Net income of $38 million; Adjusted EBITDA of
$156 million, up 13% year-on-year
Adjusted gross profit margin expanded 350 basis
points year-on-year to 30.0%
Adjusted EBITDA margin increased 270 basis
points year-on-year to 17.3%
Cash flow from operations increased $50 million
year-on-year to $108 million
H.B. Fuller Company (NYSE: FUL) today reported financial results
for its third quarter that ended September 2, 2023.
Third Quarter 2023 Noteworthy Items:
- Net revenue of $901 million, down 4.3% year-on-year; organic
revenue decreased 7.4% year-on-year, driven by lower volume;
- Gross margin was 29.3%; adjusted gross margin of 30.0%
increased 350 basis points year-on-year, driven by pricing and raw
material cost actions and restructuring benefits;
- Net income was $38 million; adjusted EBITDA was $156 million,
up 13% year-on-year, adjusted EBITDA margin expanded 270 basis
points year-on-year to 17.3%;
- Reported EPS (diluted) was $0.67; adjusted EPS (diluted) was
$1.06, flat versus the prior year, as strong operating income
growth was offset by higher interest expense and unfavorable
foreign currency exchange;
- Cash flow from operations in the third quarter improved $50
million year-on-year, or 87%, to $108 million.
Summary of Third Quarter 2023 Results:
The Company’s net revenue for the third quarter of fiscal 2023
was $901 million, down 4.3% versus the third quarter of fiscal
2022. Organic revenue declined 7.4% year-on-year, driven by lower
volume, offset somewhat by favorable pricing. Volume declined 8.0%,
driven by customer destocking actions, principally in Hygiene,
Health, and Consumable Adhesives, and generally slower industrial
demand across all three global business units. Volume development
in the third quarter improved significantly versus the second
quarter, when volume declined 14.2% year-on-year. Pricing actions
favorably impacted organic growth by 0.6 percentage points. Foreign
currency translation reduced net revenue growth by 1.7 percentage
points and acquisitions increased net revenue growth by 4.8
percentage points.
Gross profit in the third quarter of fiscal 2023 was $263
million. Adjusted gross profit was $270 million. Adjusted gross
profit margin of 30.0% increased 350 basis points year-on-year.
Pricing and raw material cost actions, restructuring benefits and
general cost reductions 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 $172
million in the third quarter of fiscal 2023 and adjusted SG&A
was $159 million, up slightly year-on-year. Continued cost
management and additional restructuring benefits offset inflation
in wages and services and the incremental SG&A costs associated
with acquisitions completed over the previous year.
Net income attributable to H.B. Fuller for the third quarter of
fiscal 2023 was $38 million, or $0.67 per diluted share. Adjusted
net income attributable to H.B. Fuller for the third quarter of
fiscal 2023 was $59 million. Adjusted EPS was $1.06 per diluted
share, essentially flat year-on-year as strong operating income
growth was offset by higher interest expense and unfavorable
foreign currency impacts, which reduced diluted earnings per share
by approximately $0.17 and $0.05, respectively, year-on-year in the
third quarter.
Adjusted EBITDA in the third quarter of fiscal 2023 was $156
million, up 13.1% year-on-year. Adjusted EBITDA margin increased
270 basis points year-on-year to 17.3%, driven by the combined
impact of pricing and raw material cost actions versus the prior
year’s third quarter, as well as restructuring savings, partially
offset by the impacts of lower volume and wage and other
inflation.
“In the third quarter we successfully drove a double-digit
increase in adjusted EBITDA year-on-year and increased adjusted
EBITDA margin meaningfully, demonstrating the strength of our
business model and ability to increase profitability regardless of
market conditions. We achieved profit growth despite weaker than
expected volumes, driven by a more adverse customer destocking
impact in Hygiene, Health, and Consumable Adhesives and lower
market demand in construction related markets,” said Celeste
Mastin, H.B. Fuller president and chief executive officer.
“The restructuring actions we announced in the first quarter in
anticipation of a challenging volume environment were timely and
prudent. During the third quarter, we increased the scope of these
actions to deliver additional cost savings and enhance our overall
operating efficiency. These actions, plus ongoing execution on
price and raw material management, enabled us to drive adjusted
EBITDA higher despite temporary volume weakness that exceeds true
underlying demand.
“Looking ahead, we are encouraged that the unusual global
customer destocking phenomenon that has taken place across nearly
all end markets is abating. Customer destocking largely ran its
course in Engineering Adhesives and Construction Adhesives and
peaked for Hygiene, Health, and Consumable Adhesives during the
third quarter. As demand conditions normalize, we expect the
continued strength of our innovation pipeline, coupled with the
operating leverage created through our restructuring actions, to
drive significant value for our business in 2024 and beyond.”
Balance Sheet and Cash Flow Items:
Net debt at the end of the third quarter of fiscal 2023 was
$1,790 million, up $11 million sequentially versus the second
quarter and down $67 million year-on-year. The sequential increase
in net debt was driven by acquisition activity during the third
quarter, offset by improved cash flow from operations.
Cash flow from operations in the third quarter was $108 million,
up $50 million year-on-year, reflecting improving margins and lower
net working capital requirements.
Fiscal 2023 Outlook:
- Net revenue for fiscal 2023 is now expected to be in the range
of $3.50 billion to $3.55 billion with organic revenue down 4.5% to
5.5% versus fiscal 2022, reflecting lower volume expectations due
to customer destocking actions and slower than anticipated
underlying demand conditions;
- Adjusted EBITDA for fiscal 2023 is now expected to be in the
range of $580 million to $590 million, reflecting lower volume
expectations more than offset by higher margins, contributions from
acquisitions, and restructuring benefits, equating to growth of
approximately 9% to 11% versus fiscal year 2022;
- Adjusted EPS (diluted) is now expected to be in the range of
$3.80 to $3.90, equating to a range of down 2.5% to 5.0%
year-on-year;
- We now expect actions from the previously announced, and
subsequently expanded, strategic restructuring to generate between
$40 and $45 million in annual pre-tax run-rate cost savings, up
from our original estimate of $30 to $35 million in annual pre-tax
run-rate savings. This is in addition to approximately $20 million
of pre-tax run-rate savings associated with the Beardow Adams
integration, which was announced during the third quarter.
Conference Call:
The Company will hold a conference call on September 28, 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 September 28, 2023, to 10:59 p.m.
CT on October 5, 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
Three Months Ended
September 2, 2023
Percent of
Net Revenue
August 27, 2022
Percent of
Net Revenue
Net revenue
$
900,634
100.0
%
$
941,230
100.0
%
Cost of sales
(637,162
)
(70.7
)%
(692,066
)
(73.5
)%
Gross profit
263,472
29.3
%
249,164
26.5
%
Selling, general and administrative
expenses
(172,153
)
(19.1
)%
(161,210
)
(17.1
)%
Other income, net
1,555
0.2
%
6,559
0.7
%
Interest expense
(35,105
)
(3.9
)%
(23,450
)
(2.5
)%
Interest income
1,128
0.1
%
2,139
0.2
%
Income before income taxes and income from
equity method investments
58,897
6.5
%
73,202
7.8
%
Income taxes
(22,231
)
(2.5
)%
(28,259
)
(3.0
)%
Income from equity method investments
984
0.1
%
1,587
0.2
%
Net income including non-controlling
interest
37,650
4.2
%
46,530
4.9
%
Net income attributable to non-controlling
interest
(23
)
(0.0
)%
(33
)
(0.0
)%
Net income attributable to H.B. Fuller
$
37,627
4.2
%
$
46,497
4.9
%
Basic income per common share attributable
to H.B. Fuller
$
0.69
$
0.87
Diluted income per common share
attributable to H.B. Fuller
$
0.67
$
0.84
Weighted-average common shares
outstanding:
Basic
54,394
53,644
Diluted
56,033
55,130
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)
Nine Months Ended
Nine Months Ended
September 2, 2023
Percent of
Net Revenue
August 27, 2022
Percent of Net Revenue
Net revenue
$
2,608,055
100.0
%
$
2,790,969
100.0
%
Cost of sales
(1,873,000
)
(71.8
)%
(2,075,392
)
(74.4
)%
Gross profit
735,055
28.2
%
715,577
25.6
%
Selling, general and administrative
expenses
(493,320
)
(18.9
)%
(483,109
)
(17.3
)%
Other income, net
4,764
0.2
%
12,701
0.5
%
Interest expense
(101,305
)
(3.9
)%
(61,475
)
(2.2
)%
Interest income
2,726
0.1
%
6,170
0.2
%
Income before income taxes and income from
equity method investments
147,920
5.7
%
189,864
6.8
%
Income taxes
(51,255
)
(2.0
)%
(62,023
)
(2.2
)%
Income from equity method investments
3,322
0.1
%
4,236
0.2
%
Net income including non-controlling
interest
99,987
3.8
%
132,077
4.7
%
Net income attributable to non-controlling
interest
(71
)
(0.0
)%
(70
)
(0.0
)%
Net income attributable to H.B. Fuller
$
99,916
3.8
%
$
132,007
4.7
%
Basic income per common share attributable
to H.B. Fuller
$
1.84
$
2.47
Diluted income per common share
attributable to H.B. Fuller
$
1.79
$
2.39
Weighted-average common shares
outstanding:
Basic
54,279
53,498
Diluted
55,890
55,201
Dividends declared per common share
$
0.600
$
0.548
H.B. FULLER COMPANY AND
SUBSIDIARIES
REGULATION G
RECONCILIATION
In thousands, except per share
amounts (unaudited)
Three Months Ended
Nine Months Ended
September 2,
August 27,
September 2,
August 27,
2023
2022
2023
2022
Net income attributable to H.B. Fuller
$
37,627
$
46,497
$
99,916
$
132,007
Adjustments:
Acquisition project costs1
6,480
1,138
11,634
9,008
Organizational realignment2
10,421
595
19,055
4,915
Royal restructuring and integration3
-
196
-
1,007
Project One
2,734
2,502
7,587
7,559
Other4
503
711
4,098
8,267
Discrete tax items5
6,243
6,449
9,131
7,697
Income tax effect on adjustments6
(4,875
)
251
(9,447
)
(6,786
)
Adjusted net income attributable to H.B.
Fuller7
59,133
58,339
141,974
163,674
Add:
Interest expense
35,105
23,450
98,615
61,501
Interest income
(1,128
)
(2,139
)
(2,726
)
(6,181
)
Adjusted Income taxes
20,862
21,559
51,569
61,112
Depreciation and Amortization expense8
41,826
36,491
118,803
108,925
Adjusted EBITDA7
155,798
137,700
408,235
389,031
Diluted Shares
56,033
55,130
55,890
55,201
Adjusted diluted income per common share
attributable to H.B. Fuller7
$
1.06
$
1.06
$
2.54
$
2.97
Revenue
$
900,634
$
941,230
$
2,608,055
$
2,790,969
Adjusted EBITDA margin7
17.3
%
14.6
%
15.7
%
13.9
%
1 Acquisition project costs include costs
related to integrating and accounting for acquisitions.
2 Organizational realignment includes
costs incurred as a direct result of the organizational realignment
program, including compensation for employees supporting the
program, consulting expense and operational inefficiencies related
to the closure of production facilities and consolidation of
business activities.
3 Royal restructuring and integration
program includes costs incurred as a direct result of the Royal
restructuring and integration program including compensation for
employees supporting the program, consulting expense and
operational inefficiencies related to the closure of production
facilities and consolidation of business activities.
4 Other expenses for the nine months ended
August 27, 2022, include a $3.3 million non-cash charge related to
the wind down and settlement of the Company’s Canadian defined
benefit pension plan, $1.3 million of hedging costs related to the
Russian ruble devaluation driven by the war in Ukraine, $1.2
million of transactional tax expense associated with an audit
settlement, other expenses for COVID-19 testing, vaccinations and
exceptional medical claims, and non-cash gains and losses related
to legal entity consolidations.
5 Discrete tax items 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 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 ($348) for
both the three and nine months ended September 2, 2023,
respectively and ($148) and ($459) for the three and nine months
ended August 27, 2022, respectively.
H.B. FULLER COMPANY AND
SUBSIDIARIES
SEGMENT FINANCIAL
INFORMATION
In thousands
(unaudited)
Three Months Ended
Nine Months Ended
September 2,
August 27,
September 2,
August 27,
2023
2022
2023
2022
Net Revenue:
Hygiene, Health and Consumable
Adhesives
$
402,388
$
424,978
$
1,190,402
$
1,252,405
Engineering Adhesives
365,862
378,264
1,063,009
1,137,587
Construction Adhesives
132,384
137,988
354,644
400,977
Corporate unallocated
-
-
-
-
Total H.B. Fuller
$
900,634
$
941,230
$
2,608,055
$
2,790,969
Segment Operating Income
(Loss):
Hygiene, Health and Consumable
Adhesives
$
52,737
$
47,470
$
149,474
$
122,950
Engineering Adhesives
52,931
39,776
129,806
115,266
Construction Adhesives
5,853
6,391
2,189
22,032
Corporate unallocated
(20,202
)
(5,683
)
(39,734
)
(27,780
)
Total H.B. Fuller
$
91,319
$
87,954
$
241,735
$
232,468
Adjusted EBITDA7
Hygiene, Health and Consumable
Adhesives
$
69,172
$
61,834
$
194,125
$
166,304
Engineering Adhesives
70,723
56,061
181,758
165,461
Construction Adhesives
18,519
19,619
39,584
59,616
Corporate unallocated
(2,616
)
186
(7,232
)
(2,350
)
Total H.B. Fuller
$
155,798
$
137,700
$
408,235
$
389,031
Adjusted EBITDA Margin7
Hygiene, Health and Consumable
Adhesives
17.2
%
14.5
%
16.3
%
13.3
%
Engineering Adhesives
19.3
%
14.8
%
17.1
%
14.5
%
Construction Adhesives
14.0
%
14.2
%
11.2
%
14.9
%
Corporate unallocated
NMP
NMP
NMP
NMP
Total H.B. Fuller
17.3
%
14.6
%
15.7
%
13.9
%
NMP = non-meaningful percentage
H.B. FULLER COMPANY AND
SUBSIDIARIES
REGULATION G
RECONCILIATION
In thousands, except per share
amounts (unaudited)
Three Months Ended
Nine Months Ended
September 2,
August 27,
September 2,
August 27,
2023
2022
2023
2022
Income before income taxes and income from
equity method investments
$
58,897
$
73,202
$
147,920
$
189,864
Adjustments:
Acquisition project costs1
6,480
1,138
11,634
9,008
Organizational realignment2
10,421
595
19,055
4,915
Royal restructuring and integration3
-
196
-
1,007
Project One
2,734
2,502
7,587
7,559
Other4
503
711
4,098
8,267
Adjusted income before income taxes and
income from equity method investments9
$
79,035
$
78,344
$
190,294
$
220,620
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
Nine Months Ended
September 2,
August 27,
September 2,
August 27,
2023
2022
2023
2022
Income Taxes
$
(22,231
)
$
(28,259
)
$
(51,255
)
$
(62,023
)
Adjustments:
Acquisition project costs1
(1,569
)
55
(2,620
)
(2,154
)
Organizational realignment2
(2,523
)
29
(4,247
)
(1,140
)
Royal restructuring and integration3
-
10
-
(213
)
Project One
(662
)
122
(1,655
)
(1,284
)
Discrete tax items5 and Other4
6,123
6,484
8,208
5,702
Adjusted income taxes10
$
(20,862
)
$
(21,559
)
$
(51,569
)
$
(61,112
)
Adjusted income before income taxes and
income from equity method investments
$
79,035
$
78,344
$
190,294
$
220,620
Adjusted effective income tax rate10
26.4
%
27.5
%
27.1
%
27.7
%
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
Nine Months Ended
September 2,
August 27,
September 2,
August 27,
2023
2022
2023
2022
Net revenue
$
900,634
$
941,230
$
2,608,055
$
2,790,969
Gross profit
$
263,472
$
249,164
$
735,055
$
715,577
Gross profit margin
29.3
%
26.5
%
28.2
%
25.6
%
Adjustments:
Acquisition project costs1
1,516
(104
)
2,617
320
Organizational realignment2
4,961
214
9,972
1,997
Royal restructuring and integration3
-
5
-
377
Project ONE
-
-
-
6
Other4
318
533
479
1,358
Adjusted gross profit11
$
270,267
$
249,812
$
748,123
$
719,635
Adjusted gross profit margin11
30.0
%
26.5
%
28.7
%
25.8
%
11 Adjusted gross profit and adjusted
gross profit margin are non-GAAP financial measures. Adjusted gross
profit and adjusted gross profit margin is defined as gross profit
and gross profit margin excluding the specific adjustments shown
above. The table above provides a reconciliation of adjusted gross
profit and gross profit margin to gross profit and gross profit
margin, the most directly comparable financial measure determined
and reported in accordance with U.S. GAAP.
H.B. FULLER COMPANY AND
SUBSIDIARIES
REGULATION G
RECONCILIATION
In thousands
(unaudited)
Three Months Ended
Nine Months Ended
September 2,
August 27,
September 2,
August 27,
2023
2022
2023
2022
Selling, general and administrative
expenses
$
(172,153
)
$
(161,210
)
$
(493,320
)
$
(483,109
)
Adjustments:
Acquisition project costs1
5,066
1,241
9,119
8,688
Organizational realignment2
5,460
630
9,083
4,134
Royal restructuring and integration3
-
191
-
656
Project ONE
2,734
2,502
7,587
7,553
Other4
149
471
880
2,691
Adjusted selling, general and
administrative expenses12
$
(158,744
)
$
(156,175
)
$
(466,651
)
$
(459,387
)
12 Adjusted selling, general and
administrative expenses is a non-GAAP financial measure. Adjusted
selling, general and administrative expenses is defined as selling,
general and administrative expenses excluding the specific
adjustments shown above. The table above provides a reconciliation
of adjusted selling, general and administrative expenses to
selling, general and administrative expenses, the most directly
comparable financial measure determined and reported in accordance
with U.S. GAAP.
H.B. FULLER COMPANY AND
SUBSIDIARIES
REGULATION G
RECONCILIATION
In thousands
(unaudited)
Hygiene, Health
Three Months Ended:
and Consumable
Engineering
Construction
Corporate
H.B. Fuller
September 2, 2023
Adhesives
Adhesives
Adhesives
Total
Unallocated
Consolidated
Net income attributable to H.B. Fuller
$
54,568
$
54,256
$
7,764
$
116,588
$
(78,961
)
$
37,627
Adjustments:
Acquisition project costs1
-
-
-
-
6,480
6,480
Organizational realignment2
-
-
-
-
10,421
10,421
Royal Restructuring and integration3
-
-
-
-
-
-
Project One
-
-
-
-
2,734
2,734
Other4
-
-
-
-
503
503
Discrete tax items5
-
-
-
-
6,243
6,243
Income tax effect on adjustments6
-
-
-
-
(4,875
)
(4,875
)
Adjusted net income attributable to H.B.
Fuller7
54,568
54,256
7,764
116,588
(57,455
)
59,133
Add:
Interest expense
-
-
-
-
35,105
35,105
Interest income
-
-
-
-
(1,128
)
(1,128
)
Adjusted Income taxes
-
-
-
-
20,862
20,862
Depreciation and amortization expense8
14,604
16,467
10,755
41,826
-
41,826
Adjusted EBITDA7
$
69,172
$
70,723
$
18,519
$
158,414
$
(2,616
)
$
155,798
Revenue
$
402,388
$
365,862
$
132,384
$
900,634
-
$
900,634
Adjusted EBITDA Margin7
17.2
%
19.3
%
14.0
%
17.6
%
NMP
17.3
%
Hygiene, Health
Nine Months Ended:
and Consumable
Engineering
Construction
Corporate
H.B. Fuller
September 2, 2023
Adhesives
Adhesives
Adhesives
Total
Unallocated
Consolidated
Net income attributable to H.B. Fuller
$
154,966
$
133,778
$
7,920
$
296,664
$
(196,748
)
$
99,916
Adjustments:
Acquisition project costs1
-
-
-
-
11,634
11,634
Organizational realignment2
-
-
-
-
19,055
19,055
Project One
-
-
-
-
7,587
7,587
Other4
-
-
-
-
4,098
4,098
Discrete tax items5
-
-
-
-
9,131
9,131
Income tax effect on adjustments6
-
-
-
-
(9,447
)
(9,447
)
Adjusted net income attributable to H.B.
Fuller7
154,966
133,778
7,920
296,664
(154,690
)
141,974
Add:
Interest expense
-
-
-
-
98,615
98,615
Interest income
-
-
-
-
(2,726
)
(2,726
)
Adjusted Income taxes
-
-
-
-
51,569
51,569
Depreciation and amortization expense8
39,159
47,980
31,664
118,803
-
118,803
Adjusted EBITDA7
$
194,125
$
181,758
$
39,584
$
415,467
$
(7,232
)
$
408,235
Revenue
$
1,190,402
$
1.063,009
$
354,644
$
2,608,055
-
$
2,608,055
Adjusted EBITDA Margin7
16.3
%
17.1
%
11.2
%
15.9
%
NMP
15.7
%
Note: Adjusted EBITDA is a non-GAAP
financial measure. The table above provides a reconciliation of
adjusted EBITDA for each segment to net income attributable to H.B.
Fuller for each segment, the most directly comparable financial
measure determined and reported in accordance with U.S. GAAP.
NMP = Non-meaningful percentage
H.B. FULLER COMPANY AND
SUBSIDIARIES
REGULATION G
RECONCILIATION
In thousands
(unaudited)
Hygiene, Health
Three Months Ended:
and Consumable
Engineering
Construction
Corporate
H.B. Fuller
August 27, 2022
Adhesives
Adhesives
Adhesives
Total
Unallocated
Consolidated
Net income attributable to H.B. Fuller
$
50,378
$
41,927
$
8,718
$
101,023
$
(54,526
)
$
46,497
Adjustments:
Acquisition project costs1
-
-
-
-
1,138
1,138
Organizational realignment2
-
-
-
-
595
595
Royal Restructuring and integration3
-
-
-
-
196
196
Project One
-
-
-
-
2,502
2,502
Other4
-
-
-
-
711
711
Discrete tax items5
-
-
-
-
6,449
6,449
Income tax effect on adjustments6
-
-
-
-
251
251
Adjusted net income attributable to H.B.
Fuller7
50,378
41,927
8,718
101,023
(42,684
)
58,339
Add:
Interest expense
-
-
-
-
23,450
23,450
Interest income
-
-
-
-
(2,139
)
(2,139
)
Adjusted Income taxes
-
-
-
-
21,559
21,559
Depreciation and amortization expense8
11,456
14,134
10,901
36,491
-
36,491
Adjusted EBITDA7
$
61,834
$
56,061
$
19,619
$
137,514
$
186
$
137,700
Revenue
$
424,978
$
378,264
$
137,988
$
941,230
-
$
941,230
Adjusted EBITDA Margin7
14.5
%
14.8
%
14.2
%
14.6
%
NMP
14.6
%
Hygiene, Health
Nine Months Ended:
and Consumable
Engineering
Construction
Corporate
H.B. Fuller
August 27, 2022
Adhesives
Adhesives
Adhesives
Total
Unallocated
Consolidated
Net income attributable to H.B. Fuller
$
131,702
$
121,741
$
29,013
$
282,456
$
(150,449
)
$
132,007
Adjustments:
Acquisition project costs1
-
-
-
-
9,008
9,008
Organizational realignment2
-
-
-
-
4,915
4,915
Royal Restructuring and integration3
-
-
-
-
1,007
1,007
Project One
-
-
-
-
7,559
7,559
Other4
-
-
-
-
8,267
8,267
Discrete tax items5
-
-
-
-
7,697
7,697
Income tax effect on adjustments6
-
-
-
-
(6,786
)
(6,786
)
Adjusted net income attributable to H.B.
Fuller7
131,702
121,741
29,013
282,456
(118,782
)
163,674
Add:
Interest expense
-
-
-
-
61,501
61,501
Interest income
-
-
-
-
(6,181
)
(6,181
)
Adjusted Income taxes
-
-
-
-
61,112
61,112
Depreciation and amortization expense8
34,602
43,720
30,603
108,925
-
108,925
Adjusted EBITDA7
$
166,304
$
165,461
$
59,616
$
391,381
$
(2,350
)
$
389,031
Revenue
$
1,252,405
$
1,137,587
$
400,977
$
2,790,969
-
$
2,790,969
Adjusted EBITDA Margin7
13.3
%
14.5
%
14.9
%
14.0
%
NMP
13.9
%
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
September 2, 2023
September 2, 2023
Price
0.6
%
4.7
%
Volume
(8.0
)%
(11.1
)%
Organic Growth13
(7.4
)%
(6.4
)%
M&A
4.8
%
3.0
%
Constant currency
(2.6
)%
(3.4
)%
F/X
(1.7
)%
(3.2
)%
Total H.B. Fuller Net Revenue Decline
(4.3
)%
(6.6
)%
Revenue growth versus 2022
Three Months Ended
September 2, 2023
Organic
Net Revenue
F/X
Constant Currency
M&A
Growth 13
Hygiene, Health and Consumable
Adhesives
(5.3
)%
(2.4
)%
(2.9
)%
7.6
%
(10.5
)%
Engineering Adhesives
(3.3
)%
(1.4
)%
(1.9
)%
1.4
%
(3.3
)%
Construction Adhesives
(4.1
)%
(0.1
)%
(4.0
)%
5.4
%
(9.4
)%
Total H.B. Fuller
(4.3
)%
(1.7
)%
(2.6
)%
4.8
%
(7.4
)%
Revenue growth versus 2022
Nine Months Ended
September 2, 2023
Organic
Net Revenue
F/X
Constant Currency
M&A
Growth 13
Hygiene, Health and Consumable
Adhesives
(5.0
)%
(4.4
)%
(0.6
)%
3.6
%
(4.2
)%
Engineering Adhesives
(6.6
)%
(2.8
)%
(3.8
)%
1.5
%
(5.3
)%
Construction Adhesives
(11.6
)%
(0.7
)%
(10.9
)%
5.1
%
(16.0
)%
Total H.B. Fuller
(6.6
)%
(3.2
)%
(3.4
)%
3.0
%
(6.4
)%
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)
September 2,
December 3,
2023
2022
Assets
Current assets:
Cash and cash equivalents
$
94,934
$
79,910
Trade receivables (net of allowances of
$12,458 and $10,939, as of September 2, 2023 and December 3, 2022,
respectively)
576,060
607,365
Inventories
472,641
491,781
Other current assets
97,756
120,319
Total current assets
1,241,391
1,299,375
Property, plant and equipment
1,709,191
1,579,738
Accumulated depreciation
(907,895
)
(846,071
)
Property, plant and equipment,
net
801,296
733,667
Goodwill
1,490,535
1,392,627
Other intangibles, net
746,521
702,092
Other assets
380,165
335,868
Total assets
$
4,659,908
$
4,463,629
Liabilities, non-controlling interest
and total equity
Current liabilities
Notes payable
$
12,553
$
28,860
Trade payables
394,914
460,669
Accrued compensation
75,035
108,328
Income taxes payable
33,007
18,530
Other accrued expenses
102,837
89,345
Total current liabilities
618,346
705,732
Long-term debt
1,872,468
1,736,256
Accrued pension liabilities
54,661
52,561
Other liabilities
387,307
358,286
Total liabilities
$
2,932,782
$
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 – 54,016,374
and 53,676,576 as of September 2, 2023 and December 3, 2022,
respectively
$
54,016
$
53,677
Additional paid-in capital
294,035
266,491
Retained earnings
1,808,687
1,741,359
Accumulated other comprehensive loss
(430,295
)
(451,357
)
Total H.B. Fuller stockholders' equity
1,726,443
1,610,170
Non-controlling interest
683
624
Total equity
1,727,126
1,610,794
Total liabilities, non-controlling
interest and total equity
$
4,659,908
$
4,463,629
CONSOLIDATED STATEMENTS of
CASH FLOWS
H.B. Fuller Company and
Subsidiaries
(In thousands)
Nine Months Ended
September 2, 2023
August 27, 2022
Cash flows from operating
activities:
Net income including non-controlling
interest
$
99,987
$
132,077
Adjustments to reconcile net income
including non-controlling interest to net cash provided by
operating activities:
Depreciation
60,518
54,297
Amortization
58,633
55,088
Deferred income taxes
(30,064
)
(4,968
)
Income from equity method investments, net
of dividends received
260
1,420
Debt issuance costs write-off
2,689
-
Loss on fair value adjustment on
contingent consideration liability
2,893
-
Gain on sale or disposal of assets
(78
)
(1,130
)
Share-based compensation
16,279
20,358
Pension and other post-retirement benefit
plan activity
(8,890
)
(15,324
)
Change in assets and liabilities, net of
effects of acquisitions:
Trade receivables, net
79,495
(51,629
)
Inventories
38,212
(112,390
)
Other assets
(30,901
)
(40,329
)
Trade payables
(74,443
)
17,381
Accrued compensation
(33,796
)
(17,275
)
Other accrued expenses
(6,992
)
1,614
Income taxes payable
24,461
10,201
Other liabilities
12,408
(35,940
)
Other
6,023
35,246
Net cash provided by operating
activities
216,696
48,697
Cash flows from investing
activities:
Purchased property, plant and
equipment
(109,545
)
(98,352
)
Purchased businesses, net of cash
acquired
(194,248
)
(242,870
)
Proceeds from sale of property, plant and
equipment
4,257
1,281
Cash received from government grant
-
3,928
Net cash used in investing
activities
(299,536
)
(336,013
)
Cash flows from financing
activities:
Proceeds from issuance of long-term
debt
1,333,000
335,000
Repayment of long-term debt
(1,184,900
)
(15,000
)
Payment of debt issuance costs
(10,214
)
(600
)
Net payment of notes payable
(18,000
)
6,707
Dividends paid
(32,319
)
(29,067
)
Contingent consideration payment
-
(5,000
)
Proceeds from stock options exercised
11,251
13,522
Repurchases of common stock
(2,560
)
(3,885
)
Net cash provided by financing
activities
96,258
301,677
Effect of exchange rate changes on cash
and cash equivalents
1,608
(15,439
)
Net change in cash and cash
equivalents
15,024
(1,078
)
Cash and cash equivalents at beginning of
period
79,910
61,786
Cash and cash equivalents at end of
period
$
94,934
$
60,708
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230927227415/en/
Steven Brazones Investor Relations Contact 651-236-5060
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