• Connecting
  • Investor Relations
News & Events: News Release
Printer Friendly Version View printer-friendly version
<< Back
H.B. Fuller Reports Third Quarter 2017 Results

Third Quarter Diluted EPS $0.49,
Third Quarter Adjusted Diluted EPS $0.651, In line With Company Guidance;
Fiscal Year 2017 Adjusted Diluted EPS Guidance Narrowed to $2.57 to $2.62

ST. PAUL, Minn., Sept. 27, 2017 (GLOBE NEWSWIRE) -- H.B. Fuller Company (NYSE:FUL) today reported financial results for the third quarter that ended September 2, 2017.

Items of Note for the Third Quarter of 2017:

  • Net revenue grew 9.8 percent. Constant currency revenue2 growth was 11 percent, with organic volume growth of 6 percent;
  • Net income was $25.1 million in the third quarter of 2017; Adjusted net income was $33.3 million, or $0.651 per diluted share;
  • Adjusted EBITDA3 margin up sequentially to 12.8 percent;
  • Organic volume growth for Engineering Adhesives was 18 percent and adjusted EBITDA3 margin grew to nearly 14 percent;
  • Asia Pacific, Americas and EIMEA delivered strong organic volume growth in the mid to high single digits;
  • Construction Products adjusted EBITDA3 margins were up 70 basis points versus the prior year’s third quarter;
  • Hurricane Harvey occurred one week prior to the end of the quarter, negatively impacting revenue by over $3 million and approximately $0.02 per diluted share;
  • Announced agreement to acquire Royal adhesives, a top 10 global adhesives supplier that operates in highly specified end markets, for $1.575 billion.

Third Quarter 2017 Results:
Net income for the third quarter of 2017 was $25.1 million, or $0.49 per diluted share, versus net income of $32.7 million, or $0.64 per diluted share, in last year’s third quarter. Adjusted diluted earnings per share in the third quarter of 2017 were $0.651 versus the prior year’s adjusted result of $0.641. Strong volume growth and positive pricing actions to offset higher year-over-year raw material costs were the primary driver of the year-over-year increase.

Net revenue for the third quarter of 2017 was $562.9 million, up 9.8 percent versus the third quarter of 2016. Higher volume, pricing and acquisitions positively impacted net revenue growth, which was offset by negative foreign currency translation. Constant currency revenue2 grew by 11 percent year over year. Organic revenue, defined as constant currency revenue less the impact from acquisitions, was up more than 7 percent year-on-year.

Gross profit margin was 26.7 percent and adjusted gross profit margin4 was 27.1 percent. Margins remained lower year-over-year due to higher raw material costs relative to the timing of price increases. Selling, General and Administrative (SG&A) expense was $110.2 million. Adjusted SG&A expense5 was $100.4 million, up versus the prior year, primarily driven by the prior year’s lower incentive compensation offset somewhat by discretionary expense management and restructuring actions.

“We are pleased with the positive progression of pricing and strong volume growth across the businesses,” said Jim Owens, H.B. Fuller president and chief executive officer. “Our actions delivered earnings per share consistent with our expectations and higher EBITDA delivery versus the prior quarter and prior year despite the negative impact on sales from Hurricane Harvey late in the quarter. The Americas is solidly back to growth mode with organic volume delivery of over 6 percent. Engineering Adhesives continued to deliver sales growth above our long term target of 15 percent and drove margins higher to nearly 14 percent, a key tenet in our long term strategy. We also announced the transformative and complementary acquisition of Royal Adhesives which will accelerate our strategy by combining their strong presence in specified adhesive applications with our global reach and focus. We are delivering on our financial commitments and expect a successful completion of our 2017 plan while we prepare for the integration of the Royal Adhesive business.” 

Balance Sheet and Cash Flow:
At the end of the third quarter of 2017, cash balances totaled $120 million with total debt of $799 million. This compares to second quarter 2017 cash and debt levels of $94 million and $786 million, respectively. Sequentially, net debt was down by approximately $13 million dollars. Cash flow from operations was positive $38 million in the third quarter and $71 million for the first nine months, reflecting continued strength in the cash flow performance of the business, offset by restructuring charges and higher inventory balances. Capital expenditures were $8 million in the third quarter of 2017.

Year-To-Date Results:
Net income for the first nine months of 2017 was $65.8 million, or $1.28 per diluted share, versus net income of $85.0 million, or $1.66 per diluted share, in the first nine months of 2016. Adjusted total diluted earnings per share in the first nine months of 2017 were $1.741, flat versus the prior year’s result of $1.741

Net revenue for the first nine months of 2017 was $1,627.8 million, up 7.1 percent versus the first nine months of 2016. Higher volume, acquisitions and price positively impacted net revenue growth offset by negative foreign currency translation and negative mix. Constant currency revenue2 grew by 10 percent year-over-year. Organic revenue, defined as constant currency revenue less the impact from acquisitions, was up 6 percent.

Fiscal 2017 Guidance:
We are narrowing our adjusted EPS guidance from our previous range of $2.57 to $2.67 to our new guidance range of $2.57 to $2.62 for fiscal year 2017, reflecting the short term impact of Hurricane Harvey. Adjusted EBITDA for fiscal year 2017 is expected to be approximately $290 million versus our previous estimate of $290 to $300 million. Constant currency growth, on a comparable 52-week basis, is now expected to be around 10 percent for 2017 versus the 2016 fiscal year which reflects strong volume growth and more pricing to offset raw material inflation, which will be offset by approximately 2 percentage points of negative foreign currency translation. Our core tax rate is expected to be between 29 and 30 percent. We expect capital investments to be around $50 million - below our previously announced $60 million in 2017 as a result of timing and planned shifting of resources toward the Royal acquisition.

This guidance excludes between $30 and $35 million, pre-tax, of previously announced restructuring charges, as well as acquisition related costs and Project ONE development costs. The guidance also excludes approximately $5 million of expenses, pre-tax, incurred in the third quarter related to the pending acquisition of Royal as well as any future impact of Royal, which cannot be estimated at this time.

Conference Call:
The Company will host an investor conference call to discuss second quarter results on Thursday, September 28, 2017, 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 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 gross profit, adjusted selling, general and administrative expense, 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 2017 outlook, which are unknown or have not yet occurred.

About H.B. Fuller Company:
For 130 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 2016 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 electronics, disposable hygiene, medical, transportation, clean energy, packaging, construction, woodworking, general industries and other consumer businesses. And our promise to our people connects them with opportunities to innovate and thrive. For more information, visit us at 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: risks to consummation of the Royal transaction, including the risk that the transaction will not be consummated within the expected time period or at all, the risk that conditions to the closing of the transaction, including receipt of required regulatory approvals, may not be satisfied, and the risk that the transaction may be terminated in circumstances requiring us to pay the $78.75 million termination fee; the Royal transaction may involve unexpected costs, liabilities or delays; our business or stock price may suffer as a result of uncertainty surrounding the transaction; we may be unable to secure the financing necessary for the transaction on favorable terms, or at all; the substantial amount of debt we would incur to finance our acquisition of Royal, our ability to repay or refinance it or incur additional debt in the future, our need for a significant amount of cash to service and repay the debt and to pay dividends on our common stock, and the effect of restrictions to be contained in our debt agreements that limit the discretion of management in operating the business or ability to pay dividends; various risks to stockholders of not receiving dividends and risks to our ability to pursue growth opportunities if we continue to pay dividends according to the current dividend policy; we may be unable to achieve expected synergies and operating efficiencies from the transaction within the expected time frames or at all; we may be unable to successfully integrate Royal’s operations into our own, or such integration may be more difficult, time consuming or costly than expected; following the Royal transaction, revenues may be lower than expected, and operating costs, customer loss and business disruption (including, without limitation, difficulties in maintaining relationships with employees, customers, clients or suppliers) may be greater than expected; the outcome of any legal proceedings related to the transaction; risks that the pending transaction disrupts current plans and operations and the potential difficulties in employee retention as a result of the pending transaction; 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 December 3, 2016. 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
  September 2, 2017   Net Revenue   August 27, 2016   Net Revenue
Net revenue $ 562,869           100.0 %   $ 512,858           100.0 %
Cost of sales   (412,469 )   (73.3 %)           (366,737 )   (71.5 %)
Gross profit   150,400     26.7 %     146,121     28.5 %
                   
Selling, general and administrative expenses           (110,219 )   (19.6 %)     (97,692 )   (19.0 %)
Special charges, net   -     0.0 %     2,807     0.5 %
Other income (expense), net   150     0.0 %     (956 )   (0.2 %)
Interest expense   (8,100 )   (1.4 %)     (6,809 )   (1.3 %)
Income before income taxes and income from equity method investments      32,231     5.7 %     43,471     8.5 %
                   
Income taxes   (9,262 )   (1.6 %)     (12,513 )   (2.4 %)
                   
Income from equity method investments   2,170     0.4 %     1,840     0.3 %
Net income including non-controlling interests   25,139     4.5 %     32,798     6.4 %
                   
Net income attributable to non-controlling interests   (1 )   (0.0 %)     (53 )   (0.0 %)
Net income attributable to H.B. Fuller $ 25,138     4.5 %   $ 32,745     6.4 %
                   
Basic income per common share attributable to H.B. Fuller $ 0.50         $ 0.65      
                   
Diluted income per common share attributable to H.B. Fuller $ 0.49         $ 0.64      
                   
Weighted-average common shares outstanding:                  
Basic   50,384           50,261      
Diluted   51,605           51,453      
                   
Dividends declared per common share $ 0.15         $ 0.14      
                       


 
Selected Balance Sheet Information (subject to change prior to filing of the Company's Quarterly Report on Form 10-Q)
                 
  September 2, 2017   December 3, 2016   August 27, 2016
Cash & cash equivalents $ 119,595   $ 142,245   $ 133,102
Trade accounts receivable, net   393,054     351,130     344,305
Inventories   317,968     247,399     261,363
Trade payables   193,345     162,964     160,836
Total assets   2,288,323     2,055,868     2,077,817
Total debt   798,973     703,271     708,994
                 


 
H.B. FULLER COMPANY AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
In thousands, except per share amounts (unaudited)
                   
  Nine Months Ended   Percent of   Nine Months Ended   Percent of
  September 2, 2017   Net Revenue   August 27, 2016   Net Revenue
Net revenue $ 1,627,843           100.0 %   $ 1,519,698           100.0 %
Cost of sales       (1,192,409 )   (73.3 %)          (1,077,716 )   (70.9 %)
Gross profit   435,434     26.7 %     441,982     29.1 %
                   
Selling, general and administrative expenses   (325,904 )   (20.0 %)     (301,143 )   (19.8 %)
Special charges   -     0.0 %     2,024     0.1 %
Other income (expense), net   661     0.0 %     (7,603 )   (0.5 %)
Interest expense   (24,628 )   (1.5 %)     (19,714 )   (1.3 %)
Income before income taxes and income from equity method investments      85,563     5.2 %     115,546     7.6 %
                   
Income taxes   (26,178 )   (1.6 %)     (35,563 )   (2.3 %)
                   
Income from equity method investments   6,449     0.4 %     5,172     0.3 %
Net income including non-controlling interests   65,834     4.0 %     85,155     5.6 %
                   
Net income attributable to non-controlling interests   (34 )   (0.0 %)     (161 )   (0.0 %)
Net income attributable to H.B. Fuller $ 65,800     4.0 %   $ 84,994     5.6 %
                   
Basic income per common share attributable to H.B. Fuller $ 1.31         $ 1.70      
                   
Diluted income per common share attributable to H.B. Fuller $ 1.28         $ 1.66      
                   
Weighted-average common shares outstanding:                  
Basic   50,374           50,122      
Diluted   51,584           51,234      
                   
Dividends declared per common share $ 0.44         $ 0.41      
                       


     
H.B. FULLER COMPANY AND SUBSIDIARIES    
REGULATION G RECONCILIATION    
In thousands, except per share amounts (unaudited)    
                             
                      Adjusted    
      Three Months
Ended
  % of Net       Three Months
Ended
  % of Net
      September 2, 2017   Revenue   Adjustments   September 2, 2017   Revenue
Net revenue     $ 562,869     100.0 %   $     $ 562,869      100.0 %
Cost of sales       (412,469 )   (73.3 %)     (2,022 )     (410,447 )   (72.9 %)
Gross profit       150,400     26.7 %     (2,022 )     152,422 4   27.1 %
                             
Selling, general and administrative expenses           (110,219 )     (19.6 %)     (9,795 )     (100,424 )5   (17.9 %)
                             
                             
Other income (expense), net       150     0.0 %     -       150     0.0 %
Interest expense       (8,100 )   (1.4 %)     (72 )     (8,028 )   (1.4 %)
Income before income taxes and income from equity method investments      32,231     5.7 %        (11,889 )     44,120     7.8 %
                             
Income taxes       (9,262 )   (1.6 %)     3,709       (12,971 )   (2.3 %)
- Effective tax rate       28.7 %         31.2 %     29.4 %    
                             
Income from equity method investments       2,170     0.4 %           2,170     0.4 %
Net income including non-controlling interests     25,139     4.5 %     (8,180 )     33,319     5.9 %
                             
Net income attributable to non-controlling interests     (1 )   (0.0 %)           (1 )   (0.0 %)
Net income attributable to H.B. Fuller   $ 25,138     4.5 %   $ (8,180 )   $ 33,318     5.9 %
                             
Basic income per common share attributable to H.B. Fuller $ 0.50         $ (0.16 )   $ 0.66      
                             
Diluted income per common share attributable to H.B. Fullera $ 0.49         $ (0.16 )   $ 0.65 1    
                             
Weighted-average common shares outstanding:                        
Basic       50,384           50,384       50,384      
Diluted       51,605           51,605       51,605      
                             
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
Ended
  % of Net       Three Months
Ended
  % of Net
      August 27, 2016   Revenue   Adjustments   August 27, 2016   Revenue
Net revenue     $ 512,858      100.0 %   $ -     $ 512,858      100.0 %
Cost of sales             (366,737 )   (71.5 %)     (1,027 )         (365,710 )   (71.3 %)
Gross profit       146,121     28.5 %     (1,027 )     147,148 4   28.7 %
                             
Selling, general and administrative expenses   (97,692 )   (19.0 %)     (908 )     (96,784 )5   (18.8 %)
                             
Acquisition and transformation related costs   (55 )                        
Facility exit costs     2,862                          
Special charges, net       2,807     0.5 %     2,807       -     0.0 %
                             
Other income (expense), net       (956 )   (0.2 %)     (684 )     (272 )   (0.1 %)
Interest expense       (6,809 )   (1.3 %)     (74 )     (6,735 )   (1.3 %)
Income before income taxes and income from equity method investments      43,471     8.5 %     114       43,357     8.5 %
                             
Income taxes       (12,513 )   (2.4 %)     (507 )     (12,006 )   (2.3 %)
- Effective tax rate       28.8 %         -       27.7 %    
                             
Income from equity method investments       1,840     0.3 %     -       1,840     0.3 %
Net income including non-controlling interests     32,798     6.4 %     (393 )     33,191     6.5 %
                             
Net income attributable to non-controlling interests     (53 )   (0.0 %)     -       (53 )   (0.0 %)
Net income attributable to H.B. Fuller   $ 32,745     6.4 %   $ (393 )   $ 33,138     6.5 %
                             
Basic income (loss) per common share attributable to H.B. Fuller $ 0.65         $ (0.01 )   $ 0.66      
                             
Diluted income (loss) per common share attributable to H.B. Fullera $ 0.64         $ (0.01 )   $ 0.64 1    
                             
Weighted-average common shares outstanding:                        
Basic       50,261           50,261       50,261      
Diluted       51,453           51,453       51,453      
                             
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    
    Nine Months
Ended
  % of Net       Nine Months
Ended
  % of Net
    September 2, 2017   Revenue   Adjustments   September 2, 2017   Revenue
Net revenue   $ 1,627,843      100.0 %   $     $ 1,627,843      100.0 %
Cost of sales            (1,192,409 )   (73.3 %)        (13,953 )          (1,178,456 )   (72.4 %)
Gross profit     435,434     26.7 %     (13,953 )     449,387 4   27.6 %
                           
Selling, general and administrative expenses   (325,904 )   (20.0 %)     (18,841 )         (307,063 )5   (18.9 %)
                           
Other income (expense), net     661     0.0 %     -       661     0.0 %
Interest expense     (24,628 )   (1.5 %)     (213 )     (24,415 )   (1.5 %)
Income before income taxes and income from equity method investments      85,563     5.2 %     (33,007 )     118,570     7.2 %
                           
Income taxes     (26,178 )   (1.6 %)     8,796       (34,974 )   (2.1 %)
- Effective tax rate     30.6 %         26.6 %     29.5 %    
                           
Income from equity method investments     6,449     0.4 %           6,449     0.4 %
Net income including non-controlling interests   65,834     4.0 %     (24,211 )     90,045     5.5 %
                           
Net income attributable to non-controlling interests   (34 )   (0.0 %)           (34 )   (0.0 %)
Net income attributable to H.B. Fuller   $ 65,800     4.0 %   $ (24,211 )   $ 90,011     5.5 %
                           
Basic income per common share attributable to H.B. Fuller $ 1.31         $ (0.48 )   $ 1.79      
                           
Diluted income per common share attributable to H.B. Fullera $ 1.28         $ (0.47 )   $ 1.74 1    
                           
Weighted-average common shares outstanding:                        
Basic     50,374           50,374       50,374      
Diluted     51,584           51,584       51,584      
                           
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    
      Nine Months
Ended
  % of Net       Nine Months
Ended
  % of Net
      August 27, 2016   Revenue   Adjustments   August 27, 2016   Revenue
Net revenue     $ 1,519,698      100.0 %   $ -     $ 1,519,698      100.0 %
Cost of sales           (1,077,716 )   (70.9 %)         (3,899 )         (1,073,817 )   (70.7 %)
Gross profit       441,982     29.1 %     (3,899 )     445,881 4   29.3 %
                             
Selling, general and administrative expenses     (301,143 )   (19.8 %)     (1,823 )     (299,320 )5   (19.7 %)
                             
Acquisition and transformation related costs (242 )                          
Workforce reduction costs 1                            
Facility exit costs 2,455                            
Other related costs (190 )                          
Special charges       2,024     0.1 %     2,024       -     0.0 %
                             
Other income (expense), net       (7,603 )   (0.5 %)     (684 )     (6,919 )   (0.5 %)
Interest expense       (19,714 )   (1.3 %)     (222 )     (19,492 )   (1.3 %)
Income before income taxes and income from equity method investments      115,546     7.6 %     (4,604 )     120,150     7.9 %
                             
Income taxes       (35,563 )   (2.3 %)     496       (36,059 )   (2.4 %)
- Effective tax rate       30.8 %         10.8 %     30.0 %    
                             
Income from equity method investments       5,172     0.3 %     -       5,172     0.3 %
Net income including non-controlling interests   85,155     5.6 %     (4,108 )     89,263     5.9 %
                             
Net loss attributable to non-controlling interests   (161 )   (0.0 %)     -       (161 )   (0.0 %)
Net income attributable to H.B. Fuller     $ 84,994     5.6 %   $ (4,108 )   $ 89,102     5.9 %
                             
Basic income per common share attributable to H.B.Fuller $ 1.70         $ (0.08 )   $ 1.78 1    
                             
Diluted income per common share attributable to H.B. Fuller $ 1.66         $ (0.08 )   $ 1.74 1    
                             
Weighted-average common shares outstanding:                        
Basic       50,122           50,122       50,122      
Diluted       51,234           51,234       51,234      
                             
a  Income per share amounts may not add due to rounding
     


 
H.B. FULLER COMPANY AND SUBSIDIARIES
ADJUSTED EARNING PER SHARE RECONCILIATION
In thousands (unaudited)
                                     
    Three Months ended September 2, 2017   Three Months ended August 27, 2016
    Income               Income            
    before     Income   Diluted   before     Income   Diluted
    Income Tax     Taxes   EPS   Income Tax     Taxes   EPS
GAAP Earnings $ 34,400     $ 9,262   $ 0.49     $ 45,258     $ 12,513     $ 0.64  
                                     
Acquisition project costsb     7,375       2,578     0.09       725       23       0.01  
Tonsan call option agreementc     1,222       -     0.02       163       -       -  
Organizational Realignment d     1,492       661     0.02       (2,389 )     (772 )     (0.03 )
Othere     1,800       470     0.03       1,387       242       0.02  
Adjusted Earnings   $ 46,289     $ 12,971   $ 0.65     $ 45,144     $ 12,006     $ 0.64  
                                     
                                     
                                     
    Nine Months ended September 2, 2017   Nine Months ended August 27, 2016
    Income               Income            
    before     Income   Diluted   before     Income   Diluted
    Income Tax     Taxes   EPS   Income Tax     Taxes   EPS
GAAP Earnings $ 91,978     $ 26,178   $ 1.28     $ 120,557     $ 35,563     $ 1.66  
                                     
Acquisition project costsb     10,574       3,681     0.13       2,132       499       0.03  
Tonsan call option agreementc     (2,241 )     -     (0.04 )     (197 )     -       -  
Organizational Realignment d     18,946       4,114     0.29       567       (487 )     0.02  
Othere     5,728       1,001     0.09       2,102       484       0.03  
Adjusted Earnings   $ 124,985     $ 34,974   $ 1.74     $ 125,161     $ 36,059     $ 1.74  
                                     
                                     
b  Costs related to integrating and accounting for acquisitions
c  Non-cash costs related to accretion and revaluation of the Tonsan call option agreement
d  Costs related to Organizational Realignment to Support 2020 Strategic Plan, Construction Products facility combination, EIMEA restructuring announced November 2015, business integration and Special Charges
e  Costs related to Project ONE development costs and discrete tax items
 


 
H.B. FULLER COMPANY AND SUBSIDIARIES
SEGMENT FINANCIAL INFORMATION
In thousands (unaudited)
           
  Three Months Ended   Three Months Ended
  September 2, 2017   August 27, 2016
Net Revenue:          
Americas Adhesives $ 230,881     $ 198,957  
EIMEA   137,408       130,619  
Asia Pacific   62,972       57,488  
Construction Products   59,080       64,402  
Engineering Adhesives   72,528       61,392  
Total H.B. Fuller $ 562,869     $ 512,858  
Segment Operating Income:6             
Americas Adhesives $ 26,664     $ 31,900  
EIMEA   9,900       8,430  
Asia Pacific   2,822       2,510  
Construction Products   955       2,093  
Engineering Adhesives   4,591       3,496  
Corporate Transaction Costs   (4,751 )     -  
Total H.B. Fuller $ 40,181     $ 48,429  
Depreciation Expense:          
Americas Adhesives $ 3,401     $ 3,583  
EIMEA   3,955       3,689  
Asia Pacific   1,492       1,569  
Construction Products   1,966       1,327  
Engineering Adhesives   1,591       1,495  
Total H.B. Fuller $ 12,405     $ 11,663  
Amortization Expense:          
Americas Adhesives $ 1,799     $ 1,075  
EIMEA   1,138       1,143  
Asia Pacific   413       536  
Construction Products   2,300       2,327  
Engineering Adhesives   2,249       1,942  
Total H.B. Fuller $ 7,899     $ 7,023  
EBITDA:3          
Americas Adhesives $ 31,864     $ 36,558  
EIMEA   14,993       13,262  
Asia Pacific   4,727       4,615  
Construction Products   5,221       5,747  
Engineering Adhesives   8,431       6,933  
Corporate Transaction Costs   (4,751 )     -  
Total H.B. Fuller $ 60,485     $ 67,115  
Segment Operating Margin:6          
Americas Adhesives   11.5 %     16.0 %
EIMEA   7.2 %     6.5 %
Asia Pacific   4.5 %     4.4 %
Construction Products   1.6 %     3.3 %
Engineering Adhesives   6.3 %     5.7 %
Corporate Transaction Costs   NMP       -  
Total H.B. Fuller   7.1 %     9.4 %
EBITDA Margin:3          
Americas Adhesives   13.8 %     18.4 %
EIMEA   10.9 %     10.2 %
Asia Pacific   7.5 %     8.0 %
Construction Products   8.8 %     8.9 %
Engineering Adhesives   11.6 %     11.3 %
Corporate Transaction Costs   NMP       -  
Total H.B. Fuller   10.7 %     13.1 %
           
Adjusted EBITDA3          
Americas Adhesives $ 34,790     $ 36,470  
EIMEA   16,629       13,616  
Asia Pacific   5,110       5,195  
Construction Products   5,669       5,716  
Engineering Adhesives   10,030       7,732  
Total H.B. Fuller $         72,228     $          68,729  
Adjusted EBITDA Margin3          
Americas Adhesives   15.1 %     18.3 %
EIMEA   12.1 %     10.4 %
Asia Pacific   8.1 %     9.0 %
Construction Products   9.6 %     8.9 %
Engineering Adhesives   13.8 %     12.6 %
Total H.B. Fuller   12.8 %     13.4 %
           
           


 
H.B. FULLER COMPANY AND SUBSIDIARIES
SEGMENT FINANCIAL INFORMATION
In thousands (unaudited)
           
           
  Nine Months Ended   Nine Months Ended
  September 2, 2017   August 27, 2016
Net Revenue:          
Americas Adhesives $ 653,665     $ 588,422  
EIMEA   396,674       394,807  
Asia Pacific   190,083       171,467  
Construction Products   179,880       192,111  
Engineering Adhesives   207,541       172,891  
Total H.B. Fuller $ 1,627,843     $ 1,519,698  
           
Segment Operating Income:6             
Americas Adhesives $ 74,152     $ 94,043  
EIMEA   19,779       25,620  
Asia Pacific   9,452       9,299  
Construction Products   (1,581 )     5,412  
Engineering Adhesives   12,479       6,465  
Corporate Transaction Costs   (4,751 )     -  
Total H.B. Fuller $ 109,530     $ 140,839  
           
Depreciation Expense:          
Americas Adhesives $ 10,434     $ 10,852  
EIMEA   11,269       12,897  
Asia Pacific   4,883       4,495  
Construction Products   5,127       3,928  
Engineering Adhesives   4,662       4,558  
Total H.B. Fuller $ 36,375     $ 36,730  
           
Amortization Expense:          
Americas Adhesives $ 4,958     $ 3,111  
EIMEA   3,272       3,424  
Asia Pacific   1,293       1,127  
Construction Products   6,912       6,975  
Engineering Adhesives   6,693       5,872  
Total H.B. Fuller $ 23,128     $ 20,509  
           
EBITDA:3          
Americas Adhesives $ 89,544     $ 108,006  
EIMEA   34,320       41,941  
Asia Pacific   15,628       14,921  
Construction Products   10,458       16,315  
Engineering Adhesives   23,834       16,895  
Corporate Transaction Costs   (4,751 )     -  
Total H.B. Fuller $           169,033     $           198,078  
           
Segment Operating Margin:6          
Americas Adhesives   11.3 %     16.0 %
EIMEA   5.0 %     6.5 %
Asia Pacific   5.0 %     5.4 %
Construction Products   (0.9 %)     2.8 %
Engineering Adhesives   6.0 %     3.7 %
Corporate Transaction Costs   NMP       -  
Total H.B. Fuller   6.7 %     9.3 %
           
EBITDA Margin:3          
Americas Adhesives   13.7 %     18.4 %
EIMEA   8.7 %     10.6 %
Asia Pacific   8.2 %     8.7 %
Construction Products   5.8 %     8.5 %
Engineering Adhesives   11.5 %     9.8 %
Corporate Transaction Costs   NMP       -  
Total H.B. Fuller   10.4 %     13.0 %
           
Adjusted EBITDA3          
Americas Adhesives $ 98,431     $ 108,554  
EIMEA   44,756       42,873  
Asia Pacific   17,901       15,884  
Construction Products   17,004       16,506  
Engineering Adhesives   23,222       17,372  
Total H.B. Fuller $ 201,314     $ 201,189  
           
Adjusted EBITDA Margin3          
Americas Adhesives   15.1 %     18.4 %
EIMEA   11.3 %     10.9 %
Asia Pacific   9.4 %     9.3 %
Construction Products   9.5 %     8.6 %
Engineering Adhesives   11.2 %     10.0 %
Total H.B. Fuller   12.4 %     13.2 %
           
           


 
H.B. FULLER COMPANY AND SUBSIDIARIES
SEGMENT FINANCIAL INFORMATION
NET REVENUE GROWTH
(unaudited)
                       
Three Months Ended September 2, 2017
                       
  Americas
Adhesives
  EIMEA   Asia
Pacific
  Construction
Products
  Engineering
Adhesives
  Total HBF
Price 0.2 %   5.6 %   0.2 %   0.2 %   0.0 %   1.6 %
Volume 6.3 %   4.4 %   9.4 %   (8.9 %)   18.3 %   5.7 %
Mix (0.4 %)   (0.4 %)   0.8 %   0.6 %   (1.1 %)   (0.2 %)
Acquisition 10.6 %   0.0 %   0.0 %   0.0 %   0.7 %   4.2 %
Constant Currency Growth2    16.7 %   9.6 %   10.4 %   (8.1 %)   17.9 %   11.3 %
                       
F/X (0.7 %)   (4.4 %)   (0.9 %)   (0.2 %)   0.2 %   (1.5 %)
                       
  16.0 %   5.2 %   9.5 %   (8.3 %)   18.1 %   9.8 %
                       
                       
                       
Nine Months Ended September 2, 2017
                       
  Americas
Adhesives
  EIMEA   Asia
Pacific
  Construction
Products
  Engineering
Adhesives
  Total HBF
Price (0.8 %)   4.1 %   (1.0 %)   (0.1 %)   (1.9 %)   0.4 %
Volume 4.8 %   4.9 %   11.5 %   (6.3 %)   20.8 %   6.0 %
Mix (1.1 %)   0.0 %   (0.8 %)   (0.2 %)   (0.4 %)   (0.6 %)
Acquisition 8.7 %   0.0 %   3.9 %   0.0 %   4.5 %   4.3 %
Constant Currency Growth2 11.6 %   9.0 %   13.6 %   (6.6 %)            23.0 %   10.1 %
                       
F/X        (0.5 %)    (8.5 %)     (2.7 %)   0.2 %   (3.0 %)        (3.0 %)
                       
  11.1 %   0.5 %   10.9 %              (6.4 %)   20.0 %   7.1 %
                                   


 
H.B. FULLER COMPANY AND SUBSIDIARIES
REGULATION G RECONCILIATION
In thousands (unaudited)
           
  Three Months Ended   Three Months Ended
  September 2, 2017   August 27, 2016
Net income including non-controlling interests $ 25,139     $ 32,798  
           
Income from equity method investments   (2,170 )     (1,840 )
Income taxes   9,262       12,513  
Interest expense   8,100       6,809  
Other income (expense), net   (150 )     956  
Special charges   -       (2,807 )
Segment operating income6   40,181       48,429  
           
Depreciation expense   12,405       11,663  
Amortization expense   7,899       7,023  
EBITDA3 $ 60,485     $ 67,115  
           
EBITDA margin3   10.7 %     13.1 %
           
Restructuring, Acquisition and other costs   11,743       1,614  
Adjusted EBITDA3 $ 72,228     $ 68,729  
           
Adjusted EBITDA margin3   12.8 %     13.4 %
           
           
  Nine Months Ended   Nine Months Ended
  September 2, 2017   August 27, 2016
Net income including non-controlling interests    $ 65,834     $ 85,155  
               
Income from equity method investments   (6,449 )     (5,172 )
Income taxes   26,178       35,563  
Interest expense   24,628       19,714  
Other income (expense), net   (661 )     7,603  
Special charges   -       (2,024 )
Segment operating income6   109,530       140,839  
           
Depreciation expense   36,375       36,730  
Amortization expense   23,128       20,509  
EBITDA3 $             169,033     $ 198,078  
           
EBITDA margin3   10.4 %     13.0 %
           
Restructuring, Acquisition and other costs   32,281       3,111  
Adjusted EBITDA3 $ 201,314     $             201,189  
           
Adjusted EBITDA margin3   12.4 %     13.2 %

_________________________________
1 Adjusted diluted earnings per share (EPS) is a non-GAAP financial measure and excludes the following costs included on the adjusted earnings per share reconciliation table above: special charges related to the “business integration”; organizational realignment to support the 2020 strategic plan as announced in December 2016; restructuring in EIMEA related to operational efficiency improvement projects; combining Construction Products facilities in Illinois; Project ONE development costs; the closing of a facility in the Philippines; and integrating and accounting for past and present acquisitions. We have not included a reconciliation of adjusted EPS to EPS as part of our guidance because all potential adjustments are not known at this time.
2 Constant currency revenue is a non-GAAP financial measure defined as changes in revenue due to price, volume, mix and acquisitions and excludes revenue changes driven by foreign currency translation. The schedule above reconciles each component of net revenue growth.
3 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. We have not included a reconciliation of adjusted EBITDA to EBITDA or net income as part of our guidance because all of the potential adjustments are not known at this time.
4 Adjusted gross profit and adjusted gross profit margin are non-GAAP financial measures. Adjusted gross profit excludes costs associated with: organizational realignment to support the 2020 strategic plan as announced in December 2016; restructuring in EIMEA related to operational efficiency improvement projects; combining Construction Products facilities in Illinois; the closing of a facility in the Philippines; and integrating and accounting for past and present acquisitions. Adjusted gross profit margin is defined as adjusted gross profit divided by adjusted net revenue.
5 Adjusted SG&A expense is a non-GAAP financial measure which excludes costs associated with: organizational realignment to support the 2020 strategic plan as announced in December 2016; restructuring in EIMEA related to operational efficiency improvement projects; combining Construction Products facilities in Illinois; Project ONE development costs; and integrating and accounting for past and present acquisitions.
6 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

Primary Logo

H.B. Fuller Company