H.B. Fuller Reports Fourth Quarter and Fiscal Year 2022 Results

Rhea-AI Summary

H.B. Fuller Company (NYSE: FUL) reported strong financial results for fiscal year 2022, with net revenue increasing by 14% to $3.75 billion, and adjusted EPS rising 15% to $4.00 per share. Despite challenges, including unfavorable foreign currency impacts reducing adjusted EPS by approximately 16%, the company experienced significant growth in adjusted EBITDA, reaching $530 million. For Q4 2022, net revenue was $958 million, a 7% year-on-year increase. However, the fourth quarter also reflected a slowdown in demand for Construction Adhesives and losses due to inflation and currency translation. The fiscal 2023 outlook predicts adjusted EBITDA of $580 million to $610 million and flat to a 3% revenue decline.

Positive

• Net revenue for fiscal year 2022 increased by 14% to $3.75 billion.
• Adjusted EPS rose to $4.00, up 15% compared to the previous year.
• Adjusted EBITDA grew by 14% to $530 million, supported by strong pricing execution.
• Cash flow from operations increased by 20% to $257 million.

Negative

• Unfavorable foreign currency exchange reduced adjusted EPS by approximately $0.56, or 16%.
• Q4 2022 saw a significant slowdown in demand for Construction Adhesives.
• Adjusted EPS in Q4 2022 was down slightly year-on-year due to raw material inflation and higher interest expenses.

ST. PAUL, Minn.--(BUSINESS WIRE)-- H.B. Fuller Company (NYSE: FUL) today reported financial results for its fourth quarter and fiscal year that ended December 3, 2022.

Fiscal Year 2022 Noteworthy Items:

• Net revenue of $3.75 billion, up 14% versus fiscal year 2021; organic revenue up 17% year-on-year, driven by responsibly strong pricing execution;
• Net income of $180 million or $3.26 per share (diluted); adjusted EPS of $4.00 per share (diluted), up 15% year-on-year; unfavorable foreign currency exchange reduced adjusted EPS by approximately $0.56, or 16% versus the prior year;
• Adjusted EBITDA of $530 million, up 14% year-on-year on pricing gains and strong execution, more than overcoming significant year-on-year raw material inflation and unfavorable foreign currency impacts;
• Cash flow from operations of $257 million, up 20% year-on-year;
• As a reminder, there was one additional reporting week in fiscal year 2022, which positively impacted net revenue and adjusted EBITDA growth versus 2021 by approximately 2% for the year and 7.5% for the fourth quarter; the definition of organic growth excludes the impact of the extra week.

Fourth Quarter 2022 Noteworthy Items:

• Net revenue of $958 million, up 7% year-on-year; organic revenue increased 6% year-on-year, driven by strong organic growth in both Hygiene, Health, and Consumable and Engineering Adhesives and solid pricing execution in all three GBUs;
• Net Income was $48 million; adjusted EBITDA of $141 million was up 5% year-on-year and adjusted EBITDA margin was 14.7%;
• Reported EPS (diluted) was $0.87; adjusted EPS (diluted) was $1.04, down slightly versus the prior year due to raw material inflation, higher interest expense and unfavorable foreign currency exchange impacts; unfavorable foreign currency exchange reduced adjusted EPS in the quarter by approximately $0.22, or 20% versus the prior year;
• Net working capital, as a percentage of annualized net revenue, decreased 100 basis points sequentially from 18.9% in the third quarter to 17.9% in the fourth quarter;
• Net debt-to-adjusted EBITDA ratio declined sequentially from 3.6X to 3.2X driven by improved cash flow from operations and growth in adjusted EBITDA.

Fiscal Year 2022 Summary:

Net revenue for fiscal year 2022 was $3.75 billion, up 14% versus fiscal year 2021. Organic revenue was up 17% year-on-year, with volume up 1% and the rest of the increase driven by higher year-on-year pricing. Unfavorable foreign currency exchange rates reduced net revenue growth by 5.8 percentage points, acquisitions increased net revenue growth by 1.6 percentage points, and the extra week in the fiscal year increased net revenue growth by 2.0 percentage points.

Net income attributable to H.B. Fuller for fiscal 2022 was $180 million, or $3.26 per diluted share. Adjusted net income attributable to H.B. Fuller was $221 million, or $4.00 per diluted share, up 15% compared to $3.47 per diluted share, in fiscal year 2021. Adjusted EBITDA for fiscal year 2022 was $530 million, up 14% versus adjusted EBITDA of $467 million in fiscal year 2021.

Summary of Fourth Quarter 2022 Results:

Net revenue for the fourth quarter of fiscal 2022 was $958 million, up 7% versus the fourth quarter of fiscal 2021. Organic revenue was up 6.4% year-on-year, as strong pricing actions increased revenue by 11.4% and volume was down 5.0% due to a slowdown in end market demand, particularly in Construction Adhesives, and softness in China due to more severe COVID-related lockdowns. Unfavorable foreign currency exchange rates reduced net revenue growth by 8.7 percentage points, acquisitions increased net revenue growth by 1.6 percentage points, and the extra week in the fourth quarter increased net revenue growth by 7.5 percentage points.

Gross profit in the fourth quarter of fiscal 2022 was $248 million. Adjusted gross profit in the fourth quarter of fiscal 2022 was $251 million. Adjusted gross profit margin of 26.2% decreased 90 basis points year-on-year. Raw material inflation and lower volumes, particularly in Construction Adhesives, offset higher pricing versus the prior year and resulted in lower gross profit margin.

Selling, general and administrative (SG&A) expense was $158 million in the fourth quarter of fiscal 2022 and adjusted SG&A was $153 million. Adjusted SG&A as a percent of net revenue decreased 130 basis points versus the fourth quarter of last year. The decrease in SG&A, as a percentage of net revenue, was driven by organic revenue growth, lower variable compensation and disciplined expense management.

Net income attributable to H.B. Fuller for the fourth quarter of fiscal 2022 was $48 million, or $0.87 per diluted share. Adjusted net income attributable to H.B. Fuller for the fourth quarter of fiscal 2022 was $58 million. Adjusted EPS was $1.04 per diluted share, down slightly year-on-year due to unfavorable foreign currency translation and higher interest rates.

Adjusted EBITDA in the fourth quarter of fiscal 2022 was $141 million, up 5% compared with the fourth quarter of last year. Adjusted EBITDA margin was relatively stable year-on-year. The increase in adjusted EBITDA was driven by strong pricing actions and good expense management, which offset the impact of significantly higher raw material costs and unfavorable foreign currency translation.

“We delivered double-digit growth in organic revenue, adjusted EBITDA, and adjusted EPS in fiscal year 2022, driven by market share gains, appropriately strong pricing actions, and improved execution,” said Celeste Mastin, H.B. Fuller president and chief executive officer. “I am proud of our team’s resilience and determination in executing our winning strategy in the face of significant headwinds, including continued raw material cost inflation, a strengthening U.S. dollar, and higher interest rates.”

“At the same time, we recognize that we did not finish the year as strong as we had expected. During the fourth quarter, we experienced a more pronounced and accelerated slowdown in demand for Construction Adhesives than we anticipated, which was driven by customer inventory de-stocking actions prior to the end of the calendar year. Additionally, we experienced unexpected softness in China due to more dramatic COVID-related lockdowns and on a global basis, greater than expected headwinds from foreign currency translation.

“As we look to the year ahead, we expect global economic conditions to remain slow and we are prepared to control expenses, expand margins by continuing to innovate for our customers and benefiting from scale with our suppliers, and grow cash flow in such an environment. We have managed pricing well in the face of unprecedented raw material inflation and we have the tools and capabilities to drive profit growth and meaningful margin expansion going forward.

“We are confident and optimistic in our ability to drive organic growth, expand EBITDA margin, and grow EBITDA at a rate consistent with our long-term financial goal of annual double-digit EBITDA growth. We have many competitive advantages to leverage in the current economic environment. In addition to our ability to collaboratively innovate with customers to serve their needs, we have pricing analytics and discipline, robust product substitution capabilities, and a track record of executing nimbly. I have great confidence in our strategy, and I see tremendous potential for continued strong financial performance.”

Balance Sheet and Cash Flow Items:

At the end of the fourth quarter of fiscal 2022 net debt was $1,685 million, down $172 million sequentially versus the third quarter. The sequential reduction in net debt, together with growth in adjusted EBITDA, reduced the ratio of net debt-to-adjusted EBITDA from 3.6X to 3.2X sequentially.

Net working capital in the fourth quarter of fiscal 2022 declined $73 million sequentially versus the third quarter. As a percentage of annualized net revenue, net working capital declined 100 basis points sequentially from 18.9% in the third quarter to 17.9%. Cash flow from operations in the fourth quarter was $208 million, up $150 million sequentially versus the third quarter and up $156 million year-on-year, reflecting actions taken to reduce net working capital requirements.

Fiscal 2023 Outlook:

• Adjusted EBITDA for fiscal 2023 is expected to be in the range of $580 million to $610 million, equating to growth of approximately 9% to 15% versus fiscal year 2022;
• Revenue for 2023 is expected to be flat to down 3% versus 2022; organic revenue growth for fiscal year 2023 is expected to be in the range of 2% to 4%, adjusting for the impact of the extra week in fiscal year 2022;
• Fiscal year 2023 will be a 52-week year compared to a 53-week year in fiscal year 2022, which will unfavorably impact year-on-year net revenue and adjusted EBITDA growth by approximately 2% in fiscal year 2023;
• Foreign currency translation is expected to unfavorably impact net revenue growth by between 3% to 4% in fiscal year 2023, with the first half of the year being more heavily impacted given the significant strengthening of the U.S. dollar that occurred in the second half of fiscal year 2022;
• The core tax rate, excluding the impact of discrete items, is anticipated to be between 27% and 29% in fiscal year 2023;
• Net interest expense for fiscal 2023 is expected to be between $115 million and $125 million, up from fiscal year 2022, reflecting higher interest rates;
• Adjusted EPS in fiscal year 2023 is expected to be in the range of $4.15 to $4.55, equating to growth of between 4% to 14% year-on-year, despite the significantly stronger U.S. dollar, higher borrowing costs, weakening global economic demand conditions, and one less week in fiscal 2023;
• Operating cash flow in fiscal year 2023 is expected to be between $300 million and $350 million, being more weighted to the second half of the year, and capital expenditures are expected to be $120 million.

Conference Call:

The company will hold a conference call on January 19, 2023, at 9:30 a.m. CT (10:30 a.m. ET) 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 must register prior to accessing the webcast using this link and should do so at least 10 minutes prior to the start of the call to install and test any necessary software and audio connections. A telephone replay of the conference call will be available from 12:30 p.m. CT on January 19, 2023, through 10:59 p.m. CT on January 26, 2023. To access the telephone replay dial 1-800-770-2030 (toll free) or 1-647-362-9199, and enter Conference ID: 6370505.

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 2023 Outlook, which the company cannot reconcile to forward-looking GAAP results without unreasonable effort.

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 2022 net revenue of $3.75 billion, H.B. Fuller’s commitment to innovation and sustainable adhesive solutions 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. 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 impact on the supply chain, raw material costs and pricing of our products due to the Russia-Ukraine war; the impact on our margins and product demand due to inflationary pressures; 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.

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.

H.B. FULLER COMPANY AND SUBSIDIARIES

CONSOLIDATED FINANCIAL INFORMATION

In thousands, except per share amounts (unaudited)

		Three Months Ended								Three Months Ended
		December 3, 2022				Percent of Net Revenue				November 27, 2021				Percent of Net Revenue
Net revenue		$	958,213				100.0	%		$	897,424				100.0	%
Cost of sales			(710,092	)			(74.1	)%			(655,965	)			(73.1	)%
Gross profit			248,121				25.9	%			241,459				26.9	%
Selling, general and administrative expenses			(157,872	)			(16.5	)%			(165,789	)			(18.5	)%
Other income, net			251				0.0	%			6,954				0.8	%
Interest expense			(30,046	)			(3.1	)%			(18,392	)			(2.0	)%
Interest income			1,609				0.2	%			1,767				0.2	%
Income before income taxes and income from equity method investments			62,063				6.5	%			65,999				7.4	%
Income taxes			(15,163	)			(1.6	)%			(16,671	)			(1.9	)%
Income from equity method investments			1,429				0.1	%			1,587				0.2	%
Net income including non-controlling interest			48,329				5.0	%			50,915				5.7	%
Net income attributable to non-controlling interest			(24	)			(0.0	)%			(31	)			(0.0	)%
Net income attributable to H.B. Fuller		$	48,305				5.0	%		$	50,884				5.7	%
Basic income per common share attributable to H.B. Fuller		$	0.90							$	0.96
Diluted income per common share attributable to H.B. Fuller		$	0.87							$	0.93
Weighted-average common shares outstanding:
Basic			53,824								53,168
Diluted			55,472								54,980
Dividends declared per common share		$	0.190							$	0.168

H.B. FULLER COMPANY AND SUBSIDIARIES

CONSOLIDATED FINANCIAL INFORMATION

In thousands, except per share amounts (unaudited)

		Year Ended								Year Ended
		December 3, 2022				Percent of Net Revenue				November 27, 2021				Percent of Net Revenue
Net revenue		$	3,749,183				100.0	%		$	3,278,031				100.0	%
Cost of sales			(2,785,484	)			(74.3	)%			(2,432,709	)			(74.2	)%
Gross profit			963,699				25.7	%			845,322				25.8	%
Selling, general and administrative expenses			(640,981	)			(17.1	)%			(592,710	)			(18.1	)%
Other income, net			12,952				0.3	%			32,855				1.0	%
Interest expense			(91,521	)			(2.4	)%			(78,092	)			(2.4	)%
Interest income			7,779				0.2	%			9,476				0.3	%
Income before income taxes and income from equity method investments			251,928				6.7	%			216,851				6.6	%
Income taxes			(77,186	)			(2.1	)%			(63,033	)			(1.9	)%
Income from equity method investments			5,665				0.2	%			7,657				0.2	%
Net income including non-controlling interest			180,407				4.8	%			161,475				4.9	%
Net income attributable to non-controlling interest			(94	)			(0.0	)%			(82	)			(0.0	)%
Net income attributable to H.B. Fuller		$	180,313				4.8	%		$	161,393				4.9	%
Basic income per common share attributable to H.B. Fuller		$	3.37							$	3.05
Diluted income per common share attributable to H.B. Fuller		$	3.26							$	2.97
Weighted-average common shares outstanding:
Basic			53,580								52,887
Diluted			55,269								54,315
Dividends declared per common share		$	0.738							$	0.665

H.B. FULLER COMPANY AND SUBSIDIARIES REGULATION G RECONCILIATION In thousands, except per share amounts (unaudited)
		Three Months Ended						Year Ended
		December 3,			November 27,			December 3,			November 27,
		2022			2021			2022			2021
Net income attributable to H.B. Fuller		$	48,305		$	50,884		$	180,313		$	161,393
Adjustments:
Acquisition project costs 1			1,822			3,344			10,830			5,622
Organizational realignment 2			1,471			3,670			6,386			12,699
Royal restructuring and integration 3			1,467			658			2,474			4,195
Project One			2,326			2,958			9,885			9,426
Other 4			4,524			3,554			12,791			(146	)
Discrete tax items 5			1,610			(796	)		9,308			4,272
Income tax effect on adjustments 6			(3,911	)		(4,511	)		(10,699	)		(8,872	)
Adjusted net income attributable to H.B. Fuller 7			57,614			59,761			221,288			188,589
Add:
Interest expense			30,046			18,406			91,547			78,175
Interest income			(1,609	)		(1,767	)		(7,790	)		(9,476	)
Income taxes			17,464			21,978			78,576			67,632
Depreciation and Amortization expense 8			37,469			35,407			146,394			142,003
Adjusted EBITDA 7			140,984			133,785			530,015			466,923
Diluted Shares			55,472			54,980			55,269			54,315
Adjusted diluted income per common share attributable to H.B. Fuller 7		$	1.04		$	1.09		$	4.00		$	3.47
Net revenue		$	958,213		$	897,424		$	3,749,183		$	3,278,031
Adjusted EBITDA margin 7			14.7	%		14.9	%		14.1	%		14.2	%

1 Acquisition project costs include costs related to integrating and accounting for acquisitions.

2 Organizational realignment 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.

3 Royal restructuring and integration program includes 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.

4 Other expenses, for the fiscal year ended December 3 2022, include a $3.3 million non-cash charge related to the wind down and settlement of the Company’s Canadian defined benefit pension plan, $1.3 million of hedging costs related to the Russian ruble devaluation driven by the war in Ukraine, $1.2 million of transactional tax expense associated with an audit settlement, other expenses for COVID-19 testing, vaccinations and exceptional medical claims, and non-cash gains and losses related to legal entity consolidations.

5 Discrete tax items are related to revaluation of cross-currency swap agreements due to depreciation of the Euro versus the U.S. Dollar and various foreign tax matters, offset by the tax effect of legal entity mergers.

6 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.

7 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.

8 Depreciation and amortization expense added back for EBITDA is adjusted for amounts already included in Adjusted net income attributable to H.B. Fuller totaling ($123) and ($145) for the three months ended December 3, 2022 and November 27, 2021, respectively and ($582) and ($1,171) for the fiscal years ended December 3, 2022 and November 27, 2021, respectively.

H.B. FULLER COMPANY AND SUBSIDIARIES SEGMENT FINANCIAL INFORMATION In thousands (unaudited)
		Three Months Ended								Year Ended
		December 3,				November 27,				December 3,				November 27,
		2022				2021				2022				2021
Net Revenue:
Hygiene, Health and Consumable Adhesives		$	443,528			$	402,834			$	1,695,934			$	1,472,756
Engineering Adhesives			395,053				371,419				1,532,639				1,371,756
Construction Adhesives			119,632				123,171				520,610				433,519
Corporate unallocated			-				-				-				-
Total H.B. Fuller		$	958,213			$	897,424			$	3,749,183			$	3,278,031
Segment Operating Income:
Hygiene, Health and Consumable Adhesives		$	42,836			$	39,874			$	165,786			$	138,366
Engineering Adhesives			53,607				39,333				168,873				135,913
Construction Adhesives			957				9,174				22,989				14,148
Corporate unallocated			(7,151	)			(12,711	)			(34,930	)			(35,815	)
Total H.B. Fuller		$	90,249			$	75,670			$	322,718			$	252,612
Adjusted EBITDA 7
Hygiene, Health and Consumable Adhesives		$	57,684			$	54,808			$	223,988			$	197,479
Engineering Adhesives			70,487				57,097				235,948				207,131
Construction Adhesives			14,571				20,105				74,187				57,890
Corporate unallocated			(1,758	)			1,775				(4,108	)			4,423
Total H.B. Fuller		$	140,984			$	133,785			$	530,015			$	466,923
Adjusted EBITDA Margin 7
Hygiene, Health and Consumable Adhesives			13.0	%			13.6	%			13.2	%			13.4	%
Engineering Adhesives			17.8	%			15.4	%			15.4	%			15.1	%
Construction Adhesives			12.2	%			16.3	%			14.3	%			13.4	%
Corporate unallocated		NMP				NMP				NMP				NMP
Total H.B. Fuller			14.7	%			14.9	%			14.1	%			14.2	%
NMP = non-meaningful percentage

H.B. FULLER COMPANY AND SUBSIDIARIES REGULATION G RECONCILIATION In thousands, except per share amounts (unaudited)
		Three Months Ended						Year Ended
		December 3,			November 27,			December 3,			November 27,
		2022			2021			2022			2021
Income before income taxes and income from equity method investments		$	62,063		$	65,999		$	251,928		$	216,851
Adjustments:
Acquisition project costs 1			1,822			3,344			10,830			5,622
Organizational realignment 2			1,471			3,670			6,386			12,699
Royal restructuring and integration 3			1,467			658			2,474			4,195
Project One			2,326			2,958			9,885			9,426
Other 4			4,524			3,554			12,791			(146	)
Adjusted income before income taxes and income from equity method investments 9		$	73,673		$	80,183		$	294,294		$	248,647

9 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						Year Ended
		December 3,			November 27,			December 3,			November 27,
		2022			2021			2022			2021
Income Taxes		$	(15,163	)	$	(16,671	)	$	(77,186	)	$	(63,033	)
Adjustments:
Acquisition project costs 1			(613	)		(1,064	)		(2,767	)		(1,559	)
Organizational realignment 2			(495	)		(1,167	)		(1,635	)		(3,372	)
Royal restructuring and integration 3			(494	)		(209	)		(707	)		(1,055	)
Project One			(783	)		(940	)		(2,067	)		(2,492	)
Other 4			84			(1,927	)		5,786			3,879
Adjusted income taxes 10		$	(17,464	)	$	(21,978	)	$	(78,576	)	$	(67,632	)
Adjusted income before income taxes and income from equity method investments		$	73,673		$	80,183		$	294,294		$	248,647
Adjusted effective income tax rate 10			23.7	%		27.4	%		26.7	%		27.2	%

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

H.B. FULLER COMPANY AND SUBSIDIARIES REGULATION G RECONCILIATION In thousands (unaudited)
		Three Months Ended						Year Ended
		December 3,			November 27,			December 3,			November 27,
		2022			2021			2022			2021
Net revenue		$	958,213		$	897,424		$	3,749,183		$	3,278,031
Gross profit		$	248,121		$	241,459		$	963,699		$	845,322
Gross profit margin			25.9	%		26.9	%		25.7	%		25.8	%
Adjustments:
Acquisition project costs 1			738			156			1,058			219
Organizational realignment 2			1,211			1,585			3,207			3,851
Royal restructuring and integration 3			329			138			706			2,100
Project ONE			-			-			6			(22	)
Other 4			472			204			1,830			1,839
Adjusted gross profit 11		$	250,871		$	243,542		$	970,506		$	853,309
Adjusted gross profit margin 11			26.2	%		27.1	%		25.9	%		26.0	%

11 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						Year Ended
		December 3,			November 27,			December 3,			November 27,
		2022			2021			2022			2021
Selling, general and administrative expenses		$	(157,872	)	$	(165,789	)	$	(640,981	)	$	(592,710	)
Adjustments:
Acquisition project costs 1			1,084			3,189			9,772			5,402
Organizational realignment 2			260			1,420			4,393			8,239
Royal restructuring and integration 3			1,138			533			1,794			2,177
Project ONE			2,326			2,957			9,879			9,449
Other 4			(408	)		2,529			2,284			2,561
Adjusted selling, general and administrative expenses 12		$	(153,472	)	$	(155,161	)	$	(612,859	)	$	(564,882	)

12 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.

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
December 3, 2022		Adhesives				Adhesives				Adhesives				Total				Unallocated				Consolidated
Net income attributable to H.B. Fuller		$	45,913			$	55,900			$	3,460			$	105,273			$	(56,968	)		$	48,305
Adjustments:
Acquisition project costs 1			-				-				-				-				1,822				1,822
Organizational realignment 2			-				-				-				-				1,471				1,471
Royal restructuring and integration 3			-				-				-				-				1,467				1,467
Project One			-				-				-				-				2,326				2,326
Other 4			-				-				-				-				4,524				4,524
Discrete tax items 5			-				-				-				-				1,610				1,610
Income tax effect on adjustments 6			-				-				-				-				(3,911	)			(3,911	)
Adjusted net income attributable to H.B. Fuller 7			45,913				55,900				3,460				105,273				(47,659	)			57,614
Add:
Interest expense			-				-				-				-				30,046				30,046
Interest income			-				-				-				-				(1,609	)			(1,609	)
Income taxes			-				-				-				-				17,464				17,464
Depreciation and amortization expense 8			11,771				14,587				11,111				37,469				-				37,469
Adjusted EBITDA 7		$	57,684			$	70,487			$	14,571			$	142,742			$	(1,758	)		$	140,984
Net revenue		$	443,528			$	395,053			$	119,632			$	958,213				-			$	958,213
Adjusted EBITDA margin 7			13.0	%			17.8	%			12.2	%			14.9	%		NMP					14.7	%

		Hygiene, Health
Year Ended		and Consumable				Engineering				Construction								Corporate				H.B. Fuller
December 3, 2022		Adhesives				Adhesives				Adhesives				Total				Unallocated				Consolidated
Net income attributable to H.B. Fuller		$	177,614			$	177,641			$	32,474			$	387,729			$	(207,416	)		$	180,313
Adjustments:
Acquisition project costs 1			-				-				-				-				10,830				10,830
Organizational realignment 2			-				-				-				-				6,386				6,386
Royal restructuring and integration 3			-				-				-				-				2,474				2,474
Project One			-				-				-				-				9,885				9,885
Other 4			-				-				-				-				12,791				12,791
Discrete tax items 5			-				-				-				-				9,308				9,308
Income tax effect on adjustments 6			-				-				-				-				(10,699	)			(10,699	)
Adjusted net income attributable to H.B. Fuller 7			177,614				177,641				32,474				387,729				(166,441	)			221,288
Add:
Interest expense			-				-				-				-				91,547				91,547
Interest income			-				-				-				-				(7,790	)			(7,790	)
Income taxes			-				-				-				-				78,576				78,576
Depreciation and amortization expense 8			46,374				58,307				41,713				146,394				-				146,394
Adjusted EBITDA 7		$	223,988			$	235,948			$	74,187			$	534,123			$	(4,108	)		$	530,015
Net revenue			1,695,934				1,532,639				520,610			$	3,749,183				-				3,749,183
Adjusted EBITDA margin 7			13.2	%			15.4	%			14.3	%			14.2	%		NMP					14.1	%

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

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
November 27, 2021		Adhesives				Adhesives				Adhesives				Total				Unallocated				Consolidated
Net income attributable to H.B. Fuller		$	43,269			$	41,950			$	11,384			$	96,603			$	(45,719	)		$	50,884
Adjustments:
Acquisition project costs 1			-				-				-				-				3,344				3,344
Organizational realignment 2			-				-				-				-				3,670				3,670
Royal restructuring and integration 3			-				-				-				-				658				658
Project One			-				-				-				-				2,958				2,958
Other 4			-				-				-				-				3,554				3,554
Discrete tax items 5			-				-				-				-				(796	)			(796	)
Income tax effect on adjustments 6			-				-				-				-				(4,511	)			(4,511	)
Adjusted net income attributable to H.B. Fuller 7			43,269				41,950				11,384				96,603				(36,842	)			59,761
Add:
Interest expense			-				-				-				-				18,406				18,406
Interest income			-				-				-				-				(1,767	)			(1,767	)
Income taxes			-				-				-				-				21,978				21,978
Depreciation and amortization expense 8			11,539				15,147				8,721				35,407				-				35,407
Adjusted EBITDA 7		$	54,808			$	57,097			$	20,105			$	132,010			$	1,775			$	133,785
Net revenue		$	402,834			$	371,419			$	123,171			$	897,424				-			$	897,424
Adjusted EBITDA margin 7			13.6	%			15.4	%			16.3	%			14.7	%		NMP					14.9	%

		Hygiene, Health
Year Ended		and Consumable				Engineering				Construction								Corporate				H.B. Fuller
November 27, 2021		Adhesives				Adhesives				Adhesives				Total				Unallocated				Consolidated
Net income attributable to H.B. Fuller		$	151,560			$	146,050			$	22,887			$	320,497			$	(159,104	)		$	161,393
Adjustments:
Acquisition project costs 1			-				-				-				-				5,622				5,622
Organizational realignment 2			-				-				-				-				12,699				12,699
Royal restructuring and integration 3			-				-				-				-				4,195				4,195
Project One			-				-				-				-				9,426				9,426
Other 4			-				-				-				-				(146	)			(146	)
Discrete tax items 5			-				-				-				-				4,272				4,272
Income tax effect on adjustments 6			-				-				-				-				(8,872	)			(8,872	)
Adjusted net income attributable to H.B. Fuller 7			151,560				146,050				22,887				320,497				(131,908	)			188,589
Add:
Interest expense			-				-				-				-				78,175				78,175
Interest income			-				-				-				-				(9,476	)			(9,476	)
Income taxes			-				-				-				-				67,632				67,632
Depreciation and amortization expense 8			45,919				61,081				35,003				142,003				-				142,003
Adjusted EBITDA 7		$	197,479			$	207,131			$	57,890			$	462,500			$	4,423			$	466,923
Net revenue		$	1,472,756			$	1,371,756			$	433,519			$	3,278,031				-			$	3,278,031
Adjusted EBITDA margin 7			13.4	%			15.1	%			13.4	%			14.1	%		NMP					14.2	%

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

H.B. FULLER COMPANY AND SUBSIDIARIES SEGMENT FINANCIAL INFORMATION NET REVENUE GROWTH (DECLINE) (unaudited)
Net revenue growth versus 2021			Three Months Ended				Year Ended
		December 3, 2022				December 3, 2022
Price			11.4	%			15.4	%
Volume			(5.0	)%			1.2	%
Organic Growth 13			6.4	%			16.6	%
Extra Week (53 week year)			7.5	%			2.0	%
M&A			1.6	%			1.6	%
Constant Currency			15.5	%			20.2	%
F/X			(8.7	)%			(5.8	)%
Total H.B. Fuller Net Revenue Growth			6.8	%			14.4	%

Net revenue growth versus 2021		Three Months Ended
		December 3, 2022
																		Extra Week
		Net Revenue				F/X				Constant Currency				M&A				(53 week year)				Organic Growth 13
Hygiene, Health and Consumable Adhesives			10.1	%			(10.0	)%			20.1	%			0.0	%			7.7	%			12.4	%
Engineering Adhesives			6.4	%			(9.6	)%			16.0	%			0.0	%			7.5	%			8.5	%
Construction Adhesives			(2.9	)%			(1.8	)%			(1.1	)%			11.9	%			6.6	%			(19.6	)%
Total H.B. Fuller			6.8	%			(8.7	)%			15.5	%			1.6	%			7.5	%			6.4	%

Net revenue growth versus 2021		Year Ended
		December 3, 2022
																		Extra Week
		Net Revenue				F/X				Constant Currency				M&A				(53 week year)				Organic Growth 13
Hygiene, Health and Consumable Adhesives			15.2	%			(6.9	)%			22.1	%			0.0	%			2.1	%			20.0	%
Engineering Adhesives			11.7	%			(6.2	)%			17.9	%			0.0	%			2.0	%			15.9	%
Construction Adhesives			20.1	%			(1.2	)%			21.3	%			12.4	%			1.9	%			7.0	%
Total H.B. Fuller			14.4	%			(5.8	)%			20.2	%			1.6	%			2.0	%			16.6	%

¹³ 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, the revenues associated with acquisitions and divestitures and the revenues associated with an extra week in 2022 as it was a 53 week year.

CONSOLIDATED BALANCE SHEETS H.B. Fuller Company and Subsidiaries (In thousands, except share and per share amounts)
		December 3,				November 27,
		2022				2021
Assets
Current assets:
Cash and cash equivalents		$	79,910			$	61,786
Trade receivables, net			607,365				614,645
Inventories			491,781				448,404
Other current assets			120,319				96,335
Total current assets			1,299,375				1,221,170
Property, plant and equipment, net			733,667				695,367
Goodwill			1,392,627				1,298,845
Other intangibles, net			702,092				687,075
Other assets			335,868				372,073
Total assets		$	4,463,629			$	4,274,530
Liabilities, non-controlling interest and total equity
Current liabilities:
Notes payable		$	28,860			$	24,983
Current maturities of long-term debt			-				-
Trade payables			460,669				500,321
Accrued compensation			108,328				109,542
Income taxes payable			18,530				15,943
Other accrued expenses			89,345				86,061
Total current liabilities			705,732				736,850
Long-term debt, net of current maturities			1,736,256				1,591,479
Accrued pension liabilities			52,561				71,651
Other liabilities			358,286				277,190
Total liabilities			2,852,835				2,677,170
Commitments and contingencies (Note 14)
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 – 53,676,576 and 52,777,753 for 2022 and 2021, respectively			53,677				52,778
Additional paid-in capital			266,491				213,637
Retained earnings			1,741,359				1,600,601
Accumulated other comprehensive loss			(451,357	)			(270,247	)
Total H.B. Fuller stockholders' equity			1,610,170				1,596,769
Non-controlling interest			624				591
Total equity			1,610,794				1,597,360
Total liabilities, non-controlling interest and total equity		$	4,463,629			$	4,274,530

CONSOLIDATED STATEMENTS of CASH FLOWS H.B. Fuller Company and Subsidiaries (In thousands)
		Fiscal Years
		December 3,				November 27,				November 28,
		2022				2021				2020
Cash flows from operating activities:
Net income including non-controlling interest		$	180,407			$	161,475			$	123,788
Adjustments to reconcile net income including non-controlling interest to net cash provided by operating activities:
Depreciation			72,593				72,106				68,226
Amortization			74,383				71,068				70,591
Deferred income taxes			(15,230	)			16,192				(24,730	)
Income from equity method investments, net of dividends received			(9	)			2,776				375
(Gain) loss on sale of assets			(1,195	)			648				86
Share-based compensation			24,368				22,366				16,914
Pension and other postretirement benefit plan contributions			(3,009	)			(3,840	)			(5,479	)
Pension and other postretirement benefit plan income			(24,021	)			(28,662	)			(14,763	)
Mark to market adjustment related to contingent consideration liabilities			-				2,300				800
Change in assets and liabilities, net of effects of acquisitions:
Trade receivables, net			(24,753	)			(124,849	)			(14,842	)
Inventories			(55,772	)			(135,351	)			15,708
Other assets			46,499				(79,097	)			38,412
Trade payables			(22,629	)			176,337				23,130
Accrued compensation			1,135				27,741				2,588
Other accrued expenses			6,303				1,186				16,361
Income taxes payable			(12,873	)			(4,137	)			5,511
Other liabilities			4,104				(73,508	)			24,566
Other			6,213				108,566				(15,683	)
Net cash provided by operating activities			256,514				213,317				331,559
Cash flows from investing activities:
Purchased property, plant and equipment			(129,964	)			(96,089	)			(87,288	)
Purchased businesses, net of cash acquired			(250,807	)			(5,445	)			(9,500	)
Purchased business assets			-				-				(5,623	)
Proceeds from sale of property, plant and equipment			1,556				2,896				1,506
Cash received from government grant			3,928				5,800				-
Cash outflow related to government grant			-				(1,822	)			(8,555	)
Net cash used in investing activities			(375,287	)			(94,660	)			(109,460	)
Cash flows from financing activities:
Proceeds from issuance of long-term debt			335,000				-				300,000
Repayment of long-term debt			(159,500	)			(156,500	)			(518,000	)
Payment of debt issue costs			(600	)			-				-
Net proceeds from notes payable			3,455				9,346				4,128
Dividends paid			(39,207	)			(34,859	)			(33,461	)
Contingent consideration payment			(5,000	)			(1,700	)			(767	)
Proceeds from stock options exercised			30,122				32,325				12,321
Repurchases of common stock			(3,950	)			(2,682	)			(3,432	)
Net cash provided by (used in) financing activities			160,320				(154,070	)			(239,211	)
Effect of exchange rate changes on cash and cash equivalents			(23,423	)			(3,335	)			5,455
Net change in cash and cash equivalents			18,124				(38,748	)			(11,657	)
Cash and cash equivalents at beginning of year			61,786				100,534				112,191
Cash and cash equivalents at end of year		$	79,910			$	61,786			$	100,534

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20230118005293/en/

Steven Brazones

Investor Relations Contact

651-236-5060

Source: H.B. Fuller Company

FAQ

What were H.B. Fuller’s earnings results for FY 2022?

H.B. Fuller reported net revenue of $3.75 billion for FY 2022, a 14% increase, and adjusted EPS of $4.00, up 15% year-on-year.

What is H.B. Fuller’s revenue outlook for fiscal year 2023?

For fiscal year 2023, H.B. Fuller expects revenue to be flat to down 3% compared to 2022.

How did foreign currency impacts affect H.B. Fuller’s financials?

In FY 2022, unfavorable foreign currency exchange reduced adjusted EPS by approximately 16% and affected revenue growth negatively.

What is H.B. Fuller’s adjusted EBITDA forecast for 2023?

H.B. Fuller expects adjusted EBITDA for fiscal 2023 to range between $580 million to $610 million, reflecting growth of approximately 9% to 15%.

When will H.B. Fuller discuss its Q4 2022 results?

H.B. Fuller will hold a conference call on January 19, 2023, at 9:30 a.m. CT to discuss its results.