Adhesives

    

EIMEA

    

Pacific

    

Adhesives

    

Adhesives

    

Total

    

Unallocated

    

Consolidated

  

52 Weeks Ended

November 30, 2019

                                                                

Net income attributable to H.B. Fuller

   $ 100,101     $ 24,752     $ 22,328     $ 14,741     $ 77,734     $ 239,656     $ (108,839 )   $ 130,817  
                                                                 

Adjustments:

                                                                

Acquisition project costs

     1,000       649       378       302       375       2,704       (500 )     2,204  

Organizational realignment

     5,942       4,889       1,040       655       1,155       13,681       (6,034 )     7,647  

Royal restructuring and integration

     4,578       6,975       1,679       4,261       4,093       21,586       (20,799 )     787  

Tax reform

     68       44       22       21       25       180       (48 )     132  

Project One

     1,993       1,288       652       598       744       5,275       (1,160 )     4,115  

Other

     1,113       598       -       -       -       1,711       6,253       7,964  
                                                                 

Adjusted net income attributable to H.B. Fuller1

     114,795       39,195       26,099       20,578       84,126       284,793       (131,127 )     153,666  
                                                                 

Add:

                                                                

Interest expense

     -       -       -       -       -       -       103,287       103,287  

Interest income

     -       -       -       -       -       -       (12,178 )     (12,178 )

Income taxes

     -       -       -       -       -       -       47,465       47,465  

Depreciation and amortization expense

     33,697       26,825       8,336       36,118       35,129       140,105       -       140,105  

Adjusted EBITDA1

   $ 148,492     $ 66,020     $ 34,435     $ 56,696     $ 119,255     $ 424,898     $ 7,447     $ 432,345  
                                                                 

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.

  

 

14
 

 

H.B. FULLER COMPANY AND SUBSIDIARIES

REGULATION G RECONCILIATION

In thousands (unaudited)

 

   

Americas

            

Asia

    

Construction

    

Engineering

                    

H.B. Fuller

  
   

Adhesives

    

EIMEA

    

Pacific

    

Adhesives

    

Adhesives

    

Total

    

Unallocated

    

Consolidated

  

13 Weeks Ended

December 1, 2018

                                                                

Net income attributable to H.B. Fuller

   $ 28,576     $ 8,153     $ 6,945     $ 7,015     $ 19,067     $ 69,756     $ (28,411 )   $ 41,345  
                                                                 

Adjustments:

                                                                

Acquisition project costs

     796       22       10       10       11       849       (233 )     616  

Tonsan call option agreement

     -       -       -       -       3,449       3,449       106       3,555  

Organizational realignment

     12       361       4       163       4       544       (75 )     469  

Royal Restructuring

     1,688       3,053       391       1,506       1,287       7,925       (1,995 )     5,930  

Tax reform

     120       75       35       36       39       305       (7,443 )     (7,138 )

Project One

     236       148       70       71       76       601       (150 )     451  

Other

     1,796       (8 )     (169 )     (77 )     (179 )     1,363       (27 )     1,336  
                                                                 

Adjusted net income attributable to H.B. Fuller1

     33,224       11,804       7,286       8,724       23,754       84,792       (38,228 )     46,564  
                                                                 

Add:

                                                                

Interest expense

     -       -       -       -       -       -       27,468       27,468  

Interest income

     -       -       -       -       -       -       (3,005 )     (3,005 )

Income taxes

     -       -       -       -       -       -       13,580       13,580  

Depreciation and amortization expense

     9,039       6,898       2,009       9,256       8,762       35,964       -       35,964  

Adjusted EBITDA1

   $ 42,263     $ 18,702     $ 9,295     $ 17,980     $ 32,516     $ 120,756     $ (185 )   $ 120,571  

 

   

Americas

            

Asia

    

Construction

    

Engineering

                    

H.B. Fuller

  
   

Adhesives

    

EIMEA

    

Pacific

    

Adhesives

    

Adhesives

    

Total

    

Unallocated

    

Consolidated

  

52 Weeks Ended

December 1, 2018

                                                                

Net income attributable to H.B. Fuller

   $ 106,955     $ 33,742     $ 18,063     $ 33,908     $ 62,094     $ 254,762     $ (83,554 )   $ 171,208  
                                                                 

Adjustments:

                                                                

Acquisition project costs

     3,679       94       45       45       95       3,958       (1,125 )     2,833  

Tonsan call option agreement

     -       -       -       -       1,126       1,126       370       1,496  

Organizational realignment

     200       1,702       8       922       9       2,841       (5 )     2,836  

Royal Restructuring

     9,002       7,597       1,874       5,843       4,081       28,397       (8,046 )     20,351  

Tax reform

     121       75       35       36       39       306       (43,582 )     (43,276 )

Project One

     2,700       1,690       797       809       871       6,867       (2,087 )     4,780  

Other

     1,817       (7 )     (168 )     (76 )     (178 )     1,388       (5,654 )     (4,266 )
                                                                 

Adjusted net income attributable to H.B. Fuller1

     124,474       44,893       20,654       41,487       68,137       299,645       (143,683 )     155,962  
                                                                 

Add:

                                                                

Interest expense

     -       -       -       -       -       -       110,624       110,624  

Interest income

     -       -       -       -       -       -       (11,774 )     (11,774 )

Income taxes

     -       -       -       -       -       -       49,541       49,541  

Depreciation and amortization expense

     35,433       28,260       8,447       36,974       35,286       144,400       -       144,400  

Adjusted EBITDA1

   $ 159,907     $ 73,153     $ 29,101     $ 78,461     $ 103,423     $ 444,045     $ 4,708     $ 448,753  
                                                                 

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.

  

 

15
 

 

H.B. FULLER COMPANY AND SUBSIDIARIES

SEGMENT FINANCIAL INFORMATION

NET REVENUE GROWTH (DECLINE)

(unaudited)

 

    13 Weeks Ended     52 Weeks Ended                                  
   

November 30, 2019

    

November 30, 2019

                                  
   

Total

    

Total

                                  

Price

     (0.5% )     1.0%                                  

Volume

     (0.4% )     (2.1% )                                

Organic

     (0.9% )     (1.1% )                                

M&A

     (0.8% )     (0.3% )                                

F/X

     (2.1% )     (3.3% )                                

Total H.B. Fuller

     (3.8% )     (4.7% )                                
                                                 
                                                 
   

13 Weeks Ended

    

52 Weeks Ended

  
   

November 30, 2019

    

November 30, 2019

  
   

Net Revenue

    

F/X and M&A

    

Organic

Growth

(Decline)

    

Net Revenue

    

F/X and M&A

    

Organic

Growth

(Decline)

  
                                                 

Americas Adhesives

     (1.5% )     (4.7% )     3.2%       (2.7% )     (3.8% )     1.1%  

EIMEA

     (5.8% )     (2.3% )     (3.5% )     (8.1% )     (5.4% )     (2.7% )

Asia Pacific

     0.4%       (1.8% )     2.2%       (2.4% )     (3.5% )     1.1%  

Construction Adhesives

     (12.7% )     (0.4% )     (12.3% )     (12.6% )     (0.6% )     (12.0% )

Engineering Adhesives

     (1.2% )     (2.4% )     1.2%       0.9%       (3.3% )     4.2%  

Total H.B. Fuller

     (3.8% )     (2.9% )     (0.9% )     (4.7% )     (3.6% )     (1.1% )

 

16