H.B. Fuller Reports Third Quarter Fiscal Year 2020 Results

Rhea-AI Summary

H.B. Fuller Company (NYSE: FUL) reported Q3 2020 net income of $42 million, with adjusted EBITDA at $106 million, surpassing guidance due to strong organic sales and lower raw material costs. Despite a 2.5% decline in organic revenues, the company experienced growth in Hygiene and Health segments. Cash flow from operations rose 20% year-over-year, enabling $59 million in debt reduction. For Q4 2020, estimated revenues are expected to rise 4% to 7% sequentially, with adjusted EBITDA projected at $110-$115 million.

Positive

• Net income of $42 million and adjusted EBITDA of $106 million exceeded guidance.
• Cash flow from operations increased by 20% year-over-year.
• Debt paydown of $59 million, exceeding the target of $40-$50 million.

Negative

• Total organic revenues declined by 2.5% year-over-year.
• Gross profit margin down 150 basis points to 27.3%.

ST. PAUL, Minn., Sept. 23, 2020 /PRNewswire/ -- H.B. Fuller Company (NYSE: FUL) today reported financial results for its third quarter ended August 29, 2020.

Items of Note for Third Quarter 2020

• Strong operational performance with net income of $42 million and adjusted EBITDA of $106 million, which exceeded the company's guidance, driven by solid organic sales results, benefits from restructuring efficiencies and lower raw material costs.
• Total organic revenues declined by 2.5% compared with last year, ahead of the company's expectations.
• Continued share gains led to organic revenue growth in Hygiene, Health and Consumable Adhesives (HHC) and higher sequential revenues in Engineering Adhesives and Construction Adhesives.
• Year-to-date cash flow from operations increased by 20% versus the same period in 2019, driven by working capital reductions.
• Debt paydown of $59 million exceeded the company's $40 to $50 million targeted debt paydown for the quarter. The company remains on track to achieve $200 million debt repayment target for 2020.
• Delivered restructuring savings of $7 million in the quarter, with expected savings of approximately $30 million for fiscal year 2020, related to our realignment to three global business units (GBUs).
• The company expects to deliver additional savings of $20 to $30 million by the end of 2022 related to the company's operations and supply chain project initiated this year.

Summary of Third Quarter 2020 Results
Net revenue of $691 million decreased 4.7% compared with the third quarter of 2019.  Organic revenue was down 2.5% versus the same period last year, excluding impacts from foreign currency exchange rates and the sale of the surfactants, thickeners and dispersants business which, combined, negatively impacted revenues by 2.2%. Hygiene, Health and Consumable Adhesives organic revenue increased 1% year over year reflecting continued demand for adhesives for essential goods and packaging. Construction Adhesives and Engineering Adhesives organic revenues were lower than last year but increased versus the second quarter. Engineering Adhesives significantly improved revenue performance included double-digit year-over-year growth in Electronics, Recreational Vehicles and Technical Textiles.

Gross profit margin was 27.2%. Adjusted gross profit margin of 27.3% was down 150 basis points versus last year. The decline was due to lower revenues and unfavorable business mix related to impacts from COVID-19, partially offset by favorable raw material costs. Selling, General and Administrative (SG&A) expense was $129 million. Adjusted SG&A expense of $123 million declined 6.4% compared with the same period last year, driven by cost savings realized from the company's business realignment to three global business units and lower discretionary expenses in the quarter.

As a result of these factors, net income attributable to H.B. Fuller in the quarter was $42 million, or $0.79 per diluted share. Adjusted net income attributable to H.B. Fuller was $40 million, or $0.76 of adjusted EPS, down from $44 million, or $0.86 of adjusted EPS in the prior year. Adjusted EBITDA was $106 million in the quarter, compared with $116 million in the same period last year, and adjusted EBITDA margin was 15.3% versus 16% in the prior year.

"In the third quarter, we delivered higher than expected organic revenue performance by building on our market share gains in HHC, improving performance in Construction Adhesives and winning new business in Engineering Adhesives," said Jim Owens, H.B. Fuller president and chief executive officer. "We continued to realize operational cost efficiencies from our GBU realignment, reduce SG&A spending and bring down raw material costs, which drove EBITDA results that were also better than forecasted. Strong cash flow enabled us to exceed our debt paydown target in the quarter, keeping us on track for $200 million of total debt paydown for the year. During the quarter, we also began implementing the operational improvement projects we announced on our second quarter call that will drive $20 to $30 million of incremental cost savings in 2021 and 2022.

Owens continued, "H.B. Fuller has performed well during the pandemic due to the competitive advantages we've created through our new GBU and global customer focused business structure, our cultural emphasis on collaboration and speed and our investments in digital tools. We will build on our successes from the first nine months of the year and leverage those wins in the fourth quarter and into 2021. Our margins and cash flow remain resilient, and we are well-positioned to accelerate our performance as end markets continue to show signs of improvement. We remain focused on our vision to be the best adhesive company in the world by creating value for our customers and shareholders today, and as the world evolves following the pandemic."

Key Balance Sheet and Cash Flow Items
At the end of the third quarter of 2020, the company had cash on hand of $75 million and total debt equal to $1,869 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. For the nine-month year-to-date period, cash flow from operations increased to $193 million from $160 million for the same period of 2019, driven by improved working capital management. Capital expenditures were $17 million versus $15 million in the third quarter of fiscal 2019, reflecting timing of capital projects and expenditures related to growth initiatives. The company estimates capital investment for the fiscal year totaling $80 to $85 million. 

H.B. Fuller has more than adequate liquidity to meet any foreseeable needs, including a $400 million revolving credit facility with a feature that allows for an increase of the facility by $300 million dollars if needed. The company also has ample room under its debt covenants using significantly conservative outlook scenarios. 

Q4 2020 Guidance
The extent of COVID-19's impact on global economic factors remains uncertain. The company is providing the following guidance based on current economic projections, order patterns and assumptions for global commercial activity:

• Estimated revenue in the fourth quarter is anticipated to increase by 4% to 7% sequentially from the third quarter and be approximately flat to down 3% year over year.
• Adjusted EBITDA is anticipated to be approximately $110 million to $115 million, in line with the fourth quarter of 2019.
• Debt reduction of $200 million for the full year, consistent with our original 2020 plans.

Conference Call
The Company will host an investor conference call to discuss its third quarter results and fourth quarter planning assumptions on Thursday, Sept. 24, 2020, at 10:30 a.m. EDT. The conference call audio and accompanying presentation slides will be available to interested parties via a simultaneous webcast, and may be accessed from the company's website at https://investors.hbfuller.com/calendar. Participants should access the webcast prior to the start of the call to register for the event and install and test any necessary software. Accompanying presentation slides will be available at the link above 30 minutes prior to the call, and the webcast and presentation will be archived on the company's website. A telephone replay of the conference call will be available approximately 1 hour after the conclusion of the call, through Oct. 1, 2020. To access the telephone replay dial 1-877-344-7529 in the US, 855-669-9658 in Canada, and 1-412-317-0088 outside the US and Canada, and enter access code 10147504.

Regulation G
The information presented in this earnings release regarding segment operating income, adjusted gross profit, adjusted gross profit margin, adjusted selling, general and administrative expense, adjusted income before income taxes and income from equity investments, adjusted income taxes, adjusted effective tax rate, adjusted net income, adjusted diluted earnings per share and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) does not conform to generally accepted accounting principles (GAAP) and should not be construed as an alternative to the reported results determined in accordance with GAAP. Management has included this non-GAAP information to assist in understanding the operating performance of the company and its operating segments as well as the comparability of results to the results of other companies. The non-GAAP information provided may not be consistent with the methodologies used by other companies. All non-GAAP information is reconciled with reported GAAP results in the "Regulation G Reconciliation" tables in this press release with the exception of our forward-looking non-GAAP measures contained above in our fiscal 2020 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 2019 net revenue of $2.9 billion, H.B. Fuller's commitment to innovation brings together people, products and processes that answer and solve some of the world's biggest challenges. Our reliable, responsive service creates lasting, rewarding connections with customers in electronics, disposable hygiene, medical, transportation, aerospace, clean energy, packaging, construction, woodworking, general industries and other consumer businesses. And, our promise to our people connects them with opportunities to innovate and thrive. For more information, visit us at https://www.hbfuller.com/.

Safe Harbor for Forward-Looking Statements
Certain statements in this press release may be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to various risks and uncertainties, including but not limited to the following: the consequences of the COVID-19 outbreak and other pandemics; the substantial amount of debt we have incurred to finance our acquisition of Royal, our ability to repay or refinance it or incur additional debt in the future, our need for a significant amount of cash to service and repay the debt and to pay dividends on our common stock, and the effect of restrictions contained in our debt agreements that limit the discretion of management in operating the business or ability to pay dividends; various risks to stockholders of not receiving dividends and risks to our ability to pursue growth opportunities if we continue to pay dividends according to the current dividend policy; we may be unable to achieve expected synergies, cost savings and operating efficiencies from the Royal transaction, the global business unit realignment or the operations and supply chain project within the expected time frames or at all; we may be unable to successfully integrate Royal's operations into our own, or such integration may be more difficult, time consuming or more costly than expected; the ability to effectively implement Project ONE;  political and economic conditions; product demand; competitive products and pricing; costs of and savings from restructuring initiatives; geographic and product mix; availability and price of raw materials; the company's relationships with its major customers and suppliers; changes in tax laws and tariffs; devaluations and other foreign exchange rate fluctuations; the impact of litigation and environmental matters; the effect of new accounting pronouncements and accounting charges and credits; and similar matters. Many of the foregoing risks and uncertainties are, and will be, exacerbated by COVID-19 and any worsening of the global business and economic environment as a result.

Further information about the various risks and uncertainties can be found in the company's SEC 10-K filing for the fiscal year ended November 30, 2019. All forward-looking information represents management's best judgment as of this date based on information currently available that in the future may prove to have been inaccurate. Additionally, the variety of products sold by the company and the regions where the company does business make it difficult to determine with certainty the increases or decreases in net revenue resulting from changes in the volume of products sold, currency impact, changes in product mix, and selling prices. However, managements' best estimate of these changes as well as changes in other factors have been included.

H.B. FULLER COMPANY AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
In thousands, except per share amounts (unaudited)
	Three Months Ended			Percent of		Three Months Ended			Percent of
	August 29, 2020			Net Revenue		August 31, 2019			Net Revenue
Net revenue	$	691,463		100.0%		$	725,376		100.0%
Cost of sales		(503,619)		(72.8%)			(518,055)		(71.4%)
Gross profit		187,844		27.2%			207,321		28.6%
Selling, general and administrative expenses		(129,113)		(18.7%)			(140,615)		(19.4%)
Other income, net		3,722		0.5%			22,762		3.1%
Interest expense		(20,196)		(2.9%)			(25,607)		(3.5%)
Interest income		2,945		0.4%			3,115		0.4%
Income before income taxes and income from equity method investments		45,202		6.5%			66,976		9.2%
Income taxes		(5,112)		(0.7%)			(19,321)		(2.7%)
Income from equity method investments		1,541		0.2%			2,075		0.3%
Net income including non-controlling interest		41,631		6.0%			49,730		6.9%
Net (loss) income attributable to non-controlling interest		(24)		(0.0%)			(12)		(0.0%)
Net income attributable to H.B. Fuller	$	41,607		6.0%		$	49,718		6.9%
Basic income per common share attributable to H.B. Fuller	$	0.80				$	0.98
Diluted income per common share attributable to H.B. Fuller	$	0.79				$	0.97
Weighted-average common shares outstanding:
Basic		52,130					50,939
Diluted		52,591					51,502
Dividends declared per common share	$	0.163				$	0.160

 

Selected Balance Sheet Information (subject to change prior to filing of the Company's Quarterly Report on Form 10-Q)
	August 29, 2020			November 30, 2019			August 31, 2019
Cash & cash equivalents	$	74,922		$	112,191		$	119,776
Trade accounts receivable, net		476,099			493,181			485,688
Inventories		354,221			337,267			373,609
Trade payables		272,232			298,869			272,554
Total assets		3,981,725			3,985,734			4,032,683
Total debt		1,868,926			1,979,116			2,097,122

 

H.B. FULLER COMPANY AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
In thousands, except per share amounts (unaudited)
	Nine Months Ended			Percent of		Nine Months Ended			Percent of
	August 29, 2020			Net Revenue		August 31, 2019			Net Revenue
Net revenue	$	2,012,629		100.0%		$	2,157,894		100.0%
Cost of sales		(1,469,622)		(73.0%)			(1,552,189)		(71.9%)
Gross profit		543,007		27.0%			605,705		28.1%
Selling, general and administrative expenses		(398,620)		(19.8%)			(432,407)		(20.0%)
Other income, net		11,740		0.6%			29,113		1.3%
Interest expense		(64,597)		(3.2%)			(79,354)		(3.7%)
Interest income		8,761		0.4%			9,191		0.4%
Income before income taxes and income from equity method investments		100,291		5.0%			132,248		6.1%
Income taxes		(22,194)		(1.1%)			(38,902)		(1.8%)
Income from equity method investments		5,068		0.3%			5,273		0.2%
Net income including non-controlling interest		83,165		4.1%			98,619		4.6%
Net (loss) income attributable to non-controlling interest		(50)		(0.0%)			(16)		(0.0%)
Net income attributable to H.B. Fuller	$	83,115		4.1%		$	98,603		4.6%
Basic income per common share attributable to H.B. Fuller1	$	1.60				$	1.94
Diluted income per common share attributable to H.B. Fuller1	$	1.59				$	1.90
Weighted-average common shares outstanding:
Basic		51,959					50,864
Diluted		52,400					51,836
Dividends declared per common share	$	0.485				$	0.475

1 Income per share amounts may not add due to rounding

 

H.B. FULLER COMPANY AND SUBSIDIARIES
REGULATION G RECONCILIATION
In thousands, except per share amounts (unaudited)
		Three Months Ended						Nine Months Ended
		August 29, 2020			August 31, 2019			August 29, 2020				August 31, 2019
Net income attributable to H.B. Fuller		$	41,607		$	49,718		$	83,115			$	98,603
Adjustments:
Acquisition project costs			(55)			1,535			(1,162)				2,158
Organizational realignment			2,511			(684)			6,199				1,110
Royal restructuring and integration			1,358			(9,132)			5,502				(1,150)
Tax reform			-			-			(26)				55
Project ONE			1,216			1,130			3,100				3,179
Other 2			(6,687)			1,660			(3,842)				3,427
Adjusted net income attributable to H.B. Fuller 3			39,950			44,227			92,886				107,382
Add:
Interest expense			20,220			25,607			64,650				79,354
Interest income			(2,945)			(3,115)			(8,761)				(9,191)
Income taxes			14,050			14,798			32,335				37,219
Depreciation and amortization expense4			34,432			34,606			102,992				105,403
Adjusted EBITDA 3			105,707			116,123			284,102				320,167
Diluted Shares			52,591			51,502			52,400				51,836
Adjusted diluted income per common share attributable to H.B. Fuller 3		$	0.76		$	0.86		$	1.77			$	2.07
Revenue		$	691,463		$	725,376		$	2,012,629			$	2,157,894
Adjusted EBITDA margin 3			15.3%			16.0%			14.1%				14.8%

_______________

2 Includes adjustment of ($7,182) of discrete tax benefit in the quarter ended August 29, 2020 related to various foreign tax matters and a tax benefit relating to the revaluation of cross-currency swap agreements due to appreciation of the Euro versus US dollar.

3 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.

4 Depreciation and amortization expense added back for EBITDA is adjusted for amounts already included in Adjusted net income attributable to H.B. Fuller totaling ($413) and ($174) for the three months ended August 29, 2020 and August 30, 2019, respectively and ($509) and ($1,135) for the nine months ended August 29, 2020 and August 30, 2019, respectively.

 

	H.B. FULLER COMPANY AND SUBSIDIARIES
	SEGMENT FINANCIAL INFORMATION
	In thousands (unaudited)
		Three Months Ended							Nine Months Ended
		August 29, 2020			August 31, 2019				August 29, 2020			August 31, 2019
Net Revenue:
Hygiene, Health and Consumable Adhesives		$	320,187		$		328,420		$	977,373		$	986,166
Engineering Adhesives			276,083				286,716			761,040			855,010
Construction Adhesives			95,193				108,406			274,216			302,987
Corporate Unallocated			-				1,834			-			13,731
Total H.B. Fuller		$	691,463		$		725,376		$	2,012,629		$	2,157,894
Segment Operating Income:
Hygiene, Health and Consumable Adhesives		$	31,883		$		32,638		$	89,556		$	85,576
Engineering Adhesives			29,873				36,847			65,386			98,146
Construction Adhesives			4,284				7,650			9,436			14,246
Corporate Unallocated			(7,309)				(10,429)			(19,991)			(24,670)
Total H.B. Fuller		$	58,731		$		66,706		$	144,387		$	173,298
Adjusted EBITDA 3
Hygiene, Health and Consumable Adhesives		$	43,697		$		45,146		$	127,914		$	123,700
Engineering Adhesives			46,831				52,152			112,918			144,521
Construction Adhesives			14,394				17,486			39,893			44,185
Corporate Unallocated			785				1,339			3,377			7,761
Total H.B. Fuller		$	105,707		$		116,123		$	284,102		$	320,167
Adjusted EBITDA Margin 3
Hygiene, Health and Consumable Adhesives			13.6%				13.7%			13.1%			12.5%
Engineering Adhesives			17.0%				18.2%			14.8%			16.9%
Construction Adhesives			15.1%				16.1%			14.5%			14.6%
Corporate Unallocated			NMP				NMP			NMP			NMP
Total H.B. Fuller			15.3%				16.0%			14.1%			14.8%

NMP = non-meaningful percentage

3 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.

 

H.B. FULLER COMPANY AND SUBSIDIARIES
REGULATION G RECONCILIATION
In thousands, except per share amounts (unaudited)
	Three Months Ended							Nine Months Ended
	August 29, 2020			August 31, 2019				August 29, 2020				August 31, 2019
Income before income taxes and income from equity method investments	$	45,202		$	66,976			$	100,291			$	132,248
Adjustments:
Acquisition related activity		(73)			1,871				(1,584)				2,641
Organizational realignment		3,308			(1,345)				8,286				885
Royal restructuring and integration		1,790			(12,131)				7,379				(1,591)
Tax reform		-			-				(35)				75
Project ONE		1,602			1,378				4,141				3,982
Other		654			213				1,725				1,105
Adjusted income before income taxes and income from equity method investments 5	$	52,483		$	56,962			$	120,203			$	139,345

5 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 29, 2020			August 31, 2019				August 29, 2020				August 31, 2019
Income taxes	$	(5,112)		$	(19,321)			$	(22,194)			$	(38,902)
Adjustments:
Acquisition related activity		18			(336)				423				(482)
Organizational realignment		(797)			660				(2,087)				225
Royal restructuring and integration		(431)			2,999				(1,877)				441
Tax reform		-			-				9				(20)
Project ONE		(386)			(247)				(1,043)				(803)
Other 2		(7,342)			1,447				(5,566)				2,322
Adjusted income taxes 6	$	(14,050)		$	(14,798)			$	(32,335)			$	(37,219)
Adjusted income before income taxes and income from equity method investments	$	52,483		$	56,962			$	120,203			$	139,345
Adjusted effective income tax rate 6		26.8%			26.0%				26.9%				26.7%

2 Includes adjustment of ($7,182) of discrete tax benefit in the quarter ended August 29, 2020 related to various foreign tax matters and a tax benefit relating to the revaluation of cross-currency swap agreements due to appreciation of the Euro versus US dollar.

6 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						Nine Months Ended
	August 29, 2020			August 31, 2019			August 29, 2020				August 31, 2019
Net revenue		691,463			725,376			2,012,629				2,157,894
Gross profit	$	187,844		$	207,321		$	543,007			$	605,705
Gross profit margin		27.2%			28.6%			27.0%				28.1%
Adjustments:
Organizational realignment		(204)			(367)			(53)				(124)
Royal restructuring and integration		1,132			1,741			2,730				4,250
Other		272			(5)			1,263				(9)
Adjusted gross profit 7	$	189,044		$	208,690		$	546,947			$	609,822
Adjusted gross profit margin 7		27.3%			28.8%			27.2%				28.3%

7 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 29, 2020			August 31, 2019			August 29, 2020				August 31, 2019
Selling, general and administrative expenses	$	(129,113)		$	(140,615)		$	(398,620)			$	(432,407)
Adjustments:
Acquisition project costs		(73)			1,871			(1,584)				2,641
Organizational realignment		3,516			2,937			8,342				4,551
Royal restructuring and integration		682			2,737			4,725				10,747
Tax reform		-			-			(35)				75
Project ONE		1,602			1,378			4,142				3,982
Other		382			242			462				1,134
Adjusted selling, general and administrative expenses 8	$	(123,004)		$	(131,450)		$	(382,568)			$	(409,277)

_______________

8 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 and Consumable Adhesives			Engineering Adhesives			Construction Adhesives				Total		Corporate Unallocated			H.B. Fuller Consolidated
Three Months Ended August 29, 2020
Net income attributable to H.B. Fuller		$	33,688		$	31,334		$	5,468		$	70,490		$	(28,883)		$	41,607
Adjustments:
Acquisition project costs			-			-			-			-			(55)			(55)
Organizational realignment			-			-			-			-			2,511			2,511
Royal restructuring and integration			-			-			-			-			1,358			1,358
Project ONE			-			-			-			-			1,216			1,216
Other			-			-			-			-			(6,687)			(6,687)
Adjusted net income attributable to H.B. Fuller 3			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 EBITDA 3	$		43,697		$	46,831		$	14,394		$	104,922		$	785		$	105,707
Revenue			320,187			276,083			95,193			691,463			-			691,463
Adjusted EBITDA Margin 3			13.6%			17.0%			15.1%			15.2%			NMP			15.3%
		Hygiene, Health and Consumable Adhesives			Engineering Adhesives			Construction Adhesives				Total		Corporate Unallocated			H.B. Fuller Consolidated
Nine Months Ended August 29, 2020
Net income attributable to H.B. Fuller		$	94,979		$	69,767		$	12,987		$	177,733		$	(94,618)		$	83,115
Adjustments:
Acquisition project costs			-			-			-			-			(1,162)			(1,162)
Organizational realignment			-			-			-			-			6,199			6,199
Royal restructuring and integration			-			-			-			-			5,502			5,502
Tax reform			-			-			-			-			(26)			(26)
Project ONE			-			-			-			-			3,100			3,100
Other			-			-			-			-			(3,842)			(3,842)
Adjusted net income attributable to H.B. Fuller 3			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 EBITDA 3	$		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 Margin 3			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
REGULATION G RECONCILIATION
In thousands (unaudited)
		Hygiene, Health and Consumable Adhesives			Engineering Adhesives			Construction Adhesives				Total		Corporate Unallocated			H.B. Fuller Consolidated
Three Months Ended August 31, 2019
Net income attributable to H.B. Fuller		$	33,934		$	38,014		$	8,662		$	80,610		$	(30,892)		$	49,718
Adjustments:
Acquisition project costs			-			-			-			-			1,535			1,535
Organizational realignment			-			-			-			-			(684)			(684)
Royal Restructuring			-			-			-			-			(9,132)			(9,132)
Project ONE			-			-			-			-			1,130			1,130
Other			-			-			-			-			1,660			1,660
Adjusted net income attributable to H.B. Fuller 3			33,934			38,014			8,662			80,610			(36,383)			44,227
Add:
Interest expense			-			-			-			-			25,607			25,607
Interest income			-			-			-			-			(3,115)			(3,115)
Income taxes			-			-			-			-			14,798			14,798
Depreciation and amortization expense			11,212			14,138			8,824			34,174			432			34,606
Adjusted EBITDA 3		$	45,146		$	52,152		$	17,486		$	114,784		$	1,339		$	116,123
Revenue			328,420			286,716			108,406			723,542			1,834			725,376
Adjusted EBITDA Margin 3			13.7%			18.2%			16.1%			15.9%			NMP			16.0%
		Hygiene, Health and Consumable Adhesives			Engineering Adhesives			Construction Adhesives				Total		Corporate Unallocated			H.B. Fuller Consolidated
Nine Months Ended August 31, 2019
Net income attributable to H.B. Fuller		$	89,567		$	101,476		$	17,228		$	208,271		$	(109,668)		$	98,603
Adjustments:
Acquisition project costs			-		-	-		-	-		-	-			2,158			2,158
Organizational realignment			-		-	-		-	-		-	-			1,110			1,110
Royal Restructuring			-		-	-		-	-		-	-			(1,150)			(1,150)
Tax Reform			-		-	-		-	-		-	-			55			55
Project ONE			-		-	-		-	-		-	-			3,179			3,179
Other			-		-	-		-	-		-	-			3,427			3,427
Adjusted net income attributable to H.B. Fuller 3			89,567			101,476			17,228			208,271			(100,889)			107,382
Add:
Interest expense			-			-			-			-			79,354			79,354
Interest income			-			-			-			-			(9,191)			(9,191)
Income taxes			-			-			-			-			37,219			37,219
Depreciation and amortization expense			34,133			43,045			26,957			104,135			1,268			105,403
Adjusted EBITDA 3	$		123,700		$	144,521		$	44,185		$	312,406		$	7,761		$	320,167
Revenue			986,166			855,010			302,987			2,144,163			13,731			2,157,894
Adjusted EBITDA Margin 3			12.5%			16.9%			14.6%			14.6%			NMP			14.8%

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)
	Three Months Ended			Nine Months Ended
		August 29, 2020
Price		(0.4%)		(0.7%)
Volume		(2.1%)		(3.1%)
Organic Growth (Decline)		(2.5%)		(3.8%)
M&A		(0.2%)		(0.6%)
F/X		(2.0%)		(2.3%)
Total H.B. Fuller net revenue		(4.7%)		(6.7%)
		Three Months Ended								Nine Months Ended
		August 29, 2020								August 29, 2020
		Net Revenue		F/X		M&A		Organic Growth (Decline)		Net Revenue		F/X		M&A		Organic Growth (Decline)
Hygiene, Health and Consumable Adhesives		(2.5%)		(3.6%)		0.0%		1.1%		(0.9%)		(3.6%)		0.0%		2.7%
Engineering Adhesives		(3.7%)		(0.8%)		0.0%		(2.9%)		(11.0%)		(1.5%)		0.0%		(9.5%)
Construction Adhesives		(12.2%)		0.0%		0.0%		(12.2%)		(9.5%)		(0.3%)		0.0%		(9.2%)
Unallocated Corporate		NMP		0.0%		NMP		0.0%		NMP		0.0%		NMP		0.0%
Total H.B. Fuller		(4.7%)		(2.0%)		(0.2%)		(2.5%)		(6.7%)		(2.3%)		(0.6%)		(3.8%)

NMP =non-meaningful percentage

 

H.B. FULLER COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
	(Unaudited)
		August 29,			November 30,
		2020			2019
Assets
Current assets:
	Cash and cash equivalents	$                       74,922		$	112,191
	Trade receivables (net of allowances of $13,637 and $10,682, as of August 29, 2020 and November 30, 2019, respectively)	476,099			493,181
	Inventories	354,221			337,267
	Other current assets	84,187			90,723
Total current assets		989,429			1,033,362
	Property, plant and equipment	1,392,017			1,304,231
	Accumulated depreciation	(737,299)			(674,418)
Property, plant and equipment, net		654,718			629,813
	Goodwill	1,306,398			1,281,808
	Other intangibles, net	771,942			799,399
	Other assets	259,238			241,352
Total assets		$                   3,981,725		$	3,985,734
Liabilities, non-controlling interest and total equity
Current liabilities:
	Notes payable	$                        21,082		$	15,732
	Current maturities of long-term debt	-			65,000
	Trade payables	272,232			298,869
	Accrued compensation	68,031			78,582
	Income taxes payable	18,352			23,229
	Other accrued expenses	75,739			60,745
Total current liabilities		455,436			542,157
	Long-term debt, excluding current maturities	1,847,844			1,898,384
	Accrued pension liabilities	84,336			80,214
	Other liabilities	280,201			242,190
Total liabilities		$                   2,667,817			$                 2,762,945
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 – 51,725,732 and 51,241,190, as of August 29, 2020 and November 30, 2019, respectively	51,726			51,241
	Additional paid-in capital	149,305			130,295
	Retained earnings	1,442,292			1,384,411
	Accumulated other comprehensive loss	(329,932)			(343,600)
	Total H.B. Fuller stockholders' equity	1,313,391			1,222,347
Non-controlling interest		517			442
Total equity		1,313,908			1,222,789
Total liabilities, non-controlling interest and total equity		$                   3,981,725		$	3,985,734

 

H.B. FULLER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
In thousands (Unaudited)
				Nine Months Ended
				August 29, 2020			August 31, 2019
Cash flows from operating activities:
	Net income including non-controlling interest			$	83,165		$	98,619
Adjustments to reconcile net income including non-controlling interest to net cash provided by operating activities:
	Depreciation				50,558			50,269
	Amortization				52,943			56,269
	Deferred income taxes				(10,952)			(36,831)
	Income from equity method investments, net of dividends received				2,660			1,743
	Loss (gain) on sale of assets				118			(19,964)
	Share-based compensation				14,087			20,170
	Change in assets and liabilities, net of effects of acquisitions:
		Trade receivables, net			17,307			(15,674)
		Inventories			(17,195)			(17,704)
		Other assets			31,372			(31,853)
		Trade payables			(9,449)			2,246
		Accrued compensation			(12,345)			(10,173)
		Other accrued expenses			8,776			7,936
		Income taxes payable			330			23,587
		Accrued / prepaid pensions			(5,954)			(7,548)
		Other liabilities			20,481			10,636
	Other				(32,872)			28,520
Net cash provided by operating activities					193,030			160,248
Cash flows from investing activities:
	Purchased property, plant and equipment				(71,939)			(47,023)
	Purchased businesses, net of cash acquired				(9,500)			(8,042)
	Purchase of assets				(5,623)			-
	Purchased business remaining equity				-			(9,870)
	Proceeds from sale of property, plant and equipment				1,407			5,314
	Proceeds from sale of business				-			70,293
	Cash received from government grant				-			9,045
	Cash payments related to government grant				(5,326)			(1,120)
Net cash (used in) provided by investing activities					(90,981)			18,597
Cash flows from financing activities:
	Repayment of long-term debt				(128,000)			(173,500)
	Net proceeds of notes payable				8,422			2,667
	Dividends paid				(24,970)			(24,181)
	Contingent consideration payment				(767)			(3,610)
	Proceeds from stock options exercised				6,567			2,495
	Repurchases of common stock				(3,342)			(2,922)
Net cash used in financing activities					(142,090)			(199,051)
	Effect of exchange rate changes on cash and cash equivalents				2,772			(10,811)
Net change in cash and cash equivalents					(37,269)			(31,017)
	Cash and cash equivalents at beginning of period				112,191			150,793
Cash and cash equivalents at end of period				$	74,922		$	119,776

 

View original content to download multimedia:http://www.prnewswire.com/news-releases/hb-fuller-reports-third-quarter-fiscal-year-2020-results-301137008.html

SOURCE H.B. Fuller Company