Net income of $40 million; Adjusted EBITDA of
$143 million, at the mid-point of Company guidance
Adjusted gross profit margin expanded 330 basis
points year-on-year to 29.0%
Adjusted EBITDA margin increased 190 basis
points year-on-year to 15.9%
Cash flow from operations increased $94 million
year-on-year
H.B. Fuller Company (NYSE: FUL) today reported financial results
for its second quarter that ended June 3, 2023.
Second Quarter 2023 Noteworthy Items:
- Net revenue of $898 million, down 9.6% year-on-year; organic
revenue decreased 8.3% year-on-year, driven by lower volume;
- Gross margin was 28.6%; adjusted gross margin of 29.0%
increased 330 basis points year-on-year, driven by the combined
impact of pricing and raw material cost actions;
- Net income was $40 million; adjusted EBITDA was $143 million,
at the mid-point of Company guidance and up 3% year-on-year,
adjusted EBITDA margin expanded 190 basis points year-on-year to
15.9%;
- Reported EPS (diluted) was $0.73; adjusted EPS (diluted) was
$0.93, down versus the prior year, driven by higher interest
expense and unfavorable foreign currency exchange;
- Cash flow from operations in the second quarter improved $94
million year-on-year to $103 million.
Summary of Second Quarter 2023 Results:
The Company’s net revenue for the second quarter of fiscal 2023
was $898 million, down 9.6% versus the second quarter of fiscal
2022. Organic revenue declined 8.3% year-on-year, driven by lower
volume, offset somewhat by favorable pricing. Volume declined
14.2%, driven by customer destocking actions and generally slower
industrial demand across all three global business units. Pricing
actions favorably impacted organic growth by 5.9 percentage points.
Foreign currency translation reduced net revenue growth by 3.4
percentage points and acquisitions increased net revenue growth by
2.1 percentage points.
Gross profit in the second quarter of fiscal 2023 was $257
million. Adjusted gross profit was $261 million. Adjusted gross
profit margin of 29.0% increased 330 basis points year-on-year.
Pricing and raw material cost actions and operating efficiencies
drove the increase in adjusted gross margin year-on-year and more
than offset the impact of lower volume.
Selling, general and administrative (SG&A) expense was $167
million in the second quarter of fiscal 2023 and adjusted SG&A
was $159 million, effectively flat year-on-year, as good cost
management, restructuring benefits, and favorable foreign currency
impacts offset inflation in wages and services.
Net income attributable to H.B. Fuller for the second quarter of
fiscal 2023 was $40 million, or $0.73 per diluted share. Adjusted
net income attributable to H.B. Fuller for the second quarter of
fiscal 2023 was $52 million. Adjusted EPS was $0.93 per diluted
share, down year-on-year due to higher interest expense and
unfavorable foreign currency impacts, which reduced diluted
earnings per share by approximately $0.19 and $0.07, respectively,
year-on-year in the second quarter.
Adjusted EBITDA in the second quarter of fiscal 2023 was $143
million, at the mid-point of Company guidance and up 3%
year-on-year. Adjusted EBITDA margin increased 190 basis points
year-on-year to 15.9%, driven by the combined impact of pricing and
raw material cost actions versus the prior year’s second quarter,
as well as restructuring savings, partially offset by the impacts
of lower volume and wage and other inflation.
“Pricing discipline and focused efforts to reduce costs drove
margin expansion and overcame a challenging volume environment,
delivering second quarter profit performance in-line with our
expectations,” said Celeste Mastin, H.B. Fuller president and chief
executive officer. “Our ability to successfully manage changing
price and raw material dynamics, and scale production costs with
volume, is delivering EBITDA growth and significant margin
improvement. We remain on track to deliver strong growth in
adjusted EBITDA and outstanding cash flow in fiscal 2023.
“Global industrial activity has slowed, but underlying demand
across the portfolio remains much stronger than our second quarter
volume performance implies, due to the effect of customer
destocking, which is significant, but not unique to us, or our
industry. This destocking is now tapering over a large portion of
our portfolio, and we believe our year-on-year volume comparisons
will be stronger in the second half of the year.
“Our diverse portfolio and robust innovation pipeline engender
continual product line upgrades that solve customer problems,
enabling strong profit growth in almost any economic environment.
Our confidence remains high in a stronger second half performance
as we expect customer destocking activities to fade, EBITDA margins
to continue to expand due to price and raw material cost
management, demand in China to improve, better foreign currency
comparisons, and restructuring benefits to ramp through the end of
the year.”
Balance Sheet and Cash Flow Items:
Net debt at the end of the second quarter of fiscal 2023 was
$1,779 million, up $31 million sequentially versus the first
quarter and down $89 million year-on-year. The sequential increase
in net debt was driven by acquisition activity during the second
quarter, offset by improved cash flow from operations.
Cash flow from operations in the second quarter was $103
million, up $94 million year-on-year, reflecting improving margins
and lower net working capital requirements.
Fiscal 2023 Outlook:
- Adjusted EBITDA for fiscal 2023 is still expected to be in the
range of $580 million to $610 million, equating to growth of
approximately 9% to 15% versus fiscal year 2022;
- Both net revenue and organic revenue for fiscal 2023 are now
expected to be down 3% to 5% versus fiscal 2022, reflecting
continued customer destocking actions and slower industrial
production; the combined impact of FX, acquisitions, and the extra
week in fiscal 2022 are expected to be effectively neutral versus
fiscal 2023;
- Net interest expense is now expected to be in the range of $125
million to $135 million and depreciation and amortization expense
is expected to be approximately $160 million, reflecting recent
acquisition activity and higher interest rates;
- Adjusted EPS (diluted) is now expected to be in the range of
$3.80 to $4.20, equating to a range of down 5% to up 5%
year-on-year;
- Operating cash flow in fiscal 2023 is now expected to be
between $325 million and $375 million.
Conference Call:
The Company will hold a conference call on June 29, 2023, at
9:30 a.m. CT (10:30 a.m. ET) to discuss its results. Interested
parties may listen to the conference call on a live webcast. The
webcast, along with a supplemental presentation, may be accessed
from the Company’s website at https://investors.hbfuller.com.
Participants must register prior to accessing the webcast using
this link and should do so at least 10 minutes prior to the start
of the call to install and test any necessary software and audio
connections. A telephone replay of the conference call will be
available from 12:30 p.m. CT on June 29, 2023, to 10:59 p.m. CT on
July 6, 2023. To access the telephone replay dial 1-800-770-2030
(toll free) or 1-647-362-9199, and enter Conference ID:
6370505.
Regulation G
The information presented in this earnings release regarding
consolidated and segment organic revenue growth, operating income,
adjusted gross profit, adjusted gross profit margin, adjusted
selling, general and administrative expense, adjusted income before
income taxes and income from equity investments, adjusted income
taxes, adjusted effective tax rate, adjusted net income, adjusted
diluted earnings per share and adjusted earnings before interest,
taxes, depreciation, and amortization (EBITDA) does not conform to
U.S. generally accepted accounting principles (U.S. GAAP) and
should not be construed as an alternative to the reported results
determined in accordance with U.S. GAAP. Management has included
this non-GAAP information to assist in understanding the operating
performance of the Company and its operating segments as well as
the comparability of results to the results of other companies. The
non-GAAP information provided may not be consistent with the
methodologies used by other companies. All non-GAAP information is
reconciled with reported U.S. GAAP results in the “Regulation G
Reconciliation” tables in this press release with the exception of
our forward-looking non-GAAP measures contained above in our Fiscal
2023 Outlook, which the Company cannot reconcile to forward-looking
GAAP results without unreasonable effort.
About H.B. Fuller
Since 1887, H.B. Fuller has been a leading global adhesives
provider focusing on perfecting adhesives and sealants to improve
products and lives. With fiscal 2022 net revenue of $3.75 billion,
H.B. Fuller’s commitment to innovation and sustainable adhesive
solutions brings together people, products and processes that
answer and solve some of the world's biggest challenges. Our
reliable, responsive service creates lasting, rewarding connections
with customers in electronics, disposable hygiene, medical,
transportation, aerospace, clean energy, packaging, construction,
woodworking, general industries and other consumer businesses. Our
promise to our people connects them with opportunities to innovate
and thrive. For more information, visit us at
https://www.hbfuller.com.
Safe Harbor for Forward-Looking Statements
Certain statements in this press release may be considered
forward-looking statements within the meaning of the federal
securities laws, including Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of
1934, as amended. Such statements often address expected future
business and financial performance, financial condition, and other
matters, and often contain words or phrases such as “anticipate,”
“believe,” “estimate,” “expect,” “intend,” “may,” “opportunity,”
“outlook,” “plan,” “project,” “seek,” “should,” “strategy,”
“target,” “will,” “will be,” “will continue,” “will likely result,”
“would” and similar expressions, and variations or negatives of
these words or phrases. These statements are subject to various
risks and uncertainties that could cause our actual results to
differ materially from those in the forward-looking statements,
including but not limited to the following: the consequences of the
COVID-19 outbreak and other pandemics on our operations and
financial results; the impact on the supply chain, raw material
costs and pricing of our products due to the Russia-Ukraine war;
the impact on our margins and product demand due to inflationary
pressures; the substantial amount of debt we have incurred to
finance our acquisition of Royal, our ability to repay or refinance
our debt or to incur additional debt in the future, our need for a
significant amount of cash to service and repay the debt and to pay
dividends on our common stock, the effect of debt covenants that
limit the discretion of management in operating the business or in
paying dividends; our ability to pay dividends and to pursue growth
opportunities if we continue to pay dividends according to the
current dividend policy; our ability to achieve expected synergies,
cost savings and operating efficiencies from our restructuring
initiatives and operational improvement projects within the
expected time frames or at all; our ability to effectively
implement Project ONE; uncertain political and economic conditions;
fluctuations in product demand; competing products and pricing; our
geographic and product mix; availability and price of raw
materials; disruptions to our relationships with our major
customers and suppliers; failures in our information technology
systems; regulatory compliance across our global footprint; trade
policies and economic sanctions impacting our markets; changes in
tax laws and tariffs; devaluations and other foreign exchange rate
fluctuations; the impact of litigation and investigations,
including for product liability and environmental matters;
impairment charges on our goodwill or long-lived assets; the effect
of new accounting pronouncements and accounting charges and
credits; and similar matters.
Additional information about these various risks and
uncertainties can be found in the “Risk Factors” section of our
Form 10-K filings, and any updates to the risk factors in our Form
10-Q and 8-K filings with the SEC, but there may be other risks and
uncertainties that we are unable to identify at this time or that
we do not currently expect to have a material impact on the
business. You should not place undue reliance on forward-looking
statements, which speak only as of the date they are made. We do
not undertake to update or revise any forward-looking statements,
except as required by law.
H.B. FULLER COMPANY AND
SUBSIDIARIES
CONSOLIDATED FINANCIAL
INFORMATION
In thousands, except per share
amounts (unaudited)
Three Months Ended
Percent of
Three Months Ended
Percent of
June 3, 2023
Net Revenue
May 28, 2022
Net Revenue
Net revenue
$
898,239
100.0
%
$
993,258
100.0
%
Cost of sales
(641,464
)
(71.4
)%
(739,737
)
(74.5
)%
Gross profit
256,775
28.6
%
253,521
25.5
%
Selling, general and administrative
expenses
(166,625
)
(18.6
)%
(166,007
)
(16.7
)%
Other income, net
605
0.1
%
-
0.0
%
Interest expense
(33,131
)
(3.7
)%
(19,828
)
(2.0
)%
Interest income
932
0.1
%
2,091
0.2
%
Income before income taxes and income from
equity method investments
58,556
6.5
%
69,777
7.0
%
Income taxes
(19,291
)
(2.1
)%
(23,616
)
(2.4
)%
Income from equity method investments
1,157
0.1
%
1,066
0.1
%
Net income including non-controlling
interest
40,422
4.5
%
47,227
4.8
%
Net income attributable to non-controlling
interest
(21
)
(0.0
)%
(24
)
(0.0
)%
Net income attributable to H.B. Fuller
$
40,401
4.5
%
$
47,203
4.8
%
Basic income per common share attributable
to H.B. Fuller
$
0.74
$
0.88
Diluted income per common share
attributable to H.B. Fuller
$
0.73
$
0.86
Weighted-average common shares
outstanding:
Basic
54,269
53,497
Diluted
55,717
55,078
Dividends declared per common share
$
0.205
$
0.190
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
June 3, 2023
Net Revenue
May 28, 2022
Net Revenue
Net revenue
$
1,707,421
100.0
%
$
1,849,739
100.0
%
Cost of sales
(1,235,838
)
(72.4
)%
(1,383,326
)
(74.8
)%
Gross profit
471,583
27.6
%
466,413
25.2
%
Selling, general and administrative
expenses
(321,167
)
(18.8
)%
(321,898
)
(17.4
)%
Other income, net
3,209
0.2
%
6,142
0.3
%
Interest expense
(66,200
)
(3.9
)%
(38,025
)
(2.1
)%
Interest income
1,599
0.1
%
4,030
0.2
%
Income before income taxes and income from
equity method investments
89,024
5.2
%
116,662
6.3
%
Income taxes
(29,024
)
(1.7
)%
(33,765
)
(1.8
)%
Income from equity method investments
2,338
0.1
%
2,649
0.1
%
Net income including non-controlling
interest
62,338
3.7
%
85,546
4.6
%
Net income attributable to non-controlling
interest
(48
)
(0.0
)%
(37
)
(0.0
)%
Net income attributable to H.B. Fuller
$
62,290
3.6
%
$
85,509
4.6
%
Basic income per common share attributable
to H.B. Fuller
$
1.15
$
1.60
Diluted income per common share
attributable to H.B. Fuller
$
1.12
$
1.55
Weighted-average common shares
outstanding:
Basic
54,222
53,425
Diluted
55,818
55,237
Dividends declared per common share
$
0.395
$
0.358
H.B. FULLER COMPANY AND
SUBSIDIARIES
REGULATION G
RECONCILIATION
In thousands, except per share
amounts (unaudited)
Three Months Ended
Six Months Ended
June 3,
May 28,
June 3,
May 28,
2023
2022
2023
2022
Net income attributable to H.B. Fuller
$
40,401
$
47,203
$
62,290
$
85,509
Adjustments:
Acquisition project costs1
2,919
2,014
5,154
7,871
Organizational realignment2
5,690
2,818
8,634
4,446
Royal restructuring and integration3
-
412
-
810
Project One
2,681
1,853
4,853
5,057
Other4
521
6,264
3,594
7,430
Discrete tax items5
2,042
4,149
2,888
1,248
Income tax effect on adjustments6
(2,172
)
(3,526
)
(4,572
)
(7,035
)
Adjusted net income attributable to H.B.
Fuller7
52,082
61,187
82,841
105,336
Add:
Interest expense
33,131
19,841
63,511
38,051
Interest income
(932
)
(2,091
)
(1,599
)
(4,041
)
Adjusted Income taxes
19,421
22,993
30,707
39,552
Depreciation and Amortization expense8
39,063
36,637
76,976
72,434
Adjusted EBITDA7
142,765
138,567
252,436
251,332
Diluted Shares
55,717
55,078
55,818
55,237
Adjusted diluted income per common share
attributable to H.B. Fuller7
$
0.93
$
1.11
$
1.48
$
1.91
Revenue
$
898,239
$
993,258
$
1,707,421
$
1,849,739
Adjusted EBITDA margin7
15.9
%
14.0
%
14.8
%
13.6
%
1 Acquisition project costs include costs
related to integrating and accounting for acquisitions.
2 Organizational realignment includes
costs incurred as a direct result of the organizational realignment
program announced in 2023, including compensation for employees
supporting the program, consulting expense and operational
inefficiencies related to the closure of production facilities and
consolidation of business activities.
3 Royal restructuring and integration
program includes costs incurred as a direct result of the Royal
restructuring and integration program including compensation for
employees supporting the program, consulting expense and
operational inefficiencies related to the closure of production
facilities and consolidation of business activities.
4 For fiscal 2023, Other expenses include
write-off of unamortized debt fees and non-cash gains and losses
related to legal entity consolidations. For fiscal 2022, other
expenses include a non-cash charge related to wind down and
settlement of the Company’s Canadian defined benefit pension plan,
hedging costs related to the Russian ruble devaluation driven by
the war in Ukraine, transactional tax expense associated with an
audit settlement, other expenses for COVID-19 testing,
vaccinations, and exceptional medical claims, and non-cash gains
and losses related to legal entity consolidations.
5 Discrete tax items for the current year
are related to various foreign tax matters offset by an excess tax
benefit related to U.S. stock compensation. Discrete tax items for
the prior year are related to the revaluation of cross-currency
swap agreements due to depreciation of the Euro versus the U.S.
Dollar, as well as various foreign tax matters offset by the tax
effect of legal entity mergers.
6 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.
7 Adjusted net income attributable to H.B.
Fuller, adjusted diluted income per common share attributable to
H.B. Fuller, adjusted EBITDA and adjusted EBITDA margin are
non-GAAP financial measures. Adjusted net income attributable to
H.B. Fuller is defined as net income before the specific
adjustments shown above. Adjusted diluted income per common share
is defined as adjusted net income attributable to H.B. Fuller
divided by the number of diluted common shares. Adjusted EBITDA is
defined as net income before interest, income taxes, depreciation,
amortization and the specific adjustments shown above. Adjusted
EBITDA margin is defined as adjusted EBITDA divided by net revenue.
The table above provides a reconciliation of adjusted net income
attributable to H.B. Fuller, adjusted diluted income per common
share attributable to H.B. Fuller, adjusted EBITDA and adjusted
EBITDA margin to net income attributable to H.B. Fuller, the most
directly comparable financial measure determined and reported in
accordance with U.S. GAAP.
8 Depreciation and amortization expense
added back for EBITDA is adjusted for amounts already included in
adjusted net income attributable to H.B. Fuller totaling $18 and
($153) for the three months ended June 3, 2023 and May 28, 2022,
respectively and $0 and ($311) for the six months ended June 3,
2023 and May 28, 2022, respectively.
H.B. FULLER COMPANY AND
SUBSIDIARIES
SEGMENT FINANCIAL
INFORMATION
In thousands
(unaudited)
Three Months Ended
Six Months Ended
June 3,
May 28,
June 3,
May 28,
2023
2022
2023
2022
Net Revenue:
Hygiene, Health and Consumable
Adhesives
$
404,486
$
437,889
$
788,014
$
827,427
Engineering Adhesives
364,080
405,346
697,147
759,323
Construction Adhesives
129,673
150,023
222,260
262,989
Corporate unallocated
-
-
-
-
Total H.B. Fuller
$
898,239
$
993,258
$
1,707,421
$
1,849,739
Segment Operating Income
(Loss):
Hygiene, Health and Consumable
Adhesives
$
51,592
$
43,267
$
96,738
$
75,480
Engineering Adhesives
44,400
42,917
76,875
75,489
Construction Adhesives
5,969
11,285
(3,664
)
15,641
Corporate unallocated
(11,811
)
(9,955
)
(19,533
)
(22,095
)
Total H.B. Fuller
$
90,150
$
87,514
$
150,416
$
144,515
Adjusted EBITDA7
Hygiene, Health and Consumable
Adhesives
$
65,234
$
57,872
$
124,953
$
104,470
Engineering Adhesives
61,159
59,520
111,035
109,399
Construction Adhesives
18,221
24,121
21,065
39,998
Corporate unallocated
(1,849
)
(2,946
)
(4,617
)
(2,535
)
Total H.B. Fuller
$
142,765
$
138,567
$
252,436
$
251,332
Adjusted EBITDA Margin7
Hygiene, Health and Consumable
Adhesives
16.1
%
13.2
%
15.9
%
12.6
%
Engineering Adhesives
16.8
%
14.7
%
15.9
%
14.4
%
Construction Adhesives
14.1
%
16.1
%
9.5
%
15.2
%
Corporate unallocated
NMP
NMP
NMP
NMP
Total H.B. Fuller
15.9
%
14.0
%
14.8
%
13.6
%
NMP = non-meaningful percentage
H.B. FULLER COMPANY AND
SUBSIDIARIES
REGULATION G
RECONCILIATION
In thousands, except per share
amounts (unaudited)
Three Months Ended
Six Months Ended
June 3,
May 28,
June 3,
May 28,
2023
2022
2023
2022
Income before income taxes and income from
equity method investments
$
58,556
$
69,777
$
89,024
$
116,662
Adjustments:
Acquisition project costs1
2,919
2,014
5,154
7,871
Organizational realignment2
5,690
2,818
8,634
4,446
Royal restructuring and integration3
-
412
-
810
Project One
2,681
1,853
4,853
5,057
Other4
521
6,264
3,594
7,430
Adjusted income before income taxes and
income from equity method investments9
$
70,367
$
83,138
$
111,259
$
142,276
9 Adjusted income before income taxes and
income from equity investments is a non-GAAP financial measure.
Adjusted income before income taxes and income from equity
investments is defined as income before income taxes and income
from equity investments before the specific adjustments shown
above. The table above provides a reconciliation of adjusted income
before income taxes and income from equity investments to income
before income taxes and income from equity investments, the most
directly comparable financial measure determined and reported in
accordance with U.S. GAAP.
H.B. FULLER COMPANY AND
SUBSIDIARIES
REGULATION G
RECONCILIATION
In thousands, except per share
amounts (unaudited)
Three Months Ended
Six Months Ended
June 3,
May 28,
June 3,
May 28,
2023
2022
2023
2022
Income Taxes
$
(19,291
)
$
(23,616
)
$
(29,024
)
$
(33,765
)
Adjustments:
Acquisition project costs1
(537
)
(531
)
(1,051
)
(2,209
)
Organizational realignment2
(1,046
)
(744
)
(1,724
)
(1,210
)
Royal restructuring and integration3
-
(109
)
-
(223
)
Project One
(493
)
(489
)
(993
)
(1,406
)
Other4
1,946
2,496
2,085
(739
)
Adjusted income taxes10
$
(19,421
)
$
(22,993
)
$
(30,707
)
$
(39,552
)
Adjusted income before income taxes and
income from equity method investments
$
70,367
$
83,138
$
111,259
$
142,276
Adjusted effective income tax rate10
27.6
%
27.7
%
27.6
%
27.8
%
10 Adjusted income taxes and adjusted
effective income tax rate are non-GAAP financial measures. Adjusted
income taxes is defined as income taxes before the specific
adjustments shown above. Adjusted effective income tax rate is
defined as income taxes divided by adjusted income before income
taxes and income from equity method investments. The table above
provides a reconciliation of adjusted income taxes and adjusted
effective income tax rate to income taxes, the most directly
comparable financial measure determined and reported in accordance
with U.S. GAAP.
H.B. FULLER COMPANY AND
SUBSIDIARIES
REGULATION G
RECONCILIATION
In thousands
(unaudited)
Three Months Ended
Six Months Ended
June 3,
May 28,
June 3,
May 28,
2023
2022
2023
2022
Net revenue
$
898,239
$
993,258
$
1,707,421
$
1,849,739
Gross profit
$
256,775
$
253,521
$
471,583
$
466,413
Gross profit margin
28.6
%
25.5
%
27.6
%
25.2
%
Adjustments:
Acquisition project costs1
1,058
(238
)
1,101
424
Organizational realignment2
2,690
1,520
5,011
1,783
Royal restructuring and integration3
-
140
-
372
Project ONE
-
6
-
6
Other4
53
447
160
825
Adjusted gross profit11
$
260,576
$
255,396
$
477,855
$
469,823
Adjusted gross profit margin11
29.0
%
25.7
%
28.0
%
25.4
%
11 Adjusted gross profit and adjusted
gross profit margin are non-GAAP financial measures. Adjusted gross
profit and adjusted gross profit margin is defined as gross profit
and gross profit margin excluding the specific adjustments shown
above. The table above provides a reconciliation of adjusted gross
profit and adjusted 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
June 3,
May 28,
June 3,
May 28,
2023
2022
2023
2022
Selling, general and administrative
expenses
$
(166,625
)
$
(166,007
)
$
(321,167
)
$
(321,898
)
Adjustments:
Acquisition project costs1
1,861
2,252
4,053
7,447
Organizational realignment2
3,000
2,275
3,623
3,630
Royal restructuring and integration3
-
286
-
464
Project ONE
2,681
1,847
4,853
5,051
Other4
468
1,421
731
2,094
Adjusted selling, general and
administrative expenses12
$
(158,615
)
$
(157,926
)
$
(307,907
)
$
(303,212
)
12 Adjusted selling, general and
administrative expenses is a non-GAAP financial measure. Adjusted
selling, general and administrative expenses is defined as selling,
general and administrative expenses excluding the specific
adjustments shown above. The table above provides a reconciliation
of adjusted selling, general and administrative expenses to
selling, general and administrative expenses, the most directly
comparable financial measure determined and reported in accordance
with U.S. GAAP.
H.B. FULLER COMPANY AND
SUBSIDIARIES
REGULATION G
RECONCILIATION
In thousands
(unaudited)
Three Months Ended
Hygiene, Health and
Consumable
Engineering
Construction
Corporate
H.B. Fuller
June 3, 2023
Adhesives
Adhesives
Adhesives
Total
Unallocated
Consolidated
Net income attributable to H.B. Fuller
$
52,692
$
45,172
$
7,687
$
105,551
$
(65,150
)
$
40,401
Adjustments:
Acquisition project costs1
-
-
-
-
2,919
2,919
Organizational realignment2
-
-
-
-
5,690
5,690
Royal Restructuring and integration3
-
-
-
-
-
-
Project One
-
-
-
-
2,681
2,681
Other4
-
-
-
-
521
521
Discrete tax items5
-
-
-
-
2,042
2,042
Income tax effect on adjustments6
-
-
-
-
(2,172
)
(2,172
)
Adjusted net income attributable to H.B.
Fuller7
52,692
45,172
7,687
105,551
(53,469
)
52,082
Add:
Interest expense
-
-
-
-
33,131
33,131
Interest income
-
-
-
-
(932
)
(932
)
Adjusted Income taxes
-
-
-
-
19,421
19,421
Depreciation and amortization expense8
12,542
15,987
10,534
39,063
-
39,063
Adjusted EBITDA7
$
65,234
$
61,159
$
18,221
$
144,614
$
(1,849
)
$
142,765
Revenue
$
404,486
$
364,080
$
129,673
$
898,239
-
$
898,239
Adjusted EBITDA Margin7
16.1
%
16.8
%
14.1
%
16.1
%
NMP
15.9
%
Six Months Ended
June 3, 2023
Net income attributable to H.B. Fuller
$
100,399
$
79,522
$
156
$
180,077
$
(117,787
)
$
62,290
Adjustments:
Acquisition project costs1
-
-
-
-
5,154
5,154
Organizational realignment2
-
-
-
-
8,634
8,634
Royal Restructuring and integration3
-
-
-
-
-
-
Project One
-
-
-
-
4,853
4,853
Other4
-
-
-
-
3,594
3,594
Discrete tax items5
-
-
-
-
2,888
2,888
Income tax effect on adjustments6
-
-
-
-
(4,572
)
(4,572
)
Adjusted net income attributable to H.B.
Fuller7
100,399
79,522
156
180,077
(97,236
)
82,841
Add:
Interest expense
-
-
-
-
63,511
63,511
Interest income
-
-
-
-
(1,599
)
(1,599
)
Adjusted Income taxes
-
-
-
-
30,707
30,707
Depreciation and amortization expense8
24,554
31,513
20,909
76,976
-
76,976
Adjusted EBITDA7
$
124,953
$
111,035
$
21,065
$
257,053
$
(4,617
)
$
252,436
Revenue
788,014
697,147
222,260
1,707,421
-
1,707,421
Adjusted EBITDA Margin7
15.9
%
15.9
%
9.5
%
15.1
%
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
REGULATION G
RECONCILIATION
In thousands
(unaudited)
Three Months Ended
Hygiene, Health and
Consumable
Engineering
Construction
Corporate
H.B. Fuller
May 28, 2022
Adhesives
Adhesives
Adhesives
Total
Unallocated
Consolidated
Net income attributable to H.B. Fuller
$
46,186
$
45,077
$
13,613
$
104,876
$
(57,673
)
$
47,203
Adjustments:
Acquisition project costs1
-
-
-
-
2,014
2,014
Organizational realignment2
-
-
-
-
2,818
2,818
Royal Restructuring and integration3
-
-
-
-
412
412
Project One
-
-
-
-
1,853
1,853
Other4
-
-
-
-
6,264
6,264
Discrete tax items5
-
-
-
-
4,149
4,149
Income tax effect on adjustments6
-
-
-
-
(3,526
)
(3,526
)
Adjusted net income attributable to H.B.
Fuller7
46,186
45,077
13,613
104,876
(43,689
)
61,187
Add:
Interest expense
-
-
-
-
19,841
19,841
Interest income
-
-
-
-
(2,091
)
(2,091
)
Adjusted Income taxes
-
-
-
-
22,993
22,993
Depreciation and amortization expense8
11,686
14,443
10,508
36,637
-
36,637
Adjusted EBITDA7
$
57,872
$
59,520
$
24,121
$
141,513
$
(2,946
)
$
138,567
Revenue
$
437,889
$
405,346
$
150,023
$
993,258
-
$
993,258
Adjusted EBITDA Margin7
13.2
%
14.7
%
16.1
%
14.2
%
NMP
14.0
%
Six Months Ended
May 28, 2022
Net income attributable to H.B. Fuller
$
81,323
$
79,814
$
20,296
$
181,433
$
(95,924
)
$
85,509
Adjustments:
Acquisition project costs1
-
-
-
-
7,871
7,871
Organizational realignment2
-
-
-
-
4,446
4,446
Royal Restructuring and integration3
-
-
-
-
810
810
Project One
-
-
-
-
5,057
5,057
Other4
-
-
-
-
7,430
7,430
Discrete tax items5
-
-
-
-
1,248
1,248
Income tax effect on adjustments6
-
-
-
-
(7,035
)
(7,035
)
Adjusted net income attributable to H.B.
Fuller7
81,323
79,814
20,296
181,433
(76,097
)
105,336
Add:
Interest expense
-
-
-
-
38,051
38,051
Interest income
-
-
-
-
(4,041
)
(4,041
)
Adjusted Income taxes
-
-
-
-
39,552
39,552
Depreciation and amortization expense8
23,147
29,585
19,702
72,434
-
72,434
Adjusted EBITDA7
$
104,470
$
109,399
$
39,998
$
253,867
$
(2,535
)
$
251,332
Revenue
$
827,427
$
759,323
$
262,989
$
1,849,739
-
$
1,849,739
Adjusted EBITDA Margin7
12.6
%
14.4
%
15.2
%
13.7
%
NMP
13.6
%
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
Six Months Ended
June 3, 2023
June 3, 2023
Price
5.9
%
7.0
%
Volume
(14.2
)%
(12.6
)%
Organic Growth13
(8.3
)%
(5.6
)%
M&A
2.1
%
2.0
%
Constant currency
(6.2
)%
(3.6
)%
F/X
(3.4
)%
(4.1
)%
Total H.B. Fuller Net Revenue
Decline
(9.6
)%
(7.7
)%
Revenue growth versus 2022
Three Months Ended
June 3, 2023
Constant
Organic
Net Revenue
F/X
Currency
M&A
Growth13
Hygiene, Health and Consumable
Adhesives
(7.6
)%
(4.8
)%
(2.8
)%
2.7
%
(5.5
)%
Engineering Adhesives
(10.2
)%
(2.8
)%
(7.4
)%
1.6
%
(9.0
)%
Construction Adhesives
(13.6
)%
(1.1
)%
(12.5
)%
1.7
%
(14.2
)%
Total H.B. Fuller
(9.6
)%
(3.4
)%
(6.2
)%
2.1
%
(8.3
)%
Revenue growth versus 2022
Six Months Ended
June 3, 2023
Constant
Organic
Net Revenue
F/X
Currency
M&A
Growth13
Hygiene, Health and Consumable
Adhesives
(4.8
)%
(5.5
)%
0.7
%
1.5
%
(0.8
)%
Engineering Adhesives
(8.2
)%
(3.6
)%
(4.6
)%
1.5
%
(6.1
)%
Construction Adhesives
(15.5
)%
(1.3
)%
(14.2
)%
5.0
%
(19.2
)%
Total H.B. Fuller
(7.7
)%
(4.1
)%
(3.6
)%
2.0
%
(5.6
)%
13 We use the term “organic revenue” to
refer to net revenue, excluding the effect of foreign currency
changes and acquisitions and divestitures. Organic growth reflects
adjustments for the impact of period-over-period changes in foreign
currency exchange rates on revenues 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)
June 3,
December 3,
2023
2022
Assets
Current assets:
Cash and cash equivalents
$
103,183
$
79,910
Trade receivables (net of allowances of
$11,512 and $10,939, as of June 3, 2023 and December 3, 2022,
respectively)
586,609
607,365
Inventories
499,275
491,781
Other current assets
128,885
120,319
Total current assets
1,317,952
1,299,375
Property, plant and equipment
1,673,871
1,579,738
Accumulated depreciation
(886,459
)
(846,071
)
Property, plant and equipment,
net
787,412
733,667
Goodwill
1,441,414
1,392,627
Other intangibles, net
721,564
702,092
Other assets
349,705
335,868
Total assets
$
4,618,047
$
4,463,629
Liabilities, non-controlling interest
and total equity
Current liabilities
Notes payable
$
30,307
$
28,860
Trade payables
436,376
460,669
Accrued compensation
66,749
108,328
Income taxes payable
28,229
18,530
Other accrued expenses
99,171
89,345
Total current liabilities
660,832
705,732
Long-term debt
1,852,036
1,736,256
Accrued pension liabilities
53,546
52,561
Other liabilities
368,476
358,286
Total liabilities
$
2,934,890
$
2,852,835
Commitments and contingencies (Note
13)
Equity
H.B. Fuller stockholders' equity:
Preferred stock (no shares outstanding)
shares authorized – 10,045,900
-
-
Common stock, par value $1.00 per share,
shares authorized – 160,000,000, shares outstanding – 53,859,908
and 53,676,576 as of June 3, 2023 and December 3, 2022,
respectively
$
53,860
$
53,677
Additional paid-in capital
280,120
266,491
Retained earnings
1,782,215
1,741,359
Accumulated other comprehensive loss
(433,705
)
(451,357
)
Total H.B. Fuller stockholders' equity
1,682,490
1,610,170
Non-controlling interest
667
624
Total equity
1,683,157
1,610,794
Total liabilities, non-controlling
interest and total equity
$
4,618,047
$
4,463,629
CONSOLIDATED STATEMENTS of
CASH FLOWS
H.B. Fuller Company and
Subsidiaries
(In thousands)
Six Months Ended
June 3, 2023
May 28, 2022
Cash flows from operating
activities:
Net income including non-controlling
interest
$
62,338
$
85,546
Adjustments to reconcile net income
including non-controlling interest to net cash (used in) provided
by operating activities:
Depreciation
39,163
36,333
Amortization
37,813
36,412
Deferred income taxes
(16,831
)
(4,961
)
Income from equity method investments, net
of dividends received
(2,338
)
(2,649
)
Debt issuance costs write-off
2,689
-
Loss on mark to market adjustment on
contingent consideration liability
(220
)
-
Loss on sale or disposal of assets
(42
)
(1,087
)
Share-based compensation
10,953
13,625
Pension and other post-retirement benefit
plan activity
(6,226
)
(9,720
)
Change in assets and liabilities, net of
effects of acquisitions:
Trade receivables, net
66,896
(35,491
)
Inventories
8,285
(95,413
)
Other assets
(36,951
)
(21,908
)
Trade payables
(20,301
)
27,237
Accrued compensation
(42,190
)
(40,448
)
Other accrued expenses
(9,988
)
4,402
Income taxes payable
10,025
(5,864
)
Other liabilities
7,866
(23,597
)
Other
(2,544
)
28,452
Net cash provided by (used in)
operating activities
108,397
(9,131
)
Cash flows from investing
activities:
Purchased property, plant and
equipment
(82,578
)
(69,055
)
Purchased businesses, net of cash
acquired
(103,744
)
(229,314
)
Proceeds from sale of property, plant and
equipment
2,623
1,269
Cash received from government grant
-
3,928
Net cash used in investing
activities
(183,699
)
(293,172
)
Cash flows from financing
activities:
Proceeds from issuance of long-term
debt
1,300,000
335,000
Repayment of long-term debt
(1,176,650
)
-
Payment of debt issuance costs
(10,214
)
(600
)
Net payment of notes payable
(239
)
3,565
Dividends paid
(21,258
)
(18,965
)
Contingent consideration payment
-
(5,000
)
Proceeds from stock options exercised
4,193
7,837
Repurchases of common stock
(2,552
)
(3,609
)
Net cash provided by financing
activities
93,280
318,228
Effect of exchange rate changes on cash
and cash equivalents
5,295
(9,562
)
Net change in cash and cash
equivalents
23,273
6,363
Cash and cash equivalents at beginning of
period
79,910
61,786
Cash and cash equivalents at end of
period
$
103,183
$
68,149
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230628382323/en/
Steven Brazones Investor Relations Contact 651-236-5060
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