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H.B. Fuller Reports Second Quarter 2016 Results

Second Quarter Diluted EPS $0.65;
Second Quarter Adjusted Diluted EPS $0.671;
Adjusted EPS Guidance Range Narrowed to $2.45-$2.601

ST. PAUL, Minn., June 22, 2016 (GLOBE NEWSWIRE) -- H.B. Fuller Company (NYSE:FUL) today reported financial results for the second quarter that ended May 28, 2016.

Items of Note for the Second Quarter of 2016:

  • Volume growth was 15 percent in the Engineering Adhesives segment, above 10 percent in the Asia Pacific segment and positive in our EIMEA segment. Although volume was down in Americas Adhesives year-over-year, trends improved sequentially in the segment while Construction Products volume was down relative to a very strong quarter in the prior year;
  • Gross profit margin was 29.7 percent; adjusted gross profit margin was 29.9 percent, an improvement of 170 basis points versus the prior year’s second quarter reflecting effective management of pricing and raw material costs;
  • Net income was $33.3 million; adjusted net income was $34.2 million, or $0.671 per diluted share, an increase of 6 percent versus the prior year;
  • Adjusted EBITDA margin2 was 13.9 percent; EIMEA segment adjusted EBITDA2 margin was 12.0 percent in the quarter up nearly 500 basis points from the prior year;
  • On June 8, 2016, in line with the Company’s strategy, we completed the acquisition of Cyberbond to broaden our global position and accelerate our growth in the high margin, high growth Engineering Adhesives segment.

Second Quarter 2016 Results:
Net income for the second quarter of 2016 was $33.3 million, or $0.65 per diluted share, versus income from continuing operations of $26.5 million, or $0.51 per diluted share, in last year’s second quarter. Adjusted diluted earnings per share in the second quarter of 2016 were $0.671, up 6 percent versus the prior year’s adjusted result of $0.631. Foreign currency losses were relatively high in the second quarter reducing adjusted EPS by about $0.02 per share relative to the prior year. Adjusted EBITDA2 was $73.8 million in the second quarter, or 13.9 percent of net revenue.

Net revenue for the second quarter of 2016 was $532.5 million, down 1.5 percent versus the second quarter of 2015. Higher volume positively impacted net revenue growth by 1.0 percentage point. Lower average selling prices and negative foreign currency translation negatively impacted net revenue growth by 1.4 and 1.1 percentage points, respectively. Constant currency revenue3 decreased by 0.4 percent year-over-year.

During the quarter we continued to improve margins through effective management of pricing and raw material costs as well as driving efficiencies in our supply chain and operations. Gross profit margin increased 220 basis points versus the prior year. Selling, General and Administrative (SG&A) expense was up by approximately 3 percent versus last year, and up about 90 basis points as a percentage of net revenue.

”We continued to drive improvements in our business during the second quarter, in line with our strategic plan,” said Jim Owens, H.B. Fuller president and chief executive officer. “Our EBITDA margin, at nearly 14 percent, was in line with our plan and driven by improvements in our two largest business segments – Americas Adhesives and EIMEA. Our high performing Engineering Adhesive segment grew organically by 15 percent, also in line with our strategic plan. Solid volume growth in our EIMEA and Asia Pacific segments, along with improving volume performance in our Americas Adhesives segment, are all indicators of the continued strengthening of our business. We also recently closed two strategic acquisitions which will enhance our returns for investors. We are pleased with the quarter and are on track to deliver our commitments for this fiscal year and the years ahead.”

Balance Sheet and Cash Flow:
At the end of the second quarter of 2016, we had cash totaling $146 million and total debt of $722 million. This compares to first quarter 2016 cash and debt levels of $127 million and $723 million, respectively. Sequentially, net debt was down by $20 million. Cash flow from operations was positive $40 million in the second quarter. The solid cash flow result allowed us to fund the acquisition of Advanced Adhesives in Australia and maintain our leverage of 2.7 times debt to EBITDA. Capital expenditures were $12 million in the second quarter.

Year-To-Date Results:
Net income for the first half of 2016 was $52.2 million, or $1.02 per diluted share, versus income from continuing operations of $36.2 million, or $0.70 per diluted share, in the first half of 2015. Adjusted total diluted earnings per share in the first half of 2016 were $1.091, up 18 percent versus the prior year’s result of $0.921.  Foreign currency losses were unusually high in the first half of this year, reducing adjusted EPS by about $0.09 per share relative to the same period last year.

Net revenue for the first half of 2016 was $1,006.8 million, down 0.5 percent versus the first half of 2015. Higher volume positively impacted net revenue growth by 3.3 percentage points. Lower average selling prices and negative foreign currency translation negatively impacted net revenue growth by 1.0 and 2.8 percentage points, respectively. Constant currency revenue3 grew by 2.3 percent year-over-year.

Fiscal 2016 Outlook:
We are narrowing our adjusted EPS guidance range to $2.45 to $2.60 for the 2016 year1. Our previous guidance for 2016 adjusted EPS was $2.40 to $2.60 per share. Constant currency growth is expected to be around 3 percent for 2016 versus the 2015 fiscal year. We expect to generate approximately $290 million of EBITDA in 2016, reflecting a full-year EBITDA margin of about 14 percent. Our core tax rate, excluding the impact of discrete items, is expected to be about 32 percent. We are on track to invest $60 million in capital items in 2016.

Conference Call:
The Company will host an investor conference call to discuss second quarter 2016 results on Thursday, June 23, 2016, at 9:30 a.m. Central U.S. time (10:30 a.m. Eastern U.S. time). The conference call audio and accompanying presentation slides will be available to all interested parties via a simultaneous webcast at www.hbfuller.com under the Investor Relations section. The event is scheduled to last one hour. For those unable to listen live, an audio replay of the event along with the accompanying presentation will be archived on the Company’s website.

Regulation G:
The information presented in this earnings release regarding segment operating income, adjusted diluted earnings per share, earnings before interest, taxes, depreciation, and amortization (EBITDA) and constant currency revenue does not conform to generally accepted accounting principles (GAAP) and should not be construed as an alternative to the reported results determined in accordance with GAAP. Management has included this non-GAAP information to assist in understanding the operating performance of the Company and its operating segments as well as the comparability of results. The non-GAAP information provided may not be consistent with the methodologies used by other companies. All non-GAAP information is reconciled with reported GAAP results in the tables below with the exception of our forward looking non-GAAP measures contained in our fiscal 2016 outlook which are unknown and have not yet occurred.

About H.B. Fuller Company:
For over 125 years, H.B. Fuller has been a leading global adhesives provider focusing on perfecting adhesives, sealants and other specialty chemical products to improve products and lives. With fiscal 2015 net revenue of $2.1 billion, H.B. Fuller’s commitment to innovation brings together people, products and processes that answer and solve some of the world's biggest challenges. Our reliable, responsive service creates lasting, rewarding connections with customers in packaging, hygiene, general assembly, electronic and assembly materials, paper converting, woodworking, construction, automotive and consumer businesses. And our promise to our people connects them with opportunities to innovate and thrive.  For more information, visit us at www.hbfuller.com and subscribe to our blog.

Safe Harbor for Forward-Looking Statements:
Certain statements in this document may be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to various risks and uncertainties, including but not limited to the following: the Company's ability to effectively integrate and operate acquired businesses; the ability to effectively implement Project ONE; political and economic conditions; product demand; competitive products and pricing; costs of and savings from restructuring initiatives; geographic and product mix; availability and price of raw materials; the Company's relationships with its major customers and suppliers; changes in tax laws and tariffs; devaluations and other foreign exchange rate fluctuations; the impact of litigation and environmental matters; the effect of new accounting pronouncements and accounting charges and credits; and similar matters. Further information about the various risks and uncertainties can be found in the Company's SEC 10-K filing for the fiscal year ended November 28, 2015. All forward-looking information represents management's best judgment as of this date based on information currently available that in the future may prove to have been inaccurate. Additionally, the variety of products sold by the Company and the regions where the Company does business make it difficult to determine with certainty the increases or decreases in net revenue resulting from changes in the volume of products sold, currency impact, changes in product mix, and selling prices. However, management's best estimates of these changes as well as changes in other factors have been included.

 
H.B. FULLER COMPANY AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
In thousands, except per share amounts (unaudited)
                   
  Three Months Ended   Percent of   Three Months Ended   Percent of
  May 28, 2016   Net Revenue   May 30, 2015   Net Revenue
Net revenue $    532,514       100.0 %   $    540,762       100.0 %
Cost of sales      (374,258 )     (70.3 %)        (391,825 )     (72.5 %)
Gross profit      158,256       29.7 %        148,937       27.5 %
                   
Selling, general and administrative expenses      (103,684 )     (19.5 %)        (100,582 )     (18.6 %)
Special charges, net      (370 )     (0.1 %)        (934 )     (0.2 %)
Other income (expense), net      (1,565 )     (0.3 %)        (569 )     (0.1 %)
Interest expense      (6,597 )     (1.2 %)        (6,215 )     (1.1 %)
Income before income taxes and income from equity method investments      46,040       8.6 %        40,637       7.5 %
                   
Income taxes      (14,290 )     (2.7 %)        (15,387 )     (2.8 %)
                   
Income from equity method investments      1,640       0.3 %        1,366       0.3 %
Income from continuing operations      33,390       6.3 %        26,616       4.9 %
                   
Loss from discontinued operations, net of tax      -       0.0 %        (1,300 )     (0.2 %)
Net income including non-controlling interests      33,390       6.3 %        25,316       4.7 %
                   
Net income attributable to non-controlling interests      (59 )     (0.0 %)        (144 )     (0.0 %)
Net income attributable to H.B. Fuller $    33,331       6.3 %   $    25,172       4.7 %
                   
Basic income per common share attributable to H.B. Fuller                  
Income from continuing operations      0.66              0.53      
Loss from discontinued operations      -               (0.03 )    
  $    0.66         $    0.50      
                   
Diluted income per common share attributable to H.B. Fullera                  
Income from continuing operations      0.65              0.51      
Loss from discontinued operations      -               (0.03 )    
  $    0.65         $    0.49      
                   
Weighted-average common shares outstanding:                  
Basic      50,145              50,345      
Diluted      51,253              51,471      
                   
Dividends declared per common share $    0.14         $    0.13      
                   
a Income per share amounts may not add due to rounding 


Selected Balance Sheet Information (subject to change prior to filing of the Company's Quarterly Report on Form 10-Q)
                 
  May 28, 2016   November 28, 2015   May 30, 2015
Cash & cash equivalents $  146,022   $  119,168   $  79,463
Trade accounts receivable, net    355,373      364,704      356,409
Inventories    261,072      248,504      265,620
Trade payables    161,724      177,864      191,930
Total assets    2,066,775      2,042,252      2,090,759
Total debt    721,847      722,863      736,899


H.B. FULLER COMPANY AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
In thousands, except per share amounts (unaudited)
                   
  Six Months Ended   Percent of   Six Months Ended   Percent of
  May 28, 2016   Net Revenue   May 30, 2015   Net Revenue
Net revenue $    1,006,840       100.0 %   $    1,011,423       100.0 %
Cost of sales      (710,979 )     (70.6 %)        (746,280 )     (73.8 %)
Gross profit      295,861       29.4 %        265,143       26.2 %
                   
Selling, general and administrative expenses      (203,451 )     (20.2 %)        (195,415 )     (19.3 %)
Special charges      (783 )     (0.1 %)        (3,295 )     (0.3 %)
Other income (expense), net      (6,647 )     (0.7 %)        (206 )     (0.0 %)
Interest expense      (12,905 )     (1.3 %)        (12,317 )     (1.2 %)
Income from continuing operations before income taxes and income from equity method investments      72,075       7.2 %        53,910       5.3 %
                   
Income taxes      (23,050 )     (2.3 %)        (20,156 )     (2.0 %)
                   
Income from equity method investments      3,332       0.3 %        2,657       0.3 %
Income from continuing operations      52,357       5.2 %        36,411       3.6 %
                   
Loss from discontinued operations      -       0.0 %        (1,300 )     (0.1 %)
Net income including non-controlling interests      52,357       5.2 %        35,111       3.5 %
                   
Net income attributable to non-controlling interests      (108 )     (0.0 %)        (229 )     (0.0 %)
Net income attributable to H.B. Fuller $    52,249       5.2 %   $    34,882       3.4 %
                   
Basic income per common share attributable to H.B. Fullera                  
Income from continuing operations      1.04              0.72      
Loss from discontinued operations      -               (0.03 )    
  $    1.04         $    0.69      
                   
Diluted income per common share attributable to H.B. Fullera                  
Income from continuing operations      1.02              0.70      
Loss from discontinued operations      -               (0.03 )    
  $    1.02         $    0.68      
                   
Weighted-average common shares outstanding:                  
Basic      50,052              50,267      
Diluted      51,124              51,425      
                   
Dividends declared per common share $    0.27         $    0.25      
                   
a Income per share amounts may not add due to rounding 


H.B. FULLER COMPANY AND SUBSIDIARIES
REGULATION G RECONCILIATION
In thousands, except per share amounts (unaudited)
 
                        Adjusted
   
       Three Months              Three Months    
      Ended   % of Net       Ended   % of Net
      May 28, 2016   Revenue   Adjustments   May 28, 2016   Revenue
Net revenue     $    532,514       100.0 %   $     $    532,514       100.0 %
Cost of sales          (374,258 )     (70.3 %)        (981 )        (373,277 )     (70.1 %)
Gross profit          158,256       29.7 %        (981 )        159,237       29.9 %
                             
Selling, general and administrative expenses      (103,684 )     (19.5 %)        (183 )        (103,501 )     (19.4 %)
                             
Acquisition and transformation related costs      (82 )                        
Workforce reduction costs     -                          
Facility exit costs      (134 )                        
Other related costs      (154 )                        
Special charges, net          (370 )     (0.1 %)        (370 )        -       0.0 %
                             
Other income (expense), net          (1,565 )     (0.3 %)              (1,565 )     (0.3 %)
Interest expense          (6,597 )     (1.2 %)        (74 )        (6,523 )     (1.2 %)
Income before income taxes and income from equity method investments      46,040       8.6 %        (1,608 )        47,648       8.9 %
                             
Income taxes          (14,290 )     (2.7 %)        773          (15,063 )     (2.8 %)
- Effective tax rate         31.0 %           48.1 %       31.6 %    
                             
Income from equity method investments          1,640       0.3 %              1,640       0.3 %
Net income including non-controlling interests        33,390       6.3 %        (835 )        34,225       6.4 %
                             
Net income attributable to non-controlling interests        (59 )     (0.0 %)              (59 )     (0.0 %)
Net income attributable to H.B. Fuller   $    33,331       6.3 %   $    (835 )   $    34,166       6.4 %
                             
Basic income (loss) per common share attributable to H.B. Fuller a $    0.66         $    (0.02 )   $    0.68      
                             
Diluted income (loss) per common share attributable to H.B. Fuller $    0.65         $    (0.02 )   $    0.67 1      
                             
Weighted-average common shares outstanding:                        
Basic          50,145              50,145          50,145      
Diluted          51,253              51,253          51,253      


H.B. FULLER COMPANY AND SUBSIDIARIES
REGULATION G RECONCILIATION
In thousands, except per share amounts (unaudited)
 
                        Adjusted
   
       Three Months              Three Months    
      Ended   % of Net       Ended   % of Net
      May 30, 2015   Revenue   Adjustments   May 30, 2015   Revenue
Net revenue     $    540,762       100.0 %   $    867     $    541,629       100.0 %
Cost of sales          (391,825 )     (72.5 %)        (2,882 )        (388,943 )     (71.8 %)
Gross profit          148,937       27.5 %        (3,749 )        152,686       28.2 %
                             
Selling, general and administrative expenses      (100,582 )     (18.6 %)        (2,458 )        (98,124 )     (18.1 %)
                             
Acquisition and transformation related costs      (75 )                        
Workforce reduction costs      270                          
Facility exit costs      (1,111 )                        
Other related costs      (18 )                        
Special charges, net          (934 )     (0.2 %)        (934 )        -       0.0 %
                             
Other income (expense), net          (569 )     (0.1 %)              (569 )     (0.1 %)
Interest expense          (6,215 )     (1.1 %)        (230 )        (5,985 )     (1.1 %)
Income before income taxes and income from equity method investments      40,637       7.5 %        (7,371 )        48,008       8.9 %
                             
Income taxes          (15,387 )     (2.8 %)        1,625          (17,012 )     (3.1 %)
- Effective tax rate         37.9 %           22.0 %       35.4 %    
                             
Income from equity method investments          1,366       0.3 %        -          1,366       0.3 %
Net income from continuing operations          26,616       4.9 %        (5,746 )        32,362       6.0 %
                             
Loss from discontinued operations          (1,300 )     (0.2 %)        (1,300 )        -       0.0 %
Net income including non-controlling interests        25,316       4.7 %        (7,046 )        32,362       6.0 %
                             
Net income attributable to non-controlling interests        (144 )     (0.0 %)        -          (144 )     (0.0 %)
Net income attributable to H.B. Fuller   $    25,172       4.7 %   $    (7,046 )   $    32,218       5.9 %
                             
Basic income (loss) per common share attributable to H.B. Fuller                    
Income (loss) from continuing operations $    0.53         $    (0.11 )   $    0.64      
Loss from discontinued operations          (0.03 )            (0.03 )        -       
  $    0.50         $    (0.14 )   $    0.64      
                             
Diluted income (loss) per common share attributable to H.B. Fullera                    
Income (loss) from continuing operations $    0.51         $    (0.11 )   $    0.63 1      
Loss from discontinued operations          (0.03 )            (0.03 )        -       
  $    0.49         $    (0.14 )   $    0.63 1      
                             
Weighted-average common shares outstanding:                        
Basic          50,345              50,345          50,345      
Diluted          51,471              51,471          51,471      
                             
a Income per share amounts may not add due to rounding 


H.B. FULLER COMPANY AND SUBSIDIARIES
REGULATION G RECONCILIATION
In thousands, except per share amounts (unaudited)
                           
                    Adjusted    
     Six Months              Six Months    
    Ended   % of Net       Ended   % of Net
    May 28, 2016   Revenue   Adjustments   May 28, 2016   Revenue
Net revenue   $    1,006,840       100.0 %   $     $    1,006,840       100.0 %
Cost of sales        (710,979 )     (70.6 %)        (2,872 )        (708,107 )     (70.3 %)
Gross profit        295,861       29.4 %        (2,872 )        298,733       29.7 %
                           
Selling, general and administrative expenses      (203,451 )     (20.3 %)        (914 )        (202,537 )     (20.1 %)
                           
Acquisition and transformation related costs    (187 )                        
Workforce reduction costs   1                          
Facility exit costs    (407 )                        
Other related costs    (190 )                        
Special charges        (783 )     (0.1 %)        (783 )        -       0.0 %
                           
Other income (expense), net        (6,647 )     (0.7 %)              (6,647 )     (0.7 %)
Interest expense        (12,905 )     (1.3 %)        (149 )        (12,756 )     (1.3 %)
Income before income taxes and income from equity method investments      72,075       7.2 %        (4,718 )        76,793       7.6 %
                           
Income taxes        (23,050 )     (2.3 %)        1,002          (24,052 )     (2.4 %)
- Effective tax rate       32.0 %           21.2 %       31.3 %    
                           
Income from equity method investments        3,332       0.3 %              3,332       0.3 %
                           
Net income including non-controlling interests        52,357       5.2 %        (3,716 )        56,073       5.6 %
                           
Net income attributable to non-controlling interests      (108 )     (0.0 %)              (108 )     (0.0 %)
Net income attributable to H.B. Fuller   $    52,249       5.2 %   $    (3,716 )   $    55,965       5.6 %
                           
Basic income per common share attributable to H.B. Fuller4, a $    1.04         $    (0.07 )   $    1.12      
                           
Diluted income per common share attributable to H.B. Fuller4, $    1.02         $    (0.07 )   $    1.09 1      
                           
Weighted-average common shares outstanding:                        
Basic        50,052              50,052          50,052      
Diluted        51,124              51,124          51,124      
                           
a Income per share amounts may not add due to rounding 


H.B. FULLER COMPANY AND SUBSIDIARIES
REGULATION G RECONCILIATION
In thousands, except per share amounts (unaudited)
 
                       Adjusted    
       Six Months              Six Months    
      Ended   % of Net       Ended   % of Net
      May 30, 2015   Revenue   Adjustments   May 30, 2015   Revenue
Net revenue     $    1,011,423       100.0 %   $    867     $    1,012,290       100.0 %
Cost of sales          (746,280 )     (73.8 %)        (6,032 )        (740,248 )     (73.1 %)
Gross profit          265,143       26.2 %        (6,899 )        272,042       26.9 %
                             
Selling, general and administrative expenses        (195,415 )     (19.3 %)        (3,296 )        (192,119 )     (19.0 %)
                             
Acquisition and transformation related costs    (547 )                          
Workforce reduction costs    214                            
Facility exit costs    (2,640 )                          
Other related costs    (322 )                          
Special charges          (3,295 )     (0.3 %)        (3,295 )        -       0.0 %
                             
Other income (expense), net          (206 )     (0.0 %)              (206 )     (0.0 %)
Interest expense          (12,317 )     (1.2 %)        (330 )        (11,987 )     (1.2 %)
Income from continuing operations before income taxes and income from equity method investments      53,910       5.3 %        (13,820 )        67,730       6.7 %
                             
Income taxes          (20,156 )     (2.0 %)        2,592          (22,748 )     (2.2 %)
- Effective tax rate         37.4 %           18.8 %       33.6 %    
                             
Income from equity method investments          2,657       0.3 %        -          2,657       0.3 %
Income from continuing operations          36,411              (11,228 )        47,639      
                             
Loss from discontinued operations          (1,300 )            (1,300 )        -      
Net income including non-controlling interests      35,111       3.5 %        (12,528 )        47,639       4.7 %
                             
Net loss attributable to non-controlling interests      (229 )     (0.0 %)        -          (229 )     (0.0 %)
Net income attributable to H.B. Fuller     $    34,882       3.4 %   $    (12,528 )   $    47,410       4.7 %
                             
Basic income per common share attributable to H.B. Fullera                        
Income from continuing operations          0.72              (0.22 )        0.94      
Income from discontinued operations          (0.03 )            (0.03 )        -       
    $    0.69         $    (0.25 )   $    0.94      
                             
Diluted income per common share attributable to H.B. Fullera                        
Income from continuing operations          0.70              (0.22 )        0.92      
Income from discontinued operations          (0.03 )            (0.03 )        -       
    $    0.68         $    (0.24 )   $    0.92 1      
                             
Weighted-average common shares outstanding:                        
Basic          50,267              50,267          50,267      
Diluted          51,425              51,425          51,425      


H.B. FULLER COMPANY AND SUBSIDIARIES
ADJUSTED EARNING PER SHARE RECONCILIATION
In thousands (unaudited)
                                     
    Three Months ended May 28, 2016   Three Months ended May 30, 2015
    Income               Income            
    before     Income   Diluted   before     Income   Diluted
    Income Tax     Taxes   EPS   Income Tax     Taxes   EPSa
Income from continuing operations $    47,621     $  14,290   $    0.65     $  41,859   $  15,387   $  0.51
                                     
Special charges, net        370        52        0.01        934      106      0.02
Acquisition project costsb        1,287        436        0.02        694      61      0.01
Construction Productsc        -        -         -         2,108      803      0.03
EIMEA business integration costsd        562        43        0.01        2,055      156      0.04
Tonsan call option agreemente        (1,326 )      -         (0.03 )      -      -       - 
Otherf        715        242       0.01         1,580      499      0.02
Adjusted Earnings   $    49,229     $  15,063   $    0.67     $  49,230   $  17,012   $  0.63
                                     
                                     
    Six Months ended May 28, 2016   Six Months ended May 30, 2015
    Income               Income            
    before     Income   Diluted   before     Income   Diluted
    Income Tax     Taxes   EPS   Income Tax     Taxes   EPS
Income from continuing operations $    75,299     $  23,050   $    1.02     $  56,338   $  20,156   $  0.70
                                     
Special charges, net        783        120        0.01        3,295      436      0.06
Acquisition project costsb        1,408        476        0.02        3,940      480      0.07
Construction Productsc        -        -         -         2,679      1,021      0.03
EIMEA business integration costsd        2,173        165        0.04        2,055      156      0.04
Tonsan call option agreemente        (360 )      -         (0.01 )      -      -       - 
Otherf       715        242       0.01        1,851      499      0.03
Adjusted Earnings   $    80,018      $  24,053   $    1.09     $  70,158   $  22,748   $  0.92
                                     
a  Income per share amounts may not add due to rounding
b  Costs related to integrating and accounting for past and potential acquisitions
c  Costs related to the ramp up of new business with Lowes and the combination of facilities in Illinois
d  Costs related to EIMEA restructuring announced November 2015, plant inefficiencies and inventory variances
e  Non-cash costs related to accretion and revaluation of the Tonsan call option agreement
f  Costs related to the completion and start-up of a new electronics facility in Yantai China, Project ONE development costs and a planned facility closure in the Philippines


H.B. FULLER COMPANY AND SUBSIDIARIES
SEGMENT FINANCIAL INFORMATION
In thousands (unaudited)
           
  Three Months Ended   Three Months Ended
  May 28, 2016   May 30, 2015
Net Revenue:          
Americas Adhesives $    206,147     $    217,474  
EIMEA      139,897          137,418  
Asia Pacific      60,119          57,553  
Construction Products      67,634          75,831  
Engineering Adhesives      58,717          52,486  
Total H.B. Fuller $    532,514     $    540,762  
           
Segment Operating Income:4          
Americas Adhesives $    35,884     $    35,727  
EIMEA      11,027          2,294  
Asia Pacific      3,036          2,944  
Construction Products      2,534          6,354  
Engineering Adhesives      2,091          1,036  
Total H.B. Fuller $    54,572     $    48,355  
           
Depreciation Expense:          
Americas Adhesives $    3,555     $    3,944  
EIMEA      3,878          3,708  
Asia Pacific      1,540          1,427  
Construction Products      1,329          1,369  
Engineering Adhesives      1,507          1,373  
Total H.B. Fuller $    11,809     $    11,821  
           
Amortization Expense:          
Americas Adhesives $    1,019     $    1,071  
EIMEA      1,174          1,163  
Asia Pacific      291          347  
Construction Products      2,325          2,408  
Engineering Adhesives      1,979          2,010  
Total H.B. Fuller $    6,788     $    6,999  
           
EBITDA:2          
Americas Adhesives $    40,458     $    40,742  
EIMEA      16,079          7,165  
Asia Pacific      4,867          4,718  
Construction Products      6,188          10,131  
Engineering Adhesives      5,577          4,419  
Total H.B. Fuller $    73,169     $    67,175  
           
Segment Operating Margin:4          
Americas Adhesives     17.4 %       16.4 %
EIMEA     7.9 %       1.7 %
Asia Pacific     5.0 %       5.1 %
Construction Products     3.7 %       8.4 %
Engineering Adhesives     3.6 %       2.0 %
Total H.B. Fuller     10.2 %       8.9 %
           
EBITDA Margin:2          
Americas Adhesives     19.6 %       18.7 %
EIMEA     11.5 %       5.2 %
Asia Pacific     8.1 %       8.2 %
Construction Products     9.1 %       13.4 %
Engineering Adhesives     9.5 %       8.4 %
Total H.B. Fuller     13.7 %       12.4 %
           
Adjusted EBITDA2          
Americas Adhesives $   41,048     $    41,513  
EIMEA     16,743          9,729  
Asia Pacific     5,236          4,932  
Construction Products      6.394          12,494  
Engineering Adhesives      4.351          4,714  
Total H.B. Fuller $   73,772     $    73,382  
           
Adjusted EBITDA Margin2          
Americas Adhesives     19.9 %       19.1 %
EIMEA     12.0 %       7.1 %
Asia Pacific     8.7 %       8.6 %
Construction Products     9.5 %       16.3 %
Engineering Adhesives     7.4 %       9.0 %
Total H.B. Fuller     13.9 %       13.5 %
           


H.B. FULLER COMPANY AND SUBSIDIARIES
SEGMENT FINANCIAL INFORMATION
In thousands (unaudited)
           
  Six Months Ended   Six Months Ended
  May 28, 2016   May 30, 2015
Net Revenue:          
Americas Adhesives $    389,466     $    411,547  
EIMEA      264,188          271,533  
Asia Pacific      113,979          112,896  
Construction Products      127,708          134,287  
Engineering Adhesives      111,499          81,160  
Total H.B. Fuller $    1,006,840     $    1,011,423  
           
Segment Operating Income:4          
Americas Adhesives $    62,143     $    57,404  
EIMEA      17,190          2,979  
Asia Pacific      6,789          6,089  
Construction Products      3,319          7,368  
Engineering Adhesives      2,969          (4,112 )
Total H.B. Fuller $    92,410     $    69,728  
           
Depreciation Expense:          
Americas Adhesives $    7,268     $    7,834  
EIMEA      9,209          7,609  
Asia Pacific      2,926          2,825  
Construction Products      2,602          2,845  
Engineering Adhesives      3,062          2,286  
Total H.B. Fuller $    25,067     $    23,399  
           
Amortization Expense:          
Americas Adhesives $    2,036     $    2,145  
EIMEA      2,281          2,447  
Asia Pacific      592          737  
Construction Products      4,648          4,799  
Engineering Adhesives      3,929          3,019  
Total H.B. Fuller $    13,486     $    13,147  
           
EBITDA:2          
Americas Adhesives $    71,447     $    67,383  
EIMEA      28,680          13,035  
Asia Pacific      10,307          9,651  
Construction Products      10,569          15,012  
Engineering Adhesives      9,960          1,193  
Total H.B. Fuller $    130,963     $    106,274  
           
Segment Operating Margin:4          
Americas Adhesives     16.0 %       13.9 %
EIMEA     6.5 %       1.1 %
Asia Pacific     6.0 %       5.4 %
Construction Products     2.6 %       5.5 %
Engineering Adhesives     2.7 %       (5.1 %)
Total H.B. Fuller     9.2 %       6.9 %
           
EBITDA Margin:2          
Americas Adhesives     18.3 %       16.4 %
EIMEA     10.9 %       4.8 %
Asia Pacific     9.0 %       8.5 %
Construction Products     8.3 %       11.2 %
Engineering Adhesives     8.9 %       1.5 %
Total H.B. Fuller     13.0 %       10.5 %
           
Adjusted EBITDA2          
Americas Adhesives $    72,084     $    68,331  
EIMEA      29,256          15,754  
Asia Pacific      10,690          9,915  
Construction Products      10,791          18,004  
Engineering Adhesives      9,639          4,465  
Total H.B. Fuller $   132,460     $    116,469  
           
Adjusted EBITDA Margin2          
Americas Adhesives     18.5 %       16.6 %
EIMEA     11.1 %       5.8 %
Asia Pacific     9.4 %       8.8 %
Construction Products     8.4 %       13.3 %
Engineering Adhesives     8.6 %       5.5 %
Total H.B. Fuller     13.2 %       11.5 %
           


H.B. FULLER COMPANY AND SUBSIDIARIES
SEGMENT FINANCIAL INFORMATION
NET REVENUE GROWTH
(unaudited)
                       
Three Months Ended May 28, 2016
 
  Americas            Construction    Engineering     
  Adhesives   EIMEA   Asia Pacific   Products   Adhesives   Total HBF
Price   (2.6 %)     (0.6 %)     (2.5 %)     0.8 %     (0.5 %)     (1.4 %)
Volume   (2.3 %)     2.9 %     11.9 %     (11.3 %)     15.1 %     1.0 %
Constant Currency Growth3   (4.9 %)     2.3 %     9.4 %     (10.5 %)     14.6 %     (0.4 %)
                       
F/X   (0.3 %)     (0.5 %)     (4.9 %)     (0.3 %)     (2.7 %)     (1.1 %)
    (5.2 %)     1.8 %     4.5 %     (10.8 %)     11.9 %     (1.5 %)
                       
                       
                       
Six Months Ended May 28, 2016
 
  Americas            Construction    Engineering     
  Adhesives   EIMEA   Asia Pacific   Products   Adhesives   Total HBF
Price   (1.9 %)       (0.4 %)     (1.5 %)     1.3 %     (1.0 %)     (1.0 %)
Volume   (2.8 %)     2.6 %     8.2 %     (5.4 %)     43.6 %     3.3 %
Constant Currency Growth3   (4.7 %)     2.2 %     6.7 %     (4.1 %)     42.6 %     2.3 %
                       
F/X   (0.7 %)       (4.9 %)     (5.7 %)     (0.8 %)     (5.2 %)     (2.8 %)
    (5.4 %)       (2.7 %)     1.0 %     (4.9 %)     37.4 %     (0.5 %)


H.B. FULLER COMPANY AND SUBSIDIARIES
REGULATION G RECONCILIATION
In thousands (unaudited)
           
  Three Months Ended   Three Months Ended
  May 28, 2016   May 30, 2015
Net income attributable to H.B. Fuller $    33,331     $    25,172  
           
Net income attributable to non-controlling interests     59         144  
Loss from discontinued operations      -           1,300  
Income from equity method investments      (1,640 )        (1,366 )
Income taxes      14, 290          15,387  
Interest expense      6,597          6,215  
Other income (expense), net      1,565          569  
Special charges      370          934  
Segment operating income4      54,572          48,355  
           
Depreciation expense      11,809          11,821  
Amortization expense      6,788          6,999  
EBITDA2 $    73,169     $   67,175  
           
EBITDA margin2     13.7 %       12.4 %
           
Non-recurring costsa     603         6,207  
Adjusted EBITDA2 $   73,772     $   73,382  
           
Adjusted EBITDA margin2     13.9 %       13.5 %
           
           
  Six Months Ended   Six Months Ended
  May 28, 2016   May 30, 2015
Net income attributable to H.B. Fuller $    52,249     $    34,882  
           
Net income attributable to non-controlling interests     108         229  
Loss from discontinued operations      -           1,300  
Income from equity method investments      (3,332 )        (2,657 )
Income taxes      23,050          20,156  
Interest expense      12,905          12,317  
Other income (expense), net      6,647          206  
Special charges      783          3,295  
Segment operating income4      92,410          69,728  
           
Depreciation expense      25,067          23,399  
Amortization expense      13,486          13,147  
EBITDA2 $    130,963     $    106,274  
           
EBITDA margin2     13.0 %       10.5 %
           
Non-recurring costsa     1,497         10,195  
Adjusted EBITDA2 $   132,460     $   116,469  
           
Adjusted EBITDA margin2     13.2 %       11.5 %
aNon-recurrings costs exclude unusual depreciation expense, which has already been added back as part of total depreciation. The unusual depreciation in
the second quarter and for the first 6 months of 2016 was $0.6 million and $2.3 million, respectively.

______________________________

1 Adjusted diluted earnings per share (EPS) is a non-GAAP financial measure and excludes the following non-recurring costs listed on the adjusted earnings per share reconciliation table above: special charges related to the “business integration”; restructuring in EIMEA related to operational efficiency improvement projects; and the start-up of a new electronics facility in Yantai China. We have not included a reconcilliation of adjusted EPS to EPS as part of our guidance because the adjustments, if any, are not known at this time. 
2 EBITDA is a non-GAAP financial measure defined on a consolidated basis as gross profit, less SG&A expense, plus depreciation expense, plus amortization expense. Adjusted EBITDA excludes items listed on the adjusted earnings per share reconciliation table above. On a segment basis it is defined as operating income, plus depreciation expense, plus amortization expense. Adjusted EBITDA margin is defined as adjusted EBITDA divided by net revenue. 
Constant currency revenue is a non-GAAP financial measure defined as changes in revenue due to price and volume and excludes revenue changes driven by foreign currency translation. The schedule above reconciles each component of net revenue growth. 
4 Segment operating income is defined as gross profit less SG&A expense. Segment operating margin is defined as segment operating income divided by net revenue.

Maximillian Marcy
Investor Relations Contact
651-236-5062

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