Recent Quotes View Full List My Watchlist Create Watchlist Indicators DJI Nasdaq Composite SPX Gold Crude Oil Hydroworld Market Index Markets Stocks ETFs Tools Overview News Currencies International Treasuries H.B. Fuller Reports Third Quarter Fiscal 2022 Results By: H.B. Fuller Company via Business Wire September 21, 2022 at 16:05 PM EDT Net Revenue Growth of 13.8%; Organic Growth of 18.4% Year-on-Year Reported EPS (diluted) of $0.84; Adjusted EPS (diluted) of $1.06, Up 34% Year-on-Year Adjusted EBITDA of $138 million, up 24% y-on-y; Adjusted EBITDA Margin Increased 120 basis points y-on-y Company Increasing FY2022 Adjusted EBITDA Expectations to a range of $540 to $550 million; 16% - 18% Growth H.B. Fuller Company (NYSE: FUL) today reported financial results for its third quarter that ended August 27, 2022. Third Quarter 2022 Noteworthy Items: Net revenue grew 13.8% year-on-year, with organic revenue increasing 18.4% year-on-year with strong organic growth in all operating segments; Gross margin was 26.5%; Adjusted gross margin of 26.5% expanded 280 basis points year-on-year, driven by strong pricing execution to recover raw material cost inflation; Net Income was $46.5 million; Adjusted EBITDA of $137.7 million was up 24.4% year-on-year and adjusted EBITDA margin was up 120 basis points; Reported EPS (diluted) was $0.84; Adjusted EPS (diluted) was $1.06, increasing 34.2% versus the prior year. Summary of Third Quarter 2022 Results: Net revenue for the third quarter of fiscal 2022 was $941.2 million, up 13.8% versus the third quarter of fiscal 2021. Robust pricing actions to recover unprecedented raw material cost inflation increased net revenue by 18.7 percentage points. As expected, volume was down 0.3% as a result of slowing economic conditions, offset by market share gains. As a result, organic revenue increased 18.4% versus the third quarter of fiscal 2021. Unfavorable foreign currency exchange rates reduced net revenue growth by 6.6 percentage points, while acquisitions increased net revenue growth by 2.0 percentage points. On a year-on-year basis, Hygiene, Health and Consumable Adhesives organic revenue increased 22.9%, Engineering Adhesives organic revenue increased 17.5%, and Construction Adhesives organic revenue increased 6.9%. Gross profit in the third quarter of fiscal 2022 was $249.2 million. Adjusted gross profit in the third quarter of fiscal 2022 was $249.8 million. Adjusted gross profit margin of 26.5% increased 280 basis points year-on-year. Strong pricing actions to recover raw material cost inflation, as well as operating efficiencies, drove adjusted gross margin higher year-on-year. Selling, general and administrative (SG&A) expense was $161.2 million in the third quarter of fiscal 2022 and adjusted SG&A was $156.2 million. Adjusted SG&A as a percent of net revenue increased 100 basis points versus the third quarter of last year. The increase in SG&A, as a percentage of net revenue, was largely driven by higher variable compensation and higher travel related expenses following the pandemic driven slowdown in travel. Net income attributable to H.B. Fuller for the third quarter of fiscal 2022 was $46.5 million, or $0.84 per diluted share. Adjusted net income attributable to H.B. Fuller for the third quarter of fiscal 2022 was $58.3 million, up 35.9% year-on-year. Adjusted EPS was $1.06 per diluted share, up $0.27 or 34.2% year-on-year, reflecting strong organic revenue growth and operating efficiencies which more than offset the unfavorable impact of currency and higher interest rates. Adjusted EBITDA in the third quarter of fiscal 2022 was $137.7 million, up 24.4% compared with the third quarter of last year. Adjusted EBITDA margin increased 120 basis points year-on-year from 13.4% to 14.6%. Strong pricing actions, continued strategic mix shift towards more highly-specified products, and operational discipline drove the improvement year-on-year. “Our strong organic growth and improved profitability in the third quarter serve as additional proof points that our strategy is working, particularly in light of continued raw material inflation and currency headwinds from the strong dollar,” said Jim Owens, H.B. Fuller president and chief executive officer. “Our innovation driven market share gains and mix shift to a more highly specified product portfolio through innovation and strategic M&A, coupled with our responsible pricing actions, are delivering significant improvement to our financial results. “Our underlying market share gains are enabling us to drive a more favorable volume performance in the marketplace and position us well as the rate of raw material inflation subsides. These share gains will endure and should grow as we execute our strategy. At the same time, our ability to substitute adhesive technologies greatly improves with supply chain normalization and allows us to provide competitive offerings while improving margins. These substitution capabilities, combined with the pricing actions we have taken throughout this unprecedented inflationary environment, will enable us to grow organic revenues and expand margins in recessionary economic environments. “We have very effectively managed both economic and currency headwinds and we remain on track to achieve significant double-digit EPS growth and EBITDA growth at the top end of the range we provided in the first quarter. We are performing exceptionally well, and we are uniquely positioned to continue to deliver above-market organic growth while expanding our margins,” concluded Owens. Balance Sheet and Cash Flow Items: At the end of the third quarter of fiscal 2022 net debt was $1,857 million, down $10 million sequentially versus the second quarter. Cash flow from operations in the quarter was $58 million, up $49 million sequentially reflecting strong revenue growth and improving margins but down versus last year due to higher year-on-year working capital requirements. Fiscal 2022 Outlook: Company is increasing full-year expectations for adjusted EBITDA, despite slower economic conditions, stronger U.S. Dollar, and continued raw material cost inflation; Organic revenue growth for fiscal year 2022 is expected to be in the range of 17% to 18%, excluding the impact of the extra week; Adjusted EBITDA for fiscal 2022 is expected to be in the range of $540 to $550 million, up from the previously provided range of $530 to $550 million and equating to growth of 16% to 18% versus fiscal year 2021; Net interest expense for fiscal 2022 is expected to be between $80 and $85 million reflecting higher interest rates and the expectation of some opportunistic refinancing before the end of the year; Adjusted EPS in the fourth quarter of fiscal 2022 is expected to be in the range of $1.15 to $1.30, resulting in fiscal year 2022 adjusted EPS increasing 19% to 23% year-on-year, despite the significantly stronger U.S. dollar and higher borrowing costs; Working capital, as a percentage of annualized net revenue, is expected to be in the range of 16% to 17% by fiscal year-end, resulting in full-year cash flow from operations similar to the prior year. Conference Call: The company will hold a conference call on September 22, 2022, 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 22, 2022, through 10:59 p.m. CT on September 29, 2022. To access the telephone replay dial 1-800-770-2030 (toll free) or 1-647-362-9199, and enter Conference ID: 6370505. Regulation G The information presented in this earnings release regarding consolidated and segment organic revenue growth, operating income, adjusted gross profit, adjusted gross profit margin, adjusted selling, general and administrative expense, adjusted income before income taxes and income from equity investments, adjusted income taxes, adjusted effective tax rate, adjusted net income, adjusted diluted earnings per share and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) does not conform to U.S. generally accepted accounting principles (U.S. GAAP) and should not be construed as an alternative to the reported results determined in accordance with U.S. GAAP. Management has included this non-GAAP information to assist in understanding the operating performance of the company and its operating segments as well as the comparability of results to the results of other companies. The non-GAAP information provided may not be consistent with the methodologies used by other companies. All non-GAAP information is reconciled with reported U.S. GAAP results in the “Regulation G Reconciliation” tables in this press release with the exception of our forward-looking non-GAAP measures contained above in our Fiscal 2022 Guidance, 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 2021 net revenue of $3.3 billion, H.B. Fuller’s commitment to innovation and sustainable adhesive solutions brings together people, products and processes that answer and solve some of the world's biggest challenges. Our reliable, responsive service creates lasting, rewarding connections with customers in electronics, disposable hygiene, medical, transportation, aerospace, clean energy, packaging, construction, woodworking, general industries and other consumer businesses. 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 federal securities laws, including Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements often address expected future business and financial performance, financial condition, and other matters, and often contain words or phrases such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “opportunity,” “outlook,” “plan,” “project,” “seek,” “should,” “strategy,” "target," “will,” “will be,” “will continue,” “will likely result,” “would” and similar expressions, and variations or negatives of these words or phrases. These statements are subject to various risks and uncertainties that could cause our actual results to differ materially from those in the forward-looking statements, including but not limited to the following: the consequences of the COVID-19 outbreak and other pandemics on our operations and financial results; the impact on the supply chain, raw material costs and pricing of our products due to the Russia-Ukraine war; the impact on our margins and product demand due to inflationary pressures; the substantial amount of debt we have incurred to finance our acquisition of Royal, our ability to repay or refinance our debt or to incur additional debt in the future, our need for a significant amount of cash to service and repay the debt and to pay dividends on our common stock, the effect of debt covenants that limit the discretion of management in operating the business or in paying dividends; our ability to pay dividends and to pursue growth opportunities if we continue to pay dividends according to the current dividend policy; our ability to achieve expected synergies, cost savings and operating efficiencies from our restructuring initiatives and operational improvement projects within the expected time frames or at all; our ability to effectively implement Project ONE; uncertain political and economic conditions; fluctuations in product demand; competing products and pricing; our geographic and product mix; availability and price of raw materials; disruptions to our relationships with our major customers and suppliers; failures in our information technology systems; regulatory compliance across our global footprint; trade policies and economic sanctions impacting our markets; changes in tax laws and tariffs; devaluations and other foreign exchange rate fluctuations; the impact of litigation and investigations, including for product liability and environmental matters; impairment charges on our goodwill or long-lived assets; the effect of new accounting pronouncements and accounting charges and credits; and similar matters. Many of the foregoing risks and uncertainties are, and will be, exacerbated by COVID-19 and the Russia-Ukraine war and the resulting deterioration of the global business and economic environment. Additional information about these various risks and uncertainties can be found in the “Risk Factors” section of our Form 10-K filings, and any updates to the risk factors in our Form 10-Q and 8-K filings with the SEC, but there may be other risks and uncertainties that we are unable to identify at this time or that we do not currently expect to have a material impact on the business. You should not place undue reliance on forward-looking statements, which speak only as of the date they are made. We do not undertake to update or revise any forward-looking statements, except as required by law. H.B. FULLER COMPANY AND SUBSIDIARIES CONSOLIDATED FINANCIAL INFORMATION In thousands, except per share amounts (unaudited) Three Months Ended Percent of Three Months Ended Percent of August 27, 2022 Net Revenue August 28, 2021 Net Revenue Net revenue $ 941,230 100.0 % $ 826,830 100.0 % Cost of sales (692,066 ) (73.5 )% (632,880 ) (76.5 )% Gross profit 249,164 26.5 % 193,950 23.5 % Selling, general and administrative expenses (161,210 ) (17.1 )% (134,497 ) (16.3 )% Other income, net 6,559 0.7 % 6,150 0.7 % Interest expense (23,450 ) (2.5 )% (19,396 ) (2.3 )% Interest income 2,139 0.2 % 2,520 0.3 % Income before income taxes and income from equity method investments 73,202 7.8 % 48,727 5.9 % Income taxes (28,259 ) (3.0 )% (19,095 ) (2.3 )% Income from equity method investments 1,587 0.2 % 1,998 0.2 % Net income including non-controlling interest 46,530 4.9 % 31,630 3.8 % Net income attributable to non-controlling interest (33 ) (0.0 )% (14 ) (0.0 )% Net income attributable to H.B. Fuller $ 46,497 4.9 % $ 31,616 3.8 % Basic income per common share attributable to H.B. Fuller $ 0.87 $ 0.60 Diluted income per common share attributable to H.B. Fuller $ 0.84 $ 0.58 Weighted-average common shares outstanding: Basic 53,644 53,049 Diluted 55,130 54,646 Dividends declared per common share $ 0.190 $ 0.168 H.B. FULLER COMPANY AND SUBSIDIARIES CONSOLIDATED FINANCIAL INFORMATION In thousands, except per share amounts (unaudited) Nine Months Ended Percent of Nine Months Ended Percent of August 27, 2022 Net Revenue August 28, 2021 Net Revenue Net revenue $ 2,790,969 100.0 % $ 2,380,607 100.0 % Cost of sales (2,075,392 ) (74.4 )% (1,776,744 ) (74.6 )% Gross profit 715,577 25.6 % 603,863 25.4 % Selling, general and administrative expenses (483,109 ) (17.3 )% (426,921 ) (17.9 )% Other income, net 12,701 0.5 % 25,899 1.1 % Interest expense (61,475 ) (2.2 )% (59,699 ) (2.5 )% Interest income 6,170 0.2 % 7,709 0.3 % Income before income taxes and income from equity method investments 189,864 6.8 % 150,851 6.3 % Income taxes (62,023 ) (2.2 )% (46,362 ) (1.9 )% Income from equity method investments 4,236 0.2 % 6,071 0.3 % Net income including non-controlling interest 132,077 4.7 % 110,560 4.6 % Net income attributable to non-controlling interest (70 ) (0.0 )% (51 ) (0.0 )% Net income attributable to H.B. Fuller $ 132,007 4.7 % $ 110,509 4.6 % Basic income per common share attributable to H.B. Fuller $ 2.47 $ 2.09 Diluted income per common share attributable to H.B. Fuller $ 2.39 $ 2.04 Weighted-average common shares outstanding: Basic 53,498 52,794 Diluted 55,201 54,093 Dividends declared per common share $ 0.548 $ 0.498 H.B. FULLER COMPANY AND SUBSIDIARIES REGULATION G RECONCILIATION In thousands, except per share amounts (unaudited) Three Months Ended Nine Months Ended August 27, August 28, August 27, August 28, 2022 2021 2022 2021 Net income attributable to H.B. Fuller $ 46,497 $ 31,616 $ 132,007 $ 110,509 Adjustments: Acquisition project costs1 1,138 901 9,008 2,277 Organizational realignment2 595 3,087 4,915 9,029 Royal restructuring and integration3 196 1,016 1,007 3,537 Project One 2,502 2,305 7,559 6,469 Other4 711 111 8,267 (3,701 ) Discrete tax items5 6,449 5,626 7,697 5,068 Income tax effect on adjustments6 251 (1,746 ) (6,786 ) (4,359 ) Adjusted net income attributable to H.B. Fuller7 58,339 42,916 163,674 128,829 Add: Interest expense 23,450 19,412 61,501 59,769 Interest income (2,139 ) (2,520 ) (6,181 ) (7,709 ) Adjusted Income taxes 21,559 15,216 61,112 45,653 Depreciation and Amortization expense8 36,491 35,705 108,925 106,596 Adjusted EBITDA7 137,700 110,729 389,031 333,138 Diluted Shares 55,130 54,646 55,201 54,093 Adjusted diluted income per common share attributable to H.B. Fuller7 $ 1.06 $ 0.79 $ 2.97 $ 2.38 Revenue $ 941,230 $ 826,830 $ 2,790,969 $ 2,380,607 Adjusted EBITDA margin7 14.6 % 13.4 % 13.9 % 14.0 % 1 Acquisition project costs include costs related to integrating and accounting for acquisitions. 2 Organizational realignment includes costs incurred as a direct result of the organizational realignment program, including compensation for employees supporting the program, consulting expense and operational inefficiencies related to the closure of production facilities and consolidation of business activities. 3 Royal restructuring and integration program includes costs incurred as a direct result of the Royal restructuring and integration program including compensation for employees supporting the program, consulting expense and operational inefficiencies related to the closure of production facilities and consolidation of business activities. 4 Other expenses, for the nine months ended August 27 2022, include a $3.3 million non-cash charge related to the wind down and settlement of the Company’s Canadian defined benefit pension plan, $1.3 million of hedging costs related to the Russian ruble devaluation driven by the war in Ukraine, $1.2 million of transactional tax expense associated with an audit settlement, other expenses for COVID-19 testing, vaccinations and exceptional medical claims, and non-cash gains and losses related to legal entity consolidations. 5 Discrete tax items are related to revaluation of cross-currency swap agreements due to depreciation of the Euro versus the U.S. Dollar and various foreign tax matters, offset by the tax effect of legal entity mergers. 6 Represents the difference between income taxes on net income before income taxes and income from equity method investments reported in accordance with U.S. GAAP and adjusted net income before income taxes and income from equity method investments. 7 Adjusted net income attributable to H.B. Fuller, adjusted diluted income per common share attributable to H.B. Fuller, adjusted EBITDA and adjusted EBITDA margin are non-GAAP financial measures. Adjusted net income attributable to H.B. Fuller is defined as net income before the specific adjustments shown above. Adjusted diluted income per common share is defined as adjusted net income attributable to H.B. Fuller divided by the number of diluted common shares. Adjusted EBITDA is defined as net income before interest, income taxes, depreciation, amortization and the specific adjustments shown above. Adjusted EBITDA margin is defined as adjusted EBITDA divided by net revenue. The table above provides a reconciliation of adjusted net income attributable to H.B. Fuller, adjusted diluted income per common share attributable to H.B. Fuller, adjusted EBITDA and adjusted EBITDA margin to net income attributable to H.B. Fuller, the most directly comparable financial measure determined and reported in accordance with U.S. GAAP. 8 Depreciation and amortization expense added back for EBITDA is adjusted for amounts already included in Adjusted net income attributable to H.B. Fuller totaling ($149) and ($292) for the three months ended August 27, 2022 and August 28, 2021, respectively and ($460) and ($1,026) for the nine months ended August 27, 2022 and August 28, 2021, respectively. H.B. FULLER COMPANY AND SUBSIDIARIES SEGMENT FINANCIAL INFORMATION In thousands (unaudited) Three Months Ended Nine Months Ended August 27, August 28, August 27, August 28, 2022 2021 2022 2021 Net Revenue: Hygiene, Health and Consumable Adhesives $ 424,978 $ 369,439 $ 1,252,405 $ 1,069,922 Engineering Adhesives 378,264 342,300 1,137,587 1,000,337 Construction Adhesives 137,988 115,091 400,977 310,348 Corporate unallocated - - - - Total H.B. Fuller $ 941,230 $ 826,830 $ 2,790,969 $ 2,380,607 Segment Operating Income (Loss): Hygiene, Health and Consumable Adhesives $ 47,470 $ 29,652 $ 122,950 $ 98,493 Engineering Adhesives 39,776 34,087 115,266 96,580 Construction Adhesives 6,391 3,339 22,032 4,974 Corporate unallocated (5,683 ) (7,625 ) (27,780 ) (23,105 ) Total H.B. Fuller $ 87,954 $ 59,453 $ 232,468 $ 176,942 Adjusted EBITDA7 Hygiene, Health and Consumable Adhesives $ 61,834 $ 44,496 $ 166,304 $ 142,671 Engineering Adhesives 56,061 52,001 165,461 150,034 Construction Adhesives 19,619 14,247 59,616 37,785 Corporate unallocated 186 (15 ) (2,350 ) 2,648 Total H.B. Fuller $ 137,700 $ 110,729 $ 389,031 $ 333,138 Adjusted EBITDA Margin7 Hygiene, Health and Consumable Adhesives 14.5 % 12.0 % 13.3 % 13.3 % Engineering Adhesives 14.8 % 15.2 % 14.5 % 15.0 % Construction Adhesives 14.2 % 12.4 % 14.9 % 12.2 % Corporate unallocated NMP NMP NMP NMP Total H.B. Fuller 14.6 % 13.4 % 13.9 % 14.0 % 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 27, August 28, August 27, August 28, 2022 2021 2022 2021 Income before income taxes and income from equity method investments $ 73,202 $ 48,727 $ 189,864 $ 150,851 Adjustments: Acquisition project costs1 1,138 901 9,008 2,277 Organizational realignment2 595 3,087 4,915 9,029 Royal restructuring and integration3 196 1,016 1,007 3,537 Project One 2,502 2,305 7,559 6,469 Other4 711 111 8,267 (3,701 ) Adjusted income before income taxes and income from equity method investments9 $ 78,344 $ 56,147 $ 220,620 $ 168,462 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 27, August 28, August 27, August 28, 2022 2021 2022 2021 Income Taxes $ (28,259 ) $ (19,095 ) $ (62,023 ) $ (46,362 ) Adjustments: Acquisition project costs1 55 (212 ) (2,154 ) (495 ) Organizational realignment2 29 (726 ) (1,140 ) (2,204 ) Royal restructuring and integration3 10 (239 ) (213 ) (846 ) Project One 122 (542 ) (1,284 ) (1,551 ) Other4 6,484 5,598 5,702 5,805 Adjusted income taxes10 $ (21,559 ) $ (15,216 ) $ (61,112 ) $ (45,653 ) Adjusted income before income taxes and income from equity method investments $ 78,344 $ 56,147 $ 220,620 $ 168,462 Adjusted effective income tax rate10 27.5 % 27.1 % 27.7 % 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 27, August 28, August 27, August 28, 2022 2021 2022 2021 Net revenue $ 941,230 $ 826,830 $ 2,790,969 $ 2,380,607 Gross profit $ 249,164 $ 193,950 $ 715,577 $ 603,863 Gross profit margin 26.5 % 23.5 % 25.6 % 25.4 % Adjustments: Acquisition project costs1 (104 ) 1 320 64 Organizational realignment2 214 1,472 1,997 2,265 Royal restructuring and integration3 5 644 377 1,962 Project ONE - (22 ) 6 (22 ) Other4 533 247 1,358 1,635 Adjusted gross profit11 $ 249,812 $ 196,292 $ 719,635 $ 609,767 Adjusted gross profit margin11 26.5 % 23.7 % 25.8 % 25.6 % 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 27, August 28, August 27, August 28, 2022 2021 2022 2021 Selling, general and administrative expenses $ (161,210 ) $ (134,497 ) $ (483,109 ) $ (426,921 ) Adjustments: Acquisition project costs1 1,241 901 8,688 2,214 Organizational realignment2 630 1,614 4,134 6,819 Royal restructuring and integration3 191 388 656 1,644 Project ONE 2,502 2,327 7,553 6,491 Other4 471 55 2,691 32 Adjusted selling, general and administrative expenses12 $ (156,175 ) $ (129,212 ) $ (459,387 ) $ (409,721 ) 12 Adjusted selling, general and administrative expenses is a non-GAAP financial measure. Adjusted selling, general and administrative expenses is defined as selling, general and administrative expenses excluding the specific adjustments shown above. The table above provides a reconciliation of adjusted selling, general and administrative expenses to selling, general and administrative expenses, the most directly comparable financial measure determined and reported in accordance with U.S. GAAP. H.B. FULLER COMPANY AND SUBSIDIARIES REGULATION G RECONCILIATION In thousands (unaudited) Hygiene, Health Three Months Ended and Consumable Engineering Construction Corporate H.B. Fuller August 27, 2022 Adhesives Adhesives Adhesives Total Unallocated Consolidated Net income attributable to H.B. Fuller $ 50,378 $ 41,927 $ 8,718 $ 101,023 $ (54,526 ) $ 46,497 Adjustments: Acquisition project costs1 - - - - 1,138 1,138 Organizational realignment2 - - - - 595 595 Royal Restructuring and integration3 - - - - 196 196 Project One - - - - 2,502 2,502 Other4 - - - - 711 711 Discrete tax items5 - - - - 6,449 6,449 Income tax effect on adjustments6 - - - - 251 251 Adjusted net income attributable to H.B. Fuller7 50,378 41,927 8,718 101,023 (42,684 ) 58,339 Add: Interest expense - - - - 23,450 23,450 Interest income - - - - (2,139 ) (2,139 ) Adjusted Income taxes - - - - 21,559 21,559 Depreciation and amortization expense8 11,456 14,134 10,901 36,491 - 36,491 Adjusted EBITDA7 $ 61,834 $ 56,061 $ 19,619 $ 137,514 $ 186 $ 137,700 Revenue $ 424,978 $ 378,264 $ 137,988 $ 941,230 - $ 941,230 Adjusted EBITDA Margin7 14.5 % 14.8 % 14.2 % 14.6 % NMP 14.6 % Nine Months Ended August 27, 2022 Net income attributable to H.B. Fuller $ 131,702 $ 121,741 $ 29,013 $ 282,456 $ (150,449 ) $ 132,007 Adjustments: Acquisition project costs1 - - - - 9,008 9,008 Organizational realignment2 - - - - 4,915 4,915 Royal Restructuring and integration3 - - - - 1,007 1,007 Project One - - - - 7,559 7,559 Other4 - - - - 8,267 8,267 Discrete tax items5 - - - - 7,697 7,697 Income tax effect on adjustments6 - - - - (6,786 ) (6,786 ) Adjusted net income attributable to H.B. Fuller7 131,702 121,741 29,013 282,456 (118,782 ) 163,674 Add: Interest expense - - - - 61,501 61,501 Interest income - - - - (6,181 ) (6,181 ) Adjusted Income taxes - - - - 61,112 61,112 Depreciation and amortization expense8 34,602 43,720 30,603 108,925 - 108,925 Adjusted EBITDA7 $ 166,304 $ 165,461 $ 59,616 $ 391,381 $ (2,350 ) $ 389,031 Revenue 1,252,405 1,137,587 400,977 2,790,969 - 2,790,969 Adjusted EBITDA Margin7 13.3 % 14.5 % 14.9 % 14.0 % NMP 13.9 % Note: Adjusted EBITDA is a non-GAAP financial measure. The table above provides a reconciliation of adjusted EBITDA for each segment to net income attributable to H.B. Fuller for each segment, the most directly comparable financial measure determined and reported in accordance with U.S. GAAP. NMP = Non-meaningful percentage H.B. FULLER COMPANY AND SUBSIDIARIES REGULATION G RECONCILIATION In thousands (unaudited) Hygiene, Health Three Months Ended: and Consumable Engineering Construction Corporate H.B. Fuller August 28, 2021 Adhesives Adhesives Adhesives Total Unallocated Consolidated Net income attributable to H.B. Fuller $ 32,924 $ 36,599 $ 5,516 $ 75,039 $ (43,423 ) $ 31,616 Adjustments: Acquisition project costs1 - - - - 901 901 Organizational realignment2 - - - - 3,087 3,087 Royal Restructuring and integration3 - - - - 1,016 1,016 Project One - - - - 2,305 2,305 Other4 - - - - 111 111 Discrete tax items5 - - - - 5,626 5,626 Income tax effect on adjustments6 - - - - (1,746 ) (1,746 ) Adjusted net income attributable to H.B. Fuller7 32,924 36,599 5,516 75,039 (32,123 ) 42,916 Add: Interest expense - - - - 19,412 19,412 Interest income - - - - (2,520 ) (2,520 ) Adjusted Income taxes - - - - 15,216 15,216 Depreciation and amortization Expense8 11,572 15,402 8,731 35,705 - 35,705 Adjusted EBITDA7 $ 44,496 $ 52,001 $ 14,247 $ 110,744 $ (15 ) $ 110,729 Revenue $ 369,439 $ 342,300 $ 115,091 $ 826,830 - $ 826,830 Adjusted EBITDA Margin7 12.0 % 15.2 % 12.4 % 13.4 % NMP 13.4 % Nine Months Ended August 28, 2021 Net income attributable to H.B. Fuller $ 108,291 $ 104,099 $ 11,504 $ 223,894 $ (113,385 ) $ 110,509 Adjustments: Acquisition project costs1 - - - - 2,277 2,277 Organizational realignment2 - - - - 9,029 9,029 Royal Restructuring and integration3 - - - - 3,537 3,537 Project One - - - - 6,469 6,469 Other4 - - - - (3,701 ) (3,701 ) Discrete tax items5 - - - - 5,068 5,068 Income tax effect on adjustments6 - - - - (4,359 ) (4,359 ) Adjusted net income attributable to H.B. Fuller7 108,291 104,099 11,504 223,894 (95,065 ) 128,829 Add: Interest expense - - - - 59,769 59,769 Interest income - - - - (7,709 ) (7,709 ) Adjusted Income taxes - - - - 45,653 45,653 Depreciation and amortization expense8 34,380 45,935 26,281 106,596 - 106,596 Adjusted EBITDA7 $ 142,671 $ 150,034 $ 37,785 $ 330,490 $ 2,648 $ 333,138 Revenue $ 1,069,922 $ 1,000,337 $ 310,348 $ 2,380,607 - $ 2,380,607 Adjusted EBITDA Margin7 13.3 % 15.0 % 12.2 % 13.9 % NMP 14.0 % Note: Adjusted EBITDA is a non-GAAP financial measure. The table above provides a reconciliation of adjusted EBITDA for each segment to net income attributable to H.B. Fuller for each segment, the most directly comparable financial measure determined and reported in accordance with U.S. GAAP. NMP = Non-meaningful percentage H.B. FULLER COMPANY AND SUBSIDIARIES SEGMENT FINANCIAL INFORMATION NET REVENUE GROWTH (DECLINE) (unaudited) Three Months Ended Nine Months Ended August 27, 2022 August 27, 2022 Price 18.7 % 17.6 % Volume (0.3 )% 2.8 % Organic Growth13 18.4 % 20.4 % M&A 2.0 % 1.6 % Constant currency 20.4 % 22.0 % F/X (6.6 )% (4.8 )% Total H.B. Fuller Net Revenue Growth 13.8 % 17.2 % Revenue growth versus 2022 Three Months Ended Nine Months Ended August 27, 2022 August 27, 2022 Organic Organic Net Revenue F/X Constant Currency M&A Growth 13 Net Revenue F/X Constant Currency M&A Growth 13 Hygiene, Health and Consumable Adhesives 15.1 % (7.8 )% 22.9 % 0.0 % 22.9 % 17.0 % (5.7 )% 22.7 % 0.0 % 22.7 % Engineering Adhesives 10.5 % (7.0 )% 17.5 % 0.0 % 17.5 % 13.7 % (5.0 )% 18.7 % 0.0 % 18.7 % Construction Adhesives 19.8 % (1.3 )% 21.1 % 14.2 % 6.9 % 29.2 % (1.0 )% 30.2 % 12.6 % 17.6 % Total H.B. Fuller 13.8 % (6.6 )% 20.4 % 2.0 % 18.4 % 17.2 % (4.8 )% 22.0 % 1.6 % 20.4 % 13 We use the term “organic revenue” to refer to net revenue, excluding the effect of foreign currency changes and acquisitions and divestitures. Organic growth reflects adjustments for the impact of period-over-period changes in foreign currency exchange rates on revenues and the revenues associated with acquisitions and divestitures. CONSOLIDATED BALANCE SHEETS H.B. Fuller Company and Subsidiaries (In thousands, except share and per share amounts) August 27, November 27, 2022 2021 Assets Current assets: Cash and cash equivalents $ 60,708 $ 61,786 Trade receivables (net of allowances of $12,662 and $9,935, as of August 27, 2022 and November 27, 2021, respectively) 649,727 614,645 Inventories 547,278 448,404 Other current assets 163,213 96,335 Total current assets 1,420,926 1,221,170 Property, plant and equipment 1,526,602 1,500,989 Accumulated depreciation (820,132 ) (805,622 ) Property, plant and equipment, net 706,470 695,367 Goodwill 1,375,964 1,298,845 Other intangibles, net 707,690 687,075 Other assets 360,588 372,073 Total assets $ 4,571,638 $ 4,274,530 Liabilities, non-controlling interest and total equity Current liabilities: Notes payable $ 33,116 $ 24,983 Trade payables 485,479 500,321 Accrued compensation 88,744 109,542 Income taxes payable 42,792 15,943 Other accrued expenses 87,260 86,061 Total current liabilities 737,391 736,850 Long-term debt 1,885,041 1,591,479 Accrued pension liabilities 66,704 71,651 Other liabilities 303,817 277,190 Total liabilities 2,992,953 2,677,170 Commitments and contingencies (Note 12) Equity: H.B. Fuller stockholders' equity: Preferred stock (no shares outstanding) shares authorized – 10,045,900 - - Common stock, par value $1.00 per share, shares authorized – 160,000,000, shares outstanding – 53,298,831 and 52,777,753 as of August 27, 2022 and November 27, 2021, respectively 53,299 52,778 Additional paid-in capital 245,826 213,637 Retained earnings 1,703,278 1,600,601 Accumulated other comprehensive loss (424,312 ) (270,247 ) Total H.B. Fuller stockholders' equity 1,578,091 1,596,769 Non-controlling interest 594 591 Total equity 1,578,685 1,597,360 Total liabilities, non-controlling interest and total equity $ 4,571,638 $ 4,274,530 CONSOLIDATED STATEMENTS of CASH FLOWS H.B. Fuller Company and Subsidiaries (In thousands) Nine Months Ended August 27, 2022 August 28, 2021 Cash flows from operating activities: Net income including non-controlling interest $ 132,077 $ 110,560 Adjustments to reconcile net income including non-controlling interest to net cash (used in) provided by operating activities: Depreciation 54,297 54,158 Amortization 55,088 53,464 Deferred income taxes (4,968 ) (1,547 ) Income from equity method investments, net of dividends received 1,420 4,363 Loss (gain) on sale or disposal of assets (1,130 ) 641 Share-based compensation 20,358 19,400 Pension and other post-retirement benefit plan activity (15,324 ) (23,192 ) Change in assets and liabilities, net of effects of acquisitions: Trade receivables, net (51,629 ) (61,900 ) Inventories (112,390 ) (141,112 ) Other assets (40,329 ) (26,060 ) Trade payables 17,381 176,210 Accrued compensation (17,275 ) (1,283 ) Other accrued expenses 1,614 (2,292 ) Income taxes payable 10,201 1,001 Other liabilities (35,940 ) (53,498 ) Other 35,246 52,221 Net cash provided by operating activities 48,697 161,134 Cash flows from investing activities: Purchased property, plant and equipment (98,352 ) (77,237 ) Purchased businesses, net of cash acquired (242,870 ) (5,445 ) Proceeds from sale of property, plant and equipment 1,281 2,751 Cash received from government grant 3,928 5,800 Cash payments related to government grant - (1,526 ) Net cash used in investing activities (336,013 ) (75,657 ) Cash flows from financing activities: Proceeds from debt 335,000 - Repayment of long-term debt (15,000 ) (118,000 ) Payment of debt issuance costs (600 ) - Net proceeds of notes payable 6,707 9,846 Dividends paid (29,067 ) (26,045 ) Contingent consideration payment (5,000 ) - Proceeds from stock options exercised 13,522 22,053 Repurchases of common stock (3,885 ) (2,668 ) Net cash provided by (used in) financing activities 301,677 (114,814 ) Effect of exchange rate changes on cash and cash equivalents (15,439 ) (3,063 ) Net change in cash and cash equivalents (1,078 ) (32,400 ) Cash and cash equivalents at beginning of period 61,786 100,534 Cash and cash equivalents at end of period $ 60,708 $ 68,134 View source version on businesswire.com: https://www.businesswire.com/news/home/20220921005935/en/Contacts Steven Brazones Investor Relations Contact 651-236-5060 Data & News supplied by www.cloudquote.io Stock quotes supplied by Barchart Quotes delayed at least 20 minutes. 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H.B. Fuller Reports Third Quarter Fiscal 2022 Results By: H.B. Fuller Company via Business Wire September 21, 2022 at 16:05 PM EDT Net Revenue Growth of 13.8%; Organic Growth of 18.4% Year-on-Year Reported EPS (diluted) of $0.84; Adjusted EPS (diluted) of $1.06, Up 34% Year-on-Year Adjusted EBITDA of $138 million, up 24% y-on-y; Adjusted EBITDA Margin Increased 120 basis points y-on-y Company Increasing FY2022 Adjusted EBITDA Expectations to a range of $540 to $550 million; 16% - 18% Growth H.B. Fuller Company (NYSE: FUL) today reported financial results for its third quarter that ended August 27, 2022. Third Quarter 2022 Noteworthy Items: Net revenue grew 13.8% year-on-year, with organic revenue increasing 18.4% year-on-year with strong organic growth in all operating segments; Gross margin was 26.5%; Adjusted gross margin of 26.5% expanded 280 basis points year-on-year, driven by strong pricing execution to recover raw material cost inflation; Net Income was $46.5 million; Adjusted EBITDA of $137.7 million was up 24.4% year-on-year and adjusted EBITDA margin was up 120 basis points; Reported EPS (diluted) was $0.84; Adjusted EPS (diluted) was $1.06, increasing 34.2% versus the prior year. Summary of Third Quarter 2022 Results: Net revenue for the third quarter of fiscal 2022 was $941.2 million, up 13.8% versus the third quarter of fiscal 2021. Robust pricing actions to recover unprecedented raw material cost inflation increased net revenue by 18.7 percentage points. As expected, volume was down 0.3% as a result of slowing economic conditions, offset by market share gains. As a result, organic revenue increased 18.4% versus the third quarter of fiscal 2021. Unfavorable foreign currency exchange rates reduced net revenue growth by 6.6 percentage points, while acquisitions increased net revenue growth by 2.0 percentage points. On a year-on-year basis, Hygiene, Health and Consumable Adhesives organic revenue increased 22.9%, Engineering Adhesives organic revenue increased 17.5%, and Construction Adhesives organic revenue increased 6.9%. Gross profit in the third quarter of fiscal 2022 was $249.2 million. Adjusted gross profit in the third quarter of fiscal 2022 was $249.8 million. Adjusted gross profit margin of 26.5% increased 280 basis points year-on-year. Strong pricing actions to recover raw material cost inflation, as well as operating efficiencies, drove adjusted gross margin higher year-on-year. Selling, general and administrative (SG&A) expense was $161.2 million in the third quarter of fiscal 2022 and adjusted SG&A was $156.2 million. Adjusted SG&A as a percent of net revenue increased 100 basis points versus the third quarter of last year. The increase in SG&A, as a percentage of net revenue, was largely driven by higher variable compensation and higher travel related expenses following the pandemic driven slowdown in travel. Net income attributable to H.B. Fuller for the third quarter of fiscal 2022 was $46.5 million, or $0.84 per diluted share. Adjusted net income attributable to H.B. Fuller for the third quarter of fiscal 2022 was $58.3 million, up 35.9% year-on-year. Adjusted EPS was $1.06 per diluted share, up $0.27 or 34.2% year-on-year, reflecting strong organic revenue growth and operating efficiencies which more than offset the unfavorable impact of currency and higher interest rates. Adjusted EBITDA in the third quarter of fiscal 2022 was $137.7 million, up 24.4% compared with the third quarter of last year. Adjusted EBITDA margin increased 120 basis points year-on-year from 13.4% to 14.6%. Strong pricing actions, continued strategic mix shift towards more highly-specified products, and operational discipline drove the improvement year-on-year. “Our strong organic growth and improved profitability in the third quarter serve as additional proof points that our strategy is working, particularly in light of continued raw material inflation and currency headwinds from the strong dollar,” said Jim Owens, H.B. Fuller president and chief executive officer. “Our innovation driven market share gains and mix shift to a more highly specified product portfolio through innovation and strategic M&A, coupled with our responsible pricing actions, are delivering significant improvement to our financial results. “Our underlying market share gains are enabling us to drive a more favorable volume performance in the marketplace and position us well as the rate of raw material inflation subsides. These share gains will endure and should grow as we execute our strategy. At the same time, our ability to substitute adhesive technologies greatly improves with supply chain normalization and allows us to provide competitive offerings while improving margins. These substitution capabilities, combined with the pricing actions we have taken throughout this unprecedented inflationary environment, will enable us to grow organic revenues and expand margins in recessionary economic environments. “We have very effectively managed both economic and currency headwinds and we remain on track to achieve significant double-digit EPS growth and EBITDA growth at the top end of the range we provided in the first quarter. We are performing exceptionally well, and we are uniquely positioned to continue to deliver above-market organic growth while expanding our margins,” concluded Owens. Balance Sheet and Cash Flow Items: At the end of the third quarter of fiscal 2022 net debt was $1,857 million, down $10 million sequentially versus the second quarter. Cash flow from operations in the quarter was $58 million, up $49 million sequentially reflecting strong revenue growth and improving margins but down versus last year due to higher year-on-year working capital requirements. Fiscal 2022 Outlook: Company is increasing full-year expectations for adjusted EBITDA, despite slower economic conditions, stronger U.S. Dollar, and continued raw material cost inflation; Organic revenue growth for fiscal year 2022 is expected to be in the range of 17% to 18%, excluding the impact of the extra week; Adjusted EBITDA for fiscal 2022 is expected to be in the range of $540 to $550 million, up from the previously provided range of $530 to $550 million and equating to growth of 16% to 18% versus fiscal year 2021; Net interest expense for fiscal 2022 is expected to be between $80 and $85 million reflecting higher interest rates and the expectation of some opportunistic refinancing before the end of the year; Adjusted EPS in the fourth quarter of fiscal 2022 is expected to be in the range of $1.15 to $1.30, resulting in fiscal year 2022 adjusted EPS increasing 19% to 23% year-on-year, despite the significantly stronger U.S. dollar and higher borrowing costs; Working capital, as a percentage of annualized net revenue, is expected to be in the range of 16% to 17% by fiscal year-end, resulting in full-year cash flow from operations similar to the prior year. Conference Call: The company will hold a conference call on September 22, 2022, 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 22, 2022, through 10:59 p.m. CT on September 29, 2022. To access the telephone replay dial 1-800-770-2030 (toll free) or 1-647-362-9199, and enter Conference ID: 6370505. Regulation G The information presented in this earnings release regarding consolidated and segment organic revenue growth, operating income, adjusted gross profit, adjusted gross profit margin, adjusted selling, general and administrative expense, adjusted income before income taxes and income from equity investments, adjusted income taxes, adjusted effective tax rate, adjusted net income, adjusted diluted earnings per share and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) does not conform to U.S. generally accepted accounting principles (U.S. GAAP) and should not be construed as an alternative to the reported results determined in accordance with U.S. GAAP. Management has included this non-GAAP information to assist in understanding the operating performance of the company and its operating segments as well as the comparability of results to the results of other companies. The non-GAAP information provided may not be consistent with the methodologies used by other companies. All non-GAAP information is reconciled with reported U.S. GAAP results in the “Regulation G Reconciliation” tables in this press release with the exception of our forward-looking non-GAAP measures contained above in our Fiscal 2022 Guidance, 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 2021 net revenue of $3.3 billion, H.B. Fuller’s commitment to innovation and sustainable adhesive solutions brings together people, products and processes that answer and solve some of the world's biggest challenges. Our reliable, responsive service creates lasting, rewarding connections with customers in electronics, disposable hygiene, medical, transportation, aerospace, clean energy, packaging, construction, woodworking, general industries and other consumer businesses. 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 federal securities laws, including Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements often address expected future business and financial performance, financial condition, and other matters, and often contain words or phrases such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “opportunity,” “outlook,” “plan,” “project,” “seek,” “should,” “strategy,” "target," “will,” “will be,” “will continue,” “will likely result,” “would” and similar expressions, and variations or negatives of these words or phrases. These statements are subject to various risks and uncertainties that could cause our actual results to differ materially from those in the forward-looking statements, including but not limited to the following: the consequences of the COVID-19 outbreak and other pandemics on our operations and financial results; the impact on the supply chain, raw material costs and pricing of our products due to the Russia-Ukraine war; the impact on our margins and product demand due to inflationary pressures; the substantial amount of debt we have incurred to finance our acquisition of Royal, our ability to repay or refinance our debt or to incur additional debt in the future, our need for a significant amount of cash to service and repay the debt and to pay dividends on our common stock, the effect of debt covenants that limit the discretion of management in operating the business or in paying dividends; our ability to pay dividends and to pursue growth opportunities if we continue to pay dividends according to the current dividend policy; our ability to achieve expected synergies, cost savings and operating efficiencies from our restructuring initiatives and operational improvement projects within the expected time frames or at all; our ability to effectively implement Project ONE; uncertain political and economic conditions; fluctuations in product demand; competing products and pricing; our geographic and product mix; availability and price of raw materials; disruptions to our relationships with our major customers and suppliers; failures in our information technology systems; regulatory compliance across our global footprint; trade policies and economic sanctions impacting our markets; changes in tax laws and tariffs; devaluations and other foreign exchange rate fluctuations; the impact of litigation and investigations, including for product liability and environmental matters; impairment charges on our goodwill or long-lived assets; the effect of new accounting pronouncements and accounting charges and credits; and similar matters. Many of the foregoing risks and uncertainties are, and will be, exacerbated by COVID-19 and the Russia-Ukraine war and the resulting deterioration of the global business and economic environment. Additional information about these various risks and uncertainties can be found in the “Risk Factors” section of our Form 10-K filings, and any updates to the risk factors in our Form 10-Q and 8-K filings with the SEC, but there may be other risks and uncertainties that we are unable to identify at this time or that we do not currently expect to have a material impact on the business. You should not place undue reliance on forward-looking statements, which speak only as of the date they are made. We do not undertake to update or revise any forward-looking statements, except as required by law. H.B. FULLER COMPANY AND SUBSIDIARIES CONSOLIDATED FINANCIAL INFORMATION In thousands, except per share amounts (unaudited) Three Months Ended Percent of Three Months Ended Percent of August 27, 2022 Net Revenue August 28, 2021 Net Revenue Net revenue $ 941,230 100.0 % $ 826,830 100.0 % Cost of sales (692,066 ) (73.5 )% (632,880 ) (76.5 )% Gross profit 249,164 26.5 % 193,950 23.5 % Selling, general and administrative expenses (161,210 ) (17.1 )% (134,497 ) (16.3 )% Other income, net 6,559 0.7 % 6,150 0.7 % Interest expense (23,450 ) (2.5 )% (19,396 ) (2.3 )% Interest income 2,139 0.2 % 2,520 0.3 % Income before income taxes and income from equity method investments 73,202 7.8 % 48,727 5.9 % Income taxes (28,259 ) (3.0 )% (19,095 ) (2.3 )% Income from equity method investments 1,587 0.2 % 1,998 0.2 % Net income including non-controlling interest 46,530 4.9 % 31,630 3.8 % Net income attributable to non-controlling interest (33 ) (0.0 )% (14 ) (0.0 )% Net income attributable to H.B. Fuller $ 46,497 4.9 % $ 31,616 3.8 % Basic income per common share attributable to H.B. Fuller $ 0.87 $ 0.60 Diluted income per common share attributable to H.B. Fuller $ 0.84 $ 0.58 Weighted-average common shares outstanding: Basic 53,644 53,049 Diluted 55,130 54,646 Dividends declared per common share $ 0.190 $ 0.168 H.B. FULLER COMPANY AND SUBSIDIARIES CONSOLIDATED FINANCIAL INFORMATION In thousands, except per share amounts (unaudited) Nine Months Ended Percent of Nine Months Ended Percent of August 27, 2022 Net Revenue August 28, 2021 Net Revenue Net revenue $ 2,790,969 100.0 % $ 2,380,607 100.0 % Cost of sales (2,075,392 ) (74.4 )% (1,776,744 ) (74.6 )% Gross profit 715,577 25.6 % 603,863 25.4 % Selling, general and administrative expenses (483,109 ) (17.3 )% (426,921 ) (17.9 )% Other income, net 12,701 0.5 % 25,899 1.1 % Interest expense (61,475 ) (2.2 )% (59,699 ) (2.5 )% Interest income 6,170 0.2 % 7,709 0.3 % Income before income taxes and income from equity method investments 189,864 6.8 % 150,851 6.3 % Income taxes (62,023 ) (2.2 )% (46,362 ) (1.9 )% Income from equity method investments 4,236 0.2 % 6,071 0.3 % Net income including non-controlling interest 132,077 4.7 % 110,560 4.6 % Net income attributable to non-controlling interest (70 ) (0.0 )% (51 ) (0.0 )% Net income attributable to H.B. Fuller $ 132,007 4.7 % $ 110,509 4.6 % Basic income per common share attributable to H.B. Fuller $ 2.47 $ 2.09 Diluted income per common share attributable to H.B. Fuller $ 2.39 $ 2.04 Weighted-average common shares outstanding: Basic 53,498 52,794 Diluted 55,201 54,093 Dividends declared per common share $ 0.548 $ 0.498 H.B. FULLER COMPANY AND SUBSIDIARIES REGULATION G RECONCILIATION In thousands, except per share amounts (unaudited) Three Months Ended Nine Months Ended August 27, August 28, August 27, August 28, 2022 2021 2022 2021 Net income attributable to H.B. Fuller $ 46,497 $ 31,616 $ 132,007 $ 110,509 Adjustments: Acquisition project costs1 1,138 901 9,008 2,277 Organizational realignment2 595 3,087 4,915 9,029 Royal restructuring and integration3 196 1,016 1,007 3,537 Project One 2,502 2,305 7,559 6,469 Other4 711 111 8,267 (3,701 ) Discrete tax items5 6,449 5,626 7,697 5,068 Income tax effect on adjustments6 251 (1,746 ) (6,786 ) (4,359 ) Adjusted net income attributable to H.B. Fuller7 58,339 42,916 163,674 128,829 Add: Interest expense 23,450 19,412 61,501 59,769 Interest income (2,139 ) (2,520 ) (6,181 ) (7,709 ) Adjusted Income taxes 21,559 15,216 61,112 45,653 Depreciation and Amortization expense8 36,491 35,705 108,925 106,596 Adjusted EBITDA7 137,700 110,729 389,031 333,138 Diluted Shares 55,130 54,646 55,201 54,093 Adjusted diluted income per common share attributable to H.B. Fuller7 $ 1.06 $ 0.79 $ 2.97 $ 2.38 Revenue $ 941,230 $ 826,830 $ 2,790,969 $ 2,380,607 Adjusted EBITDA margin7 14.6 % 13.4 % 13.9 % 14.0 % 1 Acquisition project costs include costs related to integrating and accounting for acquisitions. 2 Organizational realignment includes costs incurred as a direct result of the organizational realignment program, including compensation for employees supporting the program, consulting expense and operational inefficiencies related to the closure of production facilities and consolidation of business activities. 3 Royal restructuring and integration program includes costs incurred as a direct result of the Royal restructuring and integration program including compensation for employees supporting the program, consulting expense and operational inefficiencies related to the closure of production facilities and consolidation of business activities. 4 Other expenses, for the nine months ended August 27 2022, include a $3.3 million non-cash charge related to the wind down and settlement of the Company’s Canadian defined benefit pension plan, $1.3 million of hedging costs related to the Russian ruble devaluation driven by the war in Ukraine, $1.2 million of transactional tax expense associated with an audit settlement, other expenses for COVID-19 testing, vaccinations and exceptional medical claims, and non-cash gains and losses related to legal entity consolidations. 5 Discrete tax items are related to revaluation of cross-currency swap agreements due to depreciation of the Euro versus the U.S. Dollar and various foreign tax matters, offset by the tax effect of legal entity mergers. 6 Represents the difference between income taxes on net income before income taxes and income from equity method investments reported in accordance with U.S. GAAP and adjusted net income before income taxes and income from equity method investments. 7 Adjusted net income attributable to H.B. Fuller, adjusted diluted income per common share attributable to H.B. Fuller, adjusted EBITDA and adjusted EBITDA margin are non-GAAP financial measures. Adjusted net income attributable to H.B. Fuller is defined as net income before the specific adjustments shown above. Adjusted diluted income per common share is defined as adjusted net income attributable to H.B. Fuller divided by the number of diluted common shares. Adjusted EBITDA is defined as net income before interest, income taxes, depreciation, amortization and the specific adjustments shown above. Adjusted EBITDA margin is defined as adjusted EBITDA divided by net revenue. The table above provides a reconciliation of adjusted net income attributable to H.B. Fuller, adjusted diluted income per common share attributable to H.B. Fuller, adjusted EBITDA and adjusted EBITDA margin to net income attributable to H.B. Fuller, the most directly comparable financial measure determined and reported in accordance with U.S. GAAP. 8 Depreciation and amortization expense added back for EBITDA is adjusted for amounts already included in Adjusted net income attributable to H.B. Fuller totaling ($149) and ($292) for the three months ended August 27, 2022 and August 28, 2021, respectively and ($460) and ($1,026) for the nine months ended August 27, 2022 and August 28, 2021, respectively. H.B. FULLER COMPANY AND SUBSIDIARIES SEGMENT FINANCIAL INFORMATION In thousands (unaudited) Three Months Ended Nine Months Ended August 27, August 28, August 27, August 28, 2022 2021 2022 2021 Net Revenue: Hygiene, Health and Consumable Adhesives $ 424,978 $ 369,439 $ 1,252,405 $ 1,069,922 Engineering Adhesives 378,264 342,300 1,137,587 1,000,337 Construction Adhesives 137,988 115,091 400,977 310,348 Corporate unallocated - - - - Total H.B. Fuller $ 941,230 $ 826,830 $ 2,790,969 $ 2,380,607 Segment Operating Income (Loss): Hygiene, Health and Consumable Adhesives $ 47,470 $ 29,652 $ 122,950 $ 98,493 Engineering Adhesives 39,776 34,087 115,266 96,580 Construction Adhesives 6,391 3,339 22,032 4,974 Corporate unallocated (5,683 ) (7,625 ) (27,780 ) (23,105 ) Total H.B. Fuller $ 87,954 $ 59,453 $ 232,468 $ 176,942 Adjusted EBITDA7 Hygiene, Health and Consumable Adhesives $ 61,834 $ 44,496 $ 166,304 $ 142,671 Engineering Adhesives 56,061 52,001 165,461 150,034 Construction Adhesives 19,619 14,247 59,616 37,785 Corporate unallocated 186 (15 ) (2,350 ) 2,648 Total H.B. Fuller $ 137,700 $ 110,729 $ 389,031 $ 333,138 Adjusted EBITDA Margin7 Hygiene, Health and Consumable Adhesives 14.5 % 12.0 % 13.3 % 13.3 % Engineering Adhesives 14.8 % 15.2 % 14.5 % 15.0 % Construction Adhesives 14.2 % 12.4 % 14.9 % 12.2 % Corporate unallocated NMP NMP NMP NMP Total H.B. Fuller 14.6 % 13.4 % 13.9 % 14.0 % 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 27, August 28, August 27, August 28, 2022 2021 2022 2021 Income before income taxes and income from equity method investments $ 73,202 $ 48,727 $ 189,864 $ 150,851 Adjustments: Acquisition project costs1 1,138 901 9,008 2,277 Organizational realignment2 595 3,087 4,915 9,029 Royal restructuring and integration3 196 1,016 1,007 3,537 Project One 2,502 2,305 7,559 6,469 Other4 711 111 8,267 (3,701 ) Adjusted income before income taxes and income from equity method investments9 $ 78,344 $ 56,147 $ 220,620 $ 168,462 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 27, August 28, August 27, August 28, 2022 2021 2022 2021 Income Taxes $ (28,259 ) $ (19,095 ) $ (62,023 ) $ (46,362 ) Adjustments: Acquisition project costs1 55 (212 ) (2,154 ) (495 ) Organizational realignment2 29 (726 ) (1,140 ) (2,204 ) Royal restructuring and integration3 10 (239 ) (213 ) (846 ) Project One 122 (542 ) (1,284 ) (1,551 ) Other4 6,484 5,598 5,702 5,805 Adjusted income taxes10 $ (21,559 ) $ (15,216 ) $ (61,112 ) $ (45,653 ) Adjusted income before income taxes and income from equity method investments $ 78,344 $ 56,147 $ 220,620 $ 168,462 Adjusted effective income tax rate10 27.5 % 27.1 % 27.7 % 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 27, August 28, August 27, August 28, 2022 2021 2022 2021 Net revenue $ 941,230 $ 826,830 $ 2,790,969 $ 2,380,607 Gross profit $ 249,164 $ 193,950 $ 715,577 $ 603,863 Gross profit margin 26.5 % 23.5 % 25.6 % 25.4 % Adjustments: Acquisition project costs1 (104 ) 1 320 64 Organizational realignment2 214 1,472 1,997 2,265 Royal restructuring and integration3 5 644 377 1,962 Project ONE - (22 ) 6 (22 ) Other4 533 247 1,358 1,635 Adjusted gross profit11 $ 249,812 $ 196,292 $ 719,635 $ 609,767 Adjusted gross profit margin11 26.5 % 23.7 % 25.8 % 25.6 % 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 27, August 28, August 27, August 28, 2022 2021 2022 2021 Selling, general and administrative expenses $ (161,210 ) $ (134,497 ) $ (483,109 ) $ (426,921 ) Adjustments: Acquisition project costs1 1,241 901 8,688 2,214 Organizational realignment2 630 1,614 4,134 6,819 Royal restructuring and integration3 191 388 656 1,644 Project ONE 2,502 2,327 7,553 6,491 Other4 471 55 2,691 32 Adjusted selling, general and administrative expenses12 $ (156,175 ) $ (129,212 ) $ (459,387 ) $ (409,721 ) 12 Adjusted selling, general and administrative expenses is a non-GAAP financial measure. Adjusted selling, general and administrative expenses is defined as selling, general and administrative expenses excluding the specific adjustments shown above. The table above provides a reconciliation of adjusted selling, general and administrative expenses to selling, general and administrative expenses, the most directly comparable financial measure determined and reported in accordance with U.S. GAAP. H.B. FULLER COMPANY AND SUBSIDIARIES REGULATION G RECONCILIATION In thousands (unaudited) Hygiene, Health Three Months Ended and Consumable Engineering Construction Corporate H.B. Fuller August 27, 2022 Adhesives Adhesives Adhesives Total Unallocated Consolidated Net income attributable to H.B. Fuller $ 50,378 $ 41,927 $ 8,718 $ 101,023 $ (54,526 ) $ 46,497 Adjustments: Acquisition project costs1 - - - - 1,138 1,138 Organizational realignment2 - - - - 595 595 Royal Restructuring and integration3 - - - - 196 196 Project One - - - - 2,502 2,502 Other4 - - - - 711 711 Discrete tax items5 - - - - 6,449 6,449 Income tax effect on adjustments6 - - - - 251 251 Adjusted net income attributable to H.B. Fuller7 50,378 41,927 8,718 101,023 (42,684 ) 58,339 Add: Interest expense - - - - 23,450 23,450 Interest income - - - - (2,139 ) (2,139 ) Adjusted Income taxes - - - - 21,559 21,559 Depreciation and amortization expense8 11,456 14,134 10,901 36,491 - 36,491 Adjusted EBITDA7 $ 61,834 $ 56,061 $ 19,619 $ 137,514 $ 186 $ 137,700 Revenue $ 424,978 $ 378,264 $ 137,988 $ 941,230 - $ 941,230 Adjusted EBITDA Margin7 14.5 % 14.8 % 14.2 % 14.6 % NMP 14.6 % Nine Months Ended August 27, 2022 Net income attributable to H.B. Fuller $ 131,702 $ 121,741 $ 29,013 $ 282,456 $ (150,449 ) $ 132,007 Adjustments: Acquisition project costs1 - - - - 9,008 9,008 Organizational realignment2 - - - - 4,915 4,915 Royal Restructuring and integration3 - - - - 1,007 1,007 Project One - - - - 7,559 7,559 Other4 - - - - 8,267 8,267 Discrete tax items5 - - - - 7,697 7,697 Income tax effect on adjustments6 - - - - (6,786 ) (6,786 ) Adjusted net income attributable to H.B. Fuller7 131,702 121,741 29,013 282,456 (118,782 ) 163,674 Add: Interest expense - - - - 61,501 61,501 Interest income - - - - (6,181 ) (6,181 ) Adjusted Income taxes - - - - 61,112 61,112 Depreciation and amortization expense8 34,602 43,720 30,603 108,925 - 108,925 Adjusted EBITDA7 $ 166,304 $ 165,461 $ 59,616 $ 391,381 $ (2,350 ) $ 389,031 Revenue 1,252,405 1,137,587 400,977 2,790,969 - 2,790,969 Adjusted EBITDA Margin7 13.3 % 14.5 % 14.9 % 14.0 % NMP 13.9 % Note: Adjusted EBITDA is a non-GAAP financial measure. The table above provides a reconciliation of adjusted EBITDA for each segment to net income attributable to H.B. Fuller for each segment, the most directly comparable financial measure determined and reported in accordance with U.S. GAAP. NMP = Non-meaningful percentage H.B. FULLER COMPANY AND SUBSIDIARIES REGULATION G RECONCILIATION In thousands (unaudited) Hygiene, Health Three Months Ended: and Consumable Engineering Construction Corporate H.B. Fuller August 28, 2021 Adhesives Adhesives Adhesives Total Unallocated Consolidated Net income attributable to H.B. Fuller $ 32,924 $ 36,599 $ 5,516 $ 75,039 $ (43,423 ) $ 31,616 Adjustments: Acquisition project costs1 - - - - 901 901 Organizational realignment2 - - - - 3,087 3,087 Royal Restructuring and integration3 - - - - 1,016 1,016 Project One - - - - 2,305 2,305 Other4 - - - - 111 111 Discrete tax items5 - - - - 5,626 5,626 Income tax effect on adjustments6 - - - - (1,746 ) (1,746 ) Adjusted net income attributable to H.B. Fuller7 32,924 36,599 5,516 75,039 (32,123 ) 42,916 Add: Interest expense - - - - 19,412 19,412 Interest income - - - - (2,520 ) (2,520 ) Adjusted Income taxes - - - - 15,216 15,216 Depreciation and amortization Expense8 11,572 15,402 8,731 35,705 - 35,705 Adjusted EBITDA7 $ 44,496 $ 52,001 $ 14,247 $ 110,744 $ (15 ) $ 110,729 Revenue $ 369,439 $ 342,300 $ 115,091 $ 826,830 - $ 826,830 Adjusted EBITDA Margin7 12.0 % 15.2 % 12.4 % 13.4 % NMP 13.4 % Nine Months Ended August 28, 2021 Net income attributable to H.B. Fuller $ 108,291 $ 104,099 $ 11,504 $ 223,894 $ (113,385 ) $ 110,509 Adjustments: Acquisition project costs1 - - - - 2,277 2,277 Organizational realignment2 - - - - 9,029 9,029 Royal Restructuring and integration3 - - - - 3,537 3,537 Project One - - - - 6,469 6,469 Other4 - - - - (3,701 ) (3,701 ) Discrete tax items5 - - - - 5,068 5,068 Income tax effect on adjustments6 - - - - (4,359 ) (4,359 ) Adjusted net income attributable to H.B. Fuller7 108,291 104,099 11,504 223,894 (95,065 ) 128,829 Add: Interest expense - - - - 59,769 59,769 Interest income - - - - (7,709 ) (7,709 ) Adjusted Income taxes - - - - 45,653 45,653 Depreciation and amortization expense8 34,380 45,935 26,281 106,596 - 106,596 Adjusted EBITDA7 $ 142,671 $ 150,034 $ 37,785 $ 330,490 $ 2,648 $ 333,138 Revenue $ 1,069,922 $ 1,000,337 $ 310,348 $ 2,380,607 - $ 2,380,607 Adjusted EBITDA Margin7 13.3 % 15.0 % 12.2 % 13.9 % NMP 14.0 % Note: Adjusted EBITDA is a non-GAAP financial measure. The table above provides a reconciliation of adjusted EBITDA for each segment to net income attributable to H.B. Fuller for each segment, the most directly comparable financial measure determined and reported in accordance with U.S. GAAP. NMP = Non-meaningful percentage H.B. FULLER COMPANY AND SUBSIDIARIES SEGMENT FINANCIAL INFORMATION NET REVENUE GROWTH (DECLINE) (unaudited) Three Months Ended Nine Months Ended August 27, 2022 August 27, 2022 Price 18.7 % 17.6 % Volume (0.3 )% 2.8 % Organic Growth13 18.4 % 20.4 % M&A 2.0 % 1.6 % Constant currency 20.4 % 22.0 % F/X (6.6 )% (4.8 )% Total H.B. Fuller Net Revenue Growth 13.8 % 17.2 % Revenue growth versus 2022 Three Months Ended Nine Months Ended August 27, 2022 August 27, 2022 Organic Organic Net Revenue F/X Constant Currency M&A Growth 13 Net Revenue F/X Constant Currency M&A Growth 13 Hygiene, Health and Consumable Adhesives 15.1 % (7.8 )% 22.9 % 0.0 % 22.9 % 17.0 % (5.7 )% 22.7 % 0.0 % 22.7 % Engineering Adhesives 10.5 % (7.0 )% 17.5 % 0.0 % 17.5 % 13.7 % (5.0 )% 18.7 % 0.0 % 18.7 % Construction Adhesives 19.8 % (1.3 )% 21.1 % 14.2 % 6.9 % 29.2 % (1.0 )% 30.2 % 12.6 % 17.6 % Total H.B. Fuller 13.8 % (6.6 )% 20.4 % 2.0 % 18.4 % 17.2 % (4.8 )% 22.0 % 1.6 % 20.4 % 13 We use the term “organic revenue” to refer to net revenue, excluding the effect of foreign currency changes and acquisitions and divestitures. Organic growth reflects adjustments for the impact of period-over-period changes in foreign currency exchange rates on revenues and the revenues associated with acquisitions and divestitures. CONSOLIDATED BALANCE SHEETS H.B. Fuller Company and Subsidiaries (In thousands, except share and per share amounts) August 27, November 27, 2022 2021 Assets Current assets: Cash and cash equivalents $ 60,708 $ 61,786 Trade receivables (net of allowances of $12,662 and $9,935, as of August 27, 2022 and November 27, 2021, respectively) 649,727 614,645 Inventories 547,278 448,404 Other current assets 163,213 96,335 Total current assets 1,420,926 1,221,170 Property, plant and equipment 1,526,602 1,500,989 Accumulated depreciation (820,132 ) (805,622 ) Property, plant and equipment, net 706,470 695,367 Goodwill 1,375,964 1,298,845 Other intangibles, net 707,690 687,075 Other assets 360,588 372,073 Total assets $ 4,571,638 $ 4,274,530 Liabilities, non-controlling interest and total equity Current liabilities: Notes payable $ 33,116 $ 24,983 Trade payables 485,479 500,321 Accrued compensation 88,744 109,542 Income taxes payable 42,792 15,943 Other accrued expenses 87,260 86,061 Total current liabilities 737,391 736,850 Long-term debt 1,885,041 1,591,479 Accrued pension liabilities 66,704 71,651 Other liabilities 303,817 277,190 Total liabilities 2,992,953 2,677,170 Commitments and contingencies (Note 12) Equity: H.B. Fuller stockholders' equity: Preferred stock (no shares outstanding) shares authorized – 10,045,900 - - Common stock, par value $1.00 per share, shares authorized – 160,000,000, shares outstanding – 53,298,831 and 52,777,753 as of August 27, 2022 and November 27, 2021, respectively 53,299 52,778 Additional paid-in capital 245,826 213,637 Retained earnings 1,703,278 1,600,601 Accumulated other comprehensive loss (424,312 ) (270,247 ) Total H.B. Fuller stockholders' equity 1,578,091 1,596,769 Non-controlling interest 594 591 Total equity 1,578,685 1,597,360 Total liabilities, non-controlling interest and total equity $ 4,571,638 $ 4,274,530 CONSOLIDATED STATEMENTS of CASH FLOWS H.B. Fuller Company and Subsidiaries (In thousands) Nine Months Ended August 27, 2022 August 28, 2021 Cash flows from operating activities: Net income including non-controlling interest $ 132,077 $ 110,560 Adjustments to reconcile net income including non-controlling interest to net cash (used in) provided by operating activities: Depreciation 54,297 54,158 Amortization 55,088 53,464 Deferred income taxes (4,968 ) (1,547 ) Income from equity method investments, net of dividends received 1,420 4,363 Loss (gain) on sale or disposal of assets (1,130 ) 641 Share-based compensation 20,358 19,400 Pension and other post-retirement benefit plan activity (15,324 ) (23,192 ) Change in assets and liabilities, net of effects of acquisitions: Trade receivables, net (51,629 ) (61,900 ) Inventories (112,390 ) (141,112 ) Other assets (40,329 ) (26,060 ) Trade payables 17,381 176,210 Accrued compensation (17,275 ) (1,283 ) Other accrued expenses 1,614 (2,292 ) Income taxes payable 10,201 1,001 Other liabilities (35,940 ) (53,498 ) Other 35,246 52,221 Net cash provided by operating activities 48,697 161,134 Cash flows from investing activities: Purchased property, plant and equipment (98,352 ) (77,237 ) Purchased businesses, net of cash acquired (242,870 ) (5,445 ) Proceeds from sale of property, plant and equipment 1,281 2,751 Cash received from government grant 3,928 5,800 Cash payments related to government grant - (1,526 ) Net cash used in investing activities (336,013 ) (75,657 ) Cash flows from financing activities: Proceeds from debt 335,000 - Repayment of long-term debt (15,000 ) (118,000 ) Payment of debt issuance costs (600 ) - Net proceeds of notes payable 6,707 9,846 Dividends paid (29,067 ) (26,045 ) Contingent consideration payment (5,000 ) - Proceeds from stock options exercised 13,522 22,053 Repurchases of common stock (3,885 ) (2,668 ) Net cash provided by (used in) financing activities 301,677 (114,814 ) Effect of exchange rate changes on cash and cash equivalents (15,439 ) (3,063 ) Net change in cash and cash equivalents (1,078 ) (32,400 ) Cash and cash equivalents at beginning of period 61,786 100,534 Cash and cash equivalents at end of period $ 60,708 $ 68,134 View source version on businesswire.com: https://www.businesswire.com/news/home/20220921005935/en/Contacts Steven Brazones Investor Relations Contact 651-236-5060
Net Revenue Growth of 13.8%; Organic Growth of 18.4% Year-on-Year Reported EPS (diluted) of $0.84; Adjusted EPS (diluted) of $1.06, Up 34% Year-on-Year Adjusted EBITDA of $138 million, up 24% y-on-y; Adjusted EBITDA Margin Increased 120 basis points y-on-y Company Increasing FY2022 Adjusted EBITDA Expectations to a range of $540 to $550 million; 16% - 18% Growth
H.B. Fuller Company (NYSE: FUL) today reported financial results for its third quarter that ended August 27, 2022. Third Quarter 2022 Noteworthy Items: Net revenue grew 13.8% year-on-year, with organic revenue increasing 18.4% year-on-year with strong organic growth in all operating segments; Gross margin was 26.5%; Adjusted gross margin of 26.5% expanded 280 basis points year-on-year, driven by strong pricing execution to recover raw material cost inflation; Net Income was $46.5 million; Adjusted EBITDA of $137.7 million was up 24.4% year-on-year and adjusted EBITDA margin was up 120 basis points; Reported EPS (diluted) was $0.84; Adjusted EPS (diluted) was $1.06, increasing 34.2% versus the prior year. Summary of Third Quarter 2022 Results: Net revenue for the third quarter of fiscal 2022 was $941.2 million, up 13.8% versus the third quarter of fiscal 2021. Robust pricing actions to recover unprecedented raw material cost inflation increased net revenue by 18.7 percentage points. As expected, volume was down 0.3% as a result of slowing economic conditions, offset by market share gains. As a result, organic revenue increased 18.4% versus the third quarter of fiscal 2021. Unfavorable foreign currency exchange rates reduced net revenue growth by 6.6 percentage points, while acquisitions increased net revenue growth by 2.0 percentage points. On a year-on-year basis, Hygiene, Health and Consumable Adhesives organic revenue increased 22.9%, Engineering Adhesives organic revenue increased 17.5%, and Construction Adhesives organic revenue increased 6.9%. Gross profit in the third quarter of fiscal 2022 was $249.2 million. Adjusted gross profit in the third quarter of fiscal 2022 was $249.8 million. Adjusted gross profit margin of 26.5% increased 280 basis points year-on-year. Strong pricing actions to recover raw material cost inflation, as well as operating efficiencies, drove adjusted gross margin higher year-on-year. Selling, general and administrative (SG&A) expense was $161.2 million in the third quarter of fiscal 2022 and adjusted SG&A was $156.2 million. Adjusted SG&A as a percent of net revenue increased 100 basis points versus the third quarter of last year. The increase in SG&A, as a percentage of net revenue, was largely driven by higher variable compensation and higher travel related expenses following the pandemic driven slowdown in travel. Net income attributable to H.B. Fuller for the third quarter of fiscal 2022 was $46.5 million, or $0.84 per diluted share. Adjusted net income attributable to H.B. Fuller for the third quarter of fiscal 2022 was $58.3 million, up 35.9% year-on-year. Adjusted EPS was $1.06 per diluted share, up $0.27 or 34.2% year-on-year, reflecting strong organic revenue growth and operating efficiencies which more than offset the unfavorable impact of currency and higher interest rates. Adjusted EBITDA in the third quarter of fiscal 2022 was $137.7 million, up 24.4% compared with the third quarter of last year. Adjusted EBITDA margin increased 120 basis points year-on-year from 13.4% to 14.6%. Strong pricing actions, continued strategic mix shift towards more highly-specified products, and operational discipline drove the improvement year-on-year. “Our strong organic growth and improved profitability in the third quarter serve as additional proof points that our strategy is working, particularly in light of continued raw material inflation and currency headwinds from the strong dollar,” said Jim Owens, H.B. Fuller president and chief executive officer. “Our innovation driven market share gains and mix shift to a more highly specified product portfolio through innovation and strategic M&A, coupled with our responsible pricing actions, are delivering significant improvement to our financial results. “Our underlying market share gains are enabling us to drive a more favorable volume performance in the marketplace and position us well as the rate of raw material inflation subsides. These share gains will endure and should grow as we execute our strategy. At the same time, our ability to substitute adhesive technologies greatly improves with supply chain normalization and allows us to provide competitive offerings while improving margins. These substitution capabilities, combined with the pricing actions we have taken throughout this unprecedented inflationary environment, will enable us to grow organic revenues and expand margins in recessionary economic environments. “We have very effectively managed both economic and currency headwinds and we remain on track to achieve significant double-digit EPS growth and EBITDA growth at the top end of the range we provided in the first quarter. We are performing exceptionally well, and we are uniquely positioned to continue to deliver above-market organic growth while expanding our margins,” concluded Owens. Balance Sheet and Cash Flow Items: At the end of the third quarter of fiscal 2022 net debt was $1,857 million, down $10 million sequentially versus the second quarter. Cash flow from operations in the quarter was $58 million, up $49 million sequentially reflecting strong revenue growth and improving margins but down versus last year due to higher year-on-year working capital requirements. Fiscal 2022 Outlook: Company is increasing full-year expectations for adjusted EBITDA, despite slower economic conditions, stronger U.S. Dollar, and continued raw material cost inflation; Organic revenue growth for fiscal year 2022 is expected to be in the range of 17% to 18%, excluding the impact of the extra week; Adjusted EBITDA for fiscal 2022 is expected to be in the range of $540 to $550 million, up from the previously provided range of $530 to $550 million and equating to growth of 16% to 18% versus fiscal year 2021; Net interest expense for fiscal 2022 is expected to be between $80 and $85 million reflecting higher interest rates and the expectation of some opportunistic refinancing before the end of the year; Adjusted EPS in the fourth quarter of fiscal 2022 is expected to be in the range of $1.15 to $1.30, resulting in fiscal year 2022 adjusted EPS increasing 19% to 23% year-on-year, despite the significantly stronger U.S. dollar and higher borrowing costs; Working capital, as a percentage of annualized net revenue, is expected to be in the range of 16% to 17% by fiscal year-end, resulting in full-year cash flow from operations similar to the prior year. Conference Call: The company will hold a conference call on September 22, 2022, 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 22, 2022, through 10:59 p.m. CT on September 29, 2022. To access the telephone replay dial 1-800-770-2030 (toll free) or 1-647-362-9199, and enter Conference ID: 6370505. Regulation G The information presented in this earnings release regarding consolidated and segment organic revenue growth, operating income, adjusted gross profit, adjusted gross profit margin, adjusted selling, general and administrative expense, adjusted income before income taxes and income from equity investments, adjusted income taxes, adjusted effective tax rate, adjusted net income, adjusted diluted earnings per share and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) does not conform to U.S. generally accepted accounting principles (U.S. GAAP) and should not be construed as an alternative to the reported results determined in accordance with U.S. GAAP. Management has included this non-GAAP information to assist in understanding the operating performance of the company and its operating segments as well as the comparability of results to the results of other companies. The non-GAAP information provided may not be consistent with the methodologies used by other companies. All non-GAAP information is reconciled with reported U.S. GAAP results in the “Regulation G Reconciliation” tables in this press release with the exception of our forward-looking non-GAAP measures contained above in our Fiscal 2022 Guidance, 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 2021 net revenue of $3.3 billion, H.B. Fuller’s commitment to innovation and sustainable adhesive solutions brings together people, products and processes that answer and solve some of the world's biggest challenges. Our reliable, responsive service creates lasting, rewarding connections with customers in electronics, disposable hygiene, medical, transportation, aerospace, clean energy, packaging, construction, woodworking, general industries and other consumer businesses. 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 federal securities laws, including Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements often address expected future business and financial performance, financial condition, and other matters, and often contain words or phrases such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “opportunity,” “outlook,” “plan,” “project,” “seek,” “should,” “strategy,” "target," “will,” “will be,” “will continue,” “will likely result,” “would” and similar expressions, and variations or negatives of these words or phrases. These statements are subject to various risks and uncertainties that could cause our actual results to differ materially from those in the forward-looking statements, including but not limited to the following: the consequences of the COVID-19 outbreak and other pandemics on our operations and financial results; the impact on the supply chain, raw material costs and pricing of our products due to the Russia-Ukraine war; the impact on our margins and product demand due to inflationary pressures; the substantial amount of debt we have incurred to finance our acquisition of Royal, our ability to repay or refinance our debt or to incur additional debt in the future, our need for a significant amount of cash to service and repay the debt and to pay dividends on our common stock, the effect of debt covenants that limit the discretion of management in operating the business or in paying dividends; our ability to pay dividends and to pursue growth opportunities if we continue to pay dividends according to the current dividend policy; our ability to achieve expected synergies, cost savings and operating efficiencies from our restructuring initiatives and operational improvement projects within the expected time frames or at all; our ability to effectively implement Project ONE; uncertain political and economic conditions; fluctuations in product demand; competing products and pricing; our geographic and product mix; availability and price of raw materials; disruptions to our relationships with our major customers and suppliers; failures in our information technology systems; regulatory compliance across our global footprint; trade policies and economic sanctions impacting our markets; changes in tax laws and tariffs; devaluations and other foreign exchange rate fluctuations; the impact of litigation and investigations, including for product liability and environmental matters; impairment charges on our goodwill or long-lived assets; the effect of new accounting pronouncements and accounting charges and credits; and similar matters. Many of the foregoing risks and uncertainties are, and will be, exacerbated by COVID-19 and the Russia-Ukraine war and the resulting deterioration of the global business and economic environment. Additional information about these various risks and uncertainties can be found in the “Risk Factors” section of our Form 10-K filings, and any updates to the risk factors in our Form 10-Q and 8-K filings with the SEC, but there may be other risks and uncertainties that we are unable to identify at this time or that we do not currently expect to have a material impact on the business. You should not place undue reliance on forward-looking statements, which speak only as of the date they are made. We do not undertake to update or revise any forward-looking statements, except as required by law. H.B. FULLER COMPANY AND SUBSIDIARIES CONSOLIDATED FINANCIAL INFORMATION In thousands, except per share amounts (unaudited) Three Months Ended Percent of Three Months Ended Percent of August 27, 2022 Net Revenue August 28, 2021 Net Revenue Net revenue $ 941,230 100.0 % $ 826,830 100.0 % Cost of sales (692,066 ) (73.5 )% (632,880 ) (76.5 )% Gross profit 249,164 26.5 % 193,950 23.5 % Selling, general and administrative expenses (161,210 ) (17.1 )% (134,497 ) (16.3 )% Other income, net 6,559 0.7 % 6,150 0.7 % Interest expense (23,450 ) (2.5 )% (19,396 ) (2.3 )% Interest income 2,139 0.2 % 2,520 0.3 % Income before income taxes and income from equity method investments 73,202 7.8 % 48,727 5.9 % Income taxes (28,259 ) (3.0 )% (19,095 ) (2.3 )% Income from equity method investments 1,587 0.2 % 1,998 0.2 % Net income including non-controlling interest 46,530 4.9 % 31,630 3.8 % Net income attributable to non-controlling interest (33 ) (0.0 )% (14 ) (0.0 )% Net income attributable to H.B. Fuller $ 46,497 4.9 % $ 31,616 3.8 % Basic income per common share attributable to H.B. Fuller $ 0.87 $ 0.60 Diluted income per common share attributable to H.B. Fuller $ 0.84 $ 0.58 Weighted-average common shares outstanding: Basic 53,644 53,049 Diluted 55,130 54,646 Dividends declared per common share $ 0.190 $ 0.168 H.B. FULLER COMPANY AND SUBSIDIARIES CONSOLIDATED FINANCIAL INFORMATION In thousands, except per share amounts (unaudited) Nine Months Ended Percent of Nine Months Ended Percent of August 27, 2022 Net Revenue August 28, 2021 Net Revenue Net revenue $ 2,790,969 100.0 % $ 2,380,607 100.0 % Cost of sales (2,075,392 ) (74.4 )% (1,776,744 ) (74.6 )% Gross profit 715,577 25.6 % 603,863 25.4 % Selling, general and administrative expenses (483,109 ) (17.3 )% (426,921 ) (17.9 )% Other income, net 12,701 0.5 % 25,899 1.1 % Interest expense (61,475 ) (2.2 )% (59,699 ) (2.5 )% Interest income 6,170 0.2 % 7,709 0.3 % Income before income taxes and income from equity method investments 189,864 6.8 % 150,851 6.3 % Income taxes (62,023 ) (2.2 )% (46,362 ) (1.9 )% Income from equity method investments 4,236 0.2 % 6,071 0.3 % Net income including non-controlling interest 132,077 4.7 % 110,560 4.6 % Net income attributable to non-controlling interest (70 ) (0.0 )% (51 ) (0.0 )% Net income attributable to H.B. Fuller $ 132,007 4.7 % $ 110,509 4.6 % Basic income per common share attributable to H.B. Fuller $ 2.47 $ 2.09 Diluted income per common share attributable to H.B. Fuller $ 2.39 $ 2.04 Weighted-average common shares outstanding: Basic 53,498 52,794 Diluted 55,201 54,093 Dividends declared per common share $ 0.548 $ 0.498 H.B. FULLER COMPANY AND SUBSIDIARIES REGULATION G RECONCILIATION In thousands, except per share amounts (unaudited) Three Months Ended Nine Months Ended August 27, August 28, August 27, August 28, 2022 2021 2022 2021 Net income attributable to H.B. Fuller $ 46,497 $ 31,616 $ 132,007 $ 110,509 Adjustments: Acquisition project costs1 1,138 901 9,008 2,277 Organizational realignment2 595 3,087 4,915 9,029 Royal restructuring and integration3 196 1,016 1,007 3,537 Project One 2,502 2,305 7,559 6,469 Other4 711 111 8,267 (3,701 ) Discrete tax items5 6,449 5,626 7,697 5,068 Income tax effect on adjustments6 251 (1,746 ) (6,786 ) (4,359 ) Adjusted net income attributable to H.B. Fuller7 58,339 42,916 163,674 128,829 Add: Interest expense 23,450 19,412 61,501 59,769 Interest income (2,139 ) (2,520 ) (6,181 ) (7,709 ) Adjusted Income taxes 21,559 15,216 61,112 45,653 Depreciation and Amortization expense8 36,491 35,705 108,925 106,596 Adjusted EBITDA7 137,700 110,729 389,031 333,138 Diluted Shares 55,130 54,646 55,201 54,093 Adjusted diluted income per common share attributable to H.B. Fuller7 $ 1.06 $ 0.79 $ 2.97 $ 2.38 Revenue $ 941,230 $ 826,830 $ 2,790,969 $ 2,380,607 Adjusted EBITDA margin7 14.6 % 13.4 % 13.9 % 14.0 % 1 Acquisition project costs include costs related to integrating and accounting for acquisitions. 2 Organizational realignment includes costs incurred as a direct result of the organizational realignment program, including compensation for employees supporting the program, consulting expense and operational inefficiencies related to the closure of production facilities and consolidation of business activities. 3 Royal restructuring and integration program includes costs incurred as a direct result of the Royal restructuring and integration program including compensation for employees supporting the program, consulting expense and operational inefficiencies related to the closure of production facilities and consolidation of business activities. 4 Other expenses, for the nine months ended August 27 2022, include a $3.3 million non-cash charge related to the wind down and settlement of the Company’s Canadian defined benefit pension plan, $1.3 million of hedging costs related to the Russian ruble devaluation driven by the war in Ukraine, $1.2 million of transactional tax expense associated with an audit settlement, other expenses for COVID-19 testing, vaccinations and exceptional medical claims, and non-cash gains and losses related to legal entity consolidations. 5 Discrete tax items are related to revaluation of cross-currency swap agreements due to depreciation of the Euro versus the U.S. Dollar and various foreign tax matters, offset by the tax effect of legal entity mergers. 6 Represents the difference between income taxes on net income before income taxes and income from equity method investments reported in accordance with U.S. GAAP and adjusted net income before income taxes and income from equity method investments. 7 Adjusted net income attributable to H.B. Fuller, adjusted diluted income per common share attributable to H.B. Fuller, adjusted EBITDA and adjusted EBITDA margin are non-GAAP financial measures. Adjusted net income attributable to H.B. Fuller is defined as net income before the specific adjustments shown above. Adjusted diluted income per common share is defined as adjusted net income attributable to H.B. Fuller divided by the number of diluted common shares. Adjusted EBITDA is defined as net income before interest, income taxes, depreciation, amortization and the specific adjustments shown above. Adjusted EBITDA margin is defined as adjusted EBITDA divided by net revenue. The table above provides a reconciliation of adjusted net income attributable to H.B. Fuller, adjusted diluted income per common share attributable to H.B. Fuller, adjusted EBITDA and adjusted EBITDA margin to net income attributable to H.B. Fuller, the most directly comparable financial measure determined and reported in accordance with U.S. GAAP. 8 Depreciation and amortization expense added back for EBITDA is adjusted for amounts already included in Adjusted net income attributable to H.B. Fuller totaling ($149) and ($292) for the three months ended August 27, 2022 and August 28, 2021, respectively and ($460) and ($1,026) for the nine months ended August 27, 2022 and August 28, 2021, respectively. H.B. FULLER COMPANY AND SUBSIDIARIES SEGMENT FINANCIAL INFORMATION In thousands (unaudited) Three Months Ended Nine Months Ended August 27, August 28, August 27, August 28, 2022 2021 2022 2021 Net Revenue: Hygiene, Health and Consumable Adhesives $ 424,978 $ 369,439 $ 1,252,405 $ 1,069,922 Engineering Adhesives 378,264 342,300 1,137,587 1,000,337 Construction Adhesives 137,988 115,091 400,977 310,348 Corporate unallocated - - - - Total H.B. Fuller $ 941,230 $ 826,830 $ 2,790,969 $ 2,380,607 Segment Operating Income (Loss): Hygiene, Health and Consumable Adhesives $ 47,470 $ 29,652 $ 122,950 $ 98,493 Engineering Adhesives 39,776 34,087 115,266 96,580 Construction Adhesives 6,391 3,339 22,032 4,974 Corporate unallocated (5,683 ) (7,625 ) (27,780 ) (23,105 ) Total H.B. Fuller $ 87,954 $ 59,453 $ 232,468 $ 176,942 Adjusted EBITDA7 Hygiene, Health and Consumable Adhesives $ 61,834 $ 44,496 $ 166,304 $ 142,671 Engineering Adhesives 56,061 52,001 165,461 150,034 Construction Adhesives 19,619 14,247 59,616 37,785 Corporate unallocated 186 (15 ) (2,350 ) 2,648 Total H.B. Fuller $ 137,700 $ 110,729 $ 389,031 $ 333,138 Adjusted EBITDA Margin7 Hygiene, Health and Consumable Adhesives 14.5 % 12.0 % 13.3 % 13.3 % Engineering Adhesives 14.8 % 15.2 % 14.5 % 15.0 % Construction Adhesives 14.2 % 12.4 % 14.9 % 12.2 % Corporate unallocated NMP NMP NMP NMP Total H.B. Fuller 14.6 % 13.4 % 13.9 % 14.0 % 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 27, August 28, August 27, August 28, 2022 2021 2022 2021 Income before income taxes and income from equity method investments $ 73,202 $ 48,727 $ 189,864 $ 150,851 Adjustments: Acquisition project costs1 1,138 901 9,008 2,277 Organizational realignment2 595 3,087 4,915 9,029 Royal restructuring and integration3 196 1,016 1,007 3,537 Project One 2,502 2,305 7,559 6,469 Other4 711 111 8,267 (3,701 ) Adjusted income before income taxes and income from equity method investments9 $ 78,344 $ 56,147 $ 220,620 $ 168,462 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 27, August 28, August 27, August 28, 2022 2021 2022 2021 Income Taxes $ (28,259 ) $ (19,095 ) $ (62,023 ) $ (46,362 ) Adjustments: Acquisition project costs1 55 (212 ) (2,154 ) (495 ) Organizational realignment2 29 (726 ) (1,140 ) (2,204 ) Royal restructuring and integration3 10 (239 ) (213 ) (846 ) Project One 122 (542 ) (1,284 ) (1,551 ) Other4 6,484 5,598 5,702 5,805 Adjusted income taxes10 $ (21,559 ) $ (15,216 ) $ (61,112 ) $ (45,653 ) Adjusted income before income taxes and income from equity method investments $ 78,344 $ 56,147 $ 220,620 $ 168,462 Adjusted effective income tax rate10 27.5 % 27.1 % 27.7 % 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 27, August 28, August 27, August 28, 2022 2021 2022 2021 Net revenue $ 941,230 $ 826,830 $ 2,790,969 $ 2,380,607 Gross profit $ 249,164 $ 193,950 $ 715,577 $ 603,863 Gross profit margin 26.5 % 23.5 % 25.6 % 25.4 % Adjustments: Acquisition project costs1 (104 ) 1 320 64 Organizational realignment2 214 1,472 1,997 2,265 Royal restructuring and integration3 5 644 377 1,962 Project ONE - (22 ) 6 (22 ) Other4 533 247 1,358 1,635 Adjusted gross profit11 $ 249,812 $ 196,292 $ 719,635 $ 609,767 Adjusted gross profit margin11 26.5 % 23.7 % 25.8 % 25.6 % 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 27, August 28, August 27, August 28, 2022 2021 2022 2021 Selling, general and administrative expenses $ (161,210 ) $ (134,497 ) $ (483,109 ) $ (426,921 ) Adjustments: Acquisition project costs1 1,241 901 8,688 2,214 Organizational realignment2 630 1,614 4,134 6,819 Royal restructuring and integration3 191 388 656 1,644 Project ONE 2,502 2,327 7,553 6,491 Other4 471 55 2,691 32 Adjusted selling, general and administrative expenses12 $ (156,175 ) $ (129,212 ) $ (459,387 ) $ (409,721 ) 12 Adjusted selling, general and administrative expenses is a non-GAAP financial measure. Adjusted selling, general and administrative expenses is defined as selling, general and administrative expenses excluding the specific adjustments shown above. The table above provides a reconciliation of adjusted selling, general and administrative expenses to selling, general and administrative expenses, the most directly comparable financial measure determined and reported in accordance with U.S. GAAP. H.B. FULLER COMPANY AND SUBSIDIARIES REGULATION G RECONCILIATION In thousands (unaudited) Hygiene, Health Three Months Ended and Consumable Engineering Construction Corporate H.B. Fuller August 27, 2022 Adhesives Adhesives Adhesives Total Unallocated Consolidated Net income attributable to H.B. Fuller $ 50,378 $ 41,927 $ 8,718 $ 101,023 $ (54,526 ) $ 46,497 Adjustments: Acquisition project costs1 - - - - 1,138 1,138 Organizational realignment2 - - - - 595 595 Royal Restructuring and integration3 - - - - 196 196 Project One - - - - 2,502 2,502 Other4 - - - - 711 711 Discrete tax items5 - - - - 6,449 6,449 Income tax effect on adjustments6 - - - - 251 251 Adjusted net income attributable to H.B. Fuller7 50,378 41,927 8,718 101,023 (42,684 ) 58,339 Add: Interest expense - - - - 23,450 23,450 Interest income - - - - (2,139 ) (2,139 ) Adjusted Income taxes - - - - 21,559 21,559 Depreciation and amortization expense8 11,456 14,134 10,901 36,491 - 36,491 Adjusted EBITDA7 $ 61,834 $ 56,061 $ 19,619 $ 137,514 $ 186 $ 137,700 Revenue $ 424,978 $ 378,264 $ 137,988 $ 941,230 - $ 941,230 Adjusted EBITDA Margin7 14.5 % 14.8 % 14.2 % 14.6 % NMP 14.6 % Nine Months Ended August 27, 2022 Net income attributable to H.B. Fuller $ 131,702 $ 121,741 $ 29,013 $ 282,456 $ (150,449 ) $ 132,007 Adjustments: Acquisition project costs1 - - - - 9,008 9,008 Organizational realignment2 - - - - 4,915 4,915 Royal Restructuring and integration3 - - - - 1,007 1,007 Project One - - - - 7,559 7,559 Other4 - - - - 8,267 8,267 Discrete tax items5 - - - - 7,697 7,697 Income tax effect on adjustments6 - - - - (6,786 ) (6,786 ) Adjusted net income attributable to H.B. Fuller7 131,702 121,741 29,013 282,456 (118,782 ) 163,674 Add: Interest expense - - - - 61,501 61,501 Interest income - - - - (6,181 ) (6,181 ) Adjusted Income taxes - - - - 61,112 61,112 Depreciation and amortization expense8 34,602 43,720 30,603 108,925 - 108,925 Adjusted EBITDA7 $ 166,304 $ 165,461 $ 59,616 $ 391,381 $ (2,350 ) $ 389,031 Revenue 1,252,405 1,137,587 400,977 2,790,969 - 2,790,969 Adjusted EBITDA Margin7 13.3 % 14.5 % 14.9 % 14.0 % NMP 13.9 % Note: Adjusted EBITDA is a non-GAAP financial measure. The table above provides a reconciliation of adjusted EBITDA for each segment to net income attributable to H.B. Fuller for each segment, the most directly comparable financial measure determined and reported in accordance with U.S. GAAP. NMP = Non-meaningful percentage H.B. FULLER COMPANY AND SUBSIDIARIES REGULATION G RECONCILIATION In thousands (unaudited) Hygiene, Health Three Months Ended: and Consumable Engineering Construction Corporate H.B. Fuller August 28, 2021 Adhesives Adhesives Adhesives Total Unallocated Consolidated Net income attributable to H.B. Fuller $ 32,924 $ 36,599 $ 5,516 $ 75,039 $ (43,423 ) $ 31,616 Adjustments: Acquisition project costs1 - - - - 901 901 Organizational realignment2 - - - - 3,087 3,087 Royal Restructuring and integration3 - - - - 1,016 1,016 Project One - - - - 2,305 2,305 Other4 - - - - 111 111 Discrete tax items5 - - - - 5,626 5,626 Income tax effect on adjustments6 - - - - (1,746 ) (1,746 ) Adjusted net income attributable to H.B. Fuller7 32,924 36,599 5,516 75,039 (32,123 ) 42,916 Add: Interest expense - - - - 19,412 19,412 Interest income - - - - (2,520 ) (2,520 ) Adjusted Income taxes - - - - 15,216 15,216 Depreciation and amortization Expense8 11,572 15,402 8,731 35,705 - 35,705 Adjusted EBITDA7 $ 44,496 $ 52,001 $ 14,247 $ 110,744 $ (15 ) $ 110,729 Revenue $ 369,439 $ 342,300 $ 115,091 $ 826,830 - $ 826,830 Adjusted EBITDA Margin7 12.0 % 15.2 % 12.4 % 13.4 % NMP 13.4 % Nine Months Ended August 28, 2021 Net income attributable to H.B. Fuller $ 108,291 $ 104,099 $ 11,504 $ 223,894 $ (113,385 ) $ 110,509 Adjustments: Acquisition project costs1 - - - - 2,277 2,277 Organizational realignment2 - - - - 9,029 9,029 Royal Restructuring and integration3 - - - - 3,537 3,537 Project One - - - - 6,469 6,469 Other4 - - - - (3,701 ) (3,701 ) Discrete tax items5 - - - - 5,068 5,068 Income tax effect on adjustments6 - - - - (4,359 ) (4,359 ) Adjusted net income attributable to H.B. Fuller7 108,291 104,099 11,504 223,894 (95,065 ) 128,829 Add: Interest expense - - - - 59,769 59,769 Interest income - - - - (7,709 ) (7,709 ) Adjusted Income taxes - - - - 45,653 45,653 Depreciation and amortization expense8 34,380 45,935 26,281 106,596 - 106,596 Adjusted EBITDA7 $ 142,671 $ 150,034 $ 37,785 $ 330,490 $ 2,648 $ 333,138 Revenue $ 1,069,922 $ 1,000,337 $ 310,348 $ 2,380,607 - $ 2,380,607 Adjusted EBITDA Margin7 13.3 % 15.0 % 12.2 % 13.9 % NMP 14.0 % Note: Adjusted EBITDA is a non-GAAP financial measure. The table above provides a reconciliation of adjusted EBITDA for each segment to net income attributable to H.B. Fuller for each segment, the most directly comparable financial measure determined and reported in accordance with U.S. GAAP. NMP = Non-meaningful percentage H.B. FULLER COMPANY AND SUBSIDIARIES SEGMENT FINANCIAL INFORMATION NET REVENUE GROWTH (DECLINE) (unaudited) Three Months Ended Nine Months Ended August 27, 2022 August 27, 2022 Price 18.7 % 17.6 % Volume (0.3 )% 2.8 % Organic Growth13 18.4 % 20.4 % M&A 2.0 % 1.6 % Constant currency 20.4 % 22.0 % F/X (6.6 )% (4.8 )% Total H.B. Fuller Net Revenue Growth 13.8 % 17.2 % Revenue growth versus 2022 Three Months Ended Nine Months Ended August 27, 2022 August 27, 2022 Organic Organic Net Revenue F/X Constant Currency M&A Growth 13 Net Revenue F/X Constant Currency M&A Growth 13 Hygiene, Health and Consumable Adhesives 15.1 % (7.8 )% 22.9 % 0.0 % 22.9 % 17.0 % (5.7 )% 22.7 % 0.0 % 22.7 % Engineering Adhesives 10.5 % (7.0 )% 17.5 % 0.0 % 17.5 % 13.7 % (5.0 )% 18.7 % 0.0 % 18.7 % Construction Adhesives 19.8 % (1.3 )% 21.1 % 14.2 % 6.9 % 29.2 % (1.0 )% 30.2 % 12.6 % 17.6 % Total H.B. Fuller 13.8 % (6.6 )% 20.4 % 2.0 % 18.4 % 17.2 % (4.8 )% 22.0 % 1.6 % 20.4 % 13 We use the term “organic revenue” to refer to net revenue, excluding the effect of foreign currency changes and acquisitions and divestitures. Organic growth reflects adjustments for the impact of period-over-period changes in foreign currency exchange rates on revenues and the revenues associated with acquisitions and divestitures. CONSOLIDATED BALANCE SHEETS H.B. Fuller Company and Subsidiaries (In thousands, except share and per share amounts) August 27, November 27, 2022 2021 Assets Current assets: Cash and cash equivalents $ 60,708 $ 61,786 Trade receivables (net of allowances of $12,662 and $9,935, as of August 27, 2022 and November 27, 2021, respectively) 649,727 614,645 Inventories 547,278 448,404 Other current assets 163,213 96,335 Total current assets 1,420,926 1,221,170 Property, plant and equipment 1,526,602 1,500,989 Accumulated depreciation (820,132 ) (805,622 ) Property, plant and equipment, net 706,470 695,367 Goodwill 1,375,964 1,298,845 Other intangibles, net 707,690 687,075 Other assets 360,588 372,073 Total assets $ 4,571,638 $ 4,274,530 Liabilities, non-controlling interest and total equity Current liabilities: Notes payable $ 33,116 $ 24,983 Trade payables 485,479 500,321 Accrued compensation 88,744 109,542 Income taxes payable 42,792 15,943 Other accrued expenses 87,260 86,061 Total current liabilities 737,391 736,850 Long-term debt 1,885,041 1,591,479 Accrued pension liabilities 66,704 71,651 Other liabilities 303,817 277,190 Total liabilities 2,992,953 2,677,170 Commitments and contingencies (Note 12) Equity: H.B. Fuller stockholders' equity: Preferred stock (no shares outstanding) shares authorized – 10,045,900 - - Common stock, par value $1.00 per share, shares authorized – 160,000,000, shares outstanding – 53,298,831 and 52,777,753 as of August 27, 2022 and November 27, 2021, respectively 53,299 52,778 Additional paid-in capital 245,826 213,637 Retained earnings 1,703,278 1,600,601 Accumulated other comprehensive loss (424,312 ) (270,247 ) Total H.B. Fuller stockholders' equity 1,578,091 1,596,769 Non-controlling interest 594 591 Total equity 1,578,685 1,597,360 Total liabilities, non-controlling interest and total equity $ 4,571,638 $ 4,274,530 CONSOLIDATED STATEMENTS of CASH FLOWS H.B. Fuller Company and Subsidiaries (In thousands) Nine Months Ended August 27, 2022 August 28, 2021 Cash flows from operating activities: Net income including non-controlling interest $ 132,077 $ 110,560 Adjustments to reconcile net income including non-controlling interest to net cash (used in) provided by operating activities: Depreciation 54,297 54,158 Amortization 55,088 53,464 Deferred income taxes (4,968 ) (1,547 ) Income from equity method investments, net of dividends received 1,420 4,363 Loss (gain) on sale or disposal of assets (1,130 ) 641 Share-based compensation 20,358 19,400 Pension and other post-retirement benefit plan activity (15,324 ) (23,192 ) Change in assets and liabilities, net of effects of acquisitions: Trade receivables, net (51,629 ) (61,900 ) Inventories (112,390 ) (141,112 ) Other assets (40,329 ) (26,060 ) Trade payables 17,381 176,210 Accrued compensation (17,275 ) (1,283 ) Other accrued expenses 1,614 (2,292 ) Income taxes payable 10,201 1,001 Other liabilities (35,940 ) (53,498 ) Other 35,246 52,221 Net cash provided by operating activities 48,697 161,134 Cash flows from investing activities: Purchased property, plant and equipment (98,352 ) (77,237 ) Purchased businesses, net of cash acquired (242,870 ) (5,445 ) Proceeds from sale of property, plant and equipment 1,281 2,751 Cash received from government grant 3,928 5,800 Cash payments related to government grant - (1,526 ) Net cash used in investing activities (336,013 ) (75,657 ) Cash flows from financing activities: Proceeds from debt 335,000 - Repayment of long-term debt (15,000 ) (118,000 ) Payment of debt issuance costs (600 ) - Net proceeds of notes payable 6,707 9,846 Dividends paid (29,067 ) (26,045 ) Contingent consideration payment (5,000 ) - Proceeds from stock options exercised 13,522 22,053 Repurchases of common stock (3,885 ) (2,668 ) Net cash provided by (used in) financing activities 301,677 (114,814 ) Effect of exchange rate changes on cash and cash equivalents (15,439 ) (3,063 ) Net change in cash and cash equivalents (1,078 ) (32,400 ) Cash and cash equivalents at beginning of period 61,786 100,534 Cash and cash equivalents at end of period $ 60,708 $ 68,134 View source version on businesswire.com: https://www.businesswire.com/news/home/20220921005935/en/