FULLER H B CO - FORM 8-K - EX-99.1 - EXHIBIT 99.1

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8-K - FORM 8-K - FULLER H B CO	ful20160323_8k.htm

Worldwide Headquarters

1200 Willow Lake Boulevard

St. Paul, Minnesota 55110-5101

Exhibit 99.1

Maximillian Marcy

Investor Relations Contact

651-236-5062

NEWS

For Immediate Release

March 23, 2016

H.B. Fuller Reports First Quarter 2016 Results

First Quarter Adjusted Diluted EPS $0.43¹;

First Quarter Diluted EPS $0.37

ST. PAUL, Minn. – H.B. Fuller Company (NYSE: FUL) today reported financial results for the first quarter that ended February 27, 2016.

Items of Note for the First Quarter of 2016:

■

Constant currency revenue increased 5.3 percent compared to the prior year, led by solid growth in Engineering Adhesives along with growth in EIMEA, Construction Products and Asia Pacific;

■

Gross profit margin was 29.0 percent, an improvement of 430 basis points versus the prior year’s first quarter;

■

Adjusted EBITDA margin² was 12.4 percent; adjusted EBITDA margin in EIMEA segment was up 560 basis points relative to same period last year;

■

Adjusted diluted earnings per share of $0.43¹, up 43 percent versus last year’s first quarter.

First Quarter 2016 Results:

Net income for the first quarter of 2016 was $18.9 million, or $0.37 per diluted share, versus net income of $9.7 million, or $0.19 per diluted share, in last year’s first quarter. Adjusted diluted earnings per share in the first quarter of 2016 were $0.43¹, up 43 percent versus the prior year’s adjusted result of $0.30¹.

Net revenue for the first quarter of 2016 was $474.3 million, up 0.8 percent versus the first quarter of 2015. Higher volume positively impacted net revenue growth by 5.8 percentage points. Lower average selling prices and foreign currency translation negatively impacted net revenue growth by 0.5 and 4.5 percentage points, respectively. Constant currency revenue grew by 5.3 percent year-over-year.

During the quarter, we continued to improve margins through effective management of raw material costs and end user pricing as well as driving efficiencies in our supply chain and operations. These factors, combined with mix improvement, contributed to a 430 basis point increase in gross profit margin. We recorded unusually high foreign currency losses in the quarter, almost entirely related to the devaluation of the Argentine peso. The relevant underlying exposure in Argentina has now been substantially eliminated.

As we announced previously, we have changed our operating segment structure to better align our organization to the most significant growth opportunities. The primary change is the introduction of a new operating segment which we call Engineering Adhesives. This new segment includes our electronic materials, Tonsan engineering adhesives and automotive business, all of which have demonstrated strong growth and profit performance. The new segment alignment allows us to better allocate resources and accelerate our profit and growth plans. The attached schedules provide segment financial performance metrics for the newly defined segments. In addition, a pro-forma schedule is included which shows the results as they would have been reported under the previous segment reporting structure.

”We are off to a solid start to our 2016 fiscal year,” said Jim Owens, H.B. Fuller president and chief executive officer. “Our 2020 strategic plan identified specific areas of profitable growth and differential management of our EBITDA margins as key drivers. This quarter’s performance aligned with our strategy as we delivered solid organic growth and very strong margin improvement in our targeted segments. Our new engineering adhesives segment delivered growth and margin improvement as expected and our geographical segments all showed solid EBITDA margin performance. Our efforts resulted in over a 40 percent increase in adjusted diluted EPS versus last year’s first quarter and a first quarter EBITDA margin well above historical levels.”

Balance Sheet and Cash Flow:

At the end of the first quarter of 2016, we had cash totaling $127 million and total debt of $723 million. This compares to fourth quarter 2015 cash and debt levels of $119 million and $723 million, respectively. Sequentially, net debt was down by $7 million. Cash flow from operations was positive $43 million in the first quarter, reflecting strong net income and normal seasonal patterns. Capital expenditures were $23 million in the first quarter.

Fiscal 2016 Outlook:

Our financial performance guidance for 2016 is unchanged relative to the original guidance we provided in January of this year. Constant currency growth is expected to be around 4 percent for 2016 versus the 2015 fiscal year. The constant currency growth rate was higher in the first quarter because we recorded a full quarter of Tonsan revenue this year and only one month last year. We expect to generate approximately $290 million of EBITDA in 2016, reflecting a full-year EBITDA margin of about 14 percent. Our core tax rate, excluding the impact of discrete items, is expected to be 33 percent. We plan to invest $60 million in capital items in 2016. We are maintaining our adjusted diluted EPS plan for the 2016 fiscal year of $2.40 to $2.60.

Conference Call:

The Company will host an investor conference call to discuss first quarter 2016 results on Thursday, March 24, 2016, at 9:30 a.m. Central U.S. time (10:30 a.m. Eastern U.S. time). The conference call audio and accompanying presentation slides will be available to all interested parties via a simultaneous webcast at www.hbfuller.com under the Investor Relations section. The event is scheduled to last one hour. For those unable to listen live, an audio replay of the event along with the accompanying presentation will be archived on the Company’s website.

Regulation G:

The information presented in this earnings release regarding segment operating income, adjusted diluted earnings per share and 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. 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 tables below.

About H.B. Fuller Company:

For over 125 years, 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 2015 net revenue of $2.1 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 packaging, hygiene, general assembly, electronic and assembly materials, paper converting, woodworking, construction, automotive and consumer businesses. And our promise to our people connects them with opportunities to innovate and thrive. For more information, visit us at www.hbfuller.com and subscribe to our blog.

Safe Harbor for Forward-Looking Statements:

Certain statements in this document 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 Company's ability to effectively integrate and operate acquired businesses; 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. 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 28, 2015. 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, management's best estimates 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)

	13 Weeks Ended			Percent of			13 Weeks Ended			Percent of
	February 27, 2016			Net Revenue			February 28, 2015			Net Revenue
Net revenue	$	474,326			100.0	%	$	470,661			100.0	%
Cost of sales		(336,721	)		(71.0	%)		(354,455	)		(75.3	%)
Gross profit		137,605			29.0	%		116,206			24.7	%

Selling, general and administrative expenses		(99,767	)		(21.0	%)		(94,833	)		(20.1	%)
Special charges, net		(413	)		(0.1	%)		(2,361	)		(0.5	%)
Other income (expense), net		(5,082	)		(1.1	%)		363			0.1	%
Interest expense		(6,308	)		(1.3	%)		(6,102	)		(1.3	%)
Income before income taxes and income from equity method investments		26,035			5.5	%		13,273			2.8	%

Income taxes		(8,760	)		(1.8	%)		(4,769	)		(1.0	%)

Income from equity method investments		1,692			0.4	%		1,291			0.3	%
Net income including non-controlling interests		18,967			4.0	%		9,795			2.1	%

Net income attributable to non-controlling interests		(49	)		(0.0	%)		(85	)		(0.0	%)
Net income attributable to H.B. Fuller	$	18,918			4.0	%	$	9,710			2.1	%


Basic income per common share attributable to H.B. Fuller	$	0.38					$	0.19


Diluted income per common share attributable to H.B. Fuller	$	0.37					$	0.19

Weighted-average common shares outstanding:
Basic		49,958						50,188
Diluted		50,995						51,379

Dividends declared per common share	$	0.13					$	0.12

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

	February 27, 2016		November 28, 2015		February 28, 2015
Cash & cash equivalents	$	126,771	$	119,168	$	71,574
Trade accounts receivable, net		335,403		364,704		335,536
Inventories		264,837		248,504		275,038
Trade payables		162,513		177,864		195,000
Total assets		2,023,336		2,042,252		2,097,472
Total debt		723,374		722,863		763,570

H.B. FULLER COMPANY AND SUBSIDIARIES

REGULATION G RECONCILIATION

In thousands, except per share amounts (unaudited)

					% of						Adjusted			% of
		13 Weeks Ended			Net						13 Weeks Ended			Net
		February 27, 2016			Revenue			Adjustments			February 27, 2016			Revenue
Net revenue		$	474,326			100.0	%	$	-		$	474,326			100.0	%
Cost of sales			(336,721	)		(71.0	%)		(1,891	)		(334,830	)		(70.6	%)
Gross profit			137,605			29.0	%		(1,891	)		139,496			29.4	%

Selling, general and administrative expenses			(99,767	)		(21.0	%)		(732	)		(99,035	)		(20.9	%)

Acquisition and transformation related costs	(105)
Workforce reduction costs	1
Facility exit costs	(273)
Other related costs	(36)
Special charges, net			(413	)		(0.1	%)		(413	)		-			0.0	%

Other income (expense), net			(5,082	)		(1.1	%)		-			(5,082	)		(1.1	%)
Interest expense			(6,308	)		(1.3	%)		(75	)		(6,233	)		(1.3	%)
Income before income taxes and income from equity method investments			26,035			5.5	%		(3,111	)		29,146			6.1	%

Income taxes			(8,760	)		(1.8	%)		229			(8,989	)		(1.9	%)
- Effective tax rate			33.6	%					7.4	%		30.8	%

Income from equity method investments			1,692			0.4	%		-			1,692			0.4	%
Net income including non-controlling interests			18,967			4.0	%		(2,882	)		21,849			4.6	%

Net income attributable to non-controlling interests			(49	)		(0.0%	)		-			(49	)		(0.0	%)
Net income attributable to H.B. Fuller		$	18,918			4.0	%	$	(2,882	)	$	21,800			4.6	%

Basic income (loss) per common share attributable to H.B. Fuller		$	0.38					$	(0.06	)	$	0.44

Diluted income (loss) per common share attributable to H.B. Fuller		$	0.37					$	(0.06	)	$	0.43 ¹

Weighted-average common shares outstanding:
Basic			49,958						49,958			49,958
Diluted			50,995						50,995			50,995

H.B. FULLER COMPANY AND SUBSIDIARIES

REGULATION G RECONCILIATION

In thousands, except per share amounts (unaudited)

					% of						Adjusted			% of
		13 Weeks Ended			Net						13 Weeks Ended			Net
		February 28, 2015			Revenue			Adjustments			February 28, 2015			Revenue
Net revenue		$	470,661			100.0	%	$	-		$	470,661			100.0	%
Cost of sales			(354,455	)		(75.3%	)		(3,150	)		(351,305	)		(74.6%	)
Gross profit			116,206			24.7	%		(3,150	)		119,356			25.4	%

Selling, general and administrative expenses			(94,833	)		(20.1%	)		(838	)		(93,995	)		(20.0%	)

Acquisition and transformation related costs	(472)
Workforce reduction costs	(56)
Facility exit costs	(1,529)
Other related costs	(304)
Special charges, net			(2,361	)		(0.5%	)		(2,361	)		-			0.0	%

Other income (expense), net			363			0.1	%		-			363			0.1	%
Interest expense			(6,102	)		(1.3%	)		(100	)		(6,002	)		(1.3%	)
Income before income taxes and income from equity method investments			13,273			2.8	%		(6,449	)		19,722			4.2	%

Income taxes			(4,769	)		(1.0%	)		967			(5,736	)		(1.2%	)
- Effective tax rate			35.9	%					15.0	%		29.1	%

Income from equity method investments			1,291			0.3	%		-			1,291			0.3	%
Net income including non-controlling interests			9,795			2.1	%		(5,482	)		15,277			3.2	%

Net income attributable to non-controlling interests			(85	)		(0.0%	)		-			(85	)		(0.0%	)
Net income attributable to H.B. Fuller		$	9,710			2.1	%	$	(5,482	)	$	15,192			3.2	%

Basic income (loss) per common share attributable to H.B. Fuller		$	0.19					$	(0.11	)	$	0.30

Diluted income (loss) per common share attributable to H.B. Fuller		$	0.19					$	(0.11	)	$	0.30 ¹

Weighted-average common shares outstanding:
Basic			50,188						50,188			50,188
Diluted			51,379						51,379			51,379

H.B. FULLER COMPANY AND SUBSIDIARIES

ADJUSTED EARNINGS PER SHARE RECONCILIATION

In thousands (unaudited)

	13 weeks ended February 27, 2016						13 weeks ended February 28, 2015
	Income						Income
	before		Income		Diluted		before		Income		Diluted
	Income Tax		Taxes		EPS		Income Tax		Taxes		EPS^a
GAAP Earnings	$	27,678	$	8,760	$	0.37	$	14,479	$	4,769	$	0.19

Special charges, net		413		68		0.01		2,361		330		0.04
Acquisition project costs^b		121		39		0.00		3,145		419		0.06
Construction Products^c		-		-		-		571		218		0.01
EIMEA business integration costs^d		1,611		122		0.03		-		-		-
Tonsan call option agreement^e		966		-		0.02		100		-		0.00
Other^f		-		-		-		271		-		0.01
Adjusted Earnings	$	30,789	$	8,989	$	0.43	$	20,928	$	5,736	$	0.30

a Income per share amounts may not add due to rounding

b Non-recurring costs related to integrating and accounting for past and potential acquisitions

c Non-recurring costs related to the ramp up of new business with Lowes and the combination of facilities in Illinois

d Non-recurring costs related EIMEA restructuring announced November 2015

e Non-recurring non-cash costs related to accretion and revaluation of the Tonsan call option agreement

f Non-recurring costs related to the completion and start-up of a new electronics facility in Yantai China

H.B. FULLER COMPANY AND SUBSIDIARIES
SEGMENT FINANCIAL INFORMATION
In thousands (unaudited)

	13 Weeks Ended			13 Weeks Ended
	February 27, 2016			February 28, 2015
Net Revenue:
Americas Adhesives	$	183,319		$	194,073
EIMEA		124,291			134,115
Asia Pacific		53,860			55,343
Construction Products		60,074			58,456
Engineering Adhesives		52,782			28,674
Total H.B. Fuller	$	474,326		$	470,661

Adjusted Segment Operating Income:³
Americas Adhesives	$	26,299		$	21,854
EIMEA		7,799			840
Asia Pacific		3,765			3,195
Construction Products		799			1,643
Engineering Adhesives		1,799			(2,171	)
Total H.B. Fuller	$	40,461		$	25,361

Adjusted Depreciation Expense:
Americas Adhesives	$	3,713		$	3,890
EIMEA		3,603			3,901
Asia Pacific		1,386			1,398
Construction Products		1,273			1,476
Engineering Adhesives		1,555			913
Total H.B. Fuller	$	11,530		$	11,578

Amortization Expense:
Americas Adhesives	$	1,017		$	1,074
EIMEA		1,107			1,284
Asia Pacific		301			390
Construction Products		2,323			2,391
Engineering Adhesives		1,950			1,009
Total H.B. Fuller	$	6,698		$	6,148

Adjusted EBITDA:²
Americas Adhesives	$	31,029		$	26,818
EIMEA		12,509			6,025
Asia Pacific		5,452			4,983
Construction Products		4,395			5,510
Engineering Adhesives		5,304			(249	)
Total H.B. Fuller	$	58,689		$	43,087

Adjusted Segment Operating Margin:³
Americas Adhesives		14.3	%		11.3	%
EIMEA		6.3	%		0.6	%
Asia Pacific		7.0	%		5.8	%
Construction Products		1.3	%		2.8	%
Engineering Adhesives		3.4	%		(7.6	%)
Total H.B. Fuller		8.5	%		5.4	%

Adjusted EBITDA Margin:²
Americas Adhesives		16.9	%		13.8	%
EIMEA		10.1	%		4.5	%
Asia Pacific		10.1	%		9.0	%
Construction Products		7.3	%		9.4	%
Engineering Adhesives		10.0	%		(0.9	%)
Total H.B. Fuller		12.4	%		9.2	%

H.B. FULLER COMPANY AND SUBSIDIARIES
OLD SEGMENT STRUCTURE FINANCIAL INFORMATION
In thousands (unaudited) – FOR INFORMATIONAL PURPOSES ONLY

	13 Weeks Ended			13 Weeks Ended
	February 27, 2016			February 28, 2015
Net Revenue:
Americas Adhesives	$	194,047		$	203,943
EIMEA		135,362			147,562
Asia Pacific		92,517			69,993
Construction Products		52,400			49,163
Total H.B. Fuller	$	474,326		$	470,661

Adjusted Segment Operating Income:²
Americas Adhesives	$	26,720		$	20,982
EIMEA		7,204			(546	)
Asia Pacific		4,986			2,512
Construction Products		1,551			2,413
Total H.B. Fuller	$	40,461		$	25,361

Adjusted Depreciation Expense:
Americas Adhesives	$	3,933		$	4,164
EIMEA		3,898			4,310
Asia Pacific		2,654			1,918
Construction Products		1,045			1,186
Total H.B. Fuller	$	11,530		$	11,578

Amortization Expense:
Americas Adhesives	$	1,160		$	1,358
EIMEA		1,506			1,722
Asia Pacific		1,932			875
Construction Products		2,100			2,193
Total H.B. Fuller	$	6,698		$	6,148

Adjusted EBITDA:³
Americas Adhesives	$	31,813		$	26,310
EIMEA		12,608			5,364
Asia Pacific		9,572			5,670
Construction Products		4,696			5,743
Total H.B. Fuller	$	58,689		$	43,087

Adjusted Segment Operating Margin:²
Americas Adhesives		13.8	%		10.3	%
EIMEA		5.3	%		(0.4	%)
Asia Pacific		5.4	%		3.6	%
Construction Products		3.0	%		4.9	%
Total H.B. Fuller		8.5	%		5.4	%

Adjusted EBITDA Margin:³
Americas Adhesives		16.4	%		12.9	%
EIMEA		9.3	%		3.6	%
Asia Pacific		10.3	%		8.1	%
Construction Products		9.0	%		11.7	%
Total H.B. Fuller		12.4	%		9.2	%

H.B. FULLER COMPANY AND SUBSIDIARIES
SEGMENT FINANCIAL INFORMATION
NET REVENUE GROWTH
(unaudited)

13 Weeks Ended February 27, 2016

	Americas Adhesives			EIMEA			Asia Pacific			Construction Products			Engineering Adhesives			Total HBF
Price		(1.2	%)		(0.2	%)		(0.5	%)		2.0	%		(1.9	%)		(0.5	%)
Volume		(3.2	%)		2.8	%		4.5	%		2.3	%		90.0	%		5.8	%
Constant Currency Growth		(4.4	%)		2.6	%		4.0	%		4.3	%		88.1	%		5.3	%

F/X		(1.1	%)		(9.9	%)		(6.7	%)		(1.5	%)		(4.0	%)		(4.5	%)
		(5.5	%)		(7.3	%)		(2.7	%)		2.8	%		84.1	%		0.8	%

H.B. FULLER COMPANY AND SUBSIDIARIES
REGULATION G RECONCILIATION
In thousands (unaudited)

	13 Weeks Ended			13 Weeks Ended
	February 27, 2016			February 28, 2015
Net income including non-controlling interests	$	18,967		$	9,795

Income from equity method investments		(1,692	)		(1,291	)
Income taxes		8,760			4,769
Interest expense		6,308			6,102
Other income (expense), net		5,082			(363	)
Special charges		413			2,361
Non-recurring costs		2,623			3,988
Adjusted Segment operating income³		40,461			25,361

Depreciation Expense		13,258			11,578
Accelerated Depreciation – EIMEA²		(1,728	)		-
Adjusted Depreciation expense		11,530			11,578
Amortization expense		6,698			6,148
Adjusted EBITDA²	$	58,689		$	43,087

Adjusted EBITDA margin²		12.4	%		9.2	%

Adjusted diluted earnings per share (EPS) is a non-GAAP financial measure and excludes the following non-recurring costs listed on the adjusted earnings per share reconciliation table above: special charges related to the “business integration”; restructuring in EIMEA related to operational efficiency improvement projects; and the start-up of a new electronics facility in Yantai China.

Adjusted EBITDA is a non-GAAP financial measure defined on a consolidated basis as gross profit, less SG&A expense, plus depreciation expense, plus amortization expense and excludes items listed on the adjusted earnings per share reconciliation table above. On a segment basis it is defined as operating income, plus depreciation expense, plus amortization expense. Adjusted EBITDA margin is defined as adjusted EBITDA divided by net revenue.

³	Adjusted segment operating income is defined as gross profit less SG&A expense and excludes items listed on the adjusted earnings per share reconciliation table above. Adjusted segment operating margin is defined as adjusted segment operating income divided by net revenue.

FULLER H B CO - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - March 24, 2016

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