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 Fourth Quarter and Fiscal Year 2023 Results By: H.B. Fuller Company via Business Wire January 17, 2024 at 16:05 PM EST Q4 Reported EPS (diluted) of $0.80; Adjusted EPS (diluted) of $1.32, up 27% year-on-year Company achieves new record for Q4 and fiscal year adjusted EBITDA margin Q4 Adjusted EBITDA up 22% and Adjusted EBITDA margin up 440 basis points versus Q4 2022 FY 2023 cash flow from operations increased 48% year-on-year to $378 million H.B. Fuller Company (NYSE: FUL) today reported financial results for its fourth quarter and fiscal year that ended December 2, 2023. Fourth Quarter 2023 Noteworthy Items: Achieved strong profit growth and record fourth quarter adjusted EBITDA margin on exceptional execution and proactive response to significant customer destocking activity throughout the year; Net revenue was $903 million, down 5.8% year-on-year; net revenue was up 1.2% year-on-year on a 13-week comparable basis; organic revenue decreased 3.5% year-on-year, driven by slightly lower pricing and volume; Gross margin was 30.3%; adjusted gross margin of 31.3% increased 510 basis points year-on-year, driven by pricing and raw material cost actions and restructuring benefits; Net income was $45 million; adjusted EBITDA was $173 million, up 22% year-on-year, and adjusted EBITDA margin expanded 440 basis points year-on-year to 19.1%; Reported EPS (diluted) was $0.80; adjusted EPS (diluted) was $1.32, up 27% versus the prior year, driven by strong operating income growth; Net working capital, as a percentage of annualized net revenue, decreased 200 basis points sequentially from 18.1% in the third quarter to 16.1% in the fourth quarter; Net debt-to-adjusted EBITDA ratio declined sequentially from 3.3X to 2.9X driven both by lower net debt and growth in adjusted EBITDA. Summary of Fourth Quarter 2023 Results: The Company’s net revenue for the fourth quarter of fiscal 2023 was $903 million, down 5.8% versus the fourth quarter of fiscal 2022. Organic revenue declined 3.5% year-on-year, with pricing adjustments reducing organic revenue by 3.4% and volume reducing organic revenue by 0.1%. Foreign currency translation increased net revenue by 0.3%, acquisitions increased net revenue by 4.4%, and the impact of one less week during the fourth quarter reduced net revenue by 7.0%. Net revenue increased 1.2% year-on-year on a comparable 13-week basis in the fourth quarter. Gross profit in the fourth quarter of fiscal 2023 was $274 million. Adjusted gross profit was $283 million. Adjusted gross profit margin of 31.3% increased 510 basis points year-on-year. Pricing and raw material cost actions, restructuring benefits and general cost reductions drove the increase in adjusted gross margin year-on-year. Selling, general and administrative (SG&A) expense was $160 million in the fourth quarter of fiscal 2023 and adjusted SG&A was $156 million, effectively flat year-on-year. Continued cost management and additional restructuring benefits offset inflation in wages and services and the incremental SG&A costs associated with acquisitions completed over the previous year. Net income attributable to H.B. Fuller for the fourth quarter of fiscal 2023 was $45 million, or $0.80 per diluted share. Adjusted net income attributable to H.B. Fuller for the fourth quarter of fiscal 2023 was $74 million. Adjusted EPS was $1.32 per diluted share, up 27% year-on-year driven by strong operating income growth. Adjusted EBITDA in the fourth quarter of fiscal 2023 was $173 million, up 22.4% year-on-year. Adjusted EBITDA margin increased 440 basis points year-on-year to 19.1%, driven by the balance of raw material and price movements versus the prior year’s fourth quarter, as well as restructuring savings. This year’s fourth quarter had one less week versus the prior year’s fourth quarter and this unfavorably impacted adjusted EBITDA growth by approximately $10 million. “I am proud of our leaders for exceptional execution throughout the year, as evidenced by strong profit growth and record margins. Across the organization, our teams proactively managed the changing price and raw material dynamics successfully and implemented decisive restructuring measures in the face of unprecedented customer destocking, which we believe is largely behind us, to deliver these results and position H.B. Fuller for continued future profit growth, margin expansion and strong cash flow,” said Celeste Mastin, H.B. Fuller president and chief executive officer. “As the market leader in innovation, focused on providing highly customized solutions for our customers, we have successfully transformed our portfolio into one that is concentrated in the highly specified areas of our market segments. As such, we have begun to take our portfolio management approach to the next level by proactively driving capital allocation to the highest margin, highest growth market segments. We have compelling growth opportunities in front of us and we are confident in our capabilities to continue to transform H.B. Fuller and achieve an adjusted EBITDA margin target greater than 20 percent within the next 3 to 5 years. “As we enter fiscal year 2024, we are confident in our outlook for positive organic growth and achieving further EBITDA margin expansion. We are successfully executing our strategy to deploy capital to the highest return opportunities, innovating with speed to deliver solutions for our customers, driving efficiencies throughout our manufacturing footprint, and achieving meaningful synergies from our collections of acquisitions.” Fiscal Year 2023 Noteworthy Items: Achieved record fiscal year adjusted EBITDA margin on exceptional execution and proactive response to significant customer destocking activity throughout the year; Net revenue was $3.51 billion, down 6.4% year-on-year; on a 52-week comparable basis, net revenue was down 4.6% year-on-year; organic revenue decreased 5.5% year-on-year, driven by 8.4% lower volume due to significant customer destocking activity during the year, offset somewhat by 2.9% favorable pricing; Gross margin was 28.7%; adjusted gross margin of 29.4% increased 350 basis points year-on-year, driven by pricing and raw material cost actions and restructuring benefits; Net income was $145 million; adjusted EBITDA was $581 million, up 10% year-on-year; adjusted EBITDA margin expanded 240 basis points year-on-year to a fiscal year record high of 16.5%; Reported EPS (diluted) was $2.59; adjusted EPS (diluted) was $3.87, down slightly versus the prior year, as strong operating income growth nearly offset significantly higher net interest expense and unfavorable foreign currency exchange which reduced adjusted EPS (diluted) by $0.58 and $0.18, respectively; Cash flow from operations of $378 million improved $122 million year-on-year, or 48%, on improved profitability and lower net working capital requirements. Balance Sheet and Working Capital: Net debt at the end of the fourth quarter of fiscal 2023 was $1,659 million, down $131 million sequentially versus the third quarter and down $26 million year-on-year. The sequential reduction in net debt, together with growth in adjusted EBITDA, reduced the ratio of net debt-to-adjusted EBITDA from 3.3X to 2.9X sequentially. Net working capital in the fourth quarter of fiscal 2023 declined $74 million sequentially versus the third quarter and $58 million year-on-year. As a percentage of annualized net revenue, net working capital declined 200 basis points sequentially, and 180 basis points year-on-year on a comparable 52-week basis, to 16.1%. Fiscal 2024 Outlook: Net revenue growth for fiscal 2024 is expected to be in the range of up 2% to 6% with organic revenue flat to up 3% versus fiscal 2023, reflecting a rebound in demand following the unprecedented customer destocking activity in fiscal 2023, offset by slightly lower pricing as customers qualify lower price formulations and index-based pricing has a greater effect; Adjusted EBITDA for fiscal 2024 is expected to be in the range of $610 million to $640 million, equating to growth of approximately 5% to 10% year-on-year; The core tax rate, excluding the impact of discrete items, is anticipated to be between 27% and 28% in fiscal year 2024; Net interest expense for fiscal 2024 is expected to be between $115 million and $125 million; Adjusted EPS (diluted) is expected to be in the range of $4.15 to $4.45, equating to a range of up 7% to 15% year-on-year; Operating cash flow in fiscal year 2024 is expected to be between $300 million and $350 million and capital expenditures are expected to be approximately $140 million. Conference Call: The Company will hold a conference call on January 18, 2024, at 9:30 a.m. CT (10:30 a.m. ET) to discuss its results. Interested parties may listen to the conference call on a live webcast. The webcast, along with a supplemental presentation, may be accessed from the Company’s website at https://investors.hbfuller.com. Participants must register prior to accessing the webcast using this link and should do so at least 10 minutes prior to the start of the call to install and test any necessary software and audio connections. A telephone replay of the conference call will be available from 12:30 p.m. CT on January 18, 2024, to 10:59 p.m. CT on January 25, 2024. To access the telephone replay dial 1-800-770-2030 (toll free) or 1-647-362-9199, and enter Conference ID: 6370505. Regulation G The information presented in this earnings release regarding consolidated and segment organic revenue growth, operating income, adjusted gross profit, adjusted gross profit margin, adjusted selling, general and administrative expense, adjusted income before income taxes and income from equity investments, adjusted income taxes, adjusted effective tax rate, adjusted net income, adjusted diluted earnings per share and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) does not conform to U.S. generally accepted accounting principles (U.S. GAAP) and should not be construed as an alternative to the reported results determined in accordance with U.S. GAAP. Management has included this non-GAAP information to assist in understanding the operating performance of the Company and its operating segments as well as the comparability of results to the results of other companies. The non-GAAP information provided may not be consistent with the methodologies used by other companies. All non-GAAP information is reconciled with reported U.S. GAAP results in the “Regulation G Reconciliation” tables in this press release with the exception of our forward-looking non-GAAP measures contained above in our Fiscal 2023 Outlook, which the Company cannot reconcile to forward-looking GAAP results without unreasonable effort. About H.B. Fuller Since 1887, H.B. Fuller has been a leading global adhesives provider focusing on perfecting adhesives and sealants to improve products and lives. With fiscal 2023 net revenue of $3.5 billion, H.B. Fuller’s commitment to innovation and sustainable adhesive solutions brings together people, products and processes that answer and solve some of the world's biggest challenges. Our reliable, responsive service creates lasting, rewarding connections with customers in electronics, disposable hygiene, medical, transportation, aerospace, clean energy, packaging, construction, woodworking, general industries and other consumer businesses. Our promise to our people connects them with opportunities to innovate and thrive. For more information, visit us at https://www.hbfuller.com. Safe Harbor for Forward-Looking Statements Certain statements in this press release may be considered forward-looking statements within the meaning of the federal securities laws, including Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements often address expected future business and financial performance, financial condition, and other matters, and often contain words or phrases such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “opportunity,” “outlook,” “plan,” “project,” “seek,” “should,” “strategy,” “target,” “will,” “will be,” “will continue,” “will likely result,” “would” and similar expressions, and variations or negatives of these words or phrases. These statements are subject to various risks and uncertainties that could cause our actual results to differ materially from those in the forward-looking statements, including but not limited to the following: the availability and pricing of raw materials; the impact of potential cybersecurity attacks and security breaches; the impact on the supply chain, raw material costs and pricing of our products due to military conflict, including between Russia and Ukraine and Israel and Hamas; the consequences of the COVID-19 outbreak and other pandemics on our operations and financial results; the impact on our margins and product demand due to inflationary pressures; the substantial amount of debt we have incurred to finance our acquisition of Royal, our ability to repay or refinance our debt or to incur additional debt in the future, our need for a significant amount of cash to service and repay the debt and to pay dividends on our common stock, the effect of debt covenants that limit the discretion of management in operating the business or in paying dividends; our ability to pay dividends and to pursue growth opportunities if we continue to pay dividends according to our current dividend policy; our ability to acquire and integrate complementary businesses; our ability to achieve expected synergies, cost savings and operating efficiencies from our restructuring initiatives and operational improvement projects within the expected time frames or at all; our ability to effectively implement Project ONE; uncertain political and economic conditions; fluctuations in product demand; competing products and pricing; our geographic and product mix; disruptions to our relationships with our major customers and suppliers; failures in our information technology systems; regulatory compliance across our global footprint; trade policies and economic sanctions impacting our markets; changes in tax laws and tariffs; devaluations and other foreign exchange rate fluctuations; the impact of litigation and investigations, including for product liability and environmental matters; impairment charges on our goodwill or long-lived assets; the effect of new accounting pronouncements and accounting charges and credits; and similar matters. Additional information about these various risks and uncertainties can be found in the “Risk Factors” section of our Form 10-K filings, and any updates to the risk factors in our Form 10-Q and 8-K filings with the SEC, but there may be other risks and uncertainties that we are unable to identify at this time or that we do not currently expect to have a material impact on the business. You should not place undue reliance on forward-looking statements, which speak only as of the date they are made. We do not undertake to update or revise any forward-looking statements, except as required by law. H.B. FULLER COMPANY AND SUBSIDIARIES CONSOLIDATED FINANCIAL INFORMATION In thousands, except per share amounts (unaudited) Three Months Ended Three Months Ended December 2, Percent of December 3, Percent of 2023 Net Revenue 2022 Net Revenue Net revenue $ 902,879 100.0 % $ 958,213 100.0 % Cost of sales (629,037 ) (69.7 )% (710,092 ) (74.1 )% Gross profit 273,842 30.3 % 248,121 25.9 % Selling, general and administrative expenses (160,440 ) (17.8 )% (157,872 ) (16.5 )% Other income, net 4,918 0.5 % 251 0.0 % Interest expense (33,297 ) (3.7 )% (30,046 ) (3.1 )% Interest income 1,217 0.1 % 1,609 0.2 % Income before income taxes and income from equity method investments 86,240 9.6 % 62,063 6.5 % Income taxes (42,274 ) (4.7 )% (15,163 ) (1.6 )% Income from equity method investments 1,036 0.1 % 1,429 0.1 % Net income including non-controlling interest 45,002 5.0 % 48,329 5.0 % Net income attributable to non-controlling interest (11 ) (0.0 )% (24 ) (0.0 )% Net income attributable to H.B. Fuller $ 44,991 5.0 % $ 48,305 5.0 % Basic income per common share attributable to H.B. Fuller $ 0.83 $ 0.90 Diluted income per common share attributable to H.B. Fuller $ 0.80 $ 0.87 Weighted-average common shares outstanding: Basic 54,491 53,824 Diluted 56,161 55,472 Dividends declared per common share $ 0.205 $ 0.190 H.B. FULLER COMPANY AND SUBSIDIARIES CONSOLIDATED FINANCIAL INFORMATION In thousands, except per share amounts (unaudited) Year Ended Year Ended December 2, Percent of December 3, Percent of 2023 Net Revenue 2022 Net Revenue Net revenue $ 3,510,934 100.0 % $ 3,749,183 100.0 % Cost of sales (2,502,037 ) (71.3 )% (2,785,484 ) (74.3 )% Gross profit 1,008,897 28.7 % 963,699 25.7 % Selling, general and administrative expenses (653,760 ) (18.6 )% (640,981 ) (17.1 )% Other income, net 9,682 0.3 % 12,952 0.3 % Interest expense (134,602 ) (3.8 )% (91,521 ) (2.4 )% Interest income 3,943 0.1 % 7,779 0.2 % Income before income taxes and income from equity method investments 234,160 6.7 % 251,928 6.7 % Income taxes (93,529 ) (2.7 )% (77,186 ) (2.1 )% Income from equity method investments 4,357 0.1 % 5,665 0.2 % Net income including non-controlling interest 144,988 4.1 % 180,407 4.8 % Net income attributable to non-controlling interest (82 ) (0.0 )% (94 ) (0.0 )% Net income attributable to H.B. Fuller $ 144,906 4.1 % $ 180,313 4.8 % Basic income per common share attributable to H.B. Fuller $ 2.67 $ 3.37 Diluted income per common share attributable to H.B. Fuller $ 2.59 $ 3.26 Weighted-average common shares outstanding: Basic 54,332 53,580 Diluted 55,958 55,269 Dividends declared per common share $ 0.805 $ 0.738 H.B. FULLER COMPANY AND SUBSIDIARIES REGULATION G RECONCILIATION In thousands, except per share amounts (unaudited) Three Months Ended Year Ended December 2, December 3, December 2, December 3, 2023 2022 2023 2022 Net income attributable to H.B. Fuller $ 44,991 $ 48,305 $ 144,906 $ 180,313 Adjustments: Acquisition project costs 1 4,765 1,822 16,874 10,830 Organizational realignment 2 10,549 1,471 29,900 6,386 Royal restructuring and integration 3 - 1,467 - 2,474 Project One 2,193 2,326 9,815 9,885 Other 4 (3,903 ) 4,524 (611) 12,791 Discrete tax items 5 16,955 1,610 26,085 9,308 Income tax effect on adjustments 6 (1,158 ) (3,911 ) (10,604 ) (10,699 ) Adjusted net income attributable to H.B. Fuller 7 74,392 57,614 216,365 221,288 Add: Interest expense 33,297 30,046 131,913 91,547 Interest income (1,217 ) (1,609 ) (3,943 ) (7,790 ) Income taxes 26,477 17,464 78,047 78,576 Depreciation and Amortization expense 8 39,653 37,469 158,456 146,394 Adjusted EBITDA 7 172,602 140,984 580,838 530,015 Diluted Shares 56,161 55,472 55,958 55,269 Adjusted diluted income per common share attributable to H.B. Fuller 7 $ 1.32 $ 1.04 $ 3.87 $ 4.00 Adjusted net revenue $ 902,879 $ 958,213 $ 3,510,934 $ 3,749,183 Adjusted EBITDA margin 7 19.1 % 14.7 % 16.5 % 14.1 % 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 year ended December 3, 2022, include a $3.3 million non-cash charge related to the wind down and settlement of the Company’s Canadian defined benefit pension plan, $1.3 million of hedging costs related to the Russian ruble devaluation driven by the war in Ukraine, $1.2 million of transactional tax expense associated with an audit settlement, other expenses for COVID-19 testing, vaccinations and exceptional medical claims, and non-cash gains and losses related to legal entity consolidations. 5 Discrete tax items for the year ended December 2, 2023 are related to the tax impact of withholding tax recorded on earnings that are no longer permanently reinvested, as well as other various U.S. and foreign tax matters. Discrete tax items for the year ended December 3, 2022 are related to the revaluation of cross-currency swap agreements due to depreciation of the Euro versus the U.S. Dollar, as well as various foreign tax matters offset by the tax effect of legal entity mergers. 6 The income tax effect on adjustments represents the difference between income taxes on net income before income taxes and income from equity method investments reported in accordance with U.S. GAAP and adjusted net income before income taxes and income from equity method investments. 7 Adjusted net income attributable to H.B. Fuller, adjusted diluted income per common share attributable to H.B. Fuller, adjusted EBITDA and adjusted EBITDA margin are non-GAAP financial measures. Adjusted net income attributable to H.B. Fuller is defined as net income before the specific adjustments shown above. Adjusted diluted income per common share is defined as adjusted net income attributable to H.B. Fuller divided by the number of diluted common shares. Adjusted EBITDA is defined as net income before interest, income taxes, depreciation, amortization and the specific adjustments shown above. Adjusted EBITDA margin is defined as adjusted EBITDA divided by net revenue. The table above provides a reconciliation of adjusted net income attributable to H.B. Fuller, adjusted diluted income per common share attributable to H.B. Fuller, adjusted EBITDA and adjusted EBITDA margin to net income attributable to H.B. Fuller, the most directly comparable financial measure determined and reported in accordance with U.S. GAAP. 8 Depreciation and amortization expense added back for EBITDA is adjusted for amounts already included in adjusted net income attributable to H.B. Fuller totaling ($1,036) and ($1,384) for the three and twelve months ended December 2, 2023, respectively and ($123) and ($582) for the three and twelve months ended December 3, 2022, respectively. H.B. FULLER COMPANY AND SUBSIDIARIES SEGMENT FINANCIAL INFORMATION In thousands (unaudited) Three Months Ended Year Ended December 2, December 3, December 2, December 3, 2023 2022 2023 2022 Net Revenue: Hygiene, Health and Consumable Adhesives $ 411,085 $ 443,528 $ 1,601,487 $ 1,695,934 Engineering Adhesives 365,735 395,053 1,428,744 1,532,639 Construction Adhesives 126,059 119,632 480,703 520,610 Corporate unallocated - - - - Total H.B. Fuller $ 902,879 $ 958,213 $ 3,510,934 $ 3,749,183 Segment Operating Income: Hygiene, Health and Consumable Adhesives $ 65,614 $ 42,836 $ 215,088 $ 165,786 Engineering Adhesives 57,539 53,607 187,346 168,873 Construction Adhesives 3,772 957 5,961 22,989 Corporate unallocated (13,523 ) (7,151 ) (53,258 ) (34,930 ) Total H.B. Fuller $ 113,402 $ 90,249 $ 355,137 $ 322,718 Adjusted EBITDA 7 Hygiene, Health and Consumable Adhesives $ 81,677 $ 57,684 $ 275,802 $ 223,988 Engineering Adhesives 74,020 70,487 255,778 235,948 Construction Adhesives 15,933 14,571 55,517 74,187 Corporate unallocated 972 (1,758 ) (6,259 ) (4,108 ) Total H.B. Fuller $ 172,602 $ 140,984 $ 580,838 $ 530,015 Adjusted EBITDA Margin 7 Hygiene, Health and Consumable Adhesives 19.9 % 13.0 % 17.2 % 13.2 % Engineering Adhesives 20.2 % 17.8 % 17.9 % 15.4 % Construction Adhesives 12.6 % 12.2 % 11.5 % 14.3 % Corporate unallocated NMP NMP NMP NMP Total H.B. Fuller 19.1 % 14.7 % 16.5 % 14.1 % NMP = non-meaningful percentage H.B. FULLER COMPANY AND SUBSIDIARIES REGULATION G RECONCILIATION In thousands, except per share amounts (unaudited) Three Months Ended Year Ended December 2, December 3, December 2, December 3, 2023 2022 2023 2022 Income before income taxes and income from equity method investments $ 86,240 $ 62,063 $ 234,160 $ 251,928 Adjustments: Acquisition project costs 1 4,765 1,822 16,874 10,830 Organizational realignment 2 10,549 1,471 29,900 6,386 Royal restructuring and integration 3 - 1,467 - 2,474 Project One 2,193 2,326 9,815 9,885 Other 4 (3,903 ) 4,524 (611 ) 12,791 Adjusted income before income taxes and income from equity method investments 9 $ 99,844 $ 73,673 $ 290,138 $ 294,294 9 Adjusted income before income taxes and income from equity investments is a non-GAAP financial measure. Adjusted income before income taxes and income from equity investments is defined as income before income taxes and income from equity investments before the specific adjustments shown above. The table above provides a reconciliation of adjusted income before income taxes and income from equity investments to income before income taxes and income from equity investments, the most directly comparable financial measure determined and reported in accordance with U.S. GAAP. H.B. FULLER COMPANY AND SUBSIDIARIES REGULATION G RECONCILIATION In thousands, except per share amounts (unaudited) Three Months Ended Year Ended December 2, December 3, December 2, December 3, 2023 2022 2023 2022 Income Taxes $ (42,274 ) $ (15,163 ) $ (93,529 ) $ (77,186 ) Adjustments: Acquisition project costs 1 (405 ) (613 ) (3,127 ) (2,767 ) Organizational realignment 2 (898 ) (495 ) (5,206 ) (1,635 ) Royal restructuring and integration 3 - (494 ) - (707 ) Project One (187 ) (783 ) (1,848 ) (2,067 ) Other 4 332 (1,526 ) (422 ) (3,522 ) Discrete tax items 5 16,955 1,610 26,085 9,308 Adjusted income taxes 10 $ (26,477 ) $ (17,464 ) $ (78,047 ) $ (78,576 ) Adjusted income before income taxes and income from equity method investments $ 99,844 $ 73,673 $ 290,138 $ 294,294 Adjusted effective income tax rate 10 26.5 % 23.7 % 26.9 % 26.7 % 10 Adjusted income taxes and adjusted effective income tax rate are non-GAAP financial measures. Adjusted income taxes is defined as income taxes before the specific adjustments shown above. Adjusted effective income tax rate is defined as income taxes divided by adjusted income before income taxes and income from equity method investments. The table above provides a reconciliation of adjusted income taxes and adjusted effective income tax rate to income taxes, the most directly comparable financial measure determined and reported in accordance with U.S. GAAP. H.B. FULLER COMPANY AND SUBSIDIARIES REGULATION G RECONCILIATION In thousands (unaudited) Three Months Ended Year Ended December 2, December 3, December 2, December 3, 2023 2022 2023 2022 Net revenue $ 902,879 $ 958,213 $ 3,510,934 $ 3,749,183 Gross profit $ 273,842 $ 248,121 $ 1,008,897 $ 963,699 Gross profit margin 30.3 % 25.9 % 28.7 % 25.7 % Adjustments: Acquisition project costs 1 529 738 3,146 1,058 Organizational realignment 2 8,136 1,211 18,108 3,207 Royal restructuring and integration 3 - 329 - 706 Project ONE 223 - 223 6 Other 4 52 472 530 1,830 Adjusted gross profit 11 $ 282,782 $ 250,871 $ 1,030,904 $ 970,506 Adjusted gross profit margin 11 31.3 % 26.2 % 29.4 % 25.9 % 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 Year Ended December 2, December 3, December 2, December 3, 2023 2022 2023 2022 Selling, general and administrative expenses $ (160,440 ) $ (157,872 ) $ (653,760 ) $ (640,981 ) Adjustments: Acquisition project costs 1 4,236 1,084 13,831 9,772 Organizational realignment 2 2,333 260 11,712 4,393 Royal restructuring and integration 3 - 1,138 - 1,794 Project ONE 1,969 2,326 9,592 9,879 Other 4 (3,954 ) (408 ) (3,882 ) 2,284 Adjusted selling, general and administrative expenses 12 $ (155,856 ) $ (153,472 ) $ (622,507 ) $ (612,859 ) 12 Adjusted selling, general and administrative expenses is a non-GAAP financial measure. Adjusted selling, general and administrative expenses is defined as selling, general and administrative expenses excluding the specific adjustments shown above. The table above provides a reconciliation of adjusted selling, general and administrative expenses to selling, general and administrative expenses, the most directly comparable financial measure determined and reported in accordance with U.S. GAAP. H.B. FULLER COMPANY AND SUBSIDIARIES REGULATION G RECONCILIATION In thousands (unaudited) Three Months Ended: Hygiene, Health and Consumable Engineering Construction Corporate H.B. Fuller December 2, 2023 Adhesives Adhesives Adhesives Total Unallocated Consolidated Net income attributable to H.B. Fuller $ 67,438 $ 58,857 $ 5,682 $ 131,977 $ (86,986 ) $ 44,991 Adjustments: Acquisition project costs 1 - - - - 4,765 4,765 Organizational realignment 2 - - - - 10,549 10,549 Royal restructuring and integration 3 - - - - - - Project One - - - - 2,193 2,193 Other 4 - - - - (3,903) (3,903) Discrete tax items 5 - - - - 16,955 16,955 Income tax effect on adjustments 6 - - - - (1,158 ) (1,158 ) Adjusted net income attributable to H.B. Fuller 7 67,438 58,857 5,682 131,977 (57,585 ) 74,392 Add: Interest expense - - - - 33,297 33,297 Interest income - - - - (1,217 ) (1,217 ) Income taxes - - - - 26,477 26,477 Depreciation and amortization expense 8 14,239 15,163 10,251 39,653 - 39,653 Adjusted EBITDA 7 $ 81,677 $ 74,020 $ 15,933 $ 171,630 $ 972 $ 172,602 Adjusted net revenue $ 411,085 $ 365,735 $ 126,059 $ 902,879 - 902,879 Adjusted EBITDA margin 7 19.9 % 20.2 % 12.6 % 19.0 % NMP 19.1 % Year Ended Hygiene, Health and Consumable Engineering Construction Corporate H.B. Fuller December 2, 2023 Adhesives Adhesives Adhesives Total Unallocated Consolidated Net income attributable to H.B. Fuller $ 222,404 $ 192,635 $ 13,602 $ 428,641 $ (283,735 ) $ 144,906 Adjustments: Acquisition project costs 1 - - - - 16,874 16,874 Organizational realignment 2 - - - - 29,900 29,900 Royal restructuring and integration 3 - - - - - - Project One - - - - 9,815 9,815 Other 4 - - - - (611) (611) Discrete tax items 5 - - - - 26,085 26,085 Income tax effect on adjustments 6 - - - - (10,604 ) (10,604 ) Adjusted net income attributable to H.B. Fuller 7 222,404 192,635 13,602 428,641 (212,276 ) 216,365 Add: Interest expense - - - - 131,913 131,913 Interest income - - - - (3,943 ) (3,943 ) Income taxes - - - - 78,047 78,047 Depreciation and amortization expense 8 53,398 63,143 41,915 158,456 - 158,456 Adjusted EBITDA 7 $ 275,802 $ 255,778 $ 55,517 $ 587,097 $ (6,259 ) $ 580,838 Adjusted net revenue 1,601,487 1,428,744 480,703 $ 3,510,934 - 3,510,934 Adjusted EBITDA margin 7 17.2 % 17.9 % 11.5 % 16.7 % NMP 16.5 % Note: Adjusted EBITDA is a non-GAAP financial measure. The table above provides a reconciliation of adjusted EBITDA for each segment to net income attributable to H.B. Fuller for each segment, the most directly comparable financial measure determined and reported in accordance with U.S. GAAP. NMP = Non-meaningful percentage H.B. FULLER COMPANY AND SUBSIDIARIES REGULATION G RECONCILIATION In thousands (unaudited) Three Months Ended: Hygiene, Health and Consumable Engineering Construction Corporate H.B. Fuller December 3, 2022 Adhesives Adhesives Adhesives Total Unallocated Consolidated Net income attributable to H.B. Fuller $ 45,913 $ 55,900 $ 3,460 $ 105,273 $ (56,968 ) $ 48,305 Adjustments: Acquisition project costs 1 - - - - 1,822 1,822 Organizational realignment 2 - - - - 1,471 1,471 Royal restructuring and integration 3 - - - - 1,467 1,467 Project One - - - - 2,326 2,326 Other 4 - - - - 4,524 4,524 Discrete tax items 5 - - - - 1,610 1,610 Income tax effect on adjustments 6 - - - - (3,911 ) (3,911 ) Adjusted net income attributable to H.B. Fuller 7 45,913 55,900 3,460 105,273 (47,659 ) 57,614 Add: Interest expense - - - - 30,046 30,046 Interest income - - - - (1,609 ) (1,609 ) Income taxes - - - - 17,464 17,464 Depreciation and amortization expense 8 11,771 14,587 11,111 37,469 - 37,469 Adjusted EBITDA 7 $ 57,684 $ 70,487 $ 14,571 $ 142,742 $ (1,758 ) $ 140,984 Adjusted net revenue $ 443,528 $ 395,053 $ 119,632 $ 958,213 - $ 958,213 Adjusted EBITDA margin 7 13.0 % 17.8 % 12.2 % 14.9 % NMP 14.7 % Year Ended Hygiene, Health and Consumable Engineering Construction Corporate H.B. Fuller December 3, 2022 Adhesives Adhesives Adhesives Total Unallocated Consolidated Net income attributable to H.B. Fuller $ 177,614 $ 177,641 $ 32,474 $ 387,729 $ (207,416 ) $ 180,313 Adjustments: Acquisition project costs 1 - - - - 10,830 10,830 Organizational realignment 2 - - - - 6,386 6,386 Royal restructuring and integration 3 - - - - 2,474 2,474 Project One - - - - 9,885 9,885 Other 4 - - - - 12,791 12,791 Discrete tax items 5 - - - - 9,308 9,308 Income tax effect on adjustments 6 - - - - (10,699 ) (10,699 ) Adjusted net income attributable to H.B. Fuller 7 177,614 177,641 32,474 387,729 (166,441 ) 221,288 Add: Interest expense - - - - 91,547 91,547 Interest income - - - - (7,790 ) (7,790 ) Income taxes - - - - 78,576 78,576 Depreciation and amortization expense 8 46,374 58,307 41,713 146,394 - 146,394 Adjusted EBITDA 7 $ 223,988 $ 235,948 $ 74,187 $ 534,123 $ (4,108 ) $ 530,015 Adjusted net revenue $ 1,695,934 $ 1,532,639 $ 520,610 $ 3,749,183 - $ 3,749,183 Adjusted EBITDA margin 7 13.2 % 15.4 % 14.3 % 14.2 % NMP 14.1 % 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) Net revenue growth versus 2022 Three Months Ended Year Ended December 2, 2023 December 2, 2023 Price (3.4 )% 2.9 % Volume (0.1 )% (8.4 )% Organic Growth 13 (3.5 )% (5.5 )% Extra Week in 2022 (53-week year) (7.0 )% (1.8 )% M&A 4.4 % 3.3 % Constant Currency (6.1 )% (4.0 )% F/X 0.3 % (2.4 )% Total H.B. Fuller Net Revenue Growth (5.8 )% (6.4 )% Net revenue growth versus 2022 Three Months Ended December 2, 2023 Extra Week in 2022 Net Revenue F/X Constant Currency M&A (53-week year) Organic Growth 13 Hygiene, Health and Consumable Adhesives (7.3 )% (0.2 )% (7.1 )% 7.4 % (7.0 )% (7.5 )% Engineering Adhesives (7.4 )% 0.7 % (8.1 )% 0.4 % (7.1 )% (1.4 )% Construction Adhesives 5.4 % 0.8 % 4.6 % 6.4 % (6.8 )% 5.0 % Total H.B. Fuller (5.8 )% 0.3 % (6.1 )% 4.4 % (7.0 )% (3.5 )% Net revenue growth versus 2022 Year Ended December 2, 2023 Extra Week in 2022 Net Revenue F/X Constant Currency M&A (53-week year) Organic Growth 13 Hygiene, Health and Consumable Adhesives (5.6 )% (3.3 )% (2.3 )% 4.6 % (1.8 )% (5.1 )% Engineering Adhesives (6.8 )% (2.0 )% (4.8 )% 1.2 % (1.8 )% (4.2 )% Construction Adhesives (7.7 )% (0.5 )% (7.2 )% 5.4 % (1.6 )% (11.0 )% Total H.B. Fuller (6.4 )% (2.4 )% (4.0 )% 3.3 % (1.8 )% (5.5 )% 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) December 2, December 3, 2023 2022 Assets Current assets: Cash and cash equivalents $ 179,453 $ 79,910 Trade receivables, net 577,932 607,365 Inventories 442,040 491,781 Other current assets 112,678 120,319 Total current assets 1,312,103 1,299,375 Property, plant and equipment, net 824,655 733,667 Goodwill 1,486,512 1,392,627 Other intangibles, net 729,140 702,092 Other assets 371,165 335,868 Total assets $ 4,723,575 $ 4,463,629 Liabilities, non-controlling interest and total equity Current liabilities: Notes payable $ 1,841 $ 28,860 Current maturities of long-term debt - - Trade payables 439,700 460,669 Accrued compensation 95,680 108,328 Income taxes payable 47,688 18,530 Other accrued expenses 107,902 89,345 Total current liabilities 692,811 705,732 Long-term debt, net of current maturities 1,836,590 1,736,256 Accrued pension liabilities 50,189 52,561 Other liabilities 388,072 358,286 Total liabilities 2,967,662 2,852,835 Commitments and contingencies (Note 14) Equity: H.B. Fuller stockholders' equity: Preferred stock (no shares outstanding) Shares authorized – 10,045,900 - - Common stock, par value $1.00 per share, Shares authorized – 160,000,000, Shares outstanding – 54,092,987 and 53,676,576 for 2023 and 2022, respectively 54,093 53,677 Additional paid-in capital 301,485 266,491 Retained earnings 1,842,507 1,741,359 Accumulated other comprehensive loss (442,880 ) (451,357 ) Total H.B. Fuller stockholders' equity 1,755,205 1,610,170 Non-controlling interest 708 624 Total equity 1,755,913 1,610,794 Total liabilities, non-controlling interest and total equity $ 4,723,575 $ 4,463,629 CONSOLIDATED STATEMENTS of CASH FLOWS H.B. Fuller Company and Subsidiaries (In thousands) Fiscal Years December 2, December 3, November 27, 2023 2022 2021 Cash flows from operating activities: Net income including non-controlling interest $ 144,988 $ 180,407 $ 161,475 Adjustments to reconcile net income including non-controlling interest to net cash provided by operating activities: Depreciation 80,327 72,593 72,106 Amortization 79,514 74,383 71,068 Deferred income taxes (25,114 ) (15,230 ) 16,192 Income from equity method investments, net of dividends received 1,259 (9 ) 2,776 Loss (gain) on sale of assets 59 (1,195 ) 648 Share-based compensation 19,911 24,368 22,366 Pension and other postretirement benefit plan contributions (4,346 ) (3,009 ) (3,840 ) Pension and other postretirement benefit plan income (18,591 ) (24,021 ) (28,662 ) Debt issuance cost write-off 2,689 - - Mark to market adjustment related to contingent consideration liabilities 2,893 - 2,300 Change in assets and liabilities, net of effects of acquisitions: Trade receivables, net 68,721 (24,753 ) (124,849 ) Inventories 72,576 (55,772 ) (135,351 ) Other assets (7,927 ) 46,499 (79,097 ) Trade payables (57,752 ) (22,629 ) 176,337 Accrued compensation (13,836 ) 1,135 27,741 Other accrued expenses (3,070 ) 6,303 1,186 Income taxes payable 41,190 (12,873 ) (4,137 ) Other liabilities 22,918 4,104 (73,508 ) Other (28,011 ) 6,213 108,566 Net cash provided by operating activities 378,398 256,514 213,317 Cash flows from investing activities: Purchased property, plant and equipment (119,137 ) (129,964 ) (96,089 ) Purchased businesses, net of cash acquired (205,093 ) (250,807 ) (5,445 ) Proceeds from sale of property, plant and equipment 5,029 1,556 2,896 Cash received from government grant - 3,928 5,800 Cash outflow related to government grant - - (1,822 ) Net cash used in investing activities (319,201 ) (375,287 ) (94,660 ) Cash flows from financing activities: Proceeds from issuance of long-term debt 2,233,300 335,000 - Repayment of long-term debt (2,126,450 ) (159,500 ) (156,500 ) Payment of debt issue costs (10,214 ) (600 ) - Net (payment on) proceeds from notes payable (28,674 ) 3,455 9,346 Dividends paid (43,395 ) (39,207 ) (34,859 ) Contingent consideration payment (1,477 ) (5,000 ) (1,700 ) Proceeds from stock options exercised 14,619 30,122 32,325 Repurchases of common stock (2,567 ) (3,950 ) (2,682 ) Net cash provided by (used in) financing activities 35,142 160,320 (154,070 ) Effect of exchange rate changes on cash and cash equivalents 5,204 (23,423 ) (3,335 ) Net change in cash and cash equivalents 99,543 18,124 (38,748 ) Cash and cash equivalents at beginning of year 79,910 61,786 100,534 Cash and cash equivalents at end of year $ 179,453 $ 79,910 $ 61,786 View source version on businesswire.com: https://www.businesswire.com/news/home/20240117554213/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. By accessing this page, you agree to the following Privacy Policy and Terms and Conditions.
H.B. Fuller Reports Fourth Quarter and Fiscal Year 2023 Results By: H.B. Fuller Company via Business Wire January 17, 2024 at 16:05 PM EST Q4 Reported EPS (diluted) of $0.80; Adjusted EPS (diluted) of $1.32, up 27% year-on-year Company achieves new record for Q4 and fiscal year adjusted EBITDA margin Q4 Adjusted EBITDA up 22% and Adjusted EBITDA margin up 440 basis points versus Q4 2022 FY 2023 cash flow from operations increased 48% year-on-year to $378 million H.B. Fuller Company (NYSE: FUL) today reported financial results for its fourth quarter and fiscal year that ended December 2, 2023. Fourth Quarter 2023 Noteworthy Items: Achieved strong profit growth and record fourth quarter adjusted EBITDA margin on exceptional execution and proactive response to significant customer destocking activity throughout the year; Net revenue was $903 million, down 5.8% year-on-year; net revenue was up 1.2% year-on-year on a 13-week comparable basis; organic revenue decreased 3.5% year-on-year, driven by slightly lower pricing and volume; Gross margin was 30.3%; adjusted gross margin of 31.3% increased 510 basis points year-on-year, driven by pricing and raw material cost actions and restructuring benefits; Net income was $45 million; adjusted EBITDA was $173 million, up 22% year-on-year, and adjusted EBITDA margin expanded 440 basis points year-on-year to 19.1%; Reported EPS (diluted) was $0.80; adjusted EPS (diluted) was $1.32, up 27% versus the prior year, driven by strong operating income growth; Net working capital, as a percentage of annualized net revenue, decreased 200 basis points sequentially from 18.1% in the third quarter to 16.1% in the fourth quarter; Net debt-to-adjusted EBITDA ratio declined sequentially from 3.3X to 2.9X driven both by lower net debt and growth in adjusted EBITDA. Summary of Fourth Quarter 2023 Results: The Company’s net revenue for the fourth quarter of fiscal 2023 was $903 million, down 5.8% versus the fourth quarter of fiscal 2022. Organic revenue declined 3.5% year-on-year, with pricing adjustments reducing organic revenue by 3.4% and volume reducing organic revenue by 0.1%. Foreign currency translation increased net revenue by 0.3%, acquisitions increased net revenue by 4.4%, and the impact of one less week during the fourth quarter reduced net revenue by 7.0%. Net revenue increased 1.2% year-on-year on a comparable 13-week basis in the fourth quarter. Gross profit in the fourth quarter of fiscal 2023 was $274 million. Adjusted gross profit was $283 million. Adjusted gross profit margin of 31.3% increased 510 basis points year-on-year. Pricing and raw material cost actions, restructuring benefits and general cost reductions drove the increase in adjusted gross margin year-on-year. Selling, general and administrative (SG&A) expense was $160 million in the fourth quarter of fiscal 2023 and adjusted SG&A was $156 million, effectively flat year-on-year. Continued cost management and additional restructuring benefits offset inflation in wages and services and the incremental SG&A costs associated with acquisitions completed over the previous year. Net income attributable to H.B. Fuller for the fourth quarter of fiscal 2023 was $45 million, or $0.80 per diluted share. Adjusted net income attributable to H.B. Fuller for the fourth quarter of fiscal 2023 was $74 million. Adjusted EPS was $1.32 per diluted share, up 27% year-on-year driven by strong operating income growth. Adjusted EBITDA in the fourth quarter of fiscal 2023 was $173 million, up 22.4% year-on-year. Adjusted EBITDA margin increased 440 basis points year-on-year to 19.1%, driven by the balance of raw material and price movements versus the prior year’s fourth quarter, as well as restructuring savings. This year’s fourth quarter had one less week versus the prior year’s fourth quarter and this unfavorably impacted adjusted EBITDA growth by approximately $10 million. “I am proud of our leaders for exceptional execution throughout the year, as evidenced by strong profit growth and record margins. Across the organization, our teams proactively managed the changing price and raw material dynamics successfully and implemented decisive restructuring measures in the face of unprecedented customer destocking, which we believe is largely behind us, to deliver these results and position H.B. Fuller for continued future profit growth, margin expansion and strong cash flow,” said Celeste Mastin, H.B. Fuller president and chief executive officer. “As the market leader in innovation, focused on providing highly customized solutions for our customers, we have successfully transformed our portfolio into one that is concentrated in the highly specified areas of our market segments. As such, we have begun to take our portfolio management approach to the next level by proactively driving capital allocation to the highest margin, highest growth market segments. We have compelling growth opportunities in front of us and we are confident in our capabilities to continue to transform H.B. Fuller and achieve an adjusted EBITDA margin target greater than 20 percent within the next 3 to 5 years. “As we enter fiscal year 2024, we are confident in our outlook for positive organic growth and achieving further EBITDA margin expansion. We are successfully executing our strategy to deploy capital to the highest return opportunities, innovating with speed to deliver solutions for our customers, driving efficiencies throughout our manufacturing footprint, and achieving meaningful synergies from our collections of acquisitions.” Fiscal Year 2023 Noteworthy Items: Achieved record fiscal year adjusted EBITDA margin on exceptional execution and proactive response to significant customer destocking activity throughout the year; Net revenue was $3.51 billion, down 6.4% year-on-year; on a 52-week comparable basis, net revenue was down 4.6% year-on-year; organic revenue decreased 5.5% year-on-year, driven by 8.4% lower volume due to significant customer destocking activity during the year, offset somewhat by 2.9% favorable pricing; Gross margin was 28.7%; adjusted gross margin of 29.4% increased 350 basis points year-on-year, driven by pricing and raw material cost actions and restructuring benefits; Net income was $145 million; adjusted EBITDA was $581 million, up 10% year-on-year; adjusted EBITDA margin expanded 240 basis points year-on-year to a fiscal year record high of 16.5%; Reported EPS (diluted) was $2.59; adjusted EPS (diluted) was $3.87, down slightly versus the prior year, as strong operating income growth nearly offset significantly higher net interest expense and unfavorable foreign currency exchange which reduced adjusted EPS (diluted) by $0.58 and $0.18, respectively; Cash flow from operations of $378 million improved $122 million year-on-year, or 48%, on improved profitability and lower net working capital requirements. Balance Sheet and Working Capital: Net debt at the end of the fourth quarter of fiscal 2023 was $1,659 million, down $131 million sequentially versus the third quarter and down $26 million year-on-year. The sequential reduction in net debt, together with growth in adjusted EBITDA, reduced the ratio of net debt-to-adjusted EBITDA from 3.3X to 2.9X sequentially. Net working capital in the fourth quarter of fiscal 2023 declined $74 million sequentially versus the third quarter and $58 million year-on-year. As a percentage of annualized net revenue, net working capital declined 200 basis points sequentially, and 180 basis points year-on-year on a comparable 52-week basis, to 16.1%. Fiscal 2024 Outlook: Net revenue growth for fiscal 2024 is expected to be in the range of up 2% to 6% with organic revenue flat to up 3% versus fiscal 2023, reflecting a rebound in demand following the unprecedented customer destocking activity in fiscal 2023, offset by slightly lower pricing as customers qualify lower price formulations and index-based pricing has a greater effect; Adjusted EBITDA for fiscal 2024 is expected to be in the range of $610 million to $640 million, equating to growth of approximately 5% to 10% year-on-year; The core tax rate, excluding the impact of discrete items, is anticipated to be between 27% and 28% in fiscal year 2024; Net interest expense for fiscal 2024 is expected to be between $115 million and $125 million; Adjusted EPS (diluted) is expected to be in the range of $4.15 to $4.45, equating to a range of up 7% to 15% year-on-year; Operating cash flow in fiscal year 2024 is expected to be between $300 million and $350 million and capital expenditures are expected to be approximately $140 million. Conference Call: The Company will hold a conference call on January 18, 2024, at 9:30 a.m. CT (10:30 a.m. ET) to discuss its results. Interested parties may listen to the conference call on a live webcast. The webcast, along with a supplemental presentation, may be accessed from the Company’s website at https://investors.hbfuller.com. Participants must register prior to accessing the webcast using this link and should do so at least 10 minutes prior to the start of the call to install and test any necessary software and audio connections. A telephone replay of the conference call will be available from 12:30 p.m. CT on January 18, 2024, to 10:59 p.m. CT on January 25, 2024. To access the telephone replay dial 1-800-770-2030 (toll free) or 1-647-362-9199, and enter Conference ID: 6370505. Regulation G The information presented in this earnings release regarding consolidated and segment organic revenue growth, operating income, adjusted gross profit, adjusted gross profit margin, adjusted selling, general and administrative expense, adjusted income before income taxes and income from equity investments, adjusted income taxes, adjusted effective tax rate, adjusted net income, adjusted diluted earnings per share and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) does not conform to U.S. generally accepted accounting principles (U.S. GAAP) and should not be construed as an alternative to the reported results determined in accordance with U.S. GAAP. Management has included this non-GAAP information to assist in understanding the operating performance of the Company and its operating segments as well as the comparability of results to the results of other companies. The non-GAAP information provided may not be consistent with the methodologies used by other companies. All non-GAAP information is reconciled with reported U.S. GAAP results in the “Regulation G Reconciliation” tables in this press release with the exception of our forward-looking non-GAAP measures contained above in our Fiscal 2023 Outlook, which the Company cannot reconcile to forward-looking GAAP results without unreasonable effort. About H.B. Fuller Since 1887, H.B. Fuller has been a leading global adhesives provider focusing on perfecting adhesives and sealants to improve products and lives. With fiscal 2023 net revenue of $3.5 billion, H.B. Fuller’s commitment to innovation and sustainable adhesive solutions brings together people, products and processes that answer and solve some of the world's biggest challenges. Our reliable, responsive service creates lasting, rewarding connections with customers in electronics, disposable hygiene, medical, transportation, aerospace, clean energy, packaging, construction, woodworking, general industries and other consumer businesses. Our promise to our people connects them with opportunities to innovate and thrive. For more information, visit us at https://www.hbfuller.com. Safe Harbor for Forward-Looking Statements Certain statements in this press release may be considered forward-looking statements within the meaning of the federal securities laws, including Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements often address expected future business and financial performance, financial condition, and other matters, and often contain words or phrases such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “opportunity,” “outlook,” “plan,” “project,” “seek,” “should,” “strategy,” “target,” “will,” “will be,” “will continue,” “will likely result,” “would” and similar expressions, and variations or negatives of these words or phrases. These statements are subject to various risks and uncertainties that could cause our actual results to differ materially from those in the forward-looking statements, including but not limited to the following: the availability and pricing of raw materials; the impact of potential cybersecurity attacks and security breaches; the impact on the supply chain, raw material costs and pricing of our products due to military conflict, including between Russia and Ukraine and Israel and Hamas; the consequences of the COVID-19 outbreak and other pandemics on our operations and financial results; the impact on our margins and product demand due to inflationary pressures; the substantial amount of debt we have incurred to finance our acquisition of Royal, our ability to repay or refinance our debt or to incur additional debt in the future, our need for a significant amount of cash to service and repay the debt and to pay dividends on our common stock, the effect of debt covenants that limit the discretion of management in operating the business or in paying dividends; our ability to pay dividends and to pursue growth opportunities if we continue to pay dividends according to our current dividend policy; our ability to acquire and integrate complementary businesses; our ability to achieve expected synergies, cost savings and operating efficiencies from our restructuring initiatives and operational improvement projects within the expected time frames or at all; our ability to effectively implement Project ONE; uncertain political and economic conditions; fluctuations in product demand; competing products and pricing; our geographic and product mix; disruptions to our relationships with our major customers and suppliers; failures in our information technology systems; regulatory compliance across our global footprint; trade policies and economic sanctions impacting our markets; changes in tax laws and tariffs; devaluations and other foreign exchange rate fluctuations; the impact of litigation and investigations, including for product liability and environmental matters; impairment charges on our goodwill or long-lived assets; the effect of new accounting pronouncements and accounting charges and credits; and similar matters. Additional information about these various risks and uncertainties can be found in the “Risk Factors” section of our Form 10-K filings, and any updates to the risk factors in our Form 10-Q and 8-K filings with the SEC, but there may be other risks and uncertainties that we are unable to identify at this time or that we do not currently expect to have a material impact on the business. You should not place undue reliance on forward-looking statements, which speak only as of the date they are made. We do not undertake to update or revise any forward-looking statements, except as required by law. H.B. FULLER COMPANY AND SUBSIDIARIES CONSOLIDATED FINANCIAL INFORMATION In thousands, except per share amounts (unaudited) Three Months Ended Three Months Ended December 2, Percent of December 3, Percent of 2023 Net Revenue 2022 Net Revenue Net revenue $ 902,879 100.0 % $ 958,213 100.0 % Cost of sales (629,037 ) (69.7 )% (710,092 ) (74.1 )% Gross profit 273,842 30.3 % 248,121 25.9 % Selling, general and administrative expenses (160,440 ) (17.8 )% (157,872 ) (16.5 )% Other income, net 4,918 0.5 % 251 0.0 % Interest expense (33,297 ) (3.7 )% (30,046 ) (3.1 )% Interest income 1,217 0.1 % 1,609 0.2 % Income before income taxes and income from equity method investments 86,240 9.6 % 62,063 6.5 % Income taxes (42,274 ) (4.7 )% (15,163 ) (1.6 )% Income from equity method investments 1,036 0.1 % 1,429 0.1 % Net income including non-controlling interest 45,002 5.0 % 48,329 5.0 % Net income attributable to non-controlling interest (11 ) (0.0 )% (24 ) (0.0 )% Net income attributable to H.B. Fuller $ 44,991 5.0 % $ 48,305 5.0 % Basic income per common share attributable to H.B. Fuller $ 0.83 $ 0.90 Diluted income per common share attributable to H.B. Fuller $ 0.80 $ 0.87 Weighted-average common shares outstanding: Basic 54,491 53,824 Diluted 56,161 55,472 Dividends declared per common share $ 0.205 $ 0.190 H.B. FULLER COMPANY AND SUBSIDIARIES CONSOLIDATED FINANCIAL INFORMATION In thousands, except per share amounts (unaudited) Year Ended Year Ended December 2, Percent of December 3, Percent of 2023 Net Revenue 2022 Net Revenue Net revenue $ 3,510,934 100.0 % $ 3,749,183 100.0 % Cost of sales (2,502,037 ) (71.3 )% (2,785,484 ) (74.3 )% Gross profit 1,008,897 28.7 % 963,699 25.7 % Selling, general and administrative expenses (653,760 ) (18.6 )% (640,981 ) (17.1 )% Other income, net 9,682 0.3 % 12,952 0.3 % Interest expense (134,602 ) (3.8 )% (91,521 ) (2.4 )% Interest income 3,943 0.1 % 7,779 0.2 % Income before income taxes and income from equity method investments 234,160 6.7 % 251,928 6.7 % Income taxes (93,529 ) (2.7 )% (77,186 ) (2.1 )% Income from equity method investments 4,357 0.1 % 5,665 0.2 % Net income including non-controlling interest 144,988 4.1 % 180,407 4.8 % Net income attributable to non-controlling interest (82 ) (0.0 )% (94 ) (0.0 )% Net income attributable to H.B. Fuller $ 144,906 4.1 % $ 180,313 4.8 % Basic income per common share attributable to H.B. Fuller $ 2.67 $ 3.37 Diluted income per common share attributable to H.B. Fuller $ 2.59 $ 3.26 Weighted-average common shares outstanding: Basic 54,332 53,580 Diluted 55,958 55,269 Dividends declared per common share $ 0.805 $ 0.738 H.B. FULLER COMPANY AND SUBSIDIARIES REGULATION G RECONCILIATION In thousands, except per share amounts (unaudited) Three Months Ended Year Ended December 2, December 3, December 2, December 3, 2023 2022 2023 2022 Net income attributable to H.B. Fuller $ 44,991 $ 48,305 $ 144,906 $ 180,313 Adjustments: Acquisition project costs 1 4,765 1,822 16,874 10,830 Organizational realignment 2 10,549 1,471 29,900 6,386 Royal restructuring and integration 3 - 1,467 - 2,474 Project One 2,193 2,326 9,815 9,885 Other 4 (3,903 ) 4,524 (611) 12,791 Discrete tax items 5 16,955 1,610 26,085 9,308 Income tax effect on adjustments 6 (1,158 ) (3,911 ) (10,604 ) (10,699 ) Adjusted net income attributable to H.B. Fuller 7 74,392 57,614 216,365 221,288 Add: Interest expense 33,297 30,046 131,913 91,547 Interest income (1,217 ) (1,609 ) (3,943 ) (7,790 ) Income taxes 26,477 17,464 78,047 78,576 Depreciation and Amortization expense 8 39,653 37,469 158,456 146,394 Adjusted EBITDA 7 172,602 140,984 580,838 530,015 Diluted Shares 56,161 55,472 55,958 55,269 Adjusted diluted income per common share attributable to H.B. Fuller 7 $ 1.32 $ 1.04 $ 3.87 $ 4.00 Adjusted net revenue $ 902,879 $ 958,213 $ 3,510,934 $ 3,749,183 Adjusted EBITDA margin 7 19.1 % 14.7 % 16.5 % 14.1 % 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 year ended December 3, 2022, include a $3.3 million non-cash charge related to the wind down and settlement of the Company’s Canadian defined benefit pension plan, $1.3 million of hedging costs related to the Russian ruble devaluation driven by the war in Ukraine, $1.2 million of transactional tax expense associated with an audit settlement, other expenses for COVID-19 testing, vaccinations and exceptional medical claims, and non-cash gains and losses related to legal entity consolidations. 5 Discrete tax items for the year ended December 2, 2023 are related to the tax impact of withholding tax recorded on earnings that are no longer permanently reinvested, as well as other various U.S. and foreign tax matters. Discrete tax items for the year ended December 3, 2022 are related to the revaluation of cross-currency swap agreements due to depreciation of the Euro versus the U.S. Dollar, as well as various foreign tax matters offset by the tax effect of legal entity mergers. 6 The income tax effect on adjustments represents the difference between income taxes on net income before income taxes and income from equity method investments reported in accordance with U.S. GAAP and adjusted net income before income taxes and income from equity method investments. 7 Adjusted net income attributable to H.B. Fuller, adjusted diluted income per common share attributable to H.B. Fuller, adjusted EBITDA and adjusted EBITDA margin are non-GAAP financial measures. Adjusted net income attributable to H.B. Fuller is defined as net income before the specific adjustments shown above. Adjusted diluted income per common share is defined as adjusted net income attributable to H.B. Fuller divided by the number of diluted common shares. Adjusted EBITDA is defined as net income before interest, income taxes, depreciation, amortization and the specific adjustments shown above. Adjusted EBITDA margin is defined as adjusted EBITDA divided by net revenue. The table above provides a reconciliation of adjusted net income attributable to H.B. Fuller, adjusted diluted income per common share attributable to H.B. Fuller, adjusted EBITDA and adjusted EBITDA margin to net income attributable to H.B. Fuller, the most directly comparable financial measure determined and reported in accordance with U.S. GAAP. 8 Depreciation and amortization expense added back for EBITDA is adjusted for amounts already included in adjusted net income attributable to H.B. Fuller totaling ($1,036) and ($1,384) for the three and twelve months ended December 2, 2023, respectively and ($123) and ($582) for the three and twelve months ended December 3, 2022, respectively. H.B. FULLER COMPANY AND SUBSIDIARIES SEGMENT FINANCIAL INFORMATION In thousands (unaudited) Three Months Ended Year Ended December 2, December 3, December 2, December 3, 2023 2022 2023 2022 Net Revenue: Hygiene, Health and Consumable Adhesives $ 411,085 $ 443,528 $ 1,601,487 $ 1,695,934 Engineering Adhesives 365,735 395,053 1,428,744 1,532,639 Construction Adhesives 126,059 119,632 480,703 520,610 Corporate unallocated - - - - Total H.B. Fuller $ 902,879 $ 958,213 $ 3,510,934 $ 3,749,183 Segment Operating Income: Hygiene, Health and Consumable Adhesives $ 65,614 $ 42,836 $ 215,088 $ 165,786 Engineering Adhesives 57,539 53,607 187,346 168,873 Construction Adhesives 3,772 957 5,961 22,989 Corporate unallocated (13,523 ) (7,151 ) (53,258 ) (34,930 ) Total H.B. Fuller $ 113,402 $ 90,249 $ 355,137 $ 322,718 Adjusted EBITDA 7 Hygiene, Health and Consumable Adhesives $ 81,677 $ 57,684 $ 275,802 $ 223,988 Engineering Adhesives 74,020 70,487 255,778 235,948 Construction Adhesives 15,933 14,571 55,517 74,187 Corporate unallocated 972 (1,758 ) (6,259 ) (4,108 ) Total H.B. Fuller $ 172,602 $ 140,984 $ 580,838 $ 530,015 Adjusted EBITDA Margin 7 Hygiene, Health and Consumable Adhesives 19.9 % 13.0 % 17.2 % 13.2 % Engineering Adhesives 20.2 % 17.8 % 17.9 % 15.4 % Construction Adhesives 12.6 % 12.2 % 11.5 % 14.3 % Corporate unallocated NMP NMP NMP NMP Total H.B. Fuller 19.1 % 14.7 % 16.5 % 14.1 % NMP = non-meaningful percentage H.B. FULLER COMPANY AND SUBSIDIARIES REGULATION G RECONCILIATION In thousands, except per share amounts (unaudited) Three Months Ended Year Ended December 2, December 3, December 2, December 3, 2023 2022 2023 2022 Income before income taxes and income from equity method investments $ 86,240 $ 62,063 $ 234,160 $ 251,928 Adjustments: Acquisition project costs 1 4,765 1,822 16,874 10,830 Organizational realignment 2 10,549 1,471 29,900 6,386 Royal restructuring and integration 3 - 1,467 - 2,474 Project One 2,193 2,326 9,815 9,885 Other 4 (3,903 ) 4,524 (611 ) 12,791 Adjusted income before income taxes and income from equity method investments 9 $ 99,844 $ 73,673 $ 290,138 $ 294,294 9 Adjusted income before income taxes and income from equity investments is a non-GAAP financial measure. Adjusted income before income taxes and income from equity investments is defined as income before income taxes and income from equity investments before the specific adjustments shown above. The table above provides a reconciliation of adjusted income before income taxes and income from equity investments to income before income taxes and income from equity investments, the most directly comparable financial measure determined and reported in accordance with U.S. GAAP. H.B. FULLER COMPANY AND SUBSIDIARIES REGULATION G RECONCILIATION In thousands, except per share amounts (unaudited) Three Months Ended Year Ended December 2, December 3, December 2, December 3, 2023 2022 2023 2022 Income Taxes $ (42,274 ) $ (15,163 ) $ (93,529 ) $ (77,186 ) Adjustments: Acquisition project costs 1 (405 ) (613 ) (3,127 ) (2,767 ) Organizational realignment 2 (898 ) (495 ) (5,206 ) (1,635 ) Royal restructuring and integration 3 - (494 ) - (707 ) Project One (187 ) (783 ) (1,848 ) (2,067 ) Other 4 332 (1,526 ) (422 ) (3,522 ) Discrete tax items 5 16,955 1,610 26,085 9,308 Adjusted income taxes 10 $ (26,477 ) $ (17,464 ) $ (78,047 ) $ (78,576 ) Adjusted income before income taxes and income from equity method investments $ 99,844 $ 73,673 $ 290,138 $ 294,294 Adjusted effective income tax rate 10 26.5 % 23.7 % 26.9 % 26.7 % 10 Adjusted income taxes and adjusted effective income tax rate are non-GAAP financial measures. Adjusted income taxes is defined as income taxes before the specific adjustments shown above. Adjusted effective income tax rate is defined as income taxes divided by adjusted income before income taxes and income from equity method investments. The table above provides a reconciliation of adjusted income taxes and adjusted effective income tax rate to income taxes, the most directly comparable financial measure determined and reported in accordance with U.S. GAAP. H.B. FULLER COMPANY AND SUBSIDIARIES REGULATION G RECONCILIATION In thousands (unaudited) Three Months Ended Year Ended December 2, December 3, December 2, December 3, 2023 2022 2023 2022 Net revenue $ 902,879 $ 958,213 $ 3,510,934 $ 3,749,183 Gross profit $ 273,842 $ 248,121 $ 1,008,897 $ 963,699 Gross profit margin 30.3 % 25.9 % 28.7 % 25.7 % Adjustments: Acquisition project costs 1 529 738 3,146 1,058 Organizational realignment 2 8,136 1,211 18,108 3,207 Royal restructuring and integration 3 - 329 - 706 Project ONE 223 - 223 6 Other 4 52 472 530 1,830 Adjusted gross profit 11 $ 282,782 $ 250,871 $ 1,030,904 $ 970,506 Adjusted gross profit margin 11 31.3 % 26.2 % 29.4 % 25.9 % 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 Year Ended December 2, December 3, December 2, December 3, 2023 2022 2023 2022 Selling, general and administrative expenses $ (160,440 ) $ (157,872 ) $ (653,760 ) $ (640,981 ) Adjustments: Acquisition project costs 1 4,236 1,084 13,831 9,772 Organizational realignment 2 2,333 260 11,712 4,393 Royal restructuring and integration 3 - 1,138 - 1,794 Project ONE 1,969 2,326 9,592 9,879 Other 4 (3,954 ) (408 ) (3,882 ) 2,284 Adjusted selling, general and administrative expenses 12 $ (155,856 ) $ (153,472 ) $ (622,507 ) $ (612,859 ) 12 Adjusted selling, general and administrative expenses is a non-GAAP financial measure. Adjusted selling, general and administrative expenses is defined as selling, general and administrative expenses excluding the specific adjustments shown above. The table above provides a reconciliation of adjusted selling, general and administrative expenses to selling, general and administrative expenses, the most directly comparable financial measure determined and reported in accordance with U.S. GAAP. H.B. FULLER COMPANY AND SUBSIDIARIES REGULATION G RECONCILIATION In thousands (unaudited) Three Months Ended: Hygiene, Health and Consumable Engineering Construction Corporate H.B. Fuller December 2, 2023 Adhesives Adhesives Adhesives Total Unallocated Consolidated Net income attributable to H.B. Fuller $ 67,438 $ 58,857 $ 5,682 $ 131,977 $ (86,986 ) $ 44,991 Adjustments: Acquisition project costs 1 - - - - 4,765 4,765 Organizational realignment 2 - - - - 10,549 10,549 Royal restructuring and integration 3 - - - - - - Project One - - - - 2,193 2,193 Other 4 - - - - (3,903) (3,903) Discrete tax items 5 - - - - 16,955 16,955 Income tax effect on adjustments 6 - - - - (1,158 ) (1,158 ) Adjusted net income attributable to H.B. Fuller 7 67,438 58,857 5,682 131,977 (57,585 ) 74,392 Add: Interest expense - - - - 33,297 33,297 Interest income - - - - (1,217 ) (1,217 ) Income taxes - - - - 26,477 26,477 Depreciation and amortization expense 8 14,239 15,163 10,251 39,653 - 39,653 Adjusted EBITDA 7 $ 81,677 $ 74,020 $ 15,933 $ 171,630 $ 972 $ 172,602 Adjusted net revenue $ 411,085 $ 365,735 $ 126,059 $ 902,879 - 902,879 Adjusted EBITDA margin 7 19.9 % 20.2 % 12.6 % 19.0 % NMP 19.1 % Year Ended Hygiene, Health and Consumable Engineering Construction Corporate H.B. Fuller December 2, 2023 Adhesives Adhesives Adhesives Total Unallocated Consolidated Net income attributable to H.B. Fuller $ 222,404 $ 192,635 $ 13,602 $ 428,641 $ (283,735 ) $ 144,906 Adjustments: Acquisition project costs 1 - - - - 16,874 16,874 Organizational realignment 2 - - - - 29,900 29,900 Royal restructuring and integration 3 - - - - - - Project One - - - - 9,815 9,815 Other 4 - - - - (611) (611) Discrete tax items 5 - - - - 26,085 26,085 Income tax effect on adjustments 6 - - - - (10,604 ) (10,604 ) Adjusted net income attributable to H.B. Fuller 7 222,404 192,635 13,602 428,641 (212,276 ) 216,365 Add: Interest expense - - - - 131,913 131,913 Interest income - - - - (3,943 ) (3,943 ) Income taxes - - - - 78,047 78,047 Depreciation and amortization expense 8 53,398 63,143 41,915 158,456 - 158,456 Adjusted EBITDA 7 $ 275,802 $ 255,778 $ 55,517 $ 587,097 $ (6,259 ) $ 580,838 Adjusted net revenue 1,601,487 1,428,744 480,703 $ 3,510,934 - 3,510,934 Adjusted EBITDA margin 7 17.2 % 17.9 % 11.5 % 16.7 % NMP 16.5 % Note: Adjusted EBITDA is a non-GAAP financial measure. The table above provides a reconciliation of adjusted EBITDA for each segment to net income attributable to H.B. Fuller for each segment, the most directly comparable financial measure determined and reported in accordance with U.S. GAAP. NMP = Non-meaningful percentage H.B. FULLER COMPANY AND SUBSIDIARIES REGULATION G RECONCILIATION In thousands (unaudited) Three Months Ended: Hygiene, Health and Consumable Engineering Construction Corporate H.B. Fuller December 3, 2022 Adhesives Adhesives Adhesives Total Unallocated Consolidated Net income attributable to H.B. Fuller $ 45,913 $ 55,900 $ 3,460 $ 105,273 $ (56,968 ) $ 48,305 Adjustments: Acquisition project costs 1 - - - - 1,822 1,822 Organizational realignment 2 - - - - 1,471 1,471 Royal restructuring and integration 3 - - - - 1,467 1,467 Project One - - - - 2,326 2,326 Other 4 - - - - 4,524 4,524 Discrete tax items 5 - - - - 1,610 1,610 Income tax effect on adjustments 6 - - - - (3,911 ) (3,911 ) Adjusted net income attributable to H.B. Fuller 7 45,913 55,900 3,460 105,273 (47,659 ) 57,614 Add: Interest expense - - - - 30,046 30,046 Interest income - - - - (1,609 ) (1,609 ) Income taxes - - - - 17,464 17,464 Depreciation and amortization expense 8 11,771 14,587 11,111 37,469 - 37,469 Adjusted EBITDA 7 $ 57,684 $ 70,487 $ 14,571 $ 142,742 $ (1,758 ) $ 140,984 Adjusted net revenue $ 443,528 $ 395,053 $ 119,632 $ 958,213 - $ 958,213 Adjusted EBITDA margin 7 13.0 % 17.8 % 12.2 % 14.9 % NMP 14.7 % Year Ended Hygiene, Health and Consumable Engineering Construction Corporate H.B. Fuller December 3, 2022 Adhesives Adhesives Adhesives Total Unallocated Consolidated Net income attributable to H.B. Fuller $ 177,614 $ 177,641 $ 32,474 $ 387,729 $ (207,416 ) $ 180,313 Adjustments: Acquisition project costs 1 - - - - 10,830 10,830 Organizational realignment 2 - - - - 6,386 6,386 Royal restructuring and integration 3 - - - - 2,474 2,474 Project One - - - - 9,885 9,885 Other 4 - - - - 12,791 12,791 Discrete tax items 5 - - - - 9,308 9,308 Income tax effect on adjustments 6 - - - - (10,699 ) (10,699 ) Adjusted net income attributable to H.B. Fuller 7 177,614 177,641 32,474 387,729 (166,441 ) 221,288 Add: Interest expense - - - - 91,547 91,547 Interest income - - - - (7,790 ) (7,790 ) Income taxes - - - - 78,576 78,576 Depreciation and amortization expense 8 46,374 58,307 41,713 146,394 - 146,394 Adjusted EBITDA 7 $ 223,988 $ 235,948 $ 74,187 $ 534,123 $ (4,108 ) $ 530,015 Adjusted net revenue $ 1,695,934 $ 1,532,639 $ 520,610 $ 3,749,183 - $ 3,749,183 Adjusted EBITDA margin 7 13.2 % 15.4 % 14.3 % 14.2 % NMP 14.1 % 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) Net revenue growth versus 2022 Three Months Ended Year Ended December 2, 2023 December 2, 2023 Price (3.4 )% 2.9 % Volume (0.1 )% (8.4 )% Organic Growth 13 (3.5 )% (5.5 )% Extra Week in 2022 (53-week year) (7.0 )% (1.8 )% M&A 4.4 % 3.3 % Constant Currency (6.1 )% (4.0 )% F/X 0.3 % (2.4 )% Total H.B. Fuller Net Revenue Growth (5.8 )% (6.4 )% Net revenue growth versus 2022 Three Months Ended December 2, 2023 Extra Week in 2022 Net Revenue F/X Constant Currency M&A (53-week year) Organic Growth 13 Hygiene, Health and Consumable Adhesives (7.3 )% (0.2 )% (7.1 )% 7.4 % (7.0 )% (7.5 )% Engineering Adhesives (7.4 )% 0.7 % (8.1 )% 0.4 % (7.1 )% (1.4 )% Construction Adhesives 5.4 % 0.8 % 4.6 % 6.4 % (6.8 )% 5.0 % Total H.B. Fuller (5.8 )% 0.3 % (6.1 )% 4.4 % (7.0 )% (3.5 )% Net revenue growth versus 2022 Year Ended December 2, 2023 Extra Week in 2022 Net Revenue F/X Constant Currency M&A (53-week year) Organic Growth 13 Hygiene, Health and Consumable Adhesives (5.6 )% (3.3 )% (2.3 )% 4.6 % (1.8 )% (5.1 )% Engineering Adhesives (6.8 )% (2.0 )% (4.8 )% 1.2 % (1.8 )% (4.2 )% Construction Adhesives (7.7 )% (0.5 )% (7.2 )% 5.4 % (1.6 )% (11.0 )% Total H.B. Fuller (6.4 )% (2.4 )% (4.0 )% 3.3 % (1.8 )% (5.5 )% 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) December 2, December 3, 2023 2022 Assets Current assets: Cash and cash equivalents $ 179,453 $ 79,910 Trade receivables, net 577,932 607,365 Inventories 442,040 491,781 Other current assets 112,678 120,319 Total current assets 1,312,103 1,299,375 Property, plant and equipment, net 824,655 733,667 Goodwill 1,486,512 1,392,627 Other intangibles, net 729,140 702,092 Other assets 371,165 335,868 Total assets $ 4,723,575 $ 4,463,629 Liabilities, non-controlling interest and total equity Current liabilities: Notes payable $ 1,841 $ 28,860 Current maturities of long-term debt - - Trade payables 439,700 460,669 Accrued compensation 95,680 108,328 Income taxes payable 47,688 18,530 Other accrued expenses 107,902 89,345 Total current liabilities 692,811 705,732 Long-term debt, net of current maturities 1,836,590 1,736,256 Accrued pension liabilities 50,189 52,561 Other liabilities 388,072 358,286 Total liabilities 2,967,662 2,852,835 Commitments and contingencies (Note 14) Equity: H.B. Fuller stockholders' equity: Preferred stock (no shares outstanding) Shares authorized – 10,045,900 - - Common stock, par value $1.00 per share, Shares authorized – 160,000,000, Shares outstanding – 54,092,987 and 53,676,576 for 2023 and 2022, respectively 54,093 53,677 Additional paid-in capital 301,485 266,491 Retained earnings 1,842,507 1,741,359 Accumulated other comprehensive loss (442,880 ) (451,357 ) Total H.B. Fuller stockholders' equity 1,755,205 1,610,170 Non-controlling interest 708 624 Total equity 1,755,913 1,610,794 Total liabilities, non-controlling interest and total equity $ 4,723,575 $ 4,463,629 CONSOLIDATED STATEMENTS of CASH FLOWS H.B. Fuller Company and Subsidiaries (In thousands) Fiscal Years December 2, December 3, November 27, 2023 2022 2021 Cash flows from operating activities: Net income including non-controlling interest $ 144,988 $ 180,407 $ 161,475 Adjustments to reconcile net income including non-controlling interest to net cash provided by operating activities: Depreciation 80,327 72,593 72,106 Amortization 79,514 74,383 71,068 Deferred income taxes (25,114 ) (15,230 ) 16,192 Income from equity method investments, net of dividends received 1,259 (9 ) 2,776 Loss (gain) on sale of assets 59 (1,195 ) 648 Share-based compensation 19,911 24,368 22,366 Pension and other postretirement benefit plan contributions (4,346 ) (3,009 ) (3,840 ) Pension and other postretirement benefit plan income (18,591 ) (24,021 ) (28,662 ) Debt issuance cost write-off 2,689 - - Mark to market adjustment related to contingent consideration liabilities 2,893 - 2,300 Change in assets and liabilities, net of effects of acquisitions: Trade receivables, net 68,721 (24,753 ) (124,849 ) Inventories 72,576 (55,772 ) (135,351 ) Other assets (7,927 ) 46,499 (79,097 ) Trade payables (57,752 ) (22,629 ) 176,337 Accrued compensation (13,836 ) 1,135 27,741 Other accrued expenses (3,070 ) 6,303 1,186 Income taxes payable 41,190 (12,873 ) (4,137 ) Other liabilities 22,918 4,104 (73,508 ) Other (28,011 ) 6,213 108,566 Net cash provided by operating activities 378,398 256,514 213,317 Cash flows from investing activities: Purchased property, plant and equipment (119,137 ) (129,964 ) (96,089 ) Purchased businesses, net of cash acquired (205,093 ) (250,807 ) (5,445 ) Proceeds from sale of property, plant and equipment 5,029 1,556 2,896 Cash received from government grant - 3,928 5,800 Cash outflow related to government grant - - (1,822 ) Net cash used in investing activities (319,201 ) (375,287 ) (94,660 ) Cash flows from financing activities: Proceeds from issuance of long-term debt 2,233,300 335,000 - Repayment of long-term debt (2,126,450 ) (159,500 ) (156,500 ) Payment of debt issue costs (10,214 ) (600 ) - Net (payment on) proceeds from notes payable (28,674 ) 3,455 9,346 Dividends paid (43,395 ) (39,207 ) (34,859 ) Contingent consideration payment (1,477 ) (5,000 ) (1,700 ) Proceeds from stock options exercised 14,619 30,122 32,325 Repurchases of common stock (2,567 ) (3,950 ) (2,682 ) Net cash provided by (used in) financing activities 35,142 160,320 (154,070 ) Effect of exchange rate changes on cash and cash equivalents 5,204 (23,423 ) (3,335 ) Net change in cash and cash equivalents 99,543 18,124 (38,748 ) Cash and cash equivalents at beginning of year 79,910 61,786 100,534 Cash and cash equivalents at end of year $ 179,453 $ 79,910 $ 61,786 View source version on businesswire.com: https://www.businesswire.com/news/home/20240117554213/en/Contacts Steven Brazones Investor Relations Contact 651-236-5060
Q4 Reported EPS (diluted) of $0.80; Adjusted EPS (diluted) of $1.32, up 27% year-on-year Company achieves new record for Q4 and fiscal year adjusted EBITDA margin Q4 Adjusted EBITDA up 22% and Adjusted EBITDA margin up 440 basis points versus Q4 2022 FY 2023 cash flow from operations increased 48% year-on-year to $378 million
H.B. Fuller Company (NYSE: FUL) today reported financial results for its fourth quarter and fiscal year that ended December 2, 2023. Fourth Quarter 2023 Noteworthy Items: Achieved strong profit growth and record fourth quarter adjusted EBITDA margin on exceptional execution and proactive response to significant customer destocking activity throughout the year; Net revenue was $903 million, down 5.8% year-on-year; net revenue was up 1.2% year-on-year on a 13-week comparable basis; organic revenue decreased 3.5% year-on-year, driven by slightly lower pricing and volume; Gross margin was 30.3%; adjusted gross margin of 31.3% increased 510 basis points year-on-year, driven by pricing and raw material cost actions and restructuring benefits; Net income was $45 million; adjusted EBITDA was $173 million, up 22% year-on-year, and adjusted EBITDA margin expanded 440 basis points year-on-year to 19.1%; Reported EPS (diluted) was $0.80; adjusted EPS (diluted) was $1.32, up 27% versus the prior year, driven by strong operating income growth; Net working capital, as a percentage of annualized net revenue, decreased 200 basis points sequentially from 18.1% in the third quarter to 16.1% in the fourth quarter; Net debt-to-adjusted EBITDA ratio declined sequentially from 3.3X to 2.9X driven both by lower net debt and growth in adjusted EBITDA. Summary of Fourth Quarter 2023 Results: The Company’s net revenue for the fourth quarter of fiscal 2023 was $903 million, down 5.8% versus the fourth quarter of fiscal 2022. Organic revenue declined 3.5% year-on-year, with pricing adjustments reducing organic revenue by 3.4% and volume reducing organic revenue by 0.1%. Foreign currency translation increased net revenue by 0.3%, acquisitions increased net revenue by 4.4%, and the impact of one less week during the fourth quarter reduced net revenue by 7.0%. Net revenue increased 1.2% year-on-year on a comparable 13-week basis in the fourth quarter. Gross profit in the fourth quarter of fiscal 2023 was $274 million. Adjusted gross profit was $283 million. Adjusted gross profit margin of 31.3% increased 510 basis points year-on-year. Pricing and raw material cost actions, restructuring benefits and general cost reductions drove the increase in adjusted gross margin year-on-year. Selling, general and administrative (SG&A) expense was $160 million in the fourth quarter of fiscal 2023 and adjusted SG&A was $156 million, effectively flat year-on-year. Continued cost management and additional restructuring benefits offset inflation in wages and services and the incremental SG&A costs associated with acquisitions completed over the previous year. Net income attributable to H.B. Fuller for the fourth quarter of fiscal 2023 was $45 million, or $0.80 per diluted share. Adjusted net income attributable to H.B. Fuller for the fourth quarter of fiscal 2023 was $74 million. Adjusted EPS was $1.32 per diluted share, up 27% year-on-year driven by strong operating income growth. Adjusted EBITDA in the fourth quarter of fiscal 2023 was $173 million, up 22.4% year-on-year. Adjusted EBITDA margin increased 440 basis points year-on-year to 19.1%, driven by the balance of raw material and price movements versus the prior year’s fourth quarter, as well as restructuring savings. This year’s fourth quarter had one less week versus the prior year’s fourth quarter and this unfavorably impacted adjusted EBITDA growth by approximately $10 million. “I am proud of our leaders for exceptional execution throughout the year, as evidenced by strong profit growth and record margins. Across the organization, our teams proactively managed the changing price and raw material dynamics successfully and implemented decisive restructuring measures in the face of unprecedented customer destocking, which we believe is largely behind us, to deliver these results and position H.B. Fuller for continued future profit growth, margin expansion and strong cash flow,” said Celeste Mastin, H.B. Fuller president and chief executive officer. “As the market leader in innovation, focused on providing highly customized solutions for our customers, we have successfully transformed our portfolio into one that is concentrated in the highly specified areas of our market segments. As such, we have begun to take our portfolio management approach to the next level by proactively driving capital allocation to the highest margin, highest growth market segments. We have compelling growth opportunities in front of us and we are confident in our capabilities to continue to transform H.B. Fuller and achieve an adjusted EBITDA margin target greater than 20 percent within the next 3 to 5 years. “As we enter fiscal year 2024, we are confident in our outlook for positive organic growth and achieving further EBITDA margin expansion. We are successfully executing our strategy to deploy capital to the highest return opportunities, innovating with speed to deliver solutions for our customers, driving efficiencies throughout our manufacturing footprint, and achieving meaningful synergies from our collections of acquisitions.” Fiscal Year 2023 Noteworthy Items: Achieved record fiscal year adjusted EBITDA margin on exceptional execution and proactive response to significant customer destocking activity throughout the year; Net revenue was $3.51 billion, down 6.4% year-on-year; on a 52-week comparable basis, net revenue was down 4.6% year-on-year; organic revenue decreased 5.5% year-on-year, driven by 8.4% lower volume due to significant customer destocking activity during the year, offset somewhat by 2.9% favorable pricing; Gross margin was 28.7%; adjusted gross margin of 29.4% increased 350 basis points year-on-year, driven by pricing and raw material cost actions and restructuring benefits; Net income was $145 million; adjusted EBITDA was $581 million, up 10% year-on-year; adjusted EBITDA margin expanded 240 basis points year-on-year to a fiscal year record high of 16.5%; Reported EPS (diluted) was $2.59; adjusted EPS (diluted) was $3.87, down slightly versus the prior year, as strong operating income growth nearly offset significantly higher net interest expense and unfavorable foreign currency exchange which reduced adjusted EPS (diluted) by $0.58 and $0.18, respectively; Cash flow from operations of $378 million improved $122 million year-on-year, or 48%, on improved profitability and lower net working capital requirements. Balance Sheet and Working Capital: Net debt at the end of the fourth quarter of fiscal 2023 was $1,659 million, down $131 million sequentially versus the third quarter and down $26 million year-on-year. The sequential reduction in net debt, together with growth in adjusted EBITDA, reduced the ratio of net debt-to-adjusted EBITDA from 3.3X to 2.9X sequentially. Net working capital in the fourth quarter of fiscal 2023 declined $74 million sequentially versus the third quarter and $58 million year-on-year. As a percentage of annualized net revenue, net working capital declined 200 basis points sequentially, and 180 basis points year-on-year on a comparable 52-week basis, to 16.1%. Fiscal 2024 Outlook: Net revenue growth for fiscal 2024 is expected to be in the range of up 2% to 6% with organic revenue flat to up 3% versus fiscal 2023, reflecting a rebound in demand following the unprecedented customer destocking activity in fiscal 2023, offset by slightly lower pricing as customers qualify lower price formulations and index-based pricing has a greater effect; Adjusted EBITDA for fiscal 2024 is expected to be in the range of $610 million to $640 million, equating to growth of approximately 5% to 10% year-on-year; The core tax rate, excluding the impact of discrete items, is anticipated to be between 27% and 28% in fiscal year 2024; Net interest expense for fiscal 2024 is expected to be between $115 million and $125 million; Adjusted EPS (diluted) is expected to be in the range of $4.15 to $4.45, equating to a range of up 7% to 15% year-on-year; Operating cash flow in fiscal year 2024 is expected to be between $300 million and $350 million and capital expenditures are expected to be approximately $140 million. Conference Call: The Company will hold a conference call on January 18, 2024, at 9:30 a.m. CT (10:30 a.m. ET) to discuss its results. Interested parties may listen to the conference call on a live webcast. The webcast, along with a supplemental presentation, may be accessed from the Company’s website at https://investors.hbfuller.com. Participants must register prior to accessing the webcast using this link and should do so at least 10 minutes prior to the start of the call to install and test any necessary software and audio connections. A telephone replay of the conference call will be available from 12:30 p.m. CT on January 18, 2024, to 10:59 p.m. CT on January 25, 2024. To access the telephone replay dial 1-800-770-2030 (toll free) or 1-647-362-9199, and enter Conference ID: 6370505. Regulation G The information presented in this earnings release regarding consolidated and segment organic revenue growth, operating income, adjusted gross profit, adjusted gross profit margin, adjusted selling, general and administrative expense, adjusted income before income taxes and income from equity investments, adjusted income taxes, adjusted effective tax rate, adjusted net income, adjusted diluted earnings per share and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) does not conform to U.S. generally accepted accounting principles (U.S. GAAP) and should not be construed as an alternative to the reported results determined in accordance with U.S. GAAP. Management has included this non-GAAP information to assist in understanding the operating performance of the Company and its operating segments as well as the comparability of results to the results of other companies. The non-GAAP information provided may not be consistent with the methodologies used by other companies. All non-GAAP information is reconciled with reported U.S. GAAP results in the “Regulation G Reconciliation” tables in this press release with the exception of our forward-looking non-GAAP measures contained above in our Fiscal 2023 Outlook, which the Company cannot reconcile to forward-looking GAAP results without unreasonable effort. About H.B. Fuller Since 1887, H.B. Fuller has been a leading global adhesives provider focusing on perfecting adhesives and sealants to improve products and lives. With fiscal 2023 net revenue of $3.5 billion, H.B. Fuller’s commitment to innovation and sustainable adhesive solutions brings together people, products and processes that answer and solve some of the world's biggest challenges. Our reliable, responsive service creates lasting, rewarding connections with customers in electronics, disposable hygiene, medical, transportation, aerospace, clean energy, packaging, construction, woodworking, general industries and other consumer businesses. Our promise to our people connects them with opportunities to innovate and thrive. For more information, visit us at https://www.hbfuller.com. Safe Harbor for Forward-Looking Statements Certain statements in this press release may be considered forward-looking statements within the meaning of the federal securities laws, including Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements often address expected future business and financial performance, financial condition, and other matters, and often contain words or phrases such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “opportunity,” “outlook,” “plan,” “project,” “seek,” “should,” “strategy,” “target,” “will,” “will be,” “will continue,” “will likely result,” “would” and similar expressions, and variations or negatives of these words or phrases. These statements are subject to various risks and uncertainties that could cause our actual results to differ materially from those in the forward-looking statements, including but not limited to the following: the availability and pricing of raw materials; the impact of potential cybersecurity attacks and security breaches; the impact on the supply chain, raw material costs and pricing of our products due to military conflict, including between Russia and Ukraine and Israel and Hamas; the consequences of the COVID-19 outbreak and other pandemics on our operations and financial results; the impact on our margins and product demand due to inflationary pressures; the substantial amount of debt we have incurred to finance our acquisition of Royal, our ability to repay or refinance our debt or to incur additional debt in the future, our need for a significant amount of cash to service and repay the debt and to pay dividends on our common stock, the effect of debt covenants that limit the discretion of management in operating the business or in paying dividends; our ability to pay dividends and to pursue growth opportunities if we continue to pay dividends according to our current dividend policy; our ability to acquire and integrate complementary businesses; our ability to achieve expected synergies, cost savings and operating efficiencies from our restructuring initiatives and operational improvement projects within the expected time frames or at all; our ability to effectively implement Project ONE; uncertain political and economic conditions; fluctuations in product demand; competing products and pricing; our geographic and product mix; disruptions to our relationships with our major customers and suppliers; failures in our information technology systems; regulatory compliance across our global footprint; trade policies and economic sanctions impacting our markets; changes in tax laws and tariffs; devaluations and other foreign exchange rate fluctuations; the impact of litigation and investigations, including for product liability and environmental matters; impairment charges on our goodwill or long-lived assets; the effect of new accounting pronouncements and accounting charges and credits; and similar matters. Additional information about these various risks and uncertainties can be found in the “Risk Factors” section of our Form 10-K filings, and any updates to the risk factors in our Form 10-Q and 8-K filings with the SEC, but there may be other risks and uncertainties that we are unable to identify at this time or that we do not currently expect to have a material impact on the business. You should not place undue reliance on forward-looking statements, which speak only as of the date they are made. We do not undertake to update or revise any forward-looking statements, except as required by law. H.B. FULLER COMPANY AND SUBSIDIARIES CONSOLIDATED FINANCIAL INFORMATION In thousands, except per share amounts (unaudited) Three Months Ended Three Months Ended December 2, Percent of December 3, Percent of 2023 Net Revenue 2022 Net Revenue Net revenue $ 902,879 100.0 % $ 958,213 100.0 % Cost of sales (629,037 ) (69.7 )% (710,092 ) (74.1 )% Gross profit 273,842 30.3 % 248,121 25.9 % Selling, general and administrative expenses (160,440 ) (17.8 )% (157,872 ) (16.5 )% Other income, net 4,918 0.5 % 251 0.0 % Interest expense (33,297 ) (3.7 )% (30,046 ) (3.1 )% Interest income 1,217 0.1 % 1,609 0.2 % Income before income taxes and income from equity method investments 86,240 9.6 % 62,063 6.5 % Income taxes (42,274 ) (4.7 )% (15,163 ) (1.6 )% Income from equity method investments 1,036 0.1 % 1,429 0.1 % Net income including non-controlling interest 45,002 5.0 % 48,329 5.0 % Net income attributable to non-controlling interest (11 ) (0.0 )% (24 ) (0.0 )% Net income attributable to H.B. Fuller $ 44,991 5.0 % $ 48,305 5.0 % Basic income per common share attributable to H.B. Fuller $ 0.83 $ 0.90 Diluted income per common share attributable to H.B. Fuller $ 0.80 $ 0.87 Weighted-average common shares outstanding: Basic 54,491 53,824 Diluted 56,161 55,472 Dividends declared per common share $ 0.205 $ 0.190 H.B. FULLER COMPANY AND SUBSIDIARIES CONSOLIDATED FINANCIAL INFORMATION In thousands, except per share amounts (unaudited) Year Ended Year Ended December 2, Percent of December 3, Percent of 2023 Net Revenue 2022 Net Revenue Net revenue $ 3,510,934 100.0 % $ 3,749,183 100.0 % Cost of sales (2,502,037 ) (71.3 )% (2,785,484 ) (74.3 )% Gross profit 1,008,897 28.7 % 963,699 25.7 % Selling, general and administrative expenses (653,760 ) (18.6 )% (640,981 ) (17.1 )% Other income, net 9,682 0.3 % 12,952 0.3 % Interest expense (134,602 ) (3.8 )% (91,521 ) (2.4 )% Interest income 3,943 0.1 % 7,779 0.2 % Income before income taxes and income from equity method investments 234,160 6.7 % 251,928 6.7 % Income taxes (93,529 ) (2.7 )% (77,186 ) (2.1 )% Income from equity method investments 4,357 0.1 % 5,665 0.2 % Net income including non-controlling interest 144,988 4.1 % 180,407 4.8 % Net income attributable to non-controlling interest (82 ) (0.0 )% (94 ) (0.0 )% Net income attributable to H.B. Fuller $ 144,906 4.1 % $ 180,313 4.8 % Basic income per common share attributable to H.B. Fuller $ 2.67 $ 3.37 Diluted income per common share attributable to H.B. Fuller $ 2.59 $ 3.26 Weighted-average common shares outstanding: Basic 54,332 53,580 Diluted 55,958 55,269 Dividends declared per common share $ 0.805 $ 0.738 H.B. FULLER COMPANY AND SUBSIDIARIES REGULATION G RECONCILIATION In thousands, except per share amounts (unaudited) Three Months Ended Year Ended December 2, December 3, December 2, December 3, 2023 2022 2023 2022 Net income attributable to H.B. Fuller $ 44,991 $ 48,305 $ 144,906 $ 180,313 Adjustments: Acquisition project costs 1 4,765 1,822 16,874 10,830 Organizational realignment 2 10,549 1,471 29,900 6,386 Royal restructuring and integration 3 - 1,467 - 2,474 Project One 2,193 2,326 9,815 9,885 Other 4 (3,903 ) 4,524 (611) 12,791 Discrete tax items 5 16,955 1,610 26,085 9,308 Income tax effect on adjustments 6 (1,158 ) (3,911 ) (10,604 ) (10,699 ) Adjusted net income attributable to H.B. Fuller 7 74,392 57,614 216,365 221,288 Add: Interest expense 33,297 30,046 131,913 91,547 Interest income (1,217 ) (1,609 ) (3,943 ) (7,790 ) Income taxes 26,477 17,464 78,047 78,576 Depreciation and Amortization expense 8 39,653 37,469 158,456 146,394 Adjusted EBITDA 7 172,602 140,984 580,838 530,015 Diluted Shares 56,161 55,472 55,958 55,269 Adjusted diluted income per common share attributable to H.B. Fuller 7 $ 1.32 $ 1.04 $ 3.87 $ 4.00 Adjusted net revenue $ 902,879 $ 958,213 $ 3,510,934 $ 3,749,183 Adjusted EBITDA margin 7 19.1 % 14.7 % 16.5 % 14.1 % 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 year ended December 3, 2022, include a $3.3 million non-cash charge related to the wind down and settlement of the Company’s Canadian defined benefit pension plan, $1.3 million of hedging costs related to the Russian ruble devaluation driven by the war in Ukraine, $1.2 million of transactional tax expense associated with an audit settlement, other expenses for COVID-19 testing, vaccinations and exceptional medical claims, and non-cash gains and losses related to legal entity consolidations. 5 Discrete tax items for the year ended December 2, 2023 are related to the tax impact of withholding tax recorded on earnings that are no longer permanently reinvested, as well as other various U.S. and foreign tax matters. Discrete tax items for the year ended December 3, 2022 are related to the revaluation of cross-currency swap agreements due to depreciation of the Euro versus the U.S. Dollar, as well as various foreign tax matters offset by the tax effect of legal entity mergers. 6 The income tax effect on adjustments represents the difference between income taxes on net income before income taxes and income from equity method investments reported in accordance with U.S. GAAP and adjusted net income before income taxes and income from equity method investments. 7 Adjusted net income attributable to H.B. Fuller, adjusted diluted income per common share attributable to H.B. Fuller, adjusted EBITDA and adjusted EBITDA margin are non-GAAP financial measures. Adjusted net income attributable to H.B. Fuller is defined as net income before the specific adjustments shown above. Adjusted diluted income per common share is defined as adjusted net income attributable to H.B. Fuller divided by the number of diluted common shares. Adjusted EBITDA is defined as net income before interest, income taxes, depreciation, amortization and the specific adjustments shown above. Adjusted EBITDA margin is defined as adjusted EBITDA divided by net revenue. The table above provides a reconciliation of adjusted net income attributable to H.B. Fuller, adjusted diluted income per common share attributable to H.B. Fuller, adjusted EBITDA and adjusted EBITDA margin to net income attributable to H.B. Fuller, the most directly comparable financial measure determined and reported in accordance with U.S. GAAP. 8 Depreciation and amortization expense added back for EBITDA is adjusted for amounts already included in adjusted net income attributable to H.B. Fuller totaling ($1,036) and ($1,384) for the three and twelve months ended December 2, 2023, respectively and ($123) and ($582) for the three and twelve months ended December 3, 2022, respectively. H.B. FULLER COMPANY AND SUBSIDIARIES SEGMENT FINANCIAL INFORMATION In thousands (unaudited) Three Months Ended Year Ended December 2, December 3, December 2, December 3, 2023 2022 2023 2022 Net Revenue: Hygiene, Health and Consumable Adhesives $ 411,085 $ 443,528 $ 1,601,487 $ 1,695,934 Engineering Adhesives 365,735 395,053 1,428,744 1,532,639 Construction Adhesives 126,059 119,632 480,703 520,610 Corporate unallocated - - - - Total H.B. Fuller $ 902,879 $ 958,213 $ 3,510,934 $ 3,749,183 Segment Operating Income: Hygiene, Health and Consumable Adhesives $ 65,614 $ 42,836 $ 215,088 $ 165,786 Engineering Adhesives 57,539 53,607 187,346 168,873 Construction Adhesives 3,772 957 5,961 22,989 Corporate unallocated (13,523 ) (7,151 ) (53,258 ) (34,930 ) Total H.B. Fuller $ 113,402 $ 90,249 $ 355,137 $ 322,718 Adjusted EBITDA 7 Hygiene, Health and Consumable Adhesives $ 81,677 $ 57,684 $ 275,802 $ 223,988 Engineering Adhesives 74,020 70,487 255,778 235,948 Construction Adhesives 15,933 14,571 55,517 74,187 Corporate unallocated 972 (1,758 ) (6,259 ) (4,108 ) Total H.B. Fuller $ 172,602 $ 140,984 $ 580,838 $ 530,015 Adjusted EBITDA Margin 7 Hygiene, Health and Consumable Adhesives 19.9 % 13.0 % 17.2 % 13.2 % Engineering Adhesives 20.2 % 17.8 % 17.9 % 15.4 % Construction Adhesives 12.6 % 12.2 % 11.5 % 14.3 % Corporate unallocated NMP NMP NMP NMP Total H.B. Fuller 19.1 % 14.7 % 16.5 % 14.1 % NMP = non-meaningful percentage H.B. FULLER COMPANY AND SUBSIDIARIES REGULATION G RECONCILIATION In thousands, except per share amounts (unaudited) Three Months Ended Year Ended December 2, December 3, December 2, December 3, 2023 2022 2023 2022 Income before income taxes and income from equity method investments $ 86,240 $ 62,063 $ 234,160 $ 251,928 Adjustments: Acquisition project costs 1 4,765 1,822 16,874 10,830 Organizational realignment 2 10,549 1,471 29,900 6,386 Royal restructuring and integration 3 - 1,467 - 2,474 Project One 2,193 2,326 9,815 9,885 Other 4 (3,903 ) 4,524 (611 ) 12,791 Adjusted income before income taxes and income from equity method investments 9 $ 99,844 $ 73,673 $ 290,138 $ 294,294 9 Adjusted income before income taxes and income from equity investments is a non-GAAP financial measure. Adjusted income before income taxes and income from equity investments is defined as income before income taxes and income from equity investments before the specific adjustments shown above. The table above provides a reconciliation of adjusted income before income taxes and income from equity investments to income before income taxes and income from equity investments, the most directly comparable financial measure determined and reported in accordance with U.S. GAAP. H.B. FULLER COMPANY AND SUBSIDIARIES REGULATION G RECONCILIATION In thousands, except per share amounts (unaudited) Three Months Ended Year Ended December 2, December 3, December 2, December 3, 2023 2022 2023 2022 Income Taxes $ (42,274 ) $ (15,163 ) $ (93,529 ) $ (77,186 ) Adjustments: Acquisition project costs 1 (405 ) (613 ) (3,127 ) (2,767 ) Organizational realignment 2 (898 ) (495 ) (5,206 ) (1,635 ) Royal restructuring and integration 3 - (494 ) - (707 ) Project One (187 ) (783 ) (1,848 ) (2,067 ) Other 4 332 (1,526 ) (422 ) (3,522 ) Discrete tax items 5 16,955 1,610 26,085 9,308 Adjusted income taxes 10 $ (26,477 ) $ (17,464 ) $ (78,047 ) $ (78,576 ) Adjusted income before income taxes and income from equity method investments $ 99,844 $ 73,673 $ 290,138 $ 294,294 Adjusted effective income tax rate 10 26.5 % 23.7 % 26.9 % 26.7 % 10 Adjusted income taxes and adjusted effective income tax rate are non-GAAP financial measures. Adjusted income taxes is defined as income taxes before the specific adjustments shown above. Adjusted effective income tax rate is defined as income taxes divided by adjusted income before income taxes and income from equity method investments. The table above provides a reconciliation of adjusted income taxes and adjusted effective income tax rate to income taxes, the most directly comparable financial measure determined and reported in accordance with U.S. GAAP. H.B. FULLER COMPANY AND SUBSIDIARIES REGULATION G RECONCILIATION In thousands (unaudited) Three Months Ended Year Ended December 2, December 3, December 2, December 3, 2023 2022 2023 2022 Net revenue $ 902,879 $ 958,213 $ 3,510,934 $ 3,749,183 Gross profit $ 273,842 $ 248,121 $ 1,008,897 $ 963,699 Gross profit margin 30.3 % 25.9 % 28.7 % 25.7 % Adjustments: Acquisition project costs 1 529 738 3,146 1,058 Organizational realignment 2 8,136 1,211 18,108 3,207 Royal restructuring and integration 3 - 329 - 706 Project ONE 223 - 223 6 Other 4 52 472 530 1,830 Adjusted gross profit 11 $ 282,782 $ 250,871 $ 1,030,904 $ 970,506 Adjusted gross profit margin 11 31.3 % 26.2 % 29.4 % 25.9 % 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 Year Ended December 2, December 3, December 2, December 3, 2023 2022 2023 2022 Selling, general and administrative expenses $ (160,440 ) $ (157,872 ) $ (653,760 ) $ (640,981 ) Adjustments: Acquisition project costs 1 4,236 1,084 13,831 9,772 Organizational realignment 2 2,333 260 11,712 4,393 Royal restructuring and integration 3 - 1,138 - 1,794 Project ONE 1,969 2,326 9,592 9,879 Other 4 (3,954 ) (408 ) (3,882 ) 2,284 Adjusted selling, general and administrative expenses 12 $ (155,856 ) $ (153,472 ) $ (622,507 ) $ (612,859 ) 12 Adjusted selling, general and administrative expenses is a non-GAAP financial measure. Adjusted selling, general and administrative expenses is defined as selling, general and administrative expenses excluding the specific adjustments shown above. The table above provides a reconciliation of adjusted selling, general and administrative expenses to selling, general and administrative expenses, the most directly comparable financial measure determined and reported in accordance with U.S. GAAP. H.B. FULLER COMPANY AND SUBSIDIARIES REGULATION G RECONCILIATION In thousands (unaudited) Three Months Ended: Hygiene, Health and Consumable Engineering Construction Corporate H.B. Fuller December 2, 2023 Adhesives Adhesives Adhesives Total Unallocated Consolidated Net income attributable to H.B. Fuller $ 67,438 $ 58,857 $ 5,682 $ 131,977 $ (86,986 ) $ 44,991 Adjustments: Acquisition project costs 1 - - - - 4,765 4,765 Organizational realignment 2 - - - - 10,549 10,549 Royal restructuring and integration 3 - - - - - - Project One - - - - 2,193 2,193 Other 4 - - - - (3,903) (3,903) Discrete tax items 5 - - - - 16,955 16,955 Income tax effect on adjustments 6 - - - - (1,158 ) (1,158 ) Adjusted net income attributable to H.B. Fuller 7 67,438 58,857 5,682 131,977 (57,585 ) 74,392 Add: Interest expense - - - - 33,297 33,297 Interest income - - - - (1,217 ) (1,217 ) Income taxes - - - - 26,477 26,477 Depreciation and amortization expense 8 14,239 15,163 10,251 39,653 - 39,653 Adjusted EBITDA 7 $ 81,677 $ 74,020 $ 15,933 $ 171,630 $ 972 $ 172,602 Adjusted net revenue $ 411,085 $ 365,735 $ 126,059 $ 902,879 - 902,879 Adjusted EBITDA margin 7 19.9 % 20.2 % 12.6 % 19.0 % NMP 19.1 % Year Ended Hygiene, Health and Consumable Engineering Construction Corporate H.B. Fuller December 2, 2023 Adhesives Adhesives Adhesives Total Unallocated Consolidated Net income attributable to H.B. Fuller $ 222,404 $ 192,635 $ 13,602 $ 428,641 $ (283,735 ) $ 144,906 Adjustments: Acquisition project costs 1 - - - - 16,874 16,874 Organizational realignment 2 - - - - 29,900 29,900 Royal restructuring and integration 3 - - - - - - Project One - - - - 9,815 9,815 Other 4 - - - - (611) (611) Discrete tax items 5 - - - - 26,085 26,085 Income tax effect on adjustments 6 - - - - (10,604 ) (10,604 ) Adjusted net income attributable to H.B. Fuller 7 222,404 192,635 13,602 428,641 (212,276 ) 216,365 Add: Interest expense - - - - 131,913 131,913 Interest income - - - - (3,943 ) (3,943 ) Income taxes - - - - 78,047 78,047 Depreciation and amortization expense 8 53,398 63,143 41,915 158,456 - 158,456 Adjusted EBITDA 7 $ 275,802 $ 255,778 $ 55,517 $ 587,097 $ (6,259 ) $ 580,838 Adjusted net revenue 1,601,487 1,428,744 480,703 $ 3,510,934 - 3,510,934 Adjusted EBITDA margin 7 17.2 % 17.9 % 11.5 % 16.7 % NMP 16.5 % Note: Adjusted EBITDA is a non-GAAP financial measure. The table above provides a reconciliation of adjusted EBITDA for each segment to net income attributable to H.B. Fuller for each segment, the most directly comparable financial measure determined and reported in accordance with U.S. GAAP. NMP = Non-meaningful percentage H.B. FULLER COMPANY AND SUBSIDIARIES REGULATION G RECONCILIATION In thousands (unaudited) Three Months Ended: Hygiene, Health and Consumable Engineering Construction Corporate H.B. Fuller December 3, 2022 Adhesives Adhesives Adhesives Total Unallocated Consolidated Net income attributable to H.B. Fuller $ 45,913 $ 55,900 $ 3,460 $ 105,273 $ (56,968 ) $ 48,305 Adjustments: Acquisition project costs 1 - - - - 1,822 1,822 Organizational realignment 2 - - - - 1,471 1,471 Royal restructuring and integration 3 - - - - 1,467 1,467 Project One - - - - 2,326 2,326 Other 4 - - - - 4,524 4,524 Discrete tax items 5 - - - - 1,610 1,610 Income tax effect on adjustments 6 - - - - (3,911 ) (3,911 ) Adjusted net income attributable to H.B. Fuller 7 45,913 55,900 3,460 105,273 (47,659 ) 57,614 Add: Interest expense - - - - 30,046 30,046 Interest income - - - - (1,609 ) (1,609 ) Income taxes - - - - 17,464 17,464 Depreciation and amortization expense 8 11,771 14,587 11,111 37,469 - 37,469 Adjusted EBITDA 7 $ 57,684 $ 70,487 $ 14,571 $ 142,742 $ (1,758 ) $ 140,984 Adjusted net revenue $ 443,528 $ 395,053 $ 119,632 $ 958,213 - $ 958,213 Adjusted EBITDA margin 7 13.0 % 17.8 % 12.2 % 14.9 % NMP 14.7 % Year Ended Hygiene, Health and Consumable Engineering Construction Corporate H.B. Fuller December 3, 2022 Adhesives Adhesives Adhesives Total Unallocated Consolidated Net income attributable to H.B. Fuller $ 177,614 $ 177,641 $ 32,474 $ 387,729 $ (207,416 ) $ 180,313 Adjustments: Acquisition project costs 1 - - - - 10,830 10,830 Organizational realignment 2 - - - - 6,386 6,386 Royal restructuring and integration 3 - - - - 2,474 2,474 Project One - - - - 9,885 9,885 Other 4 - - - - 12,791 12,791 Discrete tax items 5 - - - - 9,308 9,308 Income tax effect on adjustments 6 - - - - (10,699 ) (10,699 ) Adjusted net income attributable to H.B. Fuller 7 177,614 177,641 32,474 387,729 (166,441 ) 221,288 Add: Interest expense - - - - 91,547 91,547 Interest income - - - - (7,790 ) (7,790 ) Income taxes - - - - 78,576 78,576 Depreciation and amortization expense 8 46,374 58,307 41,713 146,394 - 146,394 Adjusted EBITDA 7 $ 223,988 $ 235,948 $ 74,187 $ 534,123 $ (4,108 ) $ 530,015 Adjusted net revenue $ 1,695,934 $ 1,532,639 $ 520,610 $ 3,749,183 - $ 3,749,183 Adjusted EBITDA margin 7 13.2 % 15.4 % 14.3 % 14.2 % NMP 14.1 % 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) Net revenue growth versus 2022 Three Months Ended Year Ended December 2, 2023 December 2, 2023 Price (3.4 )% 2.9 % Volume (0.1 )% (8.4 )% Organic Growth 13 (3.5 )% (5.5 )% Extra Week in 2022 (53-week year) (7.0 )% (1.8 )% M&A 4.4 % 3.3 % Constant Currency (6.1 )% (4.0 )% F/X 0.3 % (2.4 )% Total H.B. Fuller Net Revenue Growth (5.8 )% (6.4 )% Net revenue growth versus 2022 Three Months Ended December 2, 2023 Extra Week in 2022 Net Revenue F/X Constant Currency M&A (53-week year) Organic Growth 13 Hygiene, Health and Consumable Adhesives (7.3 )% (0.2 )% (7.1 )% 7.4 % (7.0 )% (7.5 )% Engineering Adhesives (7.4 )% 0.7 % (8.1 )% 0.4 % (7.1 )% (1.4 )% Construction Adhesives 5.4 % 0.8 % 4.6 % 6.4 % (6.8 )% 5.0 % Total H.B. Fuller (5.8 )% 0.3 % (6.1 )% 4.4 % (7.0 )% (3.5 )% Net revenue growth versus 2022 Year Ended December 2, 2023 Extra Week in 2022 Net Revenue F/X Constant Currency M&A (53-week year) Organic Growth 13 Hygiene, Health and Consumable Adhesives (5.6 )% (3.3 )% (2.3 )% 4.6 % (1.8 )% (5.1 )% Engineering Adhesives (6.8 )% (2.0 )% (4.8 )% 1.2 % (1.8 )% (4.2 )% Construction Adhesives (7.7 )% (0.5 )% (7.2 )% 5.4 % (1.6 )% (11.0 )% Total H.B. Fuller (6.4 )% (2.4 )% (4.0 )% 3.3 % (1.8 )% (5.5 )% 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) December 2, December 3, 2023 2022 Assets Current assets: Cash and cash equivalents $ 179,453 $ 79,910 Trade receivables, net 577,932 607,365 Inventories 442,040 491,781 Other current assets 112,678 120,319 Total current assets 1,312,103 1,299,375 Property, plant and equipment, net 824,655 733,667 Goodwill 1,486,512 1,392,627 Other intangibles, net 729,140 702,092 Other assets 371,165 335,868 Total assets $ 4,723,575 $ 4,463,629 Liabilities, non-controlling interest and total equity Current liabilities: Notes payable $ 1,841 $ 28,860 Current maturities of long-term debt - - Trade payables 439,700 460,669 Accrued compensation 95,680 108,328 Income taxes payable 47,688 18,530 Other accrued expenses 107,902 89,345 Total current liabilities 692,811 705,732 Long-term debt, net of current maturities 1,836,590 1,736,256 Accrued pension liabilities 50,189 52,561 Other liabilities 388,072 358,286 Total liabilities 2,967,662 2,852,835 Commitments and contingencies (Note 14) Equity: H.B. Fuller stockholders' equity: Preferred stock (no shares outstanding) Shares authorized – 10,045,900 - - Common stock, par value $1.00 per share, Shares authorized – 160,000,000, Shares outstanding – 54,092,987 and 53,676,576 for 2023 and 2022, respectively 54,093 53,677 Additional paid-in capital 301,485 266,491 Retained earnings 1,842,507 1,741,359 Accumulated other comprehensive loss (442,880 ) (451,357 ) Total H.B. Fuller stockholders' equity 1,755,205 1,610,170 Non-controlling interest 708 624 Total equity 1,755,913 1,610,794 Total liabilities, non-controlling interest and total equity $ 4,723,575 $ 4,463,629 CONSOLIDATED STATEMENTS of CASH FLOWS H.B. Fuller Company and Subsidiaries (In thousands) Fiscal Years December 2, December 3, November 27, 2023 2022 2021 Cash flows from operating activities: Net income including non-controlling interest $ 144,988 $ 180,407 $ 161,475 Adjustments to reconcile net income including non-controlling interest to net cash provided by operating activities: Depreciation 80,327 72,593 72,106 Amortization 79,514 74,383 71,068 Deferred income taxes (25,114 ) (15,230 ) 16,192 Income from equity method investments, net of dividends received 1,259 (9 ) 2,776 Loss (gain) on sale of assets 59 (1,195 ) 648 Share-based compensation 19,911 24,368 22,366 Pension and other postretirement benefit plan contributions (4,346 ) (3,009 ) (3,840 ) Pension and other postretirement benefit plan income (18,591 ) (24,021 ) (28,662 ) Debt issuance cost write-off 2,689 - - Mark to market adjustment related to contingent consideration liabilities 2,893 - 2,300 Change in assets and liabilities, net of effects of acquisitions: Trade receivables, net 68,721 (24,753 ) (124,849 ) Inventories 72,576 (55,772 ) (135,351 ) Other assets (7,927 ) 46,499 (79,097 ) Trade payables (57,752 ) (22,629 ) 176,337 Accrued compensation (13,836 ) 1,135 27,741 Other accrued expenses (3,070 ) 6,303 1,186 Income taxes payable 41,190 (12,873 ) (4,137 ) Other liabilities 22,918 4,104 (73,508 ) Other (28,011 ) 6,213 108,566 Net cash provided by operating activities 378,398 256,514 213,317 Cash flows from investing activities: Purchased property, plant and equipment (119,137 ) (129,964 ) (96,089 ) Purchased businesses, net of cash acquired (205,093 ) (250,807 ) (5,445 ) Proceeds from sale of property, plant and equipment 5,029 1,556 2,896 Cash received from government grant - 3,928 5,800 Cash outflow related to government grant - - (1,822 ) Net cash used in investing activities (319,201 ) (375,287 ) (94,660 ) Cash flows from financing activities: Proceeds from issuance of long-term debt 2,233,300 335,000 - Repayment of long-term debt (2,126,450 ) (159,500 ) (156,500 ) Payment of debt issue costs (10,214 ) (600 ) - Net (payment on) proceeds from notes payable (28,674 ) 3,455 9,346 Dividends paid (43,395 ) (39,207 ) (34,859 ) Contingent consideration payment (1,477 ) (5,000 ) (1,700 ) Proceeds from stock options exercised 14,619 30,122 32,325 Repurchases of common stock (2,567 ) (3,950 ) (2,682 ) Net cash provided by (used in) financing activities 35,142 160,320 (154,070 ) Effect of exchange rate changes on cash and cash equivalents 5,204 (23,423 ) (3,335 ) Net change in cash and cash equivalents 99,543 18,124 (38,748 ) Cash and cash equivalents at beginning of year 79,910 61,786 100,534 Cash and cash equivalents at end of year $ 179,453 $ 79,910 $ 61,786 View source version on businesswire.com: https://www.businesswire.com/news/home/20240117554213/en/