H.B. Fuller Reports Third Quarter 2021 Results

Rhea-AI Summary

H.B. Fuller Company (NYSE: FUL) reported a strong third quarter for 2021, with net revenue up 20% year-over-year at $827 million and organic revenue increasing 16%. Net income reached $32 million, or $0.58 per diluted share, while adjusted EPS was $0.79, up 4%. Despite raw material challenges, adjusted EBITDA rose 5% to $111 million. The company anticipates further margin improvements and has raised its full-year revenue growth guidance to 17%-18% compared to 2020.

Positive

• Net revenue increased 20% to $827 million.
• Organic revenue grew 16%, with 10% from volume growth.
• Net income rose to $32 million; adjusted EPS increased 4% to $0.79.
• Adjusted EBITDA rose 5% to $111 million, exceeding expectations.
• Year-to-date debt reduction of $110 million supports a target of $200 million for the year.
• Full-year revenue growth guidance raised to 17%-18%.

Negative

• Adjusted gross profit margin declined year-over-year due to increased raw material and freight costs.

Net revenue up 20% and organic revenue up 16% driven by strong volume growth and pricing

Net income of $32 million and EPS of $0.58; adjusted EPS of $0.79

Adjusted EBITDA of $111 million, up 5% year-on-year despite significant raw materials headwinds

ST. PAUL, Minn.--(BUSINESS WIRE)-- H.B. Fuller Company (NYSE: FUL) today reported financial results for its third quarter ended August 28, 2021.

Items of Note

• Net revenue increased 20% versus the third quarter of last year. Organic revenue increased 16%, with 10% from volume growth and 6% from pricing.
• Organic revenue was up 13% when compared with the non-COVID-impacted third quarter of 2019.
• Net income increased to $32 million; volume leverage, pricing and operating expense efficiencies offset higher raw material costs and drove a 5% year-over-year increase in adjusted EBITDA to $111 million, ahead of our expectations.
• Earnings per diluted share (EPS) were $0.58; adjusted EPS of $0.79 increased 4% year over year.
• Strategic supply chain management enabled the company to secure raw materials to meet increasing demand, and pricing actions have been implemented that are expected to restore margins in the fourth quarter and into 2022.
• Year-to-date debt paydown of $110 million keeps the company on track to its $200 million debt reduction target for the full year.

Summary of Third Quarter 2021 Results

Net revenue of $827 million increased 20% compared with the third quarter of 2020. Foreign currency exchange rates favorably impacted revenue by 3%. Organic revenue, which excludes impacts from foreign currency translation, increased 16% versus last year, with double-digit organic growth in all three Global Business Units (GBUs). Organic revenue also significantly increased by 13% when compared with the non-COVID impacted third quarter of 2019, with strong organic growth in all three GBUs.

Gross profit was $194 million. Adjusted gross profit of $196 million increased 4% versus the same period last year. Adjusted gross profit margin declined year over year, as expected, as higher sales volume and pricing gains were offset by elevated raw material and freight costs. Selling, General and Administrative (SG&A) expense was $135 million. Adjusted SG&A expense of $129 million improved by 220 basis points as a percent of revenue versus the third quarter last year, resulting from strong volume leverage and general expense controls.

As a result of these factors, net income attributable to H.B. Fuller in the quarter was $32 million, or $0.58 per diluted share. Adjusted net income attributable to H.B. Fuller of $43 million and adjusted EPS of $0.79 increased by 7% and 4%, respectively, compared with $40 million and $0.76 in the same period last year. Adjusted EBITDA of $111 million increased 5% compared with $106 million in the prior year.

“H.B. Fuller delivered another strong quarter with double-digit organic revenue growth as we gained share in key market segments through innovative solutions, improved pricing and took decisive actions to secure raw materials and meet customer demand,” said Jim Owens, H.B. Fuller’s president and chief executive officer. “Throughout the quarter, we took strategic steps to serve customers in the face of ongoing raw material and packaging shortages as well as increasing inflationary pressures on logistics, freight, and labor. We have implemented $225 million of annualized pricing adjustments this year and recently announced additional price increases and a surcharge on global shipments effective September 1, 2021. We anticipate a significant improvement in margins in the fourth quarter as a result of these actions. As our business continues to demonstrate resilience, we are increasingly confident in our ability to create and deliver significant value for shareholders in any market environment. The actions that we have taken over the last nine months in support of our customers enables us to exit the year with strong margin momentum.”

Other Financial Metrics

At the end of the third quarter of fiscal 2021, the company had cash and equivalents of $68 million and total debt equal to $1,664 million. This compares to cash and debt levels equal to $75 million and $1,869 million, respectively, at the end of the third quarter of 2020. Capital expenditures for the nine-month period were $77 million compared with $72 million in the same period last year.

Planning Assumptions

• Based on current assumptions, we have increased our estimated full-year revenue guidance. Full-year revenue growth is now anticipated to be 17% to 18% compared with fiscal 2020, resulting in anticipated fourth quarter revenue growth of 15% to 17% versus the fourth quarter of 2020.
• For the fiscal year 2021, adjusted EBITDA is anticipated to be approximately $460 million to $470 million, an increase of 13% to 16% versus 2020, which is supported by 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 September 23, 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 September 23, 2021 through October 1, 2021. To access the telephone replay dial (800) 585-8367 or (416) 621-4642 and enter Conference ID: 1786575.

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.

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.

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
		Aug. 28, 2021				Net Revenue				Aug. 29, 2020				Net Revenue
Net revenue		$	826,830				100.0	%		$	691,463				100.0	%
Cost of sales			(632,880	)			(76.5	)%			(503,619	)			(72.8	)%
Gross profit			193,950				23.5	%			187,844				27.2	%
Selling, general and administrative expenses			(134,497	)			(16.3	)%			(129,113	)			(18.7	)%
Other income, net			6,150				0.7	%			3,722				0.5	%
Interest expense			(19,396	)			(2.3	)%			(20,196	)			(2.9	)%
Interest income			2,520				0.3	%			2,945				0.4	%
Income before income taxes and income from equity method investments			48,727				5.9	%			45,202				6.5	%
Income taxes			(19,095	)			(2.3	)%			(5,112	)			(0.7	)%
Income from equity method investments			1,998				0.2	%			1,541				0.2	%
Net income including non-controlling interest			31,630				3.8	%			41,631				6.0	%
Net income attributable to non-controlling interest			(14	)			(0.0	)%			(24	)			(0.0	)%
Net income attributable to H.B. Fuller		$	31,616				3.8	%		$	41,607				6.0	%
Basic income per common share attributable to H.B. Fuller		$	0.60							$	0.80
Diluted income per common share attributable to H.B. Fuller		$	0.58							$	0.79
Weighted-average common shares outstanding:
Basic			53,049								52,130
Diluted			54,646								52,591
Dividends declared per common share		$	0.168							$	0.163

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

		August 28, 2021				November 28, 2020				August 29, 2020
Cash & cash equivalents		$	68,134			$	100,534			$	74,922
Trade accounts receivable, net			572,855				514,916				476,099
Inventories			462,635				323,213				354,221
Trade payables			485,796				316,460				272,232
Total assets			4,258,272				4,036,704				3,981,725
Total debt			1,664,007				1,773,910				1,868,926

H.B. FULLER COMPANY AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
In thousands, except per share amounts (unaudited)
		Nine Months Ended August 28, 2021				Percent of Net Revenue				Nine Months Ended August 29, 2020				Percent of Net Revenue
Net revenue		$	2,380,607				100.0	%		$	2,012,629				100.0	%
Cost of sales			(1,776,744	)			(74.6	)%			(1,469,622	)			(73.0	)%
Gross profit			603,863				25.4	%			543,007				27.0	%
Selling, general and administrative expenses			(426,921	)			(17.9	)%			(398,620	)			(19.8	)%
Other income, net			25,899				1.1	%			11,740				0.6	%
Interest expense			(59,699	)			(2.5	)%			(64,597	)			(3.2	)%
Interest income			7,709				0.3	%			8,761				0.4	%
Income before income taxes and income from equity method investments			150,851				6.3	%			100,291				5.0	%
Income taxes			(46,362	)			(1.9	)%			(22,194	)			(1.1	)%
Income from equity method investments			6,071				0.3	%			5,068				0.3	%
Net income including non-controlling interest			110,560				4.6	%			83,165				4.1	%
Net income attributable to non-controlling interest			(51	)			(0.0	)%			(50	)			(0.0	)%
Net income attributable to H.B. Fuller		$	110,509				4.6	%		$	83,115				4.1	%
Basic income per common share attributable to H.B. Fuller		$	2.09							$	1.60
Diluted income per common share attributable to H.B. Fuller		$	2.04							$	1.59
Weighted-average common shares outstanding:
Basic			52,794								51,959
Diluted			54,093								52,400
Dividends declared per common share		$	0.498							$	0.485

H.B. FULLER COMPANY AND SUBSIDIARIES

REGULATION G RECONCILIATION

In thousands, except per share amounts (unaudited)

		Three Months Ended								Nine Months Ended
		August 28,				August 29,				August 28,				August 29,
		2021				2020				2021				2020
Net income attributable to H.B. Fuller		$	31,616			$	41,607			$	110,509			$	83,115
Adjustments:
Acquisition project costs			901				(73	)			2,277				(1,584	)
Organizational realignment1			3,087				3,308				9,029				8,286
Royal restructuring and integration2			1,016				1,790				3,537				7,379
Tax reform			-				-				-				(35	)
Project One			2,305				1,602				6,469				4,141
Other3			111				654				(3,701	)			1,725
Discrete tax items4			5,626				(7,183	)			5,068				(5,129	)
Income tax effect on adjustments5			(1,746	)			(1,755	)			(4,359	)			(5,012	)
Adjusted net income attributable to H.B. Fuller6			42,916				39,950				128,829				92,886
Add:
Interest expense			19,412				20,220				59,769				64,650
Interest income			(2,520	)			(2,945	)			(7,709	)			(8,761	)
Income taxes			15,216				14,050				45,653				32,335
Depreciation and Amortization expense7			35,705				34,432				106,596				102,992
Adjusted EBITDA6			110,729				105,707				333,138				284,102
Diluted Shares			54,646				52,591				54,093				52,400
Adjusted diluted income per common share attributable to H.B. Fuller6		$	0.79			$	0.76			$	2.38			$	1.77
Revenue		$	826,830			$	691,463			$	2,380,607			$	2,012,629
Adjusted EBITDA margin6			13.4	%			15.3	%			14.0	%			14.1	%

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 nine months ended August 28, 2021 includes one-time, non-cash gains related to a transactional tax legal settlement in Brazil and a legal entity merger.

4 Includes adjustment of $5,626 of discrete tax expense in the quarter ended August 28, 2021 relating to the revaluation of cross-currency swap agreements due to depreciation of the Euro versus U.S. dollar and various foreign tax matters. Includes adjustment of ($7,183) of discrete tax benefit in the quarter ended August 29, 2020 relating to the revaluation of cross-currency swap agreements due to appreciation of the Euro versus U.S. dollar and various foreign tax matters.

5 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.

6 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.

7 Depreciation and amortization expense added back for EBITDA is adjusted for amounts already included in Adjusted net income attributable to H.B. Fuller totaling ($292) and ($413) for the three months ended August 28, 2021 and August 29, 2020, respectively and ($1,026) and ($509) for the nine months ended August 28, 2021 and August 29, 2020, respectively.

H.B. FULLER COMPANY AND SUBSIDIARIES

SEGMENT FINANCIAL INFORMATION

In thousands (unaudited)

		Three Months Ended								Nine Months Ended
		August 28,				August 29,				August 28,				August 29,
		2021				2020				2021				2020
Net Revenue:
Hygiene, Health and Consumable Adhesives		$	369,439			$	320,187			$	1,069,922			$	977,373
Engineering Adhesives			342,300				276,083				1,000,337				761,040
Construction Adhesives			115,091				95,193				310,348				274,216
Corporate unallocated			-				-				-				-
Total H.B. Fuller		$	826,830			$	691,463			$	2,380,607			$	2,012,629
Segment Operating Income:
Hygiene, Health and Consumable Adhesives		$	29,652			$	31,883			$	98,493			$	89,556
Engineering Adhesives			34,087				29,873				96,580				65,386
Construction Adhesives			3,339				4,284				4,974				9,436
Corporate unallocated			(7,625	)			(7,309	)			(23,105	)			(19,991	)
Total H.B. Fuller		$	59,453			$	58,731			$	176,942			$	144,387
Adjusted EBITDA6
Hygiene, Health and Consumable Adhesives		$	44,496			$	43,697			$	142,671			$	127,914
Engineering Adhesives			52,001				46,831				150,034				112,918
Construction Adhesives			14,247				14,394				37,785				39,893
Corporate unallocated			(15	)			785				2,648				3,377
Total H.B. Fuller		$	110,729			$	105,707			$	333,138			$	284,102
Adjusted EBITDA Margin6
Hygiene, Health and Consumable Adhesives			12.0	%			13.6	%			13.3	%			13.1	%
Engineering Adhesives			15.2	%			17.0	%			15.0	%			14.8	%
Construction Adhesives			12.4	%			15.1	%			12.2	%			14.5	%
Corporate unallocated		NMP				NMP				NMP				NMP
Total H.B. Fuller			13.4	%			15.3	%			14.0	%			14.1	%
NMP = non-meaningful percentage

H.B. FULLER COMPANY AND SUBSIDIARIES

REGULATION G RECONCILIATION

In thousands, except per share amounts (unaudited)

		Three Months Ended								Nine Months Ended
		August 28,				August 29,				August 28,				August 29,
		2021				2020				2021				2020
Income before income taxes and income from equity method investments		$	48,727			$	45,202			$	150,851			$	100,291
Adjustments:
Acquisition project costs			901				(73	)			2,277				(1,584	)
Organizational realignment			3,087				3,308				9,029				8,286
Royal restructuring and integration			1,016				1,790				3,537				7,379
Tax reform			-				-				-				(35	)
Project One			2,305				1,602				6,469				4,141
Other3			111				654				(3,701	)			1,725
Adjusted income before income taxes and income from equity method investments8		$	56,147			$	52,483			$	168,462			$	120,203

8 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								Nine Months Ended
		August 28,				August 29,				August 28,				August 29,
		2021				2020				2021				2020
Income Taxes		$	(19,095	)		$	(5,112	)		$	(46,362	)		$	(22,194	)
Adjustments:
Acquisition project costs			(212	)			18				(495	)			423
Organizational realignment			(726	)			(797	)			(2,204	)			(2,087	)
Royal restructuring and integration			(239	)			(431	)			(846	)			(1,877	)
Tax reform			-				-				-				9
Project One			(542	)			(386	)			(1,551	)			(1,043	)
Other4			5,598				(7,342	)			5,805				(5,566	)
Adjusted income taxes9		$	(15,216	)		$	(14,050	)		$	(45,653	)		$	(32,335	)
Adjusted income before income taxes and income from equity method investments		$	56,147			$	52,483			$	168,462			$	120,203
Adjusted effective income tax rate9			27.1	%			26.8	%			27.1	%			26.9	%

9 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.

H.B. FULLER COMPANY AND SUBSIDIARIES

REGULATION G RECONCILIATION

In thousands (unaudited)

		Three Months Ended								Nine Months Ended
		August 28,				August 29,				August 28,				August 29,
		2021				2020				2021				2020
Net revenue		$	826,830			$	691,463			$	2,380,607			$	2,012,629
Gross profit		$	193,950			$	187,844			$	603,863			$	543,007
Gross profit margin			23.5	%			27.2	%			25.4	%			27.0	%
Adjustments:
Acquisition project costs			1				-				64				-
Organizational realignment			1,472				(204	)			2,265				(53	)
Royal restructuring and integration			644				1,132				1,962				2,730
Project ONE			(22	)			-				(22	)			-
Other			247				272				1,635				1,263
Adjusted gross profit10		$	196,292			$	189,044			$	609,767			$	546,947
Adjusted gross profit margin10			23.7	%			27.3	%			25.6	%			27.2	%

10 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								Nine Months Ended
		August 28,				August 29,				August 28,				August 29,
		2021				2020				2021				2020
Selling, general and administrative expenses		$	(134,497	)		$	(129,113	)		$	(426,921	)		$	(398,620	)
Adjustments:
Acquisition project costs			901				(73	)			2,214				(1,584	)
Organizational realignment			1,614				3,516				6,819				8,342
Royal restructuring and integration			388				682				1,644				4,725
Tax reform			-				-				-				(35	)
Project ONE			2,327				1,602				6,491				4,142
Other			55				382				32				462
Adjusted selling, general and administrative expenses11		$	(129,212	)		$	(123,004	)		$	(409,721	)		$	(382,568	)

11 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
August 28, 2021		Adhesives				Adhesives				Adhesives				Total				Unallocated				Consolidated
Net income attributable to H.B. Fuller		$	32,924			$	36,599			$	5,516			$	75,039			$	(43,423	)		$	31,616
Adjustments:
Acquisition project costs			-				-				-				-				901				901
Organizational realignment			-				-				-				-				3,087				3,087
Royal Restructuring			-				-				-				-				1,016				1,016
Project One			-				-				-				-				2,305				2,305
Other3			-				-				-				-				111				111
Discrete tax items4			-				-				-				-				5,626				5,626
Income tax effect on adjustments5			-				-				-				-				(1,746	)			(1,746	)
Adjusted net income attributable to H.B. Fuller6			32,924				36,599				5,516				75,039				(32,123	)			42,916
Add:
Interest expense			-				-				-				-				19,412				19,412
Interest income			-				-				-				-				(2,520	)			(2,520	)
Income taxes			-				-				-				-				15,216				15,216
Depreciation and amortization expense			11,572				15,402				8,731				35,705				-				35,705
Adjusted EBITDA6		$	44,496			$	52,001			$	14,247			$	110,744			$	(15	)		$	110,729
Revenue		$	369,439			$	342,300			$	115,091			$	826,830				-			$	826,830
Adjusted EBITDA Margin6			12.0	%			15.2	%			12.4	%			13.4	%		NMP					13.4	%

		Hygiene, Health
Nine Months Ended		and Consumable				Engineering				Construction								Corporate				H.B. Fuller
August 28, 2021		Adhesives				Adhesives				Adhesives				Total				Unallocated				Consolidated
Net income attributable to H.B. Fuller		$	108,291			$	104,099			$	11,504			$	223,894			$	(113,385	)		$	110,509
Adjustments:
Acquisition project costs			-				-				-				-				2,277				2,277
Organizational realignment			-				-				-				-				9,029				9,029
Royal Restructuring			-				-				-				-				3,537				3,537
Project One			-				-				-				-				6,469				6,469
Other3			-				-				-				-				(3,701	)			(3,701	)
Discrete tax items4			-				-				-				-				5,068				5,068
Income tax effect on adjustments5			-				-				-				-				(4,359	)			(4,359	)
Adjusted net income attributable to H.B. Fuller6			108,291				104,099				11,504				223,894				(95,065	)			128,829
Add:
Interest expense			-				-				-				-				59,769				59,769
Interest income			-				-				-				-				(7,709	)			(7,709	)
Income taxes			-				-				-				-				45,653				45,653
Depreciation and amortization expense			34,380				45,935				26,281				106,596				-				106,596
Adjusted EBITDA6		$	142,671			$	150,034			$	37,785			$	330,490			$	2,648			$	333,138
Revenue			1,069,922				1,000,337				310,348				2,380,607				-				2,380,607
Adjusted EBITDA Margin6			13.3	%			15.0	%			12.2	%			13.9	%		NMP					14.0	%

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
August 29, 2020		Adhesives				Adhesives				Adhesives				Total				Unallocated				Consolidated
Net income attributable to H.B. Fuller		$	33,688			$	31,334			$	5,468			$	70,490			$	(28,883	)		$	41,607
Adjustments:
Acquisition project costs			-				-				-				-				(73	)			(73	)
Organizational realignment			-				-				-				-				3,308				3,308
Royal Restructuring			-				-				-				-				1,790				1,790
Project One			-				-				-				-				1,602				1,602
Other3			-				-				-				-				654				654
Discrete tax items4			-				-				-				-				(7,183	)			(7,183	)
Income tax effect on adjustments5			-				-				-				-				(1,755	)			(1,755	)
Adjusted net income attributable to H.B. Fuller6			33,688				31,334				5,468				70,490				(30,540	)			39,950
Add:
Interest expense			-				-				-				-				20,220				20,220
Interest income			-				-				-				-				(2,945	)			(2,945	)
Income taxes			-				-				-				-				14,050				14,050
Depreciation and amortization expense			10,009				15,497				8,926				34,432				-				34,432
Adjusted EBITDA6		$	43,697			$	46,831			$	14,394			$	104,922			$	785			$	105,707
Revenue		$	320,187			$	276,083			$	95,193			$	691,463				-			$	691,463
Adjusted EBITDA Margin6			13.6	%			17.0	%			15.1	%			15.2	%		NMP					15.3	%

Nine Months Ended	Hygiene, Health and Consumable					Engineering				Construction								Corporate				H.B. Fuller
August 29, 2020	Adhesives					Adhesives				Adhesives				Total				Unallocated				Consolidated
Net income attributable to H.B. Fuller		$	94,979			$	69,767			$	12,987			$	177,733			$	(94,618	)		$	83,115
Adjustments:
Acquisition project costs			-				-				-				-				(1,584	)			(1,584	)
Organizational realignment			-				-				-				-				8,286				8,286
Royal Restructuring			-				-				-				-				7,379				7,379
Tax reform			-				-				-				-				(35	)			(35	)
Project One			-				-				-				-				4,141				4,141
Other3			-				-				-				-				1,725				1,725
Discrete tax items4			-				-				-				-				(5,129	)			(5,129	)
Income tax effect on adjustments5			-				-				-				-				(5,012	)			(5,012	)
Adjusted net income attributable to H.B. Fuller6			94,979				69,767				12,987				177,733				(84,847	)			92,886
Add:
Interest expense			-				-				-				-				64,650				64,650
Interest income			-				-				-				-				(8,761	)			(8,761	)
Income taxes			-				-				-				-				32,335				32,335
Depreciation and amortization expense			32,935				43,151				26,906				102,992				-				102,992
Adjusted EBITDA6		$	127,914			$	112,918			$	39,893			$	280,725			$	3,377			$	284,102
Revenue		$	977,373			$	761,040			$	274,216			$	2,012,629				-			$	2,012,629
Adjusted EBITDA Margin5			13.1	%			14.8	%			14.5	%			13.9	%		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

SEGMENT FINANCIAL INFORMATION

NET REVENUE GROWTH

(unaudited)

		Three Months Ended				Nine Months Ended
		August 28, 2021				August 28, 2021
Price			6.3	%			2.6	%
Volume			10.1	%			12.7	%
Organic Growth12			16.4	%			15.3	%
F/X			3.2	%			3.0	%
Total H.B. Fuller Net Revenue Growth			19.6	%			18.3	%

Revenue growth versus 2020		Three Months Ended												Nine Months Ended
		August 28, 2021												August 28, 2021
		Net Revenue				F/X				Organic Growth11				Net Revenue				F/X				Organic Growth11
Hygiene, Health and Consumable Adhesives			15.4	%			2.4	%			13.0	%			9.5	%			1.6	%			7.9	%
Engineering Adhesives			24.0	%			4.8	%			19.2	%			31.4	%			5.3	%			26.1	%
Construction Adhesives			20.9	%			1.4	%			19.5	%			13.2	%			1.6	%			11.6	%
Total H.B. Fuller			19.6	%			3.2	%			16.4	%			18.3	%			3.0	%			15.3	%

Revenue growth versus 2019		Three Months Ended												Nine Months Ended
		August 28, 2021												August 28, 2021
		Net Revenue				F/X and M&A				Organic Growth11				Net Revenue				F/X and M&A				Organic Growth11
Hygiene, Health and Consumable Adhesives			12.5%				(1.2%)				13.7	%			8.5%				(2.0%)				10.5	%
Engineering Adhesives			19.4%				3.8%				15.6	%			17.0%				3.2%				13.8	%
Construction Adhesives			6.2%				1.2%				5.0	%			2.4%				1.0%				1.4	%
Total H.B. Fuller			14.0%				0.9%				13.1	%			10.3%				(0.2%)				10.5	%

12 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.

CONSOLIDATED BALANCE SHEETS
H.B. FULLER COMPANY AND SUBSIDIARIES
(In thousands, except share and per share amounts)
		August 28,				November 28,
		2021				2020
Assets
Current assets:
Cash and cash equivalents		$	68,134			$	100,534
Trade receivables (net of allowances of $9,139 and $12,905, as of August 28, 2021 and November 28, 2020, respectively)			572,855				514,916
Inventories			462,635				323,213
Other current assets			100,834				81,113
Total current assets			1,204,458				1,019,776
Property, plant and equipment			1,476,158				1,428,183
Accumulated depreciation			(800,266	)			(757,439	)
Property, plant and equipment, net			675,892				670,744
Goodwill			1,313,824				1,312,003
Other intangibles, net			710,127				755,968
Other assets			353,971				278,213
Total assets		$	4,258,272			$	4,036,704
Liabilities, non-controlling interest and total equity
Current liabilities:
Notes payable		$	27,313			$	16,925
Trade payables			485,796				316,460
Accrued compensation			82,129				83,598
Income taxes payable			32,079				29,173
Other accrued expenses			82,417				83,976
Total current liabilities			709,734				530,132
Long-term debt			1,636,694				1,756,985
Accrued pension liabilities			86,954				88,806
Other liabilities			257,034				278,919
Total liabilities			2,690,416				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 – 52,549,798 and 51,906,663, as of August 28, 2021 and November 28, 2020, respectively			52,550				51,907
Additional paid-in capital			200,180				157,867
Retained earnings			1,558,619				1,474,406
Accumulated other comprehensive loss			(244,060	)			(302,859	)
Total H.B. Fuller stockholders' equity			1,567,289				1,381,321
Non-controlling interest			567				541
Total equity			1,567,856				1,381,862
Total liabilities, non-controlling interest and total equity		$	4,258,272			$	4,036,704

CONSOLIDATED STATEMENTS of CASH FLOWS

H.B. FULLER COMPANY AND SUBSIDIARIES

(In thousands)

		Nine Months Ended
		August 28, 2021				August 29, 2020
Cash flows from operating activities:
Net income including non-controlling interest		$	110,560			$	83,165
Adjustments to reconcile net income including non-controlling interest to net cash provided by operating activities:
Depreciation			54,158				50,558
Amortization			53,464				52,943
Deferred income taxes			(1,547	)			(10,952	)
Income from equity method investments, net of dividends received			4,363				2,660
Gain on sale of assets			641				118
Share-based compensation			19,400				14,087
Pension and other post-retirement benefit plan activity			(23,192	)			(5,954)
Change in assets and liabilities, net of effects of acquisitions:
Trade receivables, net			(61,900	)			17,307
Inventories			(141,112	)			(17,195	)
Other assets			(26,060)				31,372
Trade payables			176,210				(9,449	)
Accrued compensation			(1,283	)			(12,345	)
Other accrued expenses			(2,292	)			8,776
Income taxes payable			1,001				330
Other liabilities			(53,498	)			20,481
Other			52,221				(32,872	)
Net cash provided by operating activities			161,134				193,030
Cash flows from investing activities:
Purchased property, plant and equipment			(77,237	)			(71,939	)
Purchased businesses, net of cash acquired			(5,445	)			(9,500	)
Purchase of assets			-				(5,623	)
Proceeds from sale of property, plant and equipment			2,751				1,407
Cash received from government grant			5,800				-
Cash payments related to government grant			(1,526	)			(5,326	)
Net cash used in investing activities			(75,657	)			(90,981	)
Cash flows from financing activities:
Repayment of long-term debt			(118,000	)			(128,000	)
Net proceeds of notes payable			9,846				8,422
Dividends paid			(26,045	)			(24,970	)
Contingent consideration payment			-				(767	)
Proceeds from stock options exercised			22,053				6,567
Repurchases of common stock			(2,668	)			(3,342	)
Net cash used in financing activities			(114,814	)			(142,090	)
Effect of exchange rate changes on cash and cash equivalents			(3,063	)			2,772
Net change in cash and cash equivalents			(32,400	)			(37,269	)
Cash and cash equivalents at beginning of period			100,534				112,191
Cash and cash equivalents at end of period		$	68,134			$	74,922

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20210922005924/en/

Barbara Doyle

Investor Relations contact

651-236-5023

Source: H.B. Fuller Company

FAQ

What was H.B. Fuller's net revenue for Q3 2021?

H.B. Fuller's net revenue for Q3 2021 was $827 million, an increase of 20% compared to the same quarter in 2020.

What is H.B. Fuller's adjusted EPS for Q3 2021?

H.B. Fuller's adjusted EPS for Q3 2021 was $0.79, which is a 4% increase year-over-year.

How much did H.B. Fuller reduce its debt by in 2021?

H.B. Fuller reduced its debt by $110 million year-to-date, aiming for a total reduction of $200 million for the full year.

What is the anticipated revenue growth for H.B. Fuller for the full year 2021?

H.B. Fuller anticipates full-year revenue growth of 17% to 18% compared to fiscal 2020.

What challenges did H.B. Fuller face in Q3 2021?

H.B. Fuller faced challenges with raw material and packaging shortages as well as inflationary pressures on logistics and labor.