News Releases

H.B. Fuller Reports Second Quarter Fiscal Year 2020 Results
Diluted EPS of $0.61; $0.68 adjusted diluted EPS
Adjusted EBITDA of $101 million exceeded guidance range
Debt paydown ahead of same quarter last year

ST. PAUL, Minn., June 24, 2020 /PRNewswire/ -- H.B. Fuller Company (NYSE: FUL) today reported financial results for its second quarter ended May 30, 2020.

Items of Note for Second Quarter 2020

  • Strong operational performance with net income of $32 million and adjusted EBITDA of $101 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 7% compared with last year, reflecting the company's broadly diversified customer base and end markets.
  • 7% organic growth in Hygiene, Health and Consumable Adhesives (HHC) revenues, driven by double-digit growth in adhesives for essential goods and packaging.
  • Greater China organic revenues increased approximately 1% versus the same period last year as a result of China's ongoing recovery from COVID-19.
  • Year-to-date cash flow from operations increased by 40% versus the same period in 2019, driven by working capital reductions.
  • Debt paydown of $45 million in the quarter exceeded the amount repaid in the second quarter of last year.
  • The company remains on track to achieve $200 million debt repayment target for 2020.
  • During the quarter, the company increased its dividend payout for the 51st consecutive year.
  • Restructuring savings were $7 million in the quarter. The company has expanded its operational review and now anticipates total savings to be in the range of $55 to $65 million on an annual run-rate basis. The revised amount includes estimated additional savings of $20 to $30 million related to the company's operations and supply chain project initiated this year. These additional savings are expected to begin in the fourth quarter of 2020, and be fully realized in 2022.

Summary of Second Quarter 2020 Results
Net revenue of $675 million decreased 11% compared with the second quarter of 2019. Foreign currency exchange rates and the sale of the surfactants, thickeners and dispersants business negatively impacted revenues by 4% on a combined basis. Organic revenue excluding these impacts was down 7% versus the same period last year. Hygiene, Health and Consumable Adhesives organic revenue increased 7% year over year, with double-digit growth in hygiene, packaging, and health and beauty. Engineering Adhesives and Construction Adhesives organic revenue declined 20% and 15% versus last year, respectively, in-line with the company's planning assumptions for expected impacts related to the COVID-19 pandemic.

Gross profit margin was 27.4%. Adjusted gross profit margin of 27.7% was down 120 basis points versus last year. The decline was due to lower revenues and unfavorable product mix related to impacts from COVID-19, partially offset by favorable raw material costs. Selling, General and Administrative (SG&A) expense was $128 million. Adjusted SG&A expense of $125 million declined 10% 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. Additionally, interest expense declined 20% driven by the company's accelerated debt paydown and lower interest rates.

As a result of these factors, net income attributable to H.B. Fuller in the quarter was $32 million, or $0.61 per diluted share. Adjusted net income attributable to H.B. Fuller was $35 million, or $0.68 of adjusted EPS, down from $46 million, or $0.88 of adjusted EPS in the prior year. Adjusted EBITDA was $101 million in the quarter, compared with $121 million in the same period last year, and adjusted EBITDA margin was 14.9% versus 16% in the prior year.

"H.B. Fuller's operating performance in the second quarter was strong as our worldwide team relentlessly focused on supporting customers in producing essential goods," said Jim Owens, president and chief executive officer. "Throughout the quarter, we found new opportunities to grow our business while managing costs and working capital. Our business model of global collaboration with local execution and a culture of customer focus enabled us to meet customer needs faster than competitors and gain share. Our supply chain and sourcing teams were able to meet demand while reducing costs and our technical, sales and office staff around the globe embraced new ways of working to increase productivity while reducing expenses. All of this was accomplished without any employees becoming infected with COVID-19 at work in our 72 factories."

Owens continued, "We realized significant growth in Hygiene, Health and Consumable Adhesives revenues by being the first and fastest to support customers during this crisis. Our restructuring into three global business units has resulted in productivity and efficiency gains that helped deliver EBITDA above our guidance range and enabled us to exceed last year's debt paydown in the quarter while raising our dividend. During the quarter, we also scoped new operational initiatives which will generate $20 to $30 million in additional savings. Despite the challenging economic environment, we expect to continue delivering strong cash flow performance in 2020 by operating efficiently, reducing working capital needs and maintaining our debt paydown momentum, all while ensuring the health and safety of our workforce."

Key Balance Sheet and Cash Flow Items
At the end of the second quarter of 2020, the company had cash on hand of $70 million and total debt equal to $1,928 million. This compares to cash and debt levels equal to $79 million and $1,973 million, respectively, at the end of the first quarter of 2020. For the six-month year-to-date period, cash flow from operations increased to $108 million from $77 million for the same period of 2019, driven by improved working capital management. Capital expenditures were $22 million versus $18 million in the second 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 $75 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. 

2020 Planning Assumptions
The extent of COVID-19's impact on global economic factors and the pace of economic recovery as businesses reopen remains uncertain. The company is providing the following planning assumptions based on current economic projections, order patterns and assumptions for global commercial activity:

  • Estimated revenue in the third quarter anticipated to be down 5% to 10% year over year, and adjusted EBITDA anticipated to be approximately $95 million to $105 million.
  • Continued elevated demand for HHC goods, such as food and e-Commerce packaging, paper products, medical and personal protective equipment through the second half of the year, although at a slower rate than experienced in the second quarter as restocking of these products returns to more typical levels.
  • Lower year-over-year demand for durable products and building materials in industries such as new energy, transportation and construction. The company currently anticipates year-over-year comparisons for Engineering Adhesives and Construction Adhesives in the second half of the year will improve compared with second quarter results as industrial production and building construction starts to ramp up around the world.
  • Continued moderate declines in raw material costs in the second half of the year, driven by supply-demand dynamics for specialty chemicals and petrochemical feedstock costs.
  • Continued benefits from restructuring actions taken at the end of 2019.

The company remains committed to managing working capital and cash costs in order to reduce debt by $200 million in 2020. Contingency plans are available as necessary for adjustments in expenses, working capital and capital expense to achieve this target.

Company Update on COVID-19
Throughout the COVID-19 pandemic, H.B. Fuller's factories have remained open and operational. By rapidly implementing health and safety protocols and business continuity plans around the world, the company has been able to successfully protect employees, reinforce its supply chains, and deliver products to customers.

The company also created new ways to collaborate and accelerate productivity during this period. Over the past few years, H.B. Fuller has made considerable investments in technology, analytics platforms and virtual collaboration tools. The company has leveraged these tools to facilitate decision-making, maintain high levels of customer service, pursue new customer relationships, and accelerate its sales cycle through virtual product trials.

"By quickly mobilizing resources upon the outbreak of COVID-19, we were able to mitigate the severity of its impact on our operating and financial results through the first half of the year," said Owens. "At the same time, we have found new and creative ways of working with customers and colleagues around the globe that will extend beyond this crisis. Moving forward, we will continue to leverage electronic tools and new methods of interacting with customers to improve our speed and agility. We are using the critical lessons learned during this crisis to refine our planning so that we are well-prepared for growth opportunities and any potential headwinds as we progress toward a global recovery."

Conference Call
The Company will host an investor conference call to discuss first quarter results on Thursday, June 25, 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 July 2, 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 10144467.

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 or the business realignment within the expected time frames or at all; we may be unable to successfully integrate Royal's operations into our own, or such integration may be more difficult, time consuming or 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

 

May 30, 2020

 

Net Revenue

 

June 1, 2019

 

Net Revenue

Net revenue

$

674,602

 

100.0%

 

$

759,583

 

100.0%

Cost of sales

 

(489,701)

 

(72.6%)

   

(541,124)

 

(71.2%)

Gross profit

 

184,901

 

27.4%

   

218,459

 

28.8%

                   

Selling, general and administrative expenses

 

(127,998)

 

(19.0%)

   

(146,079)

 

(19.2%)

                   

Other income, net

 

3,049

 

0.5%

   

2,986

 

0.4%

Interest expense

 

(21,644)

 

(3.2%)

   

(26,940)

 

(3.5%)

Interest income

 

2,898

 

0.4%

   

3,023

 

0.4%

Income before income taxes and income from equity method investments

 

41,206

 

6.1%

   

51,449

 

6.8%

                   

Income taxes

 

(11,471)

 

(1.7%)

   

(16,441)

 

(2.2%)

                   

Income from equity method investments

 

1,893

 

0.3%

   

1,633

 

0.2%

                   

Net income including non-controlling interests

 

31,628

 

4.7%

   

36,641

 

4.8%

                   

Net (loss) income attributable to non-controlling interests

 

(15)

 

(0.0%)

   

-

 

0.0%

                   

Net income attributable to H.B. Fuller

$

31,613

 

4.7%

 

$

36,641

 

4.8%

                   

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

$

0.61

     

$

0.72

   

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

$

0.61

     

$

0.70

   
                   

Weighted-average common shares outstanding:

                 

Basic

 

51,420

       

50,902

   

Diluted

 

52,029

       

52,105

   
                   

Dividends declared per common share

$

0.1625

     

$

0.160

   
                   

 

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

                 
 

May 30, 2020

 

November 30, 2019

 

June 1, 2019

Cash & cash equivalents

$

70,346

 

$

112,191

 

$

100,246

Trade accounts receivable, net

 

448,126

   

493,181

   

499,406

Inventories

 

388,698

   

337,267

   

382,612

Trade payables

 

319,616

   

298,869

   

299,935

Total assets

 

3,979,060

   

3,985,734

   

4,149,864

Total debt

 

1,928,055

   

1,979,116

   

2,193,760

 

H.B. FULLER COMPANY AND SUBSIDIARIES

CONSOLIDATED FINANCIAL INFORMATION

In thousands, except per share amounts (unaudited)

                     
 

Six Months Ended

 

Percent of

 

Six Months Ended

 

Percent of

 
 

May 30, 2020

 

Net Revenue

 

June 1, 2019

 

Net Revenue

 

Net revenue

$

1,321,166

 

100.0%

 

$

1,432,518

 

100.0%

 

Cost of sales

 

(966,003)

 

(73.1%)

   

(1,034,134)

 

(72.2%)

 

Gross profit

 

355,163

 

26.9%

   

398,384

 

27.8%

 
                     

Selling, general and administrative expenses

 

(269,507)

 

(20.4%)

   

(291,792)

 

(20.4%)

 
                     

Other income, net

 

8,018

 

0.6%

   

6,351

 

0.4%

 

Interest expense

 

(44,401)

 

(3.4%)

   

(53,747)

 

(3.8%)

 

Interest income

 

5,816

 

0.4%

   

6,076

 

0.4%

 

Income before income taxes and income from equity method investments

 

55,089

 

4.2%

   

65,272

 

4.6%

 
                     

Income taxes

 

(17,082)

 

(1.3%)

   

(19,581)

 

(1.4%)

 
                     

Income from equity method investments

 

3,527

 

0.3%

   

3,198

 

0.2%

 
                     

Net income including non-controlling interests

 

41,534

 

3.1%

   

48,889

 

3.4%

 
                     

Net loss attributable to non-controlling interests

 

(26)

 

(0.0%)

   

(4)

 

(0.0%)

 
                     

Net income attributable to H.B. Fuller

$

41,508

 

3.1%

 

$

48,885

 

3.4%

 
                     

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

$

0.80

     

$

0.96

     

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

$

0.79

     

$

0.94

     
                     

Weighted-average common shares outstanding:

                   

Basic

 

51,874

       

50,827

     

Diluted

 

52,305

       

52,003

     
                     

Dividends declared per common share

$

0.3225

     

$

0.315

     
                     

aIncome 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

 

Six Months Ended

 

May 30, 2020

 

June 1, 2019

 

May 30, 2020

   

June 1, 2019

                         

Net income attributable to H.B. Fuller

$

31,613

 

$

36,641

 

$

41,508

   

$

48,885

                         

Adjustments:

                       

Acquisition related activity

 

(1,266)

   

539

   

(998)

     

623

Organizational realignment

 

1,550

   

1,444

   

5,154

     

1,794

Royal restructuring and integration

 

1,910

   

4,761

   

5,660

     

9,126

Tax reform

 

-

   

-

   

(44)

     

55

Project ONE

 

855

   

1,236

   

2,582

     

2,049

Other

 

484

   

1,015

   

(926)

     

623

Adjusted net income attributable to H.B. Fuller1

 

35,146

   

45,636

   

52,936

     

63,155

                         

Add:

                       

Interest expense

 

21,670

   

26,940

   

44,431

     

53,747

Interest income

 

(2,898)

   

(3,023)

   

(5,816)

     

(6,076)

Income taxes

 

12,692

   

16,371

   

18,284

     

22,421

Depreciation and amortization expenseA

 

34,009

   

35,268

   

68,561

     

70,796

Adjusted EBITDA1

 

100,619

   

121,192

   

178,396

     

204,043

                         

Diluted Shares

 

52,029

   

52,105

   

52,305

     

52,003

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

$

0.68

 

$

0.88

 

$

1.01

   

$

1.21

Revenue

$

674,602

 

$

759,583

 

$

1,321,166

   

$

1,432,518

Adjusted EBITDA margin1

 

14.9%

   

16.0%

   

13.5%

     

14.2%

_______________

                         
                           

1 Adjusted net income attributable to H.B. Fuller, adjusted diluted income per common share attributable to H.B. Fuller, adjusted EBITDA and adjusted EBITDA margin are non-GAAP financial measures. Adjusted net income attributable to H.B. Fuller is defined as net income before the specific adjustments shown above. Adjusted diluted income per common share is defined as adjusted net income attributable to H.B. Fuller divided by the number of diluted common shares. Adjusted EBITDA is defined as net income before interest, income taxes, depreciation, amortization and the specific adjustments shown above. Adjusted EBITDA margin is defined as adjusted EBITDA divided by net revenue. The table above provides a reconciliation of adjusted net income attributable to H.B. Fuller, adjusted diluted income per common share attributable to H.B. Fuller, adjusted EBITDA and adjusted EBITDA margin to net income attributable to H.B. Fuller, the most directly comparable financial measure determined and reported in accordance with U.S. GAAP.

 

A Depreciation and amortization expense added back for EBITDA is adjusted for amounts already included in Adjusted net income attributable to H.B. Fuller totaling ($63) and ($436) for the three months ended May 30, 2020 and June 1, 2019, respectively and ($96) and ($962) for the six months ended May 30, 2020 and June 1, 2019, respectively

 

H.B. FULLER COMPANY AND SUBSIDIARIES

SEGMENT FINANCIAL INFORMATION

In thousands (unaudited)

                     
 

Three Months Ended

Six Months Ended

 

May 30, 2020

 

June 1, 2019

 

May 30, 2020

 

June 1, 2019

Net Revenue:

                   

Hygiene, Health and Consumable Adhesives

$

344,673

 

$

337,892

$

657,185

 

$

657,746

Engineering Adhesives

 

236,063

   

303,922

 

484,958

   

568,294

Construction Adhesives

 

93,866

   

111,791

 

179,023

   

194,581

Corporate Unallocated

 

-

   

5,978

 

-

   

11,897

Total H.B. Fuller

$

674,602

 

$

759,583

$

1,321,166

 

$

1,432,518

                     

Segment Operating Income:

                   

Hygiene, Health and Consumable Adhesives

$

35,009

 

$

32,048

$

57,673

 

$

52,938

Engineering Adhesives

 

20,149

   

39,313

 

35,514

   

61,299

Construction Adhesives

 

6,527

   

8,252

 

5,152

   

6,596

Corporate Unallocated

 

(4,782)

   

(7,233)

 

(12,683)

   

(14,241)

Total H.B. Fuller

$

56,903

 

$

72,380

$

85,656

 

$

106,592

                     

Adjusted EBITDA1

                   

Hygiene, Health and Consumable Adhesives

$

48,321

 

$

44,845

$

84,217

 

$

78,554

Engineering Adhesives

 

35,172

   

54,795

 

66,087

   

92,369

Construction Adhesives

 

16,626

   

18,272

 

25,499

   

26,699

Corporate Unallocated

 

500

   

3,280

 

2,593

   

6,421

Total H.B. Fuller

$

100,619

 

$

121,192

$

178,396

 

$

204,043

                     

Adjusted EBITDA Margin1

                   

Hygiene, Health and Consumable Adhesives

 

14.0%

   

13.3%

 

12.8%

   

11.9%

Engineering Adhesives

 

14.9%

   

18.0%

 

13.6%

   

16.3%

Construction Adhesives

 

17.7%

   

16.3%

 

14.2%

   

13.7%

Corporate Unallocated

 

NMP

   

NMP

 

NMP

   

NMP

Total H.B. Fuller

 

14.9%

   

16.0%

 

13.5%

   

14.2%

                     

 

H.B. FULLER COMPANY AND SUBSIDIARIES

REGULATION G RECONCILIATION

In thousands, except per share amounts (unaudited)

         
 

Three Months Ended

   

Six Months Ended

 

May 30, 2020

 

June 1, 2019

   

May 30, 2020

   

June 1, 2019

                           

Income before income taxes and income from equity method investments

$

41,206

 

$

51,449

   

$

55,089

   

$

65,272

                           

Adjustments:

                         

Acquisition related activity

 

(1,725)

   

655

     

(1,512)

     

769

Organizational realignment

 

2,113

   

1,755

     

4,978

     

2,230

Royal restructuring and integration

 

2,603

   

4,625

     

5,589

     

10,543

Tax reform

 

-

   

-

     

(35)

     

75

Project ONE

 

1,165

   

1,503

     

2,540

     

2,604

Other

 

598

   

387

     

1,071

     

889

Adjusted income before income taxes and income from equity method investments2 

$

45,960

 

$

60,374

   

$

67,720

   

$

82,382

_______________

                         

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

                           

H.B. FULLER COMPANY AND SUBSIDIARIES

REGULATION G RECONCILIATION

In thousands, except per share amounts (unaudited)

                           
 

Three Months Ended

   

Six Months Ended

 

May 30, 2020

 

June 1, 2019

   

May 30, 2020

 

June 1, 2019

                           

Income taxes

$

(11,471)

 

$

(16,441)

   

$

(17,082)

   

$

(19,581)

                           

Adjustments:

                         

Acquisition related activity

 

459

   

(116)

     

514

     

(146)

Organizational realignment

 

(562)

   

(311)

     

177

     

(436)

Royal restructuring and integration

 

(693)

   

136

     

71

     

(1,417)

Tax reform

 

-

   

-

     

(9)

     

(20)

Project ONE

 

(310)

   

(267)

     

42

     

(555)

Other

 

(115)

   

628

     

(1,997)

     

(266)

Adjusted income taxes3

$

(12,692)

 

$

(16,371)

   

$

(18,284)

   

$

(22,421)

                           

Adjusted income before income taxes and income from equity method investments

$

45,960

 

$

60,374

   

$

67,720

   

$

82,382

Adjusted effective income tax rate3 

 

27.6%

   

27.1%

     

27.0%

     

27.2%

_______________

                         

3 Adjusted income taxes and adjusted effective income tax rate are non-GAAP financial measures. Adjusted income taxes is defined as income taxes before the specific adjustments shown above. Adjusted effective income tax rate is defined as 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

 

Six Months Ended

 

May 30, 2020

 

June 1, 2019

 

May 30, 2020

   

June 1, 2019

                         

Net revenue

 

674,602

   

759,583

   

1,321,166

     

1,432,518

                         

Gross profit

$

184,901

 

$

218,459

 

$

355,163

   

$

398,384

Gross profit margin

 

27.4%

   

28.8%

   

26.9%

     

27.8%

                         

Adjustments:

                       

Organizational realignment

 

70

   

195

   

151

     

242

Royal restructuring and integration

 

697

   

1,091

   

1,598

     

2,509

Other

 

981

   

-

   

991

     

(3)

Adjusted gross profit4

$

186,649

 

$

219,745

 

$

357,903

   

$

401,132

Adjusted gross profit margin4

 

27.7%

   

28.9%

   

27.1%

     

28.0%

_______________

                       
                         

4 Adjusted gross profit and adjusted gross profit margin are non-GAAP financial measures. Adjusted gross profit and adjusted gross profit margin is defined as gross profit and gross profit margin excluding the specific adjustments shown above. The table above provides a reconciliation of adjusted gross profit and gross profit margin to gross profit and gross profit margin, the most directly comparable financial measure determined and reported in accordance with U.S. GAAP. 

                         
                         

H.B. FULLER COMPANY AND SUBSIDIARIES

REGULATION G RECONCILIATION

In thousands (unaudited)

                         
 

Three Months Ended

 

Six Months Ended

 

May 30, 2020

 

June 1, 2019

 

May 30, 2020

 

June 1, 2019

                         

Selling, general and administrative expenses

$

(127,998)

 

$

(146,079)

 

$

(269,507)

   

$

(291,792)

                         

Adjustments:

                       

Acquisition related activity

 

(1,725)

   

655

   

(1,512)

     

769

Organizational realignment

 

2,042

   

1,187

   

4,826

     

1,614

Royal restructuring and integration

 

1,932

   

3,511

   

4,043

     

8,010

Tax reform

 

-

   

-

   

(35)

     

75

Project ONE

 

1,166

   

1,503

   

2,541

     

2,604

Other

 

(382)

   

387

   

80

     

893

Adjusted selling, general and administrative expenses5 

$

(124,965)

 

$

(138,836)

 

$

(259,564)

   

$

(277,827)

_______________

                       

5 Adjusted selling, general and administrative expenses is a non-GAAP financial measure. Adjusted selling, general and administrative expenses is defined as selling, general and administrative expenses excluding the specific adjustments shown above. The table above provides a reconciliation of adjusted selling, general and administrative expenses to selling, general and administrative expenses, the most directly comparable financial measure determined and reported in accordance with 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 May 30, 2020

                                   

Net income attributable to H.B. Fuller

$

36,804

 

$

21,598

 

$

7,708

 

$

66,110

 

$

(34,497)

 

$

31,613

 

Adjustments:

                                   

Acquisition related activity

 

-

   

-

   

-

   

-

   

(1,266)

   

(1,266)

 

Organizational realignment

 

-

   

-

   

-

   

-

   

1,550

   

1,550

 

Royal restructuring and integration

 

-

   

-

   

-

   

-

   

1,910

   

1,910

 

Project ONE

 

-

   

-

   

-

   

-

   

855

   

855

 

Other

 

-

   

-

   

-

   

-

   

484

   

484

 

Adjusted net income attributable to H.B. Fuller1

 

36,804

   

21,598

   

7,708

   

66,110

   

(30,964)

   

35,146

 

Add:

                                   

Interest expense

 

-

   

-

   

-

   

-

   

21,670

   

21,670

 

Interest income

 

-

   

-

   

-

   

-

   

(2,898)

   

(2,898)

 

Income taxes

 

-

   

-

   

-

   

-

   

12,692

   

12,692

 

Depreciation and amortization expense

 

11,517

   

13,574

   

8,918

   

34,009

   

-

   

34,009

 

Adjusted EBITDA1

$

48,321

 

$

35,172

 

$

16,626

 

$

100,119

 

$

500

 

$

100,619

 

Revenue

 

344,673

   

236,063

   

93,866

   

674,602

   

-

   

674,602

 

Adjusted EBITDA Margin1

 

14.0%

   

14.9%

   

17.7%

   

14.8%

   

NMP

   

14.9%

 
                                     
 

Hygiene,
Health and
Consumable
Adhesives

 

Engineering
Adhesives

 

Construction
Adhesives

   

Total

 

Corporate
Unallocated

 

H.B. Fuller
Consolidated

 

Six Months Ended May 30, 2020

                                   

Net income attributable to H.B. Fuller

$

61,291

 

$

38,433

 

$

7,518

 

$

107,242

 

$

(65,734)

 

$

41,508

 

Adjustments:

                                   

Acquisition related activity

 

-

   

-

   

-

   

-

   

(998)

   

(998)

 

Organizational realignment

 

-

   

-

   

-

   

-

   

5,154

   

5,154

 

Royal restructuring and integration

 

-

   

-

   

-

   

-

   

5,660

   

5,660

 

Tax reform

 

-

   

-

   

-

   

-

   

(44)

   

(44)

 

Project ONE

 

-

   

-

   

-

   

-

   

2,582

   

2,582

 

Other

 

-

   

-

   

-

   

-

   

(926)

   

(926)

 

Adjusted net income attributable to H.B. Fuller1

 

61,291

   

38,433

   

7,518

   

107,242

   

(54,306)

   

52,936

 

Add:

                                   

Interest expense

 

-

   

-

   

-

   

-

   

44,431

   

44,431

 

Interest income

 

-

   

-

   

-

   

-

   

(5,816)

   

(5,816)

 

Income taxes

 

-

   

-

   

-

   

-

   

18,284

   

18,284

 

Depreciation and amortization expense

 

22,926

   

27,654

   

17,981

   

68,561

   

-

   

68,561

 

Adjusted EBITDA1

$

84,217

 

$

66,087

 

$

25,499

 

$

175,803

 

$

2,593

 

$

178,396

 

Revenue

 

657,185

   

484,958

   

179,023

   

1,321,166

   

-

   

1,321,166

 

Adjusted EBITDA Margin1

 

12.8%

   

13.6%

   

14.2%

   

13.3%

   

NMP

   

13.5%

 

_______________

Note: Adjusted EBITDA is a non-GAAP financial measure. The table above provides a reconciliation of adjusted EBITDA for each segment to net income attributable to H.B. Fuller for each segment, the most directly comparable financial measure determined and reported in accordance with U.S. GAAP.

NMP: non-material 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 June 1, 2019

                                 

Net income attributable to H.B. Fuller

$

33,397

 

$

40,397

 

$

9,236

 

$

83,030

 

$

(46,389)

 

$

36,641

Adjustments:

                                 

Acquisition related activity

 

-

   

-

   

-

   

-

   

539

   

539

Organizational realignment

 

-

   

-

   

-

   

-

   

1,444

   

1,444

Royal Restructuring

 

-

   

-

   

-

   

-

   

4,761

   

4,761

Project ONE

 

-

   

-

   

-

   

-

   

1,236

   

1,236

Other

 

-

   

-

   

-

   

-

   

1,015

   

1,015

Adjusted net income attributable to

H.B. Fuller1

 

33,397

   

40,397

   

9,236

   

83,030

   

(37,394)

   

45,636

Add:

                                 

Interest expense

 

-

   

-

   

-

   

-

   

26,940

   

26,940

Interest income

 

-

   

-

   

-

   

-

   

(3,023)

   

(3,023)

Income taxes

 

-

   

-

   

-

   

-

   

16,371

   

16,371

Depreciation and amortization expense

 

11,448

   

14,398

   

9,036

   

34,882

   

386

   

35,268

Adjusted EBITDA1

$

44,845

 

$

54,795

 

$

18,272

 

$

117,912

 

$

3,280

 

$

121,192

Revenue

 

337,892

   

303,922

   

111,791

   

753,605

   

5,978

   

759,583

Adjusted EBITDA Margin1

 

13.3%

   

18.0%

   

16.3%

   

15.6%

   

NMP

   

16.0%

 

Hygiene,
Health and
Consumable
Adhesives

 

Engineering
Adhesives

 

Construction
Adhesives

   

Total

 

Corporate
Unallocated

 

H.B. Fuller
Consolidated

Six Months Ended June 1, 2019

                                 

Net income attributable to H.B. Fuller

$

55,633

 

$

63,462

 

$

8,567

 

$

127,662

 

$

(78,777)

 

$

48,885

Adjustments:

                                 

Acquisition related activity

 

-

 

 

-

 

 

-

 

 

-

   

623

   

623

Organizational realignment

 

-

 

 

-

 

 

-

 

 

-

   

1,794

   

1,794

Royal Restructuring

 

-

 

 

-

 

 

-

 

 

-

   

9,126

   

9,126

Tax Reform

 

-

 

 

-

 

 

-

 

 

-

   

55

   

55

Project ONE

 

-

 

 

-

 

 

-

 

 

-

   

2,049

   

2,049

Other

 

-

 

 

-

 

 

-

 

 

-

   

623

   

623

Adjusted net income attributable to

H.B. Fuller1

 

55,633

   

63,462

   

8,567

   

127,662

   

(64,507)

   

63,155

Add:

                                 

Interest expense

 

-

   

-

   

-

   

-

   

53,747

   

53,747

Interest income

 

-

   

-

   

-

   

-

   

(6,076)

   

(6,076)

Income taxes

 

-

   

-

   

-

   

-

   

22,421

   

22,421

Depreciation and amortization expense

 

22,921

   

28,907

   

18,132

   

69,960

   

836

   

70,796

Adjusted EBITDA1

$

78,554

 

$

92,369

 

$

26,699

 

$

197,622

 

$

6,421

 

$

204,043

Revenue

 

657,746

   

568,294

   

194,581

   

1,420,621

   

11,897

   

1,432,518

Adjusted EBITDA Margin1

 

11.9%

   

16.3%

   

13.7%

   

13.9%

   

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-material percentage

 

H.B. FULLER COMPANY AND SUBSIDIARIES

SEGMENT FINANCIAL INFORMATION

NET REVENUE GROWTH (DECLINE)

(unaudited)

   

Three Months
Ended

 

Six Months
Ended

   

May 30, 2020

   

Total

 

Total

Price

 

(0.5%)

 

(0.8)%

Volume

 

(6.8%)

 

(3.7%)

Organic Growth (Decline)

 

(7.3%)

 

(4.5%)

M&A

 

(0.8%)

 

(0.8%)

F/X

 

(3.1%)

 

(2.5%)

Total H.B. Fuller net revenue

 

(11.2%)

 

(7.8%)

 

 

Three Months Ended

 

Six Months Ended

 

May 30, 2020

 

May 30, 2020

 

Net
Revenue

 

F/X

 

M&A

 

Organic
Growth
(Decline)

 

Net
Revenue

 

F/X

 

M&A

 

Organic
Growth
(Decline)

                               

Hygiene, Health and Consumable Adhesives

2.0%

 

(4.8%)

 

0.0%

 

6.8%

 

(0.1%)

 

(3.6%)

 

0.0%

 

3.5%

Engineering Adhesives

(22.3%)

 

(2.3%)

 

0.0%

 

(20.0%)

 

(14.7%)

 

(1.9%)

 

0.0%

 

(12.8%)

Construction Adhesives

(16.0%)

 

(0.7%)

 

0.0%

 

(15.3%)

 

(8.0)%

 

(0.6%)

 

0.0%

 

(7.4)%

Unallocated Corporate

NMP

 

0.0%

 

NMP

 

0.0%

 

NMP

 

0.0%

 

NMP

 

0.0%

Total H.B. Fuller

(11.2%)

 

(3.1%)

 

(0.8%)

 

(7.3%)

 

(7.8%)

 

(2.5%)

 

(0.8%)

 

(4.5%)

                               

NMP: non-material percentage

 

H.B. FULLER COMPANY AND SUBSIDIARIES

Consolidated Balance Sheets

In thousands (unaudited)

             
     

May 30,

   

November 30,

     

2020

   

2019

Assets

         

Current assets:

         
 

Cash and cash equivalents

$

70,346

 

$

112,191

 

Trade receivables (net of allowances of $13,443 and $10,682, as of May 30, 2020 and November 30, 2019, respectively)

 

448,126

   

493,181

 

Inventories

 

388,698

   

337,267

 

Other current assets

 

100,702

   

90,723

Total current assets

 

1,007,872

   

1,033,362

             
 

Property, plant and equipment

 

1,340,692

   

1,304,231

 

Accumulated depreciation

 

(704,997)

   

(674,418)

Property, plant and equipment, net

 

635,695

   

629,813

             
 

Goodwill

 

1,273,374

   

1,281,808

 

Other intangibles, net

 

775,332

   

799,399

 

Other assets

 

286,787

   

241,352

Total assets

$

3,979,060

 

$

3,985,734

             

Liabilities, non-controlling interest and total equity

         

Current liabilities:

         
 

Notes payable

$

19,715

 

$

15,732

 

Current maturities of long-term debt

 

-

   

65,000

 

Trade payables

 

319,616

   

298,869

 

Accrued compensation

 

56,599

   

78,582

 

Income taxes payable

 

20,382

   

23,229

 

Other accrued expenses

 

75,450

   

60,745

Total current liabilities

 

491,762

   

542,157

             
 

Long-term debt, excluding current maturities

 

1,908,340

   

1,898,384

 

Accrued pension liabilities

 

81,019

   

80,214

 

Other liabilities

 

279,094

   

242,190

Total liabilities

 

2,760,215

   

2,762,945

             

Commitments and contingencies (Note 15)

         
             

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 – 51,550,524 and 51,241,190, as of May 30, 2020 and November 30, 2019, respectively

 

51,551

   

51,241

 

Additional paid-in capital

 

138,175

   

130,295

 

Retained earnings

 

1,409,158

   

1,384,411

 

Accumulated other comprehensive loss

 

(380,510)

   

(343,600)

 

    Total H.B. Fuller stockholders' equity

 

1,218,374

   

1,222,347

Non-controlling interest

 

471

   

442

Total equity

 

1,218,845

   

1,222,789

Total liabilities, non-controlling interest and total equity

$

3,979,060

 

$

3,985,734

 

H.B. FULLER COMPANY AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

In thousands (unaudited)

 
     

Six Months Ended

     

May 30, 2020

 

June 1, 2019

Cash flows from operating activities:

         
 

Net income including non-controlling interest

$

41,534

 

$

48,889

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

         
 

Depreciation

 

33,198

   

33,568

 

Amortization

 

35,458

   

38,190

 

Deferred income taxes

 

(10,412)

   

(21,871)

 

Income from equity method investments, net of dividends received

 

(3,527)

   

(3,198)

 

(Gain) loss on sale of assets

 

(24)

   

377

 

Share-based compensation

 

9,236

   

14,172

 

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

         
   

Trade receivables, net

 

33,867

   

(23,692)

   

Inventories

 

(59,232)

   

(22,798)

   

Other assets

 

(13,070)

   

(21,396)

   

Trade payables

 

42,182

   

25,943

   

Accrued compensation

 

(21,587)

   

(17,778)

   

Other accrued expenses

 

8,981

   

12,734

   

Income taxes payable

 

(2,728)

   

13,794

   

Accrued / prepaid pensions

 

(2,993)

   

(5,933)

   

Other liabilities

 

24,705

   

(1,465)

 

Other

 

(7,175)

   

7,790

Net cash provided by operating activities

 

108,413

   

77,326

               

Cash flows from investing activities:

         
 

Purchased property, plant and equipment

 

(54,533)

   

(32,192)

 

Purchased businesses, net of cash acquired

 

(9,500)

   

(7,914)

 

Purchase of assets

 

(3,998)

   

-

 

Purchased business remaining equity

 

-

   

(9,870)

 

Proceeds from sale of property, plant and equipment

 

1,416

   

45

 

Cash received from government grant

 

-

   

9,045

 

Cash payments related to government grant

 

(2,331)

   

(1,120)

Net cash used in investing activities

 

(68,946)

   

(42,006)

               

Cash flows from financing activities:

         
 

Repayment of long-term debt

 

(67,000)

   

(70,000)

 

Net payment of notes payable

 

6,994

   

4,053

 

Dividends paid

 

(16,577)

   

(16,028)

 

Contingent consideration payment

 

-

   

(3,610)

 

Proceeds from stock options exercised

 

1,557

   

1,837

 

Repurchases of common stock

 

(3,246)

   

(2,807)

Net cash used in financing activities

 

(78,272)

   

(86,555)

               
 

Effect of exchange rate changes on cash and cash equivalents

 

(3,040)

   

688

               

Net change in cash and cash equivalents

 

(41,845)

   

(50,547)

 

Cash and cash equivalents at beginning of period

 

112,191

   

150,793

Cash and cash equivalents at end of period

$

70,346

 

$

100,246

 

 

SOURCE H.B. Fuller Company

For further information: Barbara Doyle, Investor Relations contact, 651-236-5023
Financial Expert
Chairman of the Board
NYSEFUL

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