H.B. Fuller Reports Third Quarter 2024 Results

Reported EPS (diluted) of $0.98; Adjusted EPS (diluted) of $1.13, up 7% year-on-year Net income of $55 million; Adjusted EBITDA of $165 million, up 6% year-on-year Adjusted EBITDA margin of 18.0%, up 70 basis points year-on-year

H.B. Fuller Company (NYSE: FUL) today reported financial results for its third quarter that ended August 31, 2024.

Third Quarter 2024 Noteworthy Items:

Net income was $55 million; adjusted EBITDA was $165 million, up 6% year-on-year; adjusted EBITDA margin expanded 70 basis points year-on-year to 18.0%;
Reported EPS (diluted) was $0.98; adjusted EPS (diluted) was $1.13, up 7% versus the prior year;
Net revenue was $918 million, up 1.9% year-on-year including organic volume growth of 3.0%;
Gross profit margin was 30.0%; adjusted gross profit margin was 30.4%, up 40 basis points year-on-year;
Net working capital, as a percentage of annualized net revenue, decreased 200 basis points year-on-year from 18.1% to 16.1%;
Repurchased 407,400 shares year-to-date, including 225,000 shares in the quarter;
Acquired HS Butyl Limited, the UK’s largest manufacturer and distributor of high-quality butyl tapes, expanding H.B. Fuller’s position in the global waterproofing tape market.

Summary of Third Quarter 2024 Results:

The Company’s net revenue for the third quarter of fiscal 2024 was $918 million, up 1.9% versus the third quarter of fiscal 2023. Organic revenue increased slightly year-on-year, with pricing adjustments reducing organic revenue by 2.6% and volume increasing organic revenue by 3.0%. Foreign currency translation reduced net revenue by 1.5% and acquisitions increased net revenue by 3.0%.

Gross profit in the third quarter of fiscal 2024 was $276 million. Adjusted gross profit was $279 million. Adjusted gross profit margin of 30.4% increased 40 basis points year-on-year. Volume leverage, restructuring savings, and the benefit from acquisitions primarily drove the year-on-year increase in adjusted gross profit.

Selling, general and administrative (SG&A) expense was $171 million in the third quarter of fiscal 2024 and adjusted SG&A was $164 million versus $159 million in the third quarter of fiscal 2023. The impact of acquisitions and inflation in wages and services drove most of the year-on-year increase in adjusted SG&A.

Net income attributable to H.B. Fuller for the third quarter of fiscal 2024 was $55 million, or $0.98 per diluted share. Adjusted net income attributable to H.B. Fuller for the third quarter of fiscal 2024 was $64 million. Adjusted EPS was $1.13 per diluted share, up 7% year-on-year.

Adjusted EBITDA in the third quarter of fiscal 2024 was $165 million, up 6% year-on-year, driven principally by volume growth, restructuring savings, and benefits from recent acquisitions. Adjusted EBITDA margin increased 70 basis points year-on-year to 18.0%.

H.B. Fuller President and CEO Celeste Mastin said, “In the third quarter, we continued to advance our strategy and expand EBITDA margins through volume growth, restructuring actions, and the acquisition of highly profitable, fast-growing businesses. At the same time, we continue to navigate a dynamic macroeconomic environment across our portfolio. Our volume growth during the quarter was impacted by slowing market demand in certain durable goods markets in EA, and we are adjusting our full year outlook accordingly. While this quarter’s volume growth was at the low end of our expectations, we have a clear and focused strategy and a highly engaged team that is well equipped to execute and drive business success. We remain on track to deliver upon our long-term EBITDA margin and organic growth targets.”

Balance Sheet and Working Capital:

Net debt at the end of the third quarter of fiscal 2024 was $1,890 million, up $100 million year-on-year. The ratio of net debt-to-adjusted EBITDA was 3.1X, consistent with the second quarter.

Net working capital in the third quarter of fiscal 2024 decreased $64 million year-on-year. As a percentage of annualized net revenue, net working capital decreased 200 basis points year-on-year to 16.1%.

Fiscal 2024 Outlook:

As a result of our year-to-date performance and current macroeconomic conditions, we are updating our previously communicated financial guidance for fiscal 2024 as follows:

Net revenue growth is now expected to be up approximately 2% with organic revenue flat year-on-year;
Adjusted EBITDA is now expected to be in the range of $610 million to $620 million, equating to year-on-year growth of between 5% and 7%;
Adjusted EPS (diluted) is now expected be in the range of $4.10 to $4.20, equating to year-on-year growth of between 6% and 9%;
Operating cash flow is now expected to be between $325 million and $350 million.

Conference Call:

The Company will hold a conference call on September 26, 2024, 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 26, 2024, to 10:59 p.m. CT on October 3, 2024. To access the telephone replay dial 1-800-770-2030 (toll free) or 1-609-800-9909, 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, adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA), adjusted EBITDA margin, net debt, net debt-to-adjusted EBITDA, trailing twelve months adjusted EBITDA, net working capital, annualized net revenue and net working capital as a percentage of annualized net revenue 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 2024 Outlook, which the Company cannot reconcile to forward-looking GAAP results without unreasonable effort.

About H.B. Fuller:

As the largest pureplay adhesives company in the world, H.B. Fuller’s (NYSE: FUL) innovative, functional coatings, adhesives and sealants enhance the quality, safety and performance of products people use every day. Founded in 1887, with 2023 revenue of $3.5 billion, our mission to Connect What Matters is brought to life by more than 7,000 global team members who collaborate with customers across more than 30 market segments in over 140 countries to develop highly specified solutions that enable customers to bring world-changing innovations to their end markets. Learn more at 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 availability and pricing of raw materials; the impact of potential cybersecurity attacks and security breaches; the impact on the supply chain, raw material costs and pricing of our products due to military conflict, including between Russia and Ukraine and Israel and Hamas; the consequences of the COVID-19 outbreak and other pandemics on our operations and financial results; 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, and 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 our current dividend policy; our ability to acquire and integrate complementary businesses; 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; 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 August 31, 2024

Percent of Net Revenue

Three Months Ended September 2, 2023

Percent of Net Revenue

Net revenue

917,927

100.0

900,634

100.0

Cost of sales

(642,198

)

(70.0

(637,162

)

(70.7

Gross profit

275,729

30.0

263,472

29.3

Selling, general and administrative expenses

(171,388

)

(18.7

(172,153

)

(19.1

Other income, net

2,148

0.2

1,555

0.2

Interest expense

(35,288

)

(3.8

(35,105

)

(3.9

Interest income

1,092

0.1

1,128

0.1

Income before income taxes and income from equity method investments

72,293

7.9

58,897

6.5

Income taxes

(18,264

)

(2.0

(22,231

)

(2.5

Income from equity method investments

1,310

0.1

984

0.1

Net income including non-controlling interest

55,339

6.0

37,650

4.2

Net income attributable to non-controlling interest

0.0

(23

)

(0.0

Net income attributable to H.B. Fuller

55,361

6.0

37,627

4.2

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

1.01

0.69

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

0.98

0.67

Weighted-average common shares outstanding:

Basic

54,975

54,394

Diluted

56,650

56,033

Dividends declared per common share

0.223

0.205

H.B. FULLER COMPANY AND SUBSIDIARIES

CONSOLIDATED FINANCIAL INFORMATION

In thousands, except per share amounts (unaudited)

Nine Months Ended August 31, 2024

Percent of Net Revenue

Nine Months Ended September 2, 2023

Percent of Net Revenue

Net revenue

2,645,452

100.0

2,608,055

100.0

Cost of sales

(1,848,435

)

(69.9

(1,873,000

)

(71.8

Gross profit

797,017

30.1

735,055

28.2

Selling, general and administrative expenses

(525,204

)

(19.9

(493,320

)

(18.9

Other income, net

7,282

0.3

4,764

0.2

Interest expense

(99,504

)

(3.8

(101,305

)

(3.9

Interest income

3,597

0.1

2,726

0.1

Income before income taxes and income from equity method investments

183,188

6.9

147,920

5.7

Income taxes

(48,496

)

(1.8

(51,255

)

(2.0

Income from equity method investments

2,955

0.1

3,322

0.1

Net income including non-controlling interest

137,647

5.2

99,987

3.8

Net income attributable to non-controlling interest

(32

)

(0.0

(71

)

(0.0

Net income attributable to H.B. Fuller

137,615

5.2

99,916

3.8

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

2.51

1.84

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

2.43

1.79

Weighted-average common shares outstanding:

Basic

54,874

54,279

Diluted

56,620

55,890

Dividends declared per common share

0.651

0.600

H.B. FULLER COMPANY AND SUBSIDIARIES

REGULATION G RECONCILIATION

In thousands, except per share amounts (unaudited)

Three Months Ended

Nine Months Ended

August 31,

September 2,

August 31,

September 2,

2024

2023

2024

2023

Net income attributable to H.B. Fuller

55,361

37,627

137,615

99,916

Adjustments:

Acquisition project costs1

3,474

6,480

6,984

11,634

Organizational realignment2

9,471

10,421

24,038

19,055

Project One3

3,154

2,734

9,213

7,587

Other4

(2,904

)

503

(2,021

)

4,098

Discrete tax items5

(2,937

)

6,243

(4,147

)

9,131

Income tax effect on adjustments6

(1,624

)

(4,875

)

(6,472

)

(9,447

)

Adjusted net income attributable to H.B. Fuller7

63,995

59,133

165,210

141,974

Add:

Interest expense

35,287

35,105

99,502

98,615

Interest income

(1,090

)

(1,128

)

(3,594

)

(2,726

)

Adjusted Income taxes

22,825

20,862

59,114

51,569

Depreciation and Amortization expense8

44,235

41,826

125,288

118,803

Adjusted EBITDA7

165,252

155,798

445,520

408,235

Diluted Shares

56,650

56,033

56,620

55,890

Adjusted diluted income per common share attributable to H.B. Fuller7

1.13

1.06

2.92

2.54

Revenue

917,927

900,634

2,645,452

2,608,055

Adjusted EBITDA margin7

18.0

17.3

16.8

15.7

1 Acquisition project costs include costs related to evaluating, acquiring and integrating business acquisitions. Acquisition project costs include $2,457 and $1,757 in transaction costs (primarily consulting and professional fees, representations and warranties insurance premiums and employee acquisition-related travel expenses) and $1,017 and $4,723 in purchase accounting costs (primarily professional fees for valuation services, inventory step-up cost and the impact of changes to contingent consideration liabilities after the completion of the purchase price allocation) for the three months ended August 31, 2024 and September 2, 2023, respectively. Acquisition project costs include $5,135 and $5,498 in transaction costs (primarily consulting and professional fees, representations and warranties insurance premiums and employee acquisition related travel expenses), $1,272 and $6,136 in purchase accounting costs (primarily professional fees for valuation services, inventory step-up cost and the impact of changes to contingent consideration liabilities after the completion of the purchase price allocation) and $577 and $0 in business integration costs (primarily costs of transition services agreements and, for the three months ended March 2, 2024, retention bonuses paid to employees of the acquired entities) for the nine months ended August 31, 2024 and September 2, 2023, respectively.

2 Organizational realignment includes costs incurred as a direct result of the organizational realignment program, including professional fees related to legal entity and business structure changes, employee retention and severance costs, and facility rationalization costs related to the closure of production facilities and consolidation of business activities. Facility rationalization costs include plant closure costs, the impact of accelerated depreciation, and, for the three months ended March 2, 2024, operational inefficiencies. Organizational realignment includes $2,939 and $139 in professional fees related to legal entity and business structure changes, $5,363 and $8,798 in employee severance and other related costs, and $1,169 and $1,484 related to facility rationalization costs for the three months ended August 31, 2024 and September 2, 2023, respectively. Organizational realignment includes $6,915 and $3,863 in professional fees related to legal entity and business structure changes, $9,721 and $13,708 in employee severance and other related costs, and $7,402 and $1,484 related to facility rationalization costs for the nine months ended August 31, 2024 and September 2, 2023, respectively.

3 Project One includes non-capitalizable project costs related implementing our global Enterprise Resource Planning system, including upgrading to SAP S/4HANA®, which will upgrade and standardize our information system.

4 Other includes a gain from insurance recoveries and a loss from the write-off of a cost method investment for the three and nine months ended August 31, 2024. Other includes the write-off of unamortized debt fees and non-cash gains and losses related to legal entity consolidations for fiscal 2023.

5 Discrete tax items for the three and nine months ended August 31, 2024 are related to various foreign tax matters as well as excess tax benefit related to U.S. stock compensation. Discrete tax items for fiscal 2023 are related to various foreign tax matters offset by excess tax benefit related to U.S. stock compensation.

6 The income tax effect on adjustments represents the difference between income taxes on net income before income taxes and income from equity method investments reported in accordance with U.S. GAAP and adjusted net income before income taxes and income from equity method investments.

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

8 Depreciation and amortization expense added back for EBITDA is adjusted for amounts already included in adjusted net income attributable to H.B. Fuller totaling $194 and ($348) for the three months ended August 31, 2024 and September 2, 2023, respectively and ($3,425) and ($348) for the nine months ended August 31, 2024 and September 2, 2023, respectively.

H.B. FULLER COMPANY AND SUBSIDIARIES

SEGMENT FINANCIAL INFORMATION

In thousands (unaudited)

Three Months Ended

Nine Months Ended

August 31,

September 2,

August 31,

September 2,

2024

2023

2024

2023

Net Revenue:

Hygiene, Health and Consumable Adhesives

389,854

402,388

1,150,658

1,190,402

Engineering Adhesives

374,923

365,862

1,077,206

1,063,009

Construction Adhesives

153,150

132,384

417,588

354,644

Corporate unallocated

Total H.B. Fuller

917,927

900,634

2,645,452

2,608,055

Segment Operating Income (Loss):

Hygiene, Health and Consumable Adhesives

49,782

52,737

147,147

149,474

Engineering Adhesives

52,865

52,931

139,522

129,806

Construction Adhesives

12,543

5,853

20,342

2,189

Corporate unallocated

(10,849

)

(20,202

)

(35,198

)

(39,734

)

Total H.B. Fuller

104,341

91,319

271,813

241,735

Adjusted EBITDA7

Hygiene, Health and Consumable Adhesives

64,320

69,172

191,793

194,125

Engineering Adhesives

73,968

70,723

195,133

181,758

Construction Adhesives

25,119

18,519

57,314

39,584

Corporate unallocated

1,845

(2,616

)

1,280

(7,232

)

Total H.B. Fuller

165,252

155,798

445,520

408,235

Adjusted EBITDA Margin7

Hygiene, Health and Consumable Adhesives

16.5

17.2

16.7

16.3

Engineering Adhesives

19.7

19.3

18.1

17.1

Construction Adhesives

16.4

14.0

13.7

11.2

Corporate unallocated

NMP

Total H.B. Fuller

18.0

17.3

16.8

15.7

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

August 31,

September 2,

August 31,

September 2,

2024

2023

2024

2023

Income before income taxes and income from equity method investments

72,293

58,897

183,188

147,920

Adjustments:

Acquisition project costs1

3,474

6,480

6,984

11,634

Organizational realignment2

9,471

10,421

24,038

19,055

Project One3

3,154

2,734

9,213

7,587

Other4

(2,904

)

503

(2,021

)

4,098

Adjusted income before income taxes and income from equity method investments9

85,488

79,035

221,402

190,294

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

August 31,

September 2,

August 31,

September 2,

2024

2023

2024

2023

Income Taxes

(18,264

)

(22,231

)

(48,496

)

(51,255

)

Adjustments:

Acquisition project costs1

(428

)

(1,569

)

(1,147

)

(2,620

)

Organizational realignment2

(1,166

)

(2,523

)

(3,984

)

(4,247

)

Project One3

(388

)

(662

)

(1,587

)

(1,655

)

Other4

(2,579

)

6,123

(3,900

)

8,208

Adjusted income taxes10

(22,825

)

(20,862

)

(59,114

)

(51,569

)

Adjusted income before income taxes and income from equity method investments

85,488

79,035

221,402

190,294

Adjusted effective income tax rate10

26.7

26.4

26.7

27.1

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

August 31,

September 2,

August 31,

September 2,

2024

2023

2024

2023

Net revenue

917,927

900,634

2,645,452

2,608,055

Gross profit

275,729

263,472

797,017

735,055

Gross profit margin

30.0

29.3

30.1

28.2

Adjustments:

Acquisition project costs1

927

1,516

1,000

2,617

Organizational realignment2

2,799

4,961

10,679

9,972

Project One3

Other4

318

479

Adjusted gross profit11

279,455

270,267

808,709

748,123

Adjusted gross profit margin11

30.4

30.0

30.6

28.7

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

August 31,

September 2,

August 31,

September 2,

2024

2023

2024

2023

Selling, general and administrative expenses

(171,388

)

(172,153

)

(525,204

)

(493,320

)

Adjustments:

Acquisition project costs1

2,524

5,066

5,962

9,119

Organizational realignment2

6,307

5,460

12,322

9,083

Project One3

3,154

2,734

9,200

7,587

Other4

(4,871

)

149

(3,988

)

880

Adjusted selling, general and administrative expenses12

(164,274

)

(158,744

)

(501,708

)

(466,651

)

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

H.B. FULLER COMPANY AND SUBSIDIARIES

REGULATION G RECONCILIATION

In thousands (unaudited)

Three Months Ended:

Hygiene, Health and Consumable

Engineering

Construction

Corporate

H.B. Fuller

August 31, 2024

Adhesives

Total

Unallocated

Consolidated

Net income attributable to H.B. Fuller

51,280

53,918

13,974

119,172

(63,811

)

55,361

Adjustments:

Acquisition project costs1

3,474

Organizational realignment2

9,471

Project One3

3,154

Other4

(2,904

)

(2,904

)

Discrete tax items5

(2,937

)

(2,937

)

Income tax effect on adjustments6

(1,624

)

(1,624

)

Adjusted net income attributable to H.B. Fuller7

51,280

53,918

13,974

119,172

(55,177

)

63,995

Add:

Interest expense

35,287

Interest income

(1,090

)

(1,090

)

Adjusted Income taxes

22,825

Depreciation and amortization expense8

13,040

20,050

11,145

44,235

Adjusted EBITDA7

64,320

73,968

25,119

163,407

1,845

165,252

Revenue

389,854

374,923

153,150

917,927

Adjusted EBITDA Margin7

16.5

19.7

16.4

17.8

NMP

18.0

Nine Months Ended

Hygiene, Health and Consumable

Engineering

Construction

Corporate

H.B. Fuller

August 31, 2024

Adhesives

Total

Unallocated

Consolidated

Net income attributable to H.B. Fuller

151,636

142,681

24,635

318,952

(181,337

)

137,615

Adjustments:

Acquisition project costs1

6,984

Organizational realignment2

24,038

Project One3

9,213

Other4

(2,021

)

(2,021

)

Discrete tax items5

(4,147

)

(4,147

)

Income tax effect on adjustments6

(6,472

)

(6,472

)

Adjusted net income attributable to H.B. Fuller7

151,636

142,681

24,635

318,952

(153,742

)

165,210

Add:

Interest expense

99,502

Interest income

(3,594

)

(3,594

)

Adjusted Income taxes

59,114

Depreciation and amortization expense8

40,157

52,452

32,679

125,288

Adjusted EBITDA7

191,793

195,133

57,314

444,240

1,280

445,520

Revenue

1,150,658

1,077,206

417,588

2,645,452

Adjusted EBITDA Margin7

16.7

18.1

13.7

16.8

NMP

16.8

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

NMP = Non-meaningful percentage

H.B. FULLER COMPANY AND SUBSIDIARIES

REGULATION G RECONCILIATION

In thousands (unaudited)

Three Months Ended:

Hygiene, Health and Consumable

Engineering

Construction

Corporate

H.B. Fuller

September 2, 2023

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

Organizational realignment2

10,421

Project One3

2,734

Other4

503

Discrete tax items5

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

Interest income

(1,128

)

(1,128

)

Adjusted Income taxes

20,862

Depreciation and amortization expense8

14,604

16,467

10,755

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

Adjusted EBITDA Margin7

17.2

19.3

14.0

17.6

NMP

17.3

Nine Months Ended

Hygiene, Health and Consumable

Engineering

Construction

Corporate

H.B. Fuller

September 2, 2023

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

Organizational realignment2

19,055

Project One3

7,587

Other4

4,098

Discrete tax items5

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

Interest income

(2,726

)

(2,726

)

Adjusted Income taxes

51,569

Depreciation and amortization expense8

39,159

47,980

31,664

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

Adjusted EBITDA Margin7

16.3

17.1

11.2

15.9

NMP

15.7

NMP = Non-meaningful percentage

H.B. FULLER COMPANY AND SUBSIDIARIES

SEGMENT FINANCIAL INFORMATION

NET REVENUE GROWTH (DECLINE)

(unaudited)

Three Months Ended

Nine Months Ended

August 31, 2024

Price

(2.6

(3.1

Volume

3.0

1.9

Organic Growth13

0.4

(1.2

M&A

3.0

3.9

Constant currency

3.4

2.7

F/X

(1.5

(1.3

Total H.B. Fuller Net Revenue

1.9

1.4

Revenue growth versus 2023

Three Months Ended

August 31, 2024

Net Revenue

F/X

Constant Currency

M&A

Organic Growth13

Hygiene, Health and Consumable Adhesives

(3.1

(2.6

(0.5

0.0

(0.5

Engineering Adhesives

2.5

(0.8

3.3

5.3

(2.0

Construction Adhesives

15.7

(0.1

15.8

5.6

10.2

Total H.B. Fuller

1.9

(1.5

3.4

3.0

0.4

Revenue growth versus 2023

Nine Months Ended

August 31, 2024

Net Revenue

F/X

Constant Currency

M&A

Organic Growth13

Hygiene, Health and Consumable Adhesives

(3.3

(1.7

(1.6

3.2

(4.8

Engineering Adhesives

1.3

(1.2

2.5

3.2

(0.7

Construction Adhesives

17.7

0.0

17.7

8.7

9.0

Total H.B. Fuller

1.4

(1.3

2.7

3.9

(1.2

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.

H.B. FULLER COMPANY AND SUBSIDIARIES

REGULATION G RECONCILIATION

In thousands (unaudited)

Three Months Ended

Trailing Twelve Months16 Ended

Year Ended

September 2,

2023

December 2,

2023

March 2,

2024

June 1,

2024

August 31,

2024

August 31,

2024

June 1,

2024

December 2,

2023

Net income attributable to H.B. Fuller

37,627

44,991

30,991

51,264

55,361

182,607

164,873

144,906

Adjustments:

Acquisition project costs1

6,480

4,765

2,043

1,467

3,474

11,749

14,755

16,874

Organizational realignment2

10,421

10,549

7,262

7,275

9,471

34,557

35,507

29,900

Project One3

2,734

2,193

3,213

2,845

3,154

11,405

10,985

9,815

Other4

503

(3,903

)

914

(2,904

)

(5,893

)

(2,486

)

(611

)

Discrete tax items14

6,243

16,955

(2,527

)

1,317

(2,937

)

12,808

21,988

26,085

Income tax effect on adjustments5

(4,875

)

(1,158

)

(3,290

)

(1,558

)

(1,624

)

(7,630

)

(10,881

)

(10,604

)

Adjusted net income attributable to H.B. Fuller7

59,133

74,392

37,692

63,524

63,995

239,603

234,741

216,365

Add:

Interest expense

35,105

33,297

31,901

32,313

35,287

132,798

132,616

131,913

Interest income

(1,128

)

(1,217

)

(1,307

)

(1,197

)

(1,090

)

(4,811

)

(4,849

)

(3,943

)

Adjusted Income taxes

20,862

26,477

13,631

22,658

22,825

85,591

83,628

78,047

Depreciation and Amortization expense15

41,826

39,653

41,101

39,952

44,235

164,941

162,532

158,456

Adjusted EBITDA7

155,798

172,602

123,018

157,250

165,252

618,122

608,668

580,838

14 Discrete tax items for the three months ended September 2, 2024 are related to various U.S. and foreign tax matters offset by an excess tax benefit related to U.S. stock compensation. Discrete tax items for the three months ended March 2, 2024 are related to various foreign tax matters as well as excess tax benefit related to U.S. stock compensation. Discrete tax items for the three months ended June 1, 2024 are related to various foreign tax matters as well as excess tax benefit related to U.S. stock compensation. Discrete tax items for the three months ended August 31, 2024 are related to various foreign tax matters as well as excess tax benefit related to U.S. stock compensation. Discrete tax items for the three months and year ended December 2, 2023 are related to the tax impact of withholding tax recorded on earnings that are no longer permanently reinvested, as well as other various U.S. and foreign tax matters.

15 Depreciation and amortization expense added back for EBITDA is adjusted for amounts already included in adjusted net income attributable to H.B. Fuller. Depreciation and amortization expense added back was $348 for the three months ended September 2, 2023, ($1,036) for the three months ended December 2, 2023, ($2,422) for the three months ended March 2, 2024, ($1,198) for the three months ended June 1, 2024, $194 for the three months ended August 31, 2024 and ($1,384) for the year ended December 2, 2023.

16 Trailing twelve months adjusted EBITDA is a non-GAAP financial measure and is defined as adjusted EBITDA for the twelve-month period ended on the date presented. The table above provides a reconciliation of trailing twelve month adjusted EBITDA to net income attributable to H.B. Fuller for the trailing twelve-month period presented, 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)

June 1, 2024

August 31, 2024

December 2, 2023

September 2, 2023

Total debt

2,024,916

2,021,070

1,838,431

1,885,021

Less: Cash and cash equivalents

114,823

131,412

179,453

94,934

Net debt17

1,910,093

1,889,658

1,658,978

1,790,087

Trailing twelve months Adjusted EBITDA16

608,668

618,122

580,838

Net Debt-to-Adjusted EBITDA17

3.1

2.9

17 Net debt and net debt-to-adjusted EBITDA are non-GAAP financial measures. Net debt is defined as total debt less cash and cash equivalents. Net debt-to-adjusted EBITDA is defined as net debt divided by trailing twelve months adjusted EBITDA. The calculations of these non-GAAP financial measures are shown in the table above. The table above provides a reconciliation of each of these non-GAAP financial measures to total debt, 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)

August 31, 2024

September 2, 2023

December 2, 2023

Trade receivables, net

574,781

576,060

577,932

Inventory

509,029

472,641

442,040

Trade payables

493,550

394,914

439,700

Net working capital18

590,260

653,787

580,272

Net revenue three months ended

917,927

900,634

Annualized net revenue18

3,671,708

3,602,536

Net working capital as a percentage of annualized revenue18

16.1

18.1

18 Net working capital, annualized net revenue and net working capital as a percentage of annualized net revenue are non-GAAP financial measures. Net working capital is defined as trade receivables, net plus inventory less trade payables. Annualized net revenue is defined as net revenue for the three months ended on the date presented multiplied by four. Net working capital as a percentage of annualized net revenue is net working capital divided by annualized net revenue. The calculations of these non-GAAP financial measures are shown in the table above. The table above provides a reconciliation of each of these non-GAAP financial measures to the most directly comparable financial measure determined and reported in accordance with U.S. GAAP.

CONSOLIDATED BALANCE SHEETS

H.B. Fuller Company and Subsidiaries

(In thousands, except share and per share amounts)

August 31,

December 2,

2024

2023

Assets

Current assets:

Cash and cash equivalents

131,412

179,453

Trade receivables (net of allowances of $13,389 and $11,080, as of August 31, 2024 and December 2, 2023, respectively)

574,781

577,932

Inventories

509,029

442,040

Other current assets

115,070

112,678

Total current assets

1,330,292

1,312,103

Property, plant and equipment

1,855,203

1,755,035

Accumulated depreciation

(993,884

)

(930,380

)

Property, plant and equipment, net

861,319

824,655

Goodwill

1,591,709

1,486,512

Other intangibles, net

806,148

729,140

Other assets

388,777

371,165

Total assets

4,978,245

4,723,575

Liabilities, non-controlling interest and total equity

Current liabilities

Notes payable

797

1,841

Trade payables

493,550

439,700

Accrued compensation

83,861

95,680

Income taxes payable

39,244

47,688

Other accrued expenses

87,495

107,902

Total current liabilities

704,947

692,811

Long-term debt

2,020,273

1,836,590

Accrued pension liabilities

51,739

50,189

Other liabilities

359,565

388,072

Total liabilities

3,136,524

2,967,662

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 – 54,612,541 and 54,092,987 as of August 31, 2024 and December 2, 2023, respectively

54,613

54,093

Additional paid-in capital

316,324

301,485

Retained earnings

1,944,380

1,842,507

Accumulated other comprehensive loss

(474,326

)

(442,880

)

Total H.B. Fuller stockholders' equity

1,840,991

1,755,205

Non-controlling interest

730

708

Total equity

1,841,721

1,755,913

Total liabilities, non-controlling interest and total equity

4,978,245

4,723,575

CONSOLIDATED STATEMENTS of CASH FLOWS

H.B. Fuller Company and Subsidiaries

(In thousands)

Nine Months Ended

August 31, 2024

September 2, 2023

Cash flows from operating activities:

Net income including non-controlling interest

137,647

99,987

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

Depreciation

66,990

60,518

Amortization

61,723

58,633

Deferred income taxes

(45,998

)

(30,064

)

(Income) loss from equity method investments, net of dividends received

622

260

Gain from Insurance Proceeds

(7,264

)

Equity Investment Impairment Loss

1,966

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

(501

)

(78

)

Share-based compensation

17,662

16,279

Pension and other post-retirement benefit plan activity

(6,671

)

(8,890

)

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

Trade receivables, net

26,373

79,495

Inventories

(62,206

)

38,212

Other assets

(39,025

)

(30,901

)

Trade payables

49,705

(74,443

)

Accrued compensation

(11,566

)

(33,796

)

Other accrued expenses

(5,244

)

(6,992

)

Income taxes payable

(17,873

)

24,461

Other liabilities

856

12,408

Other

49,591

6,023

Net cash provided by operating activities

216,787

216,694

Cash flows from investing activities:

Purchased property, plant and equipment

(112,799

)

(109,545

)

Purchased businesses, net of cash acquired

(274,067

)

(194,248

)

Proceeds from sale of property, plant and equipment

1,048

4,257

Net cash used in investing activities

(385,818

)

(299,536

)

Cash flows from financing activities:

Proceeds from issuance of long-term debt

1,732,900

1,333,000

Repayment of long-term debt

(1,556,135

)

(1,184,900

)

Payment of debt issuance costs

(3,493

)

(10,214

)

Net payment of notes payable

(1,014

)

(18,000

)

Dividends paid

(35,440

)

(32,319

)

Proceeds from stock options exercised

34,161

11,251

Repurchases of common stock

(39,371

)

(2,560

)

Net cash provided by financing activities

131,608

96,258

Effect of exchange rate changes on cash and cash equivalents

(10,618

)

1,608

Net change in cash and cash equivalents

(48,041

)

15,024

Cash and cash equivalents at beginning of period

179,453

79,910

Cash and cash equivalents at end of period

131,412

94,934

View source version on businesswire.com: https://www.businesswire.com/news/home/20240925304542/en/

Steven Brazones Investor Relations Contact 651-236-5060

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