EX-99.1 2 ex_259488.htm EXHIBIT 99.1 ex_259488.htm
 

 

hb01.jpg
Worldwide Headquarters 
1200 Willow Lake Boulevard 
St. Paul, Minnesota 55110-5101
 

Exhibit 99.1

 

 

Barbara Doyle

Vice President, Investor Relations

651-236-5023
NEWS June 23, 2021

 

H.B. Fuller Reports Second Quarter Fiscal 2021 Results

Net revenue growth of 23% and organic revenue growth of 19% driven by share gains and strong demand

Net income of $49 million and EPS of $0.90; adjusted EPS of $0.94 up 38% year over year

Adjusted EBITDA of $122 million up 21% year over year

 

ST. PAUL, Minn. – H.B. Fuller Company (NYSE: FUL) today reported financial results for its second quarter ended May 29, 2021.

 

Items of Note for Second Quarter 2021

■

Strong operational execution, benefits from restructuring efficiencies and improved global industrial demand drove significant revenue and earnings growth versus the second quarter of fiscal 2020.

■

Revenue was up 22.7% versus the second quarter of last year. Organic revenue increased 18.8% versus the second quarter last year. Organic revenue was up 9.5% when compared with the non-COVID-impacted second quarter of 2019.

■

Net income increased to $49 million; volume leverage, pricing and operational efficiencies offset higher raw material costs and drove a 21% year-over-year increase in adjusted EBITDA to $122 million.

■

Earnings per diluted share (EPS) were $0.90; adjusted EPS of $0.94 increased 38% year over year, driven primarily by strong operating income growth and lower interest expense associated with reduced debt.

■

Year-to-date debt paydown of $61.5 million was 20% higher than the same period last year. The company remains on track to its $200 million debt reduction target for the full year.

 

Summary of Second Quarter 2021 Results

Net revenue of $828 million increased 22.7% compared with the second quarter of 2020. Foreign currency exchange rates favorably impacted revenue by 3.9%. Organic revenue, which excludes impacts from foreign currency translation, increased 18.8% versus last year, with organic growth in all three Global Business Units (GBUs) including strong, double-digit growth in Engineering Adhesives and Construction Adhesives. Organic revenue also significantly increased by 9.5% when compared with the non-COVID impacted second quarter of 2019, with strong organic growth in all three GBUs.

 

1
 

 

Gross profit was $218 million. Adjusted gross profit of $219 million increased 18% versus the same period last year. Adjusted gross profit margin declined by 120 basis points year over year as higher sales volume and pricing gains were offset by higher raw material costs. Selling, General and Administrative (SG&A) expense was $148 million. Adjusted SG&A expense of $142 million improved by 130 basis points as a percent of revenue versus the second quarter last year, resulting from strong volume leverage and savings related to the business reorganization to our three GBUs.

 

As a result of these factors, net income attributable to H.B. Fuller in the quarter was $49 million, or $0.90 per diluted share. Adjusted net income attributable to H.B. Fuller of $51 million and adjusted EPS of $0.94 increased by 45% and 38%, respectively, compared with $35 million and $0.68 in the same period last year. Adjusted EBITDA of $122 million increased 21% compared with $101 million in the prior year.

 

“H.B. Fuller did an outstanding job supporting customers during the quarter, and we delivered another quarter of strong sales and earnings growth,” said Jim Owens, H.B. Fuller president and chief executive officer. “Despite considerable raw material and packaging shortages, H.B. Fuller was able to meet a sizeable increase in demand by leveraging our extensive global network and partnering with customers and suppliers. Raw material costs increased substantially in the second quarter, exacerbated by shortages and impacts from Storm Uri earlier this year. We have implemented significant price adjustments and delivered efficiencies through our streamlined global business unit structure and operational excellence programs. These actions are enabling us to seamlessly serve our customers, achieve our profit targets, and increase our debt paydown over last year’s level, in line with our target for $200 million of debt reduction in 2021. Our effective sourcing strategies, market-driven innovation and operational agility are supporting H.B. Fuller’s profitable business growth in the current supply-constrained environment. We continue to demonstrate the resiliency of our business, and our ability to grow, gain share and deliver value for shareholders.”

 

Other Financial Metrics

At the end of the second quarter of fiscal 2021, the company had cash and equivalents of $70 million and total debt equal to $1,712 million. This compares to cash and debt levels equal to $70 million and $1,928 million, respectively, at the end of the second quarter of 2020. Capital expenditures for the six-month period were $51 million compared with $55 million in the same period last year.

 

2
 

 

2021 Planning Assumptions

■

Based on current assumptions, full year 2021 revenue growth is anticipated to be in the low double-digits versus 2020.

■

The company expects raw material cost increases to exceed 10% on a full year basis versus 2020, with the most significant margin head winds expected in the third quarter. The company has implemented annualized price adjustments of $150 million effective March 1 through July 15 and is planning additional increases of $75 million in August and September to offset higher raw material costs. The company is prepared to implement further increases as necessary.

■

Given these assumptions, the company’s prior outlook for full year adjusted EBITDA in the range of $455 million to $475 million remains unchanged. This reflects adjusted EBTIDA growth of 12% to 17% versus 2020, which is supported by share gains, on-going recovery in global industrial production, pricing actions balancing higher input costs, and benefits from the company’s operational improvement projects.

 

Conference Call

The company will hold a conference call on June 24, 2021, at 9:30 a.m. CDT (10:30 a.m. EDT) to discuss its results. Interested parties may listen to the conference call on a live webcast. The webcast, along with a supplemental presentation, may be accessed from the company’s website at https://investors.hbfuller.com. Participants should access the webcast 10 minutes prior to the start of the call to install and test any necessary audio software. A telephone replay of the conference call will be available from 12:30 p.m. CDT on June 24, 2021 through July 1, 2021. To access the telephone replay dial (800) 585-8367 or (416) 621-4642 and enter Conference ID: 9378807.

 

Regulation G

The information presented in this earnings release regarding consolidated and segment organic revenue growth, 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 U.S. generally accepted accounting principles (U.S. GAAP) and should not be construed as an alternative to the reported results determined in accordance with U.S. 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 U.S. GAAP results in the “Regulation G Reconciliation” tables in this press release with the exception of our forward-looking non-GAAP measures contained above in our fiscal 2021 Planning Assumptions, which the company cannot reconcile to forward-looking GAAP results without unreasonable effort.

 

3
 

 

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 2020 net revenue of $2.8 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 federal securities laws, including Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements often address expected future business and financial performance, financial condition, and other matters, and often contain words or phrases such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “opportunity,” “outlook,” “plan,” “project,” “seek,” “should,” “strategy,” "target," “will,” “will be,” “will continue,” “will likely result,” “would” and similar expressions, and variations or negatives of these words or phrases. These statements are subject to various risks and uncertainties that could cause our actual results to differ materially from those in the forward-looking statements, including but not limited to the following: the consequences of the COVID-19 outbreak and other pandemics on our operations and financial results; the substantial amount of debt we have incurred to finance our acquisition of Royal, our ability to repay or refinance our debt or to 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, the effect of debt covenants that limit the discretion of management in operating the business or in paying dividends; our ability to pay dividends and to pursue growth opportunities if we continue to pay dividends according to the current dividend policy; our ability to achieve expected synergies, cost savings and operating efficiencies from our restructuring initiatives and operational improvement projects within the expected time frames or at all; our ability to effectively implement Project ONE; uncertain political and economic conditions; fluctuations in product demand; competing products and pricing; our geographic and product mix; availability and price of raw materials; disruptions to our relationships with our major customers and suppliers; failures in our information technology systems; regulatory compliance across our global footprint; trade policies and economic sanctions impacting our markets; changes in tax laws and tariffs; devaluations and other foreign exchange rate fluctuations; the impact of litigation and investigations, including for product liability and environmental matters; impairment charges on our goodwill or long-lived assets; the effect of new accounting pronouncements and accounting charges and credits; and similar matters. Many of the foregoing risks and uncertainties are, and will be, exacerbated by COVID-19 and resulting deterioration of the global business and economic environment.

 

Additional information about these various risks and uncertainties can be found in the “Risk Factors” section of our Form 10-K filings, and any updates to the risk factors in our Form 10-Q and 8-K filings with the SEC, but there may be other risks and uncertainties that we are unable to identify at this time or that we do not currently expect to have a material impact on the business. You should not place undue reliance on forward-looking statements, which speak only as of the date they are made. We do not undertake to update or revise any forward-looking statements, except as required by law.

 

4
 

 

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

  
   

May 29, 2021

    

Net Revenue

    

May 30, 2020

    

Net Revenue

  

Net revenue

   $ 827,873       100.0%

 

   $ 674,602       100.0%

 

Cost of sales

     (610,323

)

     (73.7%

)

     (489,701

)

     (72.6%

)

Gross profit

     217,550       26.3%

 

     184,901       27.4%

 
                                 

Selling, general and administrative expenses

     (148,409

)

     (17.9%

)

     (127,998

)

     (19.0%

)

Other income, net

     11,879       1.4%

 

     3,049       0.5%

 

Interest expense

     (19,942

)

     (2.4%

)

     (21,644

)

     (3.2%

)

Interest income

     2,530       0.3%

 

     2,898       0.4%

 

Income before income taxes and income from equity method investments

     63,608       7.7%

 

     41,206       6.1%

 
                                 

Income taxes

     (16,660

)

     (2.0%

)

     (11,471

)

     (1.7%

)
                                 

Income from equity method investments

     2,176       0.3%

 

     1,893       0.3%

 

Net income including non-controlling interest

     49,124       5.9%

 

     31,628       4.7%

 
                                 

Net income attributable to non-controlling interest

     (22

)

     (0.0%

)

     (15

)

     (0.0%

)

Net income attributable to H.B. Fuller

   $ 49,102       5.9%

 

   $ 31,613       4.7%

 
                                 

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

   $ 0.93             $ 0.61          

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

   $ 0.90             $ 0.61          
                                 

Weighted-average common shares outstanding:

                                

Basic

     52,839               51,420          

Diluted

     54,294               52,029          
                                 

Dividends declared per common share

   $ 0.168             $ 0.163          

 

 

 

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

 

   

May 29, 2021

    

November 28, 2020

    

May 30, 2020

  

Cash & cash equivalents

   $ 69,597     $ 100,534     $ 70,346  

Trade accounts receivable, net

     583,270       514,916       448,126  

Inventories

     427,835       323,213       388,698  

Trade payables

     433,515       316,460       319,616  

Total assets

     4,266,927       4,036,704       3,979,060  

Total debt

     1,712,410       1,773,910       1,928,055  

 

5
 

 

H.B. FULLER COMPANY AND SUBSIDIARIES

CONSOLIDATED FINANCIAL INFORMATION

In thousands, except per share amounts (unaudited)

 

   

Six Months

Ended

    

Percent of

    

Six Months

Ended

    

Percent of

  
   

May 29, 2021

    

Net Revenue

    

May 30, 2020

    

Net Revenue

  

Net revenue

   $ 1,553,777       100.0%

 

   $ 1,321,166       100.0%

 

Cost of sales

     (1,143,863

)

     (73.6%

)

     (966,003

)

     (73.1%

)

Gross profit

     409,914       26.4%

 

     355,163       26.9%

 
                                 

Selling, general and administrative expenses

     (292,423

)

     (18.8%

)

     (269,507

)

     (20.4%

)
                                 

Other income, net

     19,748       1.3%

 

     8,018       0.6%

 

Interest expense

     (40,303

)

     (2.6%

)

     (44,401

)

     (3.4%

)

Interest income

     5,189       0.3%

 

     5,816       0.4%

 

Income before income taxes and income from equity method investments

     102,125       6.6%

 

     55,089       4.2%

 
                                 

Income taxes

     (27,267

)

     (1.8%

)

     (17,082

)

     (1.3%

)
                                 

Income from equity method investments

     4,072       0.3%

 

     3,527       0.3%

 

Net income including non-controlling interest

     78,930       5.1%

 

     41,534       3.1%

 
                                 

Net income attributable to non-controlling interest

     (37

)

     (0.0%

)

     (26

)

     (0.0%

)

Net income attributable to H.B. Fuller

   $ 78,893       5.1%

 

   $ 41,508       3.1%

 
                                 
                                 

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

   $ 1.50             $ 0.80          

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

   $ 1.47             $ 0.79          
                                 

Weighted-average common shares outstanding:

                                

Basic

     52,666               51,874          

Diluted

     53,817               52,305          
                                 

Dividends declared per common share

   $ 0.330             $ 0.323          

 

6
 

 

H.B. FULLER COMPANY AND SUBSIDIARIES

REGULATION G RECONCILIATION

In thousands, except per share amounts (unaudited)

 

   

Three Months Ended

    

Six Months Ended

  
   

May 29,

    

May 30,

    

May 29,

    

May 30,

  
   

2021

    

2020

    

2021

    

2020

  
                                 

Net income attributable to H.B. Fuller

   $ 49,102     $ 31,613     $ 78,893     $ 41,508  
                                 

Adjustments:

                                

Acquisition project costs

     1,302       (1,725

)

     1,376       (1,512

)

Organizational realignment 1

     2,307       2,113       5,942       4,978  

Royal restructuring and integration 2

     1,239       2,603       2,521       5,589  

Project One

     1,959       1,165       4,164       2,540  

Other 3

     (3,857

)

     598       (3,812

)

     1,036  

Discrete tax items

     (600

)

     45       (558

)

     1,959  

Income tax effect on adjustments 4

     (594

)

     (1,266

)

     (2,613

)

     (3,162

)

Adjusted net income attributable to H.B. Fuller 5

     50,858       35,146       85,913       52,936  
                                 

Add:

                                

Interest expense

     19,965       21,670       40,357       44,431  

Interest income

     (2,530

)

     (2,898

)

     (5,189

)

     (5,816

)

Income taxes

     17,854       12,692       30,437       18,284  

Depreciation and Amortization expense 6

     35,389       34,009       70,891       68,561  

Adjusted EBITDA 5

     121,536       100,619       222,409       178,396  
                                 

Diluted Shares

     54,294       52,029       53,817       52,305  

Adjusted diluted income per common share attributable to

H.B. Fuller 5

   $ 0.94     $ 0.68     $ 1.60     $ 1.01  

Revenue

   $ 827,873     $ 674,602     $ 1,553,777     $ 1,321,166  

Adjusted EBITDA margin 5

     14.7

%

     14.9

%

     14.3

%

     13.5

%

 

1 Includes costs incurred as a direct result of the organizational realignment program, including compensation for employees supporting the program, consulting expense and operational inefficiencies related to the closure of production facilities and consolidation of business activities.
 

2 Costs incurred as a direct result of the Royal restructuring and integration program including compensation for employees supporting the program, consulting expense and operational inefficiencies related to the closure of production facilities and consolidation of business activities.

 

3 Three and six months ended May 29, 2021 includes one-time, non-cash gains related to a transactional tax legal settlement in Brazil and a legal entity merger.
 

4 The income tax effect on adjustments represents the difference between income taxes on net income before income taxes and income from equity method investments reported in accordance with U.S. GAAP and adjusted net income before income taxes and income from equity method investments.
 

5 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 U.S. GAAP.
 

6 Depreciation and amortization expense added back for EBITDA is adjusted for amounts already included in Adjusted net income attributable to H.B. Fuller totaling ($507) and ($63) for the three months ended May 29, 2021 and May 30, 2020, respectively and ($734) and ($96) for the six months ended May 29, 2021 and May 30, 2020, respectively.

 

7
 

 

H.B. FULLER COMPANY AND SUBSIDIARIES

SEGMENT FINANCIAL INFORMATION

In thousands (unaudited)

 

   

Three Months Ended

    

Six Months Ended

  
   

May 29,

    

May 30,

    

May 29,

    

May 30,

  
   

2021

    

2020

    

2021

    

2020

  

Net Revenue:

                                

Hygiene, Health and Consumable Adhesives

   $ 364,814     $ 344,673     $ 700,482     $ 657,185  

Engineering Adhesives

     345,373       236,063       658,037       484,958  

Construction Adhesives

     117,686       93,866       195,258       179,023  

Corporate unallocated

     -       -       -       -  

Total H.B. Fuller

   $ 827,873     $ 674,602     $ 1,553,777     $ 1,321,166  
                                 

Segment Operating Income:

                                

Hygiene, Health and Consumable Adhesives

   $ 38,929     $ 35,009     $ 68,840     $ 57,673  

Engineering Adhesives

     32,075       20,149       62,493       35,514  

Construction Adhesives

     6,338       6,527       1,635       5,152  

Corporate unallocated

     (8,201

)

     (4,782

)

     (15,477

)

     (12,683

)

Total H.B. Fuller

   $ 69,141     $ 56,903     $ 117,491     $ 85,656  
                                 

Adjusted EBITDA 5

                                

Hygiene, Health and Consumable Adhesives

   $ 53,569     $ 48,321     $ 98,175     $ 84,217  

Engineering Adhesives

     49,864       35,172       98,032       66,087  

Construction Adhesives

     17,252       16,626       23,539       25,499  

Corporate unallocated

     851       500       2,663       2,593  

Total H.B. Fuller

   $ 121,536     $ 100,619     $ 222,409     $ 178,396  
                                 

Adjusted EBITDA Margin 5

                                

Hygiene, Health and Consumable Adhesives

     14.7%

 

     14.0%

 

     14.0%

 

     12.8%

 

Engineering Adhesives

     14.4%

 

     14.9%

 

     14.9%

 

     13.6%

 

Construction Adhesives

     14.7%

 

     17.7%

 

     12.1%

 

     14.2%

 

Corporate unallocated

  

NMP

    

NMP

    

NMP

    

NMP

  

Total H.B. Fuller

     14.7%

 

     14.9%

 

     14.3%

 

     13.5%

 
                                 

NMP = non-meaningful percentage

                                

 

8
 

 

H.B. FULLER COMPANY AND SUBSIDIARIES

REGULATION G RECONCILIATION

In thousands, except per share amounts (unaudited)

 

   

Three Months Ended

    

Six Months Ended

  
   

May 29,

    

May 30,

    

May 29,

    

May 30,

  
   

2021

    

2020

    

2021

    

2020

  

Income before income taxes and income from equity method investments

   $ 63,608     $ 41,206     $ 102,125     $ 55,089  
                                 

Adjustments:

                                

Acquisition project costs

     1,302       (1,725

)

     1,376       (1,512

)

Organizational realignment

     2,307       2,113       5,942       4,978  

Royal restructuring and integration

     1,239       2,603       2,521       5,589  

Project One

     1,959       1,165       4,164       2,540  

Other 3

     (3,857

)

     598       (3,812

)

     1,036  

Adjusted income before income taxes and income from equity method investments 7

   $ 66,558     $ 45,960     $ 112,316     $ 67,720  

 

7 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 U.S. GAAP.

 

 

 

H.B. FULLER COMPANY AND SUBSIDIARIES

REGULATION G RECONCILIATION

In thousands, except per share amounts (unaudited)
 
   

Three Months Ended

    

Six Months Ended

  
   

May 29,

    

May 30,

    

May 29,

    

May 30,

  
   

2021

    

2020

    

2021

    

2020

  

Income Taxes

   $ (16,660

)

   $ (11,471

)

   $ (27,267

)

   $ (17,082

)
                                 

Adjustments:

                                

Acquisition project costs

     (262

)

     459       (283

)

     514  

Organizational realignment

     (465

)

     (562

)

     (1,478

)

     177  

Royal restructuring and integration

     (249

)

     (693

)

     (606

)

     71  

Project One

     (395

)

     (310

)

     (1,009

)

     42  

Other

     177       (115

)

     206       (2,006

)

Adjusted income taxes 8

   $ (17,854

)

   $ (12,692

)

   $ (30,437

)

   $ (18,284

)
                                 

Adjusted income before income taxes and income from equity method investments

   $ 66,558     $ 45,960     $ 112,316     $ 67,720  

Adjusted effective income tax rate 8

     26.8

%

     27.6

%

     27.1

%

     27.0

%

 

8 Adjusted income taxes and adjusted effective income tax rate are non-GAAP financial measures. Adjusted income taxes are 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 U.S. GAAP.

 

9
 

 

H.B. FULLER COMPANY AND SUBSIDIARIES

REGULATION G RECONCILIATION

In thousands (unaudited)

 

   

Three Months Ended

    

Six Months Ended

  
   

May 29,

    

May 30,

    

May 29,

    

May 30,

  
   

2021

    

2020

    

2021

    

2020

  
                                 

Net revenue

   $ 827,873     $ 674,602     $ 1,553,777     $ 1,321,166  
                                 

Gross profit

   $ 217,550     $ 184,901     $ 409,914     $ 355,163  

Gross profit margin

     26.3

%

     27.4

%

     26.4

%

     26.9

%
                                 

Adjustments:

                                

Acquisition project costs

     63       -       63       -  

Organizational realignment

     544       70       793       151  

Royal restructuring and integration

     578       697       1,319       1,598  

Project ONE

     (725

)

     -       -       -  

Other

     1,378       981       1,386       991  

Adjusted gross profit 9

   $ 219,388     $ 186,649     $ 413,475     $ 357,903  

Adjusted gross profit margin 9

     26.5

%

     27.7

%

     26.6

%

     27.1

%

 

9 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 U.S. GAAP.

 

 

 

H.B. FULLER COMPANY AND SUBSIDIARIES

REGULATION G RECONCILIATION

In thousands (unaudited)
 

 

   

Three Months Ended

    

Six Months Ended

  
   

May 29,

    

May 30,

    

May 29,

    

May 30,

  
   

2021

    

2020

    

2021

    

2020

  
                                 

Selling, general and administrative expenses

   $ (148,409

)

   $ (127,998

)

   $ (292,423

)

   $ (269,507

)
                                 

Adjustments:

                                

Acquisition project costs

     1,239       (1,725

)

     1,313       (1,512

)

Organizational realignment

     1,818       2,042       5,205       4,826  

Royal restructuring and integration

     683       1,932       1,255       4,043  

Project ONE

     2,684       1,166       4,164       2,541  

Other

     (59

)

     (382

)

     (23

)

     45  

Adjusted selling, general and administrative expenses 10

   $ (142,044

)

   $ (124,965

)

   $ (280,509

)

   $ (259,564

)

 

10 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 U.S. GAAP.

 

10
 

 

H.B. FULLER COMPANY AND SUBSIDIARIES

REGULATION G RECONCILIATION

In thousands (unaudited)
 
   

Hygiene, Health

                                          

Three Months Ended:

  

and Consumable

    

Engineering

    

Construction

            

Corporate

    

H.B. Fuller

  

May 29, 2021

  

Adhesives

    

Adhesives

    

Adhesives

    

Total

    

Unallocated

    

Consolidated

  

Net income attributable to H.B. Fuller

   $ 42,197     $ 34,584     $ 8,515     $ 85,296     $ (36,194

)

   $ 49,102  

Adjustments:

                                                

Acquisition project costs

     -       -       -       -       1,302       1,302  

Organizational realignment

     -       -       -       -       2,307       2,307  

Royal Restructuring

     -       -       -       -       1,239       1,239  

Project One

     -       -       -       -       1,959       1,959  

Other 3

     -       -       -       -       (3,857

)

     (3,857

)

Discrete tax items

     -       -       -       -       (600

)

     (600

)

Income tax effect on adjustments 4

     -       -       -       -       (594

)

     (594

)

Adjusted net income attributable to H.B. Fuller 5

     42,197       34,584       8,515       85,296       (34,438

)

     50,858  

Add:

                                                

Interest expense

     -       -       -       -       19,965       19,965  

Interest income

     -       -       -       -       (2,530

)

     (2,530

)

Income taxes

     -       -       -       -       17,854       17,854  

Depreciation and amortization expense

     11,372       15,280       8,737       35,389       -       35,389  

Adjusted EBITDA 5

   $ 53,569     $ 49,864     $ 17,252     $ 120,685     $ 851     $ 121,536  

Revenue

   $ 364,814     $ 345,373     $ 117,686     $ 827,873       -     $ 827,873  

Adjusted EBITDA Margin 5

     14.7

%

     14.4

%

     14.7

%

     14.6

%

  

NMP

       14.7

%

 

 

   

Hygiene,

Health

                                          

Six Months Ended:

  

and

Consumable

    

Engineering

    

Construction

            

Corporate

    

H.B. Fuller

  

May 29, 2021

  

Adhesives

    

Adhesives

    

Adhesives

    

Total

    

Unallocated

    

Consolidated

  

Net income attributable to H.B. Fuller

   $ 75,367     $ 67,500     $ 5,988     $ 148,855     $ (69,962

)

   $ 78,893  

Adjustments:

                                                

Acquisition project costs

     -       -       -       -       1,376       1,376  

Organizational realignment

     -       -       -       -       5,942       5,942  

Royal Restructuring

     -       -       -       -       2,521       2,521  

Project One

     -       -       -       -       4,164       4,164  

Other 3

     -       -       -       -       (3,812

)

     (3,812

)

Discrete tax items

     -       -       -       -       (558

)

     (558

)

Income tax effect on adjustments 4

     -       -       -       -       (2,613

)

     (2,613

)

Adjusted net income attributable to H.B. Fuller 5

     75,367       67,500       5,988       148,855       (62,942

)

     85,913  

Add:

                                                

Interest expense

     -       -       -       -       40,357       40,357  

Interest income

     -       -       -       -       (5,189

)

     (5,189

)

Income taxes

     -       -       -       -       30,437       30,437  

Depreciation and amortization expense

     22,808       30,532       17,551       70,891       -       70,891  

Adjusted EBITDA 5

   $ 98,175     $ 98,032     $ 23,539     $ 219,746     $ 2,663     $ 222,409  

Revenue

     700,482       658,037       195,258       1,553,777       -       1,553,777  

Adjusted EBITDA Margin 5

     14.0

%

     14.9

%

     12.1

%

     14.1

%

  

NMP

       14.3

%

 

Note: Adjusted EBITDA is a non-GAAP financial measure. The table above provides 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.

 

NMP = Non-meaningful percentage

 

11
 

 

H.B. FULLER COMPANY AND SUBSIDIARIES

REGULATION G RECONCILIATION

In thousands (unaudited)

 

   

Hygiene, Health

                                          

Three Months Ended:

  

and Consumable

    

Engineering

    

Construction

            

Corporate

    

H.B. Fuller

  

May 30, 2020

  

Adhesives

    

Adhesives

    

Adhesives

    

Total

    

Unallocated

    

Consolidated

  

Net income attributable to H.B. Fuller

   $ 36,804     $ 21,598     $ 7,708     $ 66,110     $ (34,497

)

   $ 31,613  

Adjustments:

                                                

Acquisition project costs

     -       -       -       -       (1,725

)

     (1,725

)

Organizational realignment

     -       -       -       -       2,113       2,113  

Royal Restructuring

     -       -       -       -       2,603       2,603  

Project One

     -       -       -       -       1,165       1,165  

Other

     -       -       -       -       598       598  

Discrete tax items

     -       -       -       -       45       45  

Income tax effect on adjustments 4

     -       -       -       -       (1,266

)

     (1,266

)

Adjusted net income attributable to H.B. Fuller 5

     36,804       21,598       7,708       66,110       (30,964

)

     35,146  

Add:

                                                

Interest expense

     -       -       -       -       21,670       21,670  

Interest income

     -       -       -       -       (2,898

)

     (2,898

)

Income taxes

     -       -       -       -       12,692       12,692  

Depreciation and amortization expense

     11,517       13,574       8,918       34,009       -       34,009  

Adjusted EBITDA 5

   $ 48,321     $ 35,172     $ 16,626     $ 100,119     $ 500     $ 100,619  

Revenue

   $ 344,673     $ 236,063     $ 93,866     $ 674,602       -     $ 674,602  

Adjusted EBITDA Margin 5

     14.0

%

     14.9

%

     17.7

%

     14.8

%

  

NMP

       14.9

%

 

 

   

Hygiene,

Health

                                          

Six Months Ended:

  

and 

Consumable

    

Engineering

     Construction            

Corporate

    

H.B. Fuller

  

May 30, 2020

  

Adhesives

    

Adhesives

     Adhesives     Total    

Unallocated

    

Consolidated

  

Net income attributable to H.B. Fuller

   $ 61,291     $ 38,433     $ 7,518     $ 107,242     $ (65,734

)

   $ 41,508  

Adjustments:

                                                

Acquisition project costs

     -       -       -       -       (1,512

)

     (1,512

)

Organizational realignment

     -       -       -       -       4,978       4,978  

Royal Restructuring

     -       -       -       -       5,589       5,589  

Project One

     -       -       -       -       2,540       2,540  

Other

     -       -       -       -       1,036       1,036  

Discrete tax items

     -       -       -       -       1,959       1,959  

Income tax effect on adjustments 4

     -       -       -       -       (3,162

)

     (3,162

)

Adjusted net income attributable to H.B. Fuller 5

     61,291       38,433       7,518       107,242       (54,306

)

     52,936  

Add:

                                                

Interest expense

     -       -       -       -       44,431       44,431  

Interest income

     -       -       -       -       (5,816

)

     (5,816

)

Income taxes

     -       -       -       -       18,284       18,284  

Depreciation and amortization expense

     22,926       27,654       17,981       68,561       -       68,561  

Adjusted EBITDA 5

   $ 84,217     $ 66,087     $ 25,499     $ 175,803     $ 2,593     $ 178,396  

Revenue

   $ 657,185     $ 484,958     $ 179,023     $ 1,321,166       -     $ 1,321,166  

Adjusted EBITDA Margin 5

     12.8

%

     13.6

%

     14.2

%

     13.3

%

  

NMP

       13.5

%

 

Note: Adjusted EBITDA is a non-GAAP financial measure. The table above provides 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.

 

NMP = Non-meaningful percentage

 

12
 

 

H.B. FULLER COMPANY AND SUBSIDIARIES

SEGMENT FINANCIAL INFORMATION

NET REVENUE GROWTH (DECLINE)

(unaudited)

 

   

Three Months

Ended

    

Six Months

Ended

  
   

May 29, 2021

    

May 29, 2021

  

Price

     1.4%

 

     0.7%

 

Volume

     17.4%

 

     14.0%

 

Organic Growth (Decline)11

     18.8%

 

     14.7%

 

M&A

     0.0%

 

     0.0%

 

F/X

     3.9%

 

     2.8%

 

Total H.B. Fuller Net Revenue Growth (Decline)

     22.7%

 

     17.5%

 

 

 

Revenue growth versus 2020

  

Three Months Ended

    

Six Months Ended

  
   

May 29, 2021

    

May 29, 2021

  
                                                 
   

Net

Revenue

    

F/X and

M&A

    

Organic

Growth11

    

Net

Revenue

    

F/X and

M&A

    

Organic

Growth11

  

Hygiene, Health and Consumable Adhesives

     5.8%

 

     2.5%

 

     3.3%

 

     6.6%

 

     1.2%

 

     5.4%

 

Engineering Adhesives

     46.3%

 

     6.6%

 

     39.7%

 

     35.7%

 

     5.5%

 

     30.2%

 

Construction Adhesives

     25.4%

 

     2.2%

 

     23.2%

 

     9.1%

 

     1.7%

 

     7.4%

 

Total H.B. Fuller

     22.7%

 

     3.9%

 

     18.8%

 

     17.5%

 

     2.8%

 

     14.7%

 

 

 

Revenue growth versus 2019

  

Three Months Ended

  
   

May 29, 2021

  
                   

 

  
   

Net

Revenue

    

F/X and

M&A

    

Organic

Growth11

  

Hygiene, Health and Consumable Adhesives

     8.0%

 

     (2.3%

)

     10.3%

 

Engineering Adhesives

     13.6%

 

     2.9%

 

     10.7%

 

Construction Adhesives

     5.3%

 

     1.1%

 

     4.2%

 

Total H.B. Fuller

     9.0%

 

     (0.5%

)

     9.5%

 

 

11 We use the term “organic revenue” to refer to net revenue, excluding the effect of foreign currency changes and acquisitions and divestitures. Organic growth reflects adjustments for the impact of period-over-period changes in foreign currency exchange rates on revenues and the revenues associated with acquisitions and divestitures.

 

13
 

 

H.B. FULLER COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

In thousands, except share and per share amounts (unaudited)

 

   

May 29,

    

November 28,

  
   

2021

    

2020

  

Assets

                

Current assets:

                

Cash and cash equivalents

   $ 69,597     $ 100,534  

Trade receivables (net of allowances of $11,486 and $12,905, as of May 29, 2021 and November 28, 2020, respectively)

     583,270       514,916  

Inventories

     427,835       323,213  

Other current assets

     86,242       81,113  

Total current assets

     1,166,944       1,019,776  
                 

Property, plant and equipment

     1,476,601       1,428,183  

Accumulated depreciation

     (795,025

)

     (757,439

)

Property, plant and equipment, net

     681,576       670,744  
                 

Goodwill

     1,330,535       1,312,003  

Other intangibles, net

     732,760       755,968  

Other assets

     355,112       278,213  

Total assets

   $ 4,266,927     $ 4,036,704  
                 

Liabilities, non-controlling interest and total equity

                

Current liabilities:

                

Notes payable

   $ 26,857     $ 16,925  

Trade payables

     433,515       316,460  

Accrued compensation

     75,902       83,598  

Income taxes payable

     28,074       29,173  

Other accrued expenses

     87,324       83,976  

Total current liabilities

     651,672       530,132  
                 

Long-term debt

     1,685,553       1,756,985  

Accrued pension liabilities

     89,145       88,806  

Other liabilities

     277,345       278,919  

Total liabilities

     2,703,715       2,654,842  
                 

Equity:

                

H.B. Fuller stockholders' equity:

                

Preferred stock (no shares outstanding) shares authorized – 10,045,900

     -       -  

Common stock, par value $1.00 per share, shares authorized – 160,000,000, shares outstanding – 52,499,414 and 51,906,663, as of May 29, 2021 and November 28, 2020, respectively

     52,499       51,907  

Additional paid-in capital

     190,243       157,867  

Retained earnings

     1,535,887       1,474,406  

Accumulated other comprehensive loss

     (215,997

)

     (302,859

)

Total H.B. Fuller stockholders' equity

     1,562,632       1,381,321  

Non-controlling interest

     580       541  

Total equity

     1,563,212       1,381,862  

Total liabilities, non-controlling interest and total equity

   $ 4,266,927     $ 4,036,704  

 

14
 

 

H.B. FULLER COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

In thousands (unaudited)

 

   

Six Months Ended

  
   

May 29, 2021

    

May 30, 2020

  

Cash flows from operating activities:

                

Net income including non-controlling interest

   $ 78,930     $ 41,534  

Adjustments to reconcile net income including non-controlling interest to net cash provided by operating activities:

                

Depreciation

     35,976       33,198  

Amortization

     35,649       35,458  

Deferred income taxes

     (1,167

)

     (10,412

)

Income from equity method investments, net of dividends received

     (4,072

)

     (3,527

)

Share-based compensation

     12,486       9,236  

Pension and other post-retirement benefit plan activity

     (15,927

)

     (2,993

)

Change in assets and liabilities, net of effects of acquisitions:

                

Trade receivables, net

     (43,191 )     33,867  

Inventories

     (100,358

)

     (59,232

)

Other assets

     (21,709

)

     (13,070

)

Trade payables

     115,488       42,182  

Accrued compensation

     (8,760

)

     (21,587

)

Other accrued expenses

     1,925       8,981  

Income taxes payable

     (1,513 )     (2,728

)

Other liabilities

     (28,980

)

     24,705  

Other

     25,055       (7,199

)

Net cash provided by operating activities

     79,832       108,413  
                 

Cash flows from investing activities:

                

Purchased property, plant and equipment

     (50,726

)

     (54,533

)

Purchased businesses, net of cash acquired

     (5,445

)

     (9,500

)

Purchase of assets

     -       (3,998

)

Proceeds from sale of property, plant and equipment

     1,237       1,416  

Cash payments related to government grant

     (1,526

)

     (2,331

)

Net cash used in investing activities

     (56,460

)

     (68,946

)
                 

Cash flows from financing activities:

                

Repayment of long-term debt

     (68,000

)

     (67,000

)

Net (payments) proceeds of notes payable

     9,335       6,994  

Dividends paid

     (17,244

)

     (16,577

)

Proceeds from stock options exercised

     20,621       1,557  

Repurchases of common stock

     (2,628

)

     (3,246

)

Net cash used in financing activities

     (57,916

)

     (78,272

)
                 

Effect of exchange rate changes on cash and cash equivalents

     3,607       (3,040

)

Net change in cash and cash equivalents

     (30,937

)

     (41,845

)

Cash and cash equivalents at beginning of period

     100,534       112,191  

Cash and cash equivalents at end of period

   $ 69,597     $ 70,346  

 

15