Exhibit 99.1

 

Worldwide Headquarters 1200 Willow Lake Boulevard St. Paul, Minnesota 55110-5101

Barbara Doyle  Investor Relations contact  651-236-5023

 

NEWS		June 24, 2020

 

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

 

Diluted EPS of $0.61; $0.68 adjusted diluted EPS

Adjusted EBITDA of $101 million exceeded guidance range

Debt paydown ahead of same quarter last year

 

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

 

Items of Note for Second Quarter 2020

■	Strong operational performance with net income of $32 million and adjusted EBITDA of $101 million, which exceeded the company’s guidance, driven by solid organic sales results, benefits from restructuring efficiencies, and lower raw material costs.

■	Total organic revenues declined by 7% compared with last year, reflecting the company’s broadly diversified customer base and end markets.

■	7% organic growth in Hygiene, Health and Consumable Adhesives (HHC) revenues, driven by double-digit growth in adhesives for essential goods and packaging.

■	Greater China organic revenues increased approximately 1% versus the same period last year as a result of China’s ongoing recovery from COVID-19.

■	Year-to-date cash flow from operations increased by 40% versus the same period in 2019, driven by working capital reductions.

■	Debt paydown of $45 million in the quarter exceeded the amount repaid in the second quarter of last year.

■	The company remains on track to achieve $200 million debt repayment target for 2020.

■	During the quarter, the company increased its dividend payout for the 51st consecutive year.

■

Restructuring savings were $7 million in the quarter. The company has expanded its operational review and now anticipates total savings to be in the range of $55 to $65 million on an annual run-rate basis. The revised amount includes estimated additional savings of $20 to $30 million related to the company’s operations and supply chain project initiated this year. These additional savings are expected to begin in the fourth quarter of 2020, and be fully realized in 2022.

 

 

Summary of Second Quarter 2020 Results

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

 

Gross profit margin was 27.4%. Adjusted gross profit margin of 27.7% was down 120 basis points versus last year. The decline was due to lower revenues and unfavorable product mix related to impacts from COVID-19, partially offset by favorable raw material costs. Selling, General and Administrative (SG&A) expense was $128 million. Adjusted SG&A expense of $125 million declined 10% compared with the same period last year, driven by cost savings realized from the company’s business realignment to three global business units and lower discretionary expenses in the quarter. Additionally, interest expense declined 20% driven by the company’s accelerated debt paydown and lower interest rates.

 

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

 

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

 

 

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

 

Key Balance Sheet and Cash Flow Items

At the end of the second quarter of 2020, the company had cash on hand of $70 million and total debt equal to $1,928 million. This compares to cash and debt levels equal to $79 million and $1,973 million, respectively, at the end of the first quarter of 2020. For the six-month year-to-date period, cash flow from operations increased to $108 million from $77 million for the same period of 2019, driven by improved working capital management. Capital expenditures were $22 million versus $18 million in the second quarter of fiscal 2019, reflecting timing of capital projects and expenditures related to growth initiatives. The company estimates capital investment for the fiscal year totaling $75 to $85 million.

 

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

 

 

2020 Planning Assumptions

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

■	Estimated revenue in the third quarter anticipated to be down 5% to 10% year over year, and adjusted EBITDA anticipated to be approximately $95 million to $105 million.

■

Continued elevated demand for HHC goods, such as food and e-Commerce packaging, paper products, medical and personal protective equipment through the second half of the year, although at a slower rate than experienced in the second quarter as restocking of these products returns to more typical levels.

■

Lower year-over-year demand for durable products and building materials in industries such as new energy, transportation and construction. The company currently anticipates year-over-year comparisons for Engineering Adhesives and Construction Adhesives in the second half of the year will improve compared with second quarter results as industrial production and building construction starts to ramp up around the world.

■	Continued moderate declines in raw material costs in the second half of the year, driven by supply-demand dynamics for specialty chemicals and petrochemical feedstock costs.

■	Continued benefits from restructuring actions taken at the end of 2019.

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

 

Company Update on COVID-19

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

 

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

 

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

 

 

Conference Call 

The Company will host an investor conference call to discuss first quarter results on Thursday, June 25, 2020, at 10:30 a.m. EDT. The conference call audio and accompanying presentation slides will be available to interested parties via a simultaneous webcast, and may be accessed from the company's website at https://investors.hbfuller.com/calendar. Participants should access the webcast prior to the start of the call to register for the event and install and test any necessary software. Accompanying presentation slides will be available at the link above 30 minutes prior to the call, and the webcast and presentation will be archived on the company's website. A telephone replay of the conference call will be available approximately 1 hour after the conclusion of the call, through July 2, 2020. To access the telephone replay dial 1-877-344-7529 in the US, 855-669-9658 in Canada, and 1-412-317-0088 outside the US and Canada, and enter access code 10144467.

 

Regulation G

The information presented in this earnings release regarding segment operating income, adjusted gross profit, adjusted gross profit margin, adjusted selling, general and administrative expense, adjusted income before income taxes and income from equity investments, adjusted income taxes, adjusted effective tax rate, adjusted net income, adjusted diluted earnings per share and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) does not conform to generally accepted accounting principles (GAAP) and should not be construed as an alternative to the reported results determined in accordance with GAAP. Management has included this non-GAAP information to assist in understanding the operating performance of the company and its operating segments as well as the comparability of results to the results of other companies. The non-GAAP information provided may not be consistent with the methodologies used by other companies. All non-GAAP information is reconciled with reported GAAP results in the “Regulation G Reconciliation” tables in this press release with the exception of our forward-looking non-GAAP measures contained above in our fiscal 2020 Planning Assumptions, which the company cannot reconcile to forward-looking GAAP results without unreasonable effort.

 

 

About H.B. Fuller

Since 1887, H.B. Fuller has been a leading global adhesives provider focusing on perfecting adhesives, sealants and other specialty chemical products to improve products and lives. With fiscal 2019 net revenue of $2.9 billion, H.B. Fuller’s commitment to innovation brings together people, products and processes that answer and solve some of the world's biggest challenges. Our reliable, responsive service creates lasting, rewarding connections with customers in electronics, disposable hygiene, medical, transportation, aerospace, clean energy, packaging, construction, woodworking, general industries and other consumer businesses. And, our promise to our people connects them with opportunities to innovate and thrive. For more information, visit us at https://www.hbfuller.com/.

 

Safe Harbor for Forward-Looking Statements

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

 

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

 

 

H.B. FULLER COMPANY AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
In thousands, except per share amounts (unaudited)
		Three Months Ended				Percent of				Three Months Ended				Percent of
		May 30, 2020				Net Revenue				June 1, 2019				Net Revenue
Net revenue		$	674,602				100.0%			$	759,583				100.0%
Cost of sales			(489,701	)			(72.6%	)			(541,124	)			(71.2%	)
Gross profit			184,901				27.4%				218,459				28.8%
Selling, general and administrative expenses			(127,998	)			(19.0%	)			(146,079	)			(19.2%	)
Other income, net			3,049				0.5%				2,986				0.4%
Interest expense			(21,644	)			(3.2%	)			(26,940	)			(3.5%	)
Interest income			2,898				0.4%				3,023				0.4%
Income before income taxes and income from equity method investments			41,206				6.1%				51,449				6.8%
Income taxes			(11,471	)			(1.7%	)			(16,441	)			(2.2%	)
Income from equity method investments			1,893				0.3%				1,633				0.2%
Net income including non-controlling interests			31,628				4.7%				36,641				4.8%
Net (loss) income attributable to non-controlling interests			(15	)			(0.0%	)			-				0.0%
Net income attributable to H.B. Fuller		$	31,613				4.7%			$	36,641				4.8%
Basic income per common share attributable to H.B. Fuller		$	0.61							$	0.72
Diluted income per common share attributable to H.B. Fuller		$	0.61							$	0.70
Weighted-average common shares outstanding:
Basic			51,420								50,902
Diluted			52,029								52,105
Dividends declared per common share		$	0.1625							$	0.160

 

 

Selected Balance Sheet Information (subject to change prior to filing of the Company's Quarterly Report on Form 10-Q)
		May 30, 2020				November 30, 2019				June 1, 2019
Cash & cash equivalents		$	70,346			$	112,191			$	100,246
Trade accounts receivable, net			448,126				493,181				499,406
Inventories			388,698				337,267				382,612
Trade payables			319,616				298,869				299,935
Total assets			3,979,060				3,985,734				4,149,864
Total debt			1,928,055				1,979,116				2,193,760

 

 

H.B. FULLER COMPANY AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
In thousands, except per share amounts (unaudited)
		Six Months Ended				Percent of				Six Months Ended				Percent of
		May 30, 2020				Net Revenue				June 1, 2019				Net Revenue
Net revenue		$	1,321,166				100.0%			$	1,432,518				100.0%
Cost of sales			(966,003	)			(73.1%	)			(1,034,134	)			(72.2%	)
Gross profit			355,163				26.9%				398,384				27.8%
Selling, general and administrative expenses			(269,507	)			(20.4%	)			(291,792	)			(20.4%	)
Other income, net			8,018				0.6%				6,351				0.4%
Interest expense			(44,401	)			(3.4%	)			(53,747	)			(3.8%	)
Interest income			5,816				0.4%				6,076				0.4%
Income before income taxes and income from equity method investments			55,089				4.2%				65,272				4.6%
Income taxes			(17,082	)			(1.3%	)			(19,581	)			(1.4%	)
Income from equity method investments			3,527				0.3%				3,198				0.2%
Net income including non-controlling interests			41,534				3.1%				48,889				3.4%
Net loss attributable to non-controlling interests			(26	)			(0.0%	)			(4	)			(0.0%	)
Net income attributable to H.B. Fuller		$	41,508				3.1%			$	48,885				3.4%
Basic income per common share attributable to H.B. Fuller a		$	0.80							$	0.96
Diluted income per common share attributable to H.B. Fuller a		$	0.79							$	0.94
Weighted-average common shares outstanding:
Basic			51,874								50,827
Diluted			52,305								52,003
Dividends declared per common share		$	0.3225							$	0.315

 

aIncome per share amounts may not add due to rounding

 

 

H.B. FULLER COMPANY AND SUBSIDIARIES
REGULATION G RECONCILIATION
In thousands, except per share amounts (unaudited)
		Three Months Ended								Six Months Ended
		May 30, 2020				June 1, 2019				May 30, 2020				June 1, 2019
Net income attributable to H.B. Fuller		$	31,613			$	36,641			$	41,508			$	48,885
Adjustments:
Acquisition related activity			(1,266	)			539				(998	)			623
Organizational realignment			1,550				1,444				5,154				1,794
Royal restructuring and integration			1,910				4,761				5,660				9,126
Tax reform			-				-				(44	)			55
Project ONE			855				1,236				2,582				2,049
Other			484				1,015				(926	)			623
Adjusted net income attributable to H.B. Fuller1			35,146				45,636				52,936				63,155
Add:
Interest expense			21,670				26,940				44,431				53,747
Interest income			(2,898	)			(3,023	)			(5,816	)			(6,076	)
Income taxes			12,692				16,371				18,284				22,421
Depreciation and amortization expenseA			34,009				35,268				68,561				70,796
Adjusted EBITDA1			100,619				121,192				178,396				204,043
Diluted Shares			52,029				52,105				52,305				52,003
Adjusted diluted income per common share attributable to H.B. Fuller1		$	0.68			$	0.88			$	1.01			$	1.21
Revenue		$	674,602			$	759,583			$	1,321,166			$	1,432,518
Adjusted EBITDA margin1			14.9%				16.0%				13.5%				14.2%

 

_______________

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

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

 

 

H.B. FULLER COMPANY AND SUBSIDIARIES
SEGMENT FINANCIAL INFORMATION
In thousands (unaudited)
		Three Months Ended								Six Months Ended
		May 30, 2020				June 1, 2019				May 30, 2020				June 1, 2019
Net Revenue:
Hygiene, Health and Consumable Adhesives		$	344,673			$	337,892			$	657,185			$	657,746
Engineering Adhesives			236,063				303,922				484,958				568,294
Construction Adhesives			93,866				111,791				179,023				194,581
Corporate Unallocated			-				5,978				-				11,897
Total H.B. Fuller		$	674,602			$	759,583			$	1,321,166			$	1,432,518
Segment Operating Income:
Hygiene, Health and Consumable Adhesives		$	35,009			$	32,048			$	57,673			$	52,938
Engineering Adhesives			20,149				39,313				35,514				61,299
Construction Adhesives			6,527				8,252				5,152				6,596
Corporate Unallocated			(4,782	)			(7,233	)			(12,683	)			(14,241	)
Total H.B. Fuller		$	56,903			$	72,380			$	85,656			$	106,592

 

Adjusted EBITDA1
Hygiene, Health and Consumable Adhesives		$	48,321			$	44,845			$	84,217			$	78,554
Engineering Adhesives			35,172				54,795				66,087				92,369
Construction Adhesives			16,626				18,272				25,499				26,699
Corporate Unallocated			500				3,280				2,593				6,421
Total H.B. Fuller		$	100,619			$	121,192			$	178,396			$	204,043
Adjusted EBITDA Margin1
Hygiene, Health and Consumable Adhesives			14.0%				13.3%				12.8%				11.9%
Engineering Adhesives			14.9%				18.0%				13.6%				16.3%
Construction Adhesives			17.7%				16.3%				14.2%				13.7%
Corporate Unallocated		NMP				NMP				NMP				NMP
Total H.B. Fuller			14.9%				16.0%				13.5%				14.2%

 

 

H.B. FULLER COMPANY AND SUBSIDIARIES

REGULATION G RECONCILIATION

In thousands, except per share amounts (unaudited)

 

		Three Months Ended								Six Months Ended
		May 30, 2020				June 1, 2019				May 30, 2020				June 1, 2019
Income before income taxes and income from equity method investments		$	41,206			$	51,449			$	55,089			$	65,272
Adjustments:
Acquisition related activity			(1,725	)			655				(1,512	)			769
Organizational realignment			2,113				1,755				4,978				2,230
Royal restructuring and integration			2,603				4,625				5,589				10,543
Tax reform			-				-				(35	)			75
Project ONE			1,165				1,503				2,540				2,604
Other			598				387				1,071				889
Adjusted income before income taxes and income from equity method investments2		$	45,960			$	60,374			$	67,720			$	82,382

 

_______________

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

 

 

H.B. FULLER COMPANY AND SUBSIDIARIES

REGULATION G RECONCILIATION

In thousands, except per share amounts (unaudited)

 

		Three Months Ended								Six Months Ended
		May 30, 2020				June 1, 2019				May 30, 2020				June 1, 2019
Income taxes		$	(11,471	)		$	(16,441	)		$	(17,082	)		$	(19,581	)
Adjustments:
Acquisition related activity			459				(116	)			514				(146	)
Organizational realignment			(562	)			(311	)			177				(436	)
Royal restructuring and integration			(693	)			136				71				(1,417	)
Tax reform			-				-				(9	)			(20	)
Project ONE			(310	)			(267	)			42				(555	)
Other			(115	)			628				(1,997	)			(266	)
Adjusted income taxes3		$	(12,692	)		$	(16,371	)		$	(18,284	)		$	(22,421	)
Adjusted income before income taxes and income from equity method investments		$	45,960			$	60,374			$	67,720			$	82,382
Adjusted effective income tax rate3			27.6%				27.1%				27.0%				27.2%

 

_______________

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

 

 

H.B. FULLER COMPANY AND SUBSIDIARIES

REGULATION G RECONCILIATION

In thousands (unaudited)

 

		Three Months Ended								Six Months Ended
		May 30, 2020				June 1, 2019				May 30, 2020				June 1, 2019
Net revenue			674,602				759,583				1,321,166				1,432,518
Gross profit		$	184,901			$	218,459			$	355,163			$	398,384
Gross profit margin			27.4%				28.8%				26.9%				27.8%
Adjustments:
Organizational realignment			70				195				151				242
Royal restructuring and integration			697				1,091				1,598				2,509
Other			981				-				991				(3	)
Adjusted gross profit4		$	186,649			$	219,745			$	357,903			$	401,132
Adjusted gross profit margin4			27.7%				28.9%				27.1%				28.0%

 

_______________

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

 

 

H.B. FULLER COMPANY AND SUBSIDIARIES

REGULATION G RECONCILIATION

In thousands (unaudited)

 

		Three Months Ended								Six Months Ended
		May 30, 2020				June 1, 2019				May 30, 2020				June 1, 2019
Selling, general and administrative expenses		$	(127,998	)		$	(146,079	)		$	(269,507	)		$	(291,792	)
Adjustments:
Acquisition related activity			(1,725	)			655				(1,512	)			769
Organizational realignment			2,042				1,187				4,826				1,614
Royal restructuring and integration			1,932				3,511				4,043				8,010
Tax reform			-				-				(35	)			75
Project ONE			1,166				1,503				2,541				2,604
Other			(382	)			387				80				893
Adjusted selling, general and administrative expenses5		$	(124,965	)		$	(138,836	)		$	(259,564	)		$	(277,827	)

 

_______________

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

 

 

H.B. FULLER COMPANY AND SUBSIDIARIES

REGULATION G RECONCILIATION

In thousands (unaudited)

 

		Hygiene, Health and Consumable Adhesives				Engineering Adhesives				Construction Adhesives				Total				Corporate Unallocated				H.B. Fuller Consolidated
Three Months Ended May 30, 2020
Net income attributable to H.B. Fuller		$	36,804			$	21,598			$	7,708			$	66,110			$	(34,497	)		$	31,613
Adjustments:
Acquisition related activity			-				-				-				-				(1,266	)			(1,266	)
Organizational realignment			-				-				-				-				1,550				1,550
Royal restructuring and integration			-				-				-				-				1,910				1,910
Project ONE			-				-				-				-				855				855
Other			-				-				-				-				484				484
Adjusted net income attributable to H.B. Fuller1			36,804				21,598				7,708				66,110				(30,964	)			35,146
Add:
Interest expense			-				-				-				-				21,670				21,670
Interest income			-				-				-				-				(2,898	)			(2,898	)
Income taxes			-				-				-				-				12,692				12,692
Depreciation and amortization expense			11,517				13,574				8,918				34,009				-				34,009
Adjusted EBITDA1		$	48,321			$	35,172			$	16,626			$	100,119			$	500			$	100,619
Revenue			344,673				236,063				93,866				674,602				-				674,602
Adjusted EBITDA Margin1			14.0%				14.9%				17.7%				14.8%			NMP					14.9%

 

		Hygiene, Health and Consumable Adhesives				Engineering Adhesives				Construction Adhesives				Total				Corporate Unallocated				H.B. Fuller Consolidated
Six Months Ended May 30, 2020
Net income attributable to H.B. Fuller		$	61,291			$	38,433			$	7,518			$	107,242			$	(65,734	)		$	41,508
Adjustments:
Acquisition related activity			-				-				-				-				(998	)			(998	)
Organizational realignment			-				-				-				-				5,154				5,154
Royal restructuring and integration			-				-				-				-				5,660				5,660
Tax reform			-				-				-				-				(44	)			(44	)
Project ONE			-				-				-				-				2,582				2,582
Other			-				-				-				-				(926	)			(926	)
Adjusted net income attributable to H.B. Fuller1			61,291				38,433				7,518				107,242				(54,306	)			52,936
Add:
Interest expense			-				-				-				-				44,431				44,431
Interest income			-				-				-				-				(5,816	)			(5,816	)
Income taxes			-				-				-				-				18,284				18,284
Depreciation and amortization expense			22,926				27,654				17,981				68,561				-				68,561
Adjusted EBITDA1		$	84,217			$	66,087			$	25,499			$	175,803			$	2,593			$	178,396
Revenue			657,185				484,958				179,023				1,321,166				-				1,321,166
Adjusted EBITDA Margin1			12.8%				13.6%				14.2%				13.3%			NMP					13.5%

 

_______________

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

NMP: non-material percentage

 

 

H.B. FULLER COMPANY AND SUBSIDIARIES

REGULATION G RECONCILIATION

In thousands (unaudited)

 

		Hygiene, Health and Consumable Adhesives				Engineering Adhesives				Construction Adhesives				Total				Corporate Unallocated				H.B. Fuller Consolidated
Three Months Ended June 1, 2019
Net income attributable to H.B. Fuller		$	33,397			$	40,397			$	9,236			$	83,030			$	(46,389	)		$	36,641
Adjustments:
Acquisition related activity			-				-				-				-				539				539
Organizational realignment			-				-				-				-				1,444				1,444
Royal Restructuring			-				-				-				-				4,761				4,761
Project ONE			-				-				-				-				1,236				1,236
Other			-				-				-				-				1,015				1,015
Adjusted net income attributable to H.B. Fuller1			33,397				40,397				9,236				83,030				(37,394	)			45,636
Add:
Interest expense			-				-				-				-				26,940				26,940
Interest income			-				-				-				-				(3,023	)			(3,023	)
Income taxes			-				-				-				-				16,371				16,371
Depreciation and amortization expense			11,448				14,398				9,036				34,882				386				35,268
Adjusted EBITDA1		$	44,845			$	54,795			$	18,272			$	117,912			$	3,280			$	121,192
Revenue			337,892				303,922				111,791				753,605				5,978				759,583
Adjusted EBITDA Margin1			13.3%				18.0%				16.3%				15.6%			NMP					16.0%

 

 

		Hygiene, Health and Consumable Adhesives				Engineering Adhesives				Construction Adhesives				Total				Corporate Unallocated				H.B. Fuller Consolidated
Six Months Ended June 1, 2019
Net income attributable to H.B. Fuller		$	55,633			$	63,462			$	8,567			$	127,662			$	(78,777	)		$	48,885
Adjustments:
Acquisition related activity			-				-				-				-				623				623
Organizational realignment			-				-				-				-				1,794				1,794
Royal Restructuring			-				-				-				-				9,126				9,126
Tax Reform			-				-				-				-				55				55
Project ONE			-				-				-				-				2,049				2,049
Other			-				-				-				-				623				623
Adjusted net income attributable toH.B. Fuller1			55,633				63,462				8,567				127,662				(64,507	)			63,155
Add:
Interest expense			-				-				-				-				53,747				53,747
Interest income			-				-				-				-				(6,076	)			(6,076	)
Income taxes			-				-				-				-				22,421				22,421
Depreciation and amortization expense			22,921				28,907				18,132				69,960				836				70,796
Adjusted EBITDA1		$	78,554			$	92,369			$	26,699			$	197,622			$	6,421			$	204,043
Revenue			657,746				568,294				194,581				1,420,621				11,897				1,432,518
Adjusted EBITDA Margin1			11.9%				16.3%				13.7%				13.9%			NMP					14.2%

 

_______________

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

NMP: non-material percentage

 

 

H.B. FULLER COMPANY AND SUBSIDIARIES

SEGMENT FINANCIAL INFORMATION

NET REVENUE GROWTH (DECLINE)

(unaudited)

 

		Three Months Ended				Six Months Ended
		May 30, 2020
		Total				Total
Price			(0.5%	)			(0.8%	)
Volume			(6.8%	)			(3.7%	)
Organic Growth (Decline)			(7.3%	)			(4.5%	)
M&A			(0.8%	)			(0.8%	)
F/X			(3.1%	)			(2.5%	)
Total H.B. Fuller net revenue			(11.2%	)			(7.8%	)

 

 

		Three Months Ended																Six Months Ended
		May 30, 2020																May 30, 2020
		Net Revenue				F/X				M&A				Organic Growth (Decline)				Net Revenue				F/X				M&A				Organic Growth (Decline)
Hygiene, Health and Consumable Adhesives			2.0%				(4.8%	)			0.0%				6.8%				(0.1%	)			(3.6%	)			0.0%				3.5%
Engineering Adhesives			(22.3%	)			(2.3%	)			0.0%				(20.0%	)			(14.7%	)			(1.9%	)			0.0%				(12.8%	)
Construction Adhesives			(16.0%	)			(0.7%	)			0.0%				(15.3%	)			(8.0%	)			(0.6%	)			0.0%				(7.4%	)
Unallocated Corporate		NMP					0.0%			NMP					0.0%			NMP					0.0%			NMP					0.0%
Total H.B. Fuller			(11.2%	)			(3.1%	)			(0.8%	)			(7.3%	)			(7.8%	)			(2.5%	)			(0.8%	)			(4.5%	)

 

NMP: non-material percentage

 

 

H.B. FULLER COMPANY AND SUBSIDIARIES

Consolidated Balance Sheets

In thousands (unaudited)

 

		May 30,				November 30,
		2020				2019
Assets
Current assets:
Cash and cash equivalents		$	70,346			$	112,191
Trade receivables (net of allowances of $13,443 and $10,682, as of May 30, 2020 and November 30, 2019, respectively)			448,126				493,181
Inventories			388,698				337,267
Other current assets			100,702				90,723
Total current assets			1,007,872				1,033,362
Property, plant and equipment			1,340,692				1,304,231
Accumulated depreciation			(704,997	)			(674,418	)
Property, plant and equipment, net			635,695				629,813
Goodwill			1,273,374				1,281,808
Other intangibles, net			775,332				799,399
Other assets			286,787				241,352
Total assets		$	3,979,060			$	3,985,734
Liabilities, non-controlling interest and total equity
Current liabilities:
Notes payable		$	19,715			$	15,732
Current maturities of long-term debt			-				65,000
Trade payables			319,616				298,869
Accrued compensation			56,599				78,582
Income taxes payable			20,382				23,229
Other accrued expenses			75,450				60,745
Total current liabilities			491,762				542,157
Long-term debt, excluding current maturities			1,908,340				1,898,384
Accrued pension liabilities			81,019				80,214
Other liabilities			279,094				242,190
Total liabilities			2,760,215				2,762,945
Commitments and contingencies (Note 15)
Equity:
H.B. Fuller stockholders' equity:
Preferred stock (no shares outstanding) shares authorized – 10,045,900			-				-
Common stock, par value $1.00 per share, shares authorized – 160,000,000, shares outstanding – 51,550,524 and 51,241,190, as of May 30, 2020 and November 30, 2019, respectively			51,551				51,241
Additional paid-in capital			138,175				130,295
Retained earnings			1,409,158				1,384,411
Accumulated other comprehensive loss			(380,510	)			(343,600	)
Total H.B. Fuller stockholders' equity			1,218,374				1,222,347
Non-controlling interest			471				442
Total equity			1,218,845				1,222,789
Total liabilities, non-controlling interest and total equity		$	3,979,060			$	3,985,734

 

 

H.B. FULLER COMPANY AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

In thousands (unaudited)

 

		Six Months Ended
		May 30, 2020				June 1, 2019
Cash flows from operating activities:
Net income including non-controlling interest		$	41,534			$	48,889
Adjustments to reconcile net income including non-controlling interest to net cash provided by operating activities:
Depreciation			33,198				33,568
Amortization			35,458				38,190
Deferred income taxes			(10,412	)			(21,871	)
Income from equity method investments, net of dividends received			(3,527	)			(3,198	)
(Gain) loss on sale of assets			(24	)			377
Share-based compensation			9,236				14,172
Change in assets and liabilities, net of effects of acquisitions:
Trade receivables, net			33,867				(23,692	)
Inventories			(59,232	)			(22,798	)
Other assets			(13,070	)			(21,396	)
Trade payables			42,182				25,943
Accrued compensation			(21,587	)			(17,778	)
Other accrued expenses			8,981				12,734
Income taxes payable			(2,728	)			13,794
Accrued / prepaid pensions			(2,993	)			(5,933	)
Other liabilities			24,705				(1,465	)
Other			(7,175	)			7,790
Net cash provided by operating activities			108,413				77,326
Cash flows from investing activities:
Purchased property, plant and equipment			(54,533	)			(32,192	)
Purchased businesses, net of cash acquired			(9,500	)			(7,914	)
Purchase of assets			(3,998	)			-
Purchased business remaining equity			-				(9,870	)
Proceeds from sale of property, plant and equipment			1,416				45
Cash received from government grant			-				9,045
Cash payments related to government grant			(2,331	)			(1,120	)
Net cash used in investing activities			(68,946	)			(42,006	)
Cash flows from financing activities:
Repayment of long-term debt			(67,000	)			(70,000	)
Net payment of notes payable			6,994				4,053
Dividends paid			(16,577	)			(16,028	)
Contingent consideration payment			-				(3,610	)
Proceeds from stock options exercised			1,557				1,837
Repurchases of common stock			(3,246	)			(2,807	)
Net cash used in financing activities			(78,272	)			(86,555	)
Effect of exchange rate changes on cash and cash equivalents			(3,040	)			688
Net change in cash and cash equivalents			(41,845	)			(50,547	)
Cash and cash equivalents at beginning of period			112,191				150,793
Cash and cash equivalents at end of period		$	70,346			$	100,246