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FUL H.B. Fuller

Filed: 26 Jan 21, 9:22am

Exhibit 99.1

 ex_222476img001.jpg

Worldwide Headquarters  Barbara Doyle
1200 Willow Lake Boulevard Investor Relations contact
St. Paul, Minnesota 55110-5101 651-236-5023
  
NEWSJanuary 25, 2021

 

H.B. Fuller Reports Fourth Quarter and Fiscal Year 2020 Results

 

Fourth quarter net income of $41 million or $0.77 EPS; Adjusted EPS of $1.06 up 21% versus 2019

Fourth quarter adjusted EBITDA of $123 million up 9% versus 2019

Full Year debt paydown of $205 million surpassed $200 million target

 

ST. PAUL, Minn. – H.B. Fuller Company (NYSE: FUL) today reported financial results for the fourth quarter and fiscal year ended Nov. 28, 2020.

 

Items of Note for Fourth Quarter 2020

Fourth quarter revenue and earnings growth exceeded the company’s guidance, driven by strong operational execution, higher sales, and benefits from restructuring efficiencies.

Total organic revenue increased 5% compared with last year, with positive year-over-year growth in all three global business units (GBUs), including double-digit growth in Electronics, Recreational Vehicles, Woodworking, Panels, Flexible Packaging, and Tape and Labels.

Increased sales and restructuring efficiencies resulted in net income of $41 million. Adjusted EBITDA of $123 million and adjusted EPS of $1.06 increased 9% and 21%, respectively, versus last year.

Q4 cash flow from operations increased 27% versus the same period in 2019, driven by sales growth, restructuring efficiencies and working capital improvements.

Full year debt paydown of $205 million exceeded the company’s $200 million debt paydown target set at the beginning of the year.

Achieved restructuring savings of $10 million in the quarter, which resulted in cumulative savings of $30 million for fiscal year 2020, related to our realignment to three GBUs.

 

1

 

2021 Planning Assumptions

H.B. Fuller is planning for on-going business recovery in 2021 in an environment that continues to be impacted by COVID-19-related restrictions and corresponding recessionary impacts. The company is providing the following planning assumptions for fiscal year 2021, which are based on current economic views and assumptions for global commercial activity:

Base case outlook for low to mid-single digit organic revenue growth and approximately 10% adjusted EBITDA growth for fiscal 2021, supported by share gains, on-going recovery in global industrial production, and benefits from the company’s internal operational improvement projects.

Raw material costs are expected to rise as the year progresses driven by increasing industrial demand. New product formulations and pricing are expected to offset raw material increases.

Improved margins and reduced working capital requirements will enable the company to continue to drive strong cash flow and pay down an additional $200 million of debt in 2021, after dividends and approximately $95 million of capital investments.

The company’s core tax rate, excluding the impact of discrete items, is anticipated to be between 26% and 29%, and full year interest expense is estimated to be approximately $70 million.

 

Summary of Fourth Quarter 2020 Results

Net revenue of $778 million increased 5.2% compared with the fourth quarter of 2019. Foreign currency exchange rates favorably impacted revenue by 0.5%. Organic revenue, which excludes impacts from foreign currency, mergers, acquisitions and divestitures, increased 4.7% versus last year, with growth in all three GBUs, including double-digit growth in Electronics, Recreational Vehicles, Woodworking, Panels, Flexible Packaging, and Tape and Labels.

 

Gross profit margin was 27.5%. Adjusted gross profit margin, also 27.5%, was down 10 basis points versus last year as higher volume was offset by higher variable compensation. Selling, General and Administrative (SG&A) expense was $140 million. Adjusted SG&A expense of $133 million was down 100 basis points as a percent of revenue versus last year, reflecting savings related to the business reorganization to our three GBUs and lower travel expense which was partially offset by higher variable compensation associated with strong fourth quarter results.

 

As a result of these factors, net income attributable to H.B. Fuller in the quarter was $41 million, or $0.77 per diluted share. Adjusted net income attributable to H.B. Fuller was $56 million, or $1.06 of adjusted EPS, up more than 20% compared with $46 million, or $0.88 of adjusted EPS in the prior year. Adjusted EBITDA of $123 million increased 9% compared with $112 million in the same period last year, and adjusted EBITDA margin of 15.8% improved 60 basis points versus prior year.

 

2

 

“H.B. Fuller delivered strong results in the quarter with revenue and earnings growth that exceeded our outlook, and cash flow that enabled us to exceed our debt paydown target,” said Jim Owens, H.B. Fuller president and chief executive officer. “Our team remained focused on superior operational execution to support the dynamic needs of our customers in a world transformed by the COVID-19 pandemic. We leveraged our competitive advantages and realized the benefits of actions taken to realign our organization and enhance operational agility. As a result, we successfully capitalized on share gains and strengthening business activity in our end markets, including strong demand for our adhesives for consumable goods, electronics, automotive, recreational vehicles, and other durable goods.”

 

Full Year 2020 Summary

Net revenue for fiscal 2020 of $2,790 million decreased 3.7% compared with fiscal 2019. Foreign currency exchange rates unfavorably impacted full year revenues by 1.6%, and the divestiture of the surfactants, thickeners and dispersants business negatively impacted revenues by 0.5%. Full year organic revenue decreased by 1.6% year-over-year, due to the impact from the COVID-19 pandemic on Construction Adhesives and Engineering Adhesives global demand offsetting sales growth in Hygiene, Health and Consumables Adhesives.

 

Full year gross profit margin was 27.1%. Adjusted gross profit margin of 27.3% decreased 80 basis points versus last year on lower sales and unfavorable business mix related to impacts from COVID-19, partially offset by favorable raw material costs. Net income attributable to H.B. Fuller for fiscal 2020 was $124 million, or $2.36 per diluted share. Adjusted net income attributable to H.B. Fuller was $149 million, or $2.84 per diluted share, compared with $154 million, or $2.96 per diluted share, in fiscal 2019. Adjusted EBITDA for full year 2020 was $407 million compared with $432 million in 2019.

 

3

 

Key Balance Sheet and Cash Flow Items

At the end of the fourth quarter of 2020, the company had cash on hand of $101 million and total debt equal to $1,774 million. This compares to cash and debt levels equal to $112 million and $1,979 million, respectively, at the end of the fourth quarter of 2019. Cash flow from operations for the full year increased 23% to $332 million from $269 million in fiscal 2019, driven by improved working capital management. Capital expenditures were $87 million in 2020 compared with $62 million in fiscal 2019, reflecting timing of capital projects and expenditures related to growth initiatives. Capital expenditures were in line with the company’s planned capital investment.

 

“In 2020, we demonstrated the resilience of our business strategy and cash flow generation,” said Owens. “The breadth of our global resources and our team’s commitment to being first and fastest allowed us to meet our customers’ needs with extraordinary collaboration and unwavering focus, while ensuring the health and safety of our employees during this challenging period. We exited this unprecedented year as a much stronger company. In 2021, we will build on this momentum, capture new revenue opportunities, and realize additional benefits from our ongoing operational improvement plans. Throughout the COVID-19 pandemic, adhesives have proven their enduring importance in the supply chain for essential goods around the world. As the leader in adhesive innovation for hygiene, health, consumer products and advanced adhesive applications, H.B. Fuller is well-positioned to continue to create value for shareholders in 2021 and beyond.”

 

Conference Call 

The Company will host an investor conference call to discuss fourth quarter results on Tuesday, January 26, 2021, at 10:30 a.m. EDT. The conference call audio and accompanying presentation slides will be available to interested parties via a simultaneous webcast, and may be accessed from the company's website at https://investors.hbfuller.com/calendar. Participants should access the webcast prior to the start of the call to register for the event and install and test any necessary software. The webcast and presentation will be archived on the Company’s website. A telephone replay of the conference call will be available approximately 2 hours after the conclusion of the call, through Feb. 2, 2021. To access the telephone replay dial (800) 585-8367 or (416) 621-4642 and enter Conference ID 8756909.

 

4

 

Regulation G

The information presented in this earnings release regarding segment 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 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 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 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 2021 Planning Assumptions, which the company cannot reconcile to forward-looking GAAP results without unreasonable effort.

 

About H.B. Fuller

Since 1887, H.B. Fuller has been a leading global adhesives provider focusing on perfecting adhesives, sealants and other specialty chemical products to improve products and lives. With fiscal 2020 net revenue of $2.8 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, aerospace, clean energy, packaging, construction, woodworking, general industries and other consumer businesses. And, our promise to our people connects them with opportunities to innovate and thrive. For more information, visit us at https://www.hbfuller.com/.

 

5

 

Safe Harbor for Forward-Looking Statements

Certain statements in this press release 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 consequences of the COVID-19 outbreak and other pandemics; the substantial amount of debt we have incurred 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 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, cost savings and operating efficiencies from the business realignment and the company’s other restructuring initiatives within the expected time frames or at all; the ability to effectively implement Project ONE; political and economic conditions; product demand; competitive products and pricing; 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. Many of the foregoing risks and uncertainties are, and will be, exacerbated by COVID-19 and any worsening of the global business and economic environment as a result.

 

Further information about the various risks and uncertainties can be found in the company’s SEC 10-K filings. 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, managements’ best estimate of these changes as well as changes in other factors have been included.

 

6

 

H.B. FULLER COMPANY AND SUBSIDIARIES

CONSOLIDATED FINANCIAL INFORMATION

In thousands, except per share amounts (unaudited)

 

  

13 Weeks Ended

  

Percent of

  

13 Weeks Ended

  

Percent of

 
  

November 28, 2020

  

Net Revenue

  

November 30, 2019

  

Net Revenue

 

Net revenue

 $777,640   100.0%  $739,106   100.0% 

Cost of sales

  (563,998)  (72.5%)  (537,889)  (72.8%)

Gross profit

  213,642   27.5%   201,217   27.2% 
                 

Selling, general and administrative expenses

  (139,712)  (18.0%)  (148,521)  (20.1%)

Other income, net

  3,658   0.5%   8,830   1.2% 

Interest expense

  (22,179)  (2.9%)  (23,933)  (3.2%)

Interest income

  2,656   0.3%   2,987   0.4% 

Income before income taxes and income from equity method investments

  58,065   7.5%   40,580   5.5% 
                 

Income taxes

  (19,727)  (2.5%)  (10,506)  (1.4%)
                 

Income from equity method investments

  2,285   0.3%   2,151   0.3% 

Net income including non-controlling interest

  40,623   5.2%   32,225   4.4% 
                 

Net income attributable to non-controlling interest

  (19)  (0.0%)  (11)  (0.0%)

Net income attributable to H.B. Fuller

 $40,604   5.2%  $32,214   4.4% 
                 

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

 $0.78      $0.63     

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

 $0.77      $0.61     
                 

Weighted-average common shares outstanding:

                

Basic

  52,276       51,089     

Diluted

  52,879       52,423     
                 

Dividends declared per common share

 $0.163      $0.160     

 

 

 

Selected Balance Sheet Information (subject to change prior to filing of the Company's Annual Report on Form 10-K)

 

  

November 28, 2020

  

November 30, 2019

  

December 1, 2018

 

Cash & cash equivalents

 $100,534  $112,191  $150,793 

Trade accounts receivable, net

  514,916   493,181   495,008 

Inventories

  323,213   337,267   348,461 

Trade payables

  316,460   298,869   273,378 

Total assets

  4,036,704   3,985,734   4,176,314 

Total debt

  1,773,910   1,979,116   2,247,527 

 

7

 

H.B. FULLER COMPANY AND SUBSIDIARIES

CONSOLIDATED FINANCIAL INFORMATION

In thousands, except per share amounts (unaudited)

 

  

52 Weeks Ended

  

Percent of

  

52 Weeks Ended

  

Percent of

 
  

November 28, 2020

  

Net Revenue

  

November 30, 2019

  

Net Revenue

 

Net revenue

 $2,790,269   100.0%  $2,897,000   100.0% 

Cost of sales

  (2,033,620)  (72.9%)  (2,090,078)  (72.1%)

Gross profit

  756,649   27.1%   806,922   27.9% 
                 

Selling, general and administrative expenses

  (538,332)  (19.3%)  (580,928)  (20.1%)
                 

Other income, net

  15,398   0.6%   37,943   1.3% 

Interest expense

  (86,776)  (3.1%)  (103,287)  (3.6%)

Interest income

  11,417   0.4%   12,178   0.4% 

Income before income taxes and income from equity method investments

  158,356   5.7%   172,828   6.0% 
                 

Income taxes

  (41,921)  (1.5%)  (49,408)  (1.7%)
                 

Income from equity method investments

  7,353   0.3%   7,424   0.3% 

Net income including non-controlling interest

  123,788   4.4%   130,844   4.5% 
                 

Net income attributable to non-controlling interest

  (69)  (0.0%)  (27)  (0.0%)

Net income attributable to H.B. Fuller

 $123,719   4.4%  $130,817   4.5% 
                 
                 

Basic income per common share attributable to H.B. Fuller 1

 $2.38      $2.57     

Diluted income per common share attributable to H.B. Fuller 1

 $2.36      $2.52     
                 

Weighted-average common shares outstanding:

                

Basic

  52,039       50,920     

Diluted

  52,520       51,983     
                 

Dividends declared per common share

 $0.648      $0.635     

 

1 Income per share amounts may not add due to rounding

 

8

 

H.B. FULLER COMPANY AND SUBSIDIARIES

REGULATION G RECONCILIATION

In thousands, except per share amounts (unaudited)

 

  

13 Weeks Ended

  

52 Weeks Ended

 
  

November 28,

2020

  

November 30,

2019

  

November 28,

2020

  

November 30,

2019

 
                 

Net income attributable to H.B. Fuller

 $40,604  $32,214  $123,719  $130,817 
                 

Adjustments:

                

Acquisition project costs

  999   45   (162)  2,204 

Organizational realignment

  5,250   6,535   11,449   7,647 

Royal restructuring and integration

  1,894   1,957   7,396   787 

Tax reform

  -   76   (26)  132 

Project One

  1,165   937   4,265   4,115 

Other 2

  6,110   4,520   2,268   7,964 

Adjusted net income attributable to H.B. Fuller 3

  56,022   46,284   148,909   153,666 
                 

Add:

                

Interest expense

  19,969   23,933   84,619   103,287 

Interest income

  (2,656)  (2,987)  (11,417)  (12,178)

Income taxes

  14,122   10,246   46,456   47,465 

Depreciation and Amortization expense 4

  35,249   34,702   138,242   140,105 

Adjusted EBITDA 3

  122,706   112,178   406,809   432,345 
                 

Diluted Shares

  52,879   52,423   52,520   51,983 

Adjusted diluted income per common share attributable to H.B. Fuller 3

 $1.06  $0.88  $2.84  $2.96 

Revenue

 $777,640  $739,106  $2,790,269  $2,897,000 

Adjusted EBITDA margin 3

  15.8%   15.2%   14.6%   14.9% 

 

2 Primarily related to discrete tax expense in the quarter ended November 28, 2020 associated with various foreign tax matters and audit settlements. The full year amount includes discrete tax expense related to various foreign matters and audit settlements partially offset by discrete tax benefit related to the revaluation of cross-currency swap agreements due to appreciation of the Euro versus US dollar.

 

3 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.

 

4 Depreciation and amortization expense added back for EBITDA is adjusted for amounts already included in Adjusted net income attributable to H.B. Fuller totaling ($67) and $34 for the three months ended November 28, 2020 and November 30, 2019, respectively and ($575) and ($1,101) for the twelve months ended November 28, 2020 and November 30, 2019, respectively.

 

9

 

H.B. FULLER COMPANY AND SUBSIDIARIES

SEGMENT FINANCIAL INFORMATION

In thousands (unaudited)

 

  

13 Weeks Ended

  

52 Weeks Ended

 
  

November 28, 2020

  

November 30, 2019

  

November 28, 2020

  

November 30, 2019

 

Net Revenue:

                

Hygiene, Health and Consumable Adhesives

 $355,413  $342,120  $1,332,786  $1,328,286 

Engineering Adhesives

  327,273   303,393   1,088,313   1,158,403 

Construction Adhesives

  94,954   93,593   369,170   396,580 

Corporate unallocated

  -   -   -   13,731 

Total H.B. Fuller

 $777,640  $739,106  $2,790,269  $2,897,000 
                 

Segment Operating Income:

                

Hygiene, Health and Consumable Adhesives

 $41,233  $30,385  $130,789  $115,961 

Engineering Adhesives

  38,588   38,153   103,974   136,299 

Construction Adhesives

  1,712   2,411   11,148   16,657 

Corporate unallocated

  (7,603)  (18,253)  (27,594)  (42,923)

Total H.B. Fuller

 $73,930  $52,696  $218,317  $225,994 
                 

Adjusted EBITDA 3

                

Hygiene, Health and Consumable Adhesives

 $54,533  $42,985  $182,448  $166,685 

Engineering Adhesives

  54,997   53,332   167,915   197,853 

Construction Adhesives

  11,799   12,329   51,692   56,514 

Corporate unallocated

  1,377   3,532   4,754   11,293 

Total H.B. Fuller

 $122,706  $112,178  $406,809  $432,345 
                 

Adjusted EBITDA Margin 3

                

Hygiene, Health and Consumable Adhesives

  15.3%   12.6%   13.7%   12.5% 

Engineering Adhesives

  16.8%   17.6%   15.4%   17.1% 

Construction Adhesives

  12.4%   13.2%   14.0%   14.3% 

Corporate unallocated

 

NMP

  

NMP

  

NMP

  

NMP

 

Total H.B. Fuller

  15.8%   15.2%   14.6%   14.9% 
                 
NMP = non-meaningful percentage                

 

10

 

H.B. FULLER COMPANY AND SUBSIDIARIES

REGULATION G RECONCILIATION

In thousands, except per share amounts (unaudited)

 

  

13 Weeks Ended

  

52 Weeks Ended

 
  

November 28,

2020

  

November 30,

2019

  

November 28,

2020

  

November 30,

2019

 

Income before income taxes and income from equity method investments

 $58,065  $40,580  $158,356  $172,828 
                 

Adjustments:

                

Acquisition project costs

  1,082   63   (502)  2,703 

Organizational realignment

  5,685   9,280   13,971   10,168 

Royal restructuring and integration

  2,051   2,327   9,430   713 

Tax reform

  -   106   (35)  180 

Project One

  1,260   1,293   5,402   5,275 

Other

  (264)  741   1,459   1,867 

Adjusted income before income taxes and income from equity method investments 5

 $67,879  $54,390  $188,081  $193,734 

 

5 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)

 

  

13 Weeks Ended

  

52 Weeks Ended

 
  

November 28,

2020

  

November 30,

2019

  

November 28,

2020

  

November 30,

2019

 

Income Taxes

 $(19,727) $(10,506) $(41,921) $(49,408)
                 

Adjustments:

                

Acquisition project costs

  (82)  (17)  340   (500)

Organizational realignment

  (435)  (2,746)  (2,522)  (2,521)

Royal restructuring and integration

  (157)  (371)  (2,034)  74 

Tax reform

  -   (29)  9   (49)

Project One

  (95)  (356)  (1,138)  (1,159)

Other 2

  6,374   3,779   810   6,098 

Adjusted income taxes 6

 $(14,122) $(10,246) $(46,456) $(47,465)
                 

Adjusted income before income taxes and income from equity method investments

 $67,879  $54,390  $188,081  $193,734 

Adjusted effective income tax rate 6

  20.8%   18.8%   24.7%   24.5% 

 

2 Primarily related to discrete tax expense in the quarter ended November 28, 2020 associated with various foreign tax matters and audit settlements. The full year amount includes discrete tax expense related to various foreign matters and audit settlements partially offset by discrete tax benefit related to the revaluation of cross-currency swap agreements due to appreciation of the Euro versus US dollar. 

 

6 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.

 

11

 

H.B. FULLER COMPANY AND SUBSIDIARIES

REGULATION G RECONCILIATION

In thousands (unaudited)

 

  

13 Weeks Ended

  

52 Weeks Ended

 
  

November 28,

2020

  

November 30,

2019

  

November 28,

2020

  

November 30,

2019

 
                 

Net revenue

 $777,640  $739,106  $2,790,269  $2,897,000 
                 

Gross profit

 $213,642  $201,217  $756,649  $806,922 

Gross profit margin

  27.5%   27.2%   27.1%   27.9% 
                 

Adjustments:

                

Acquisition project costs

  85   -   85   - 

Organizational realignment

  219   506   166   381 

Royal restructuring and integration

  953   2,065   3,682   6,316 

Other

  (821)  199   443   191 

Adjusted gross profit 7

 $214,078  $203,987  $761,025  $813,810 

Adjusted gross profit margin 7

  27.5%   27.6%   27.3%   28.1% 

 

7 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)

 

  

13 Weeks Ended

  

52 Weeks Ended

 
  

November 28,

2020

  

November 30,

2019

  

November 28,

2020

  

November 30,

2019

 
                 

Selling, general and administrative expenses

 $(139,712) $(148,521) $(538,332) $(580,928)
                 

Adjustments:

                

Acquisition project costs

  997   63   (587)  2,703 

Organizational realignment

  5,466   8,746   13,809   13,300 

Royal restructuring and integration

  1,125   4,551   5,851   15,296 

Tax reform

  -   105   (35)  180 

Project ONE

  1,260   1,293   5,402   5,275 

Other

  (1,682)  363   (1,222)  1,497 

Adjusted selling, general and administrative expenses 8

 $(132,546) $(133,400) $(515,114) $(542,677)

 

8 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.

 

12

 

H.B. FULLER COMPANY AND SUBSIDIARIES

REGULATION G RECONCILIATION

In thousands (unaudited)

 

13 Weeks Ended:

 

Hygiene, Health

and Consumable

  

Engineering

  

Construction

      

Corporate

  

H.B. Fuller

 

November 28, 2020

 

Adhesives

  

Adhesives

  

Adhesives

  

Total

  

Unallocated

  

Consolidated

 

Net income attributable to H.B. Fuller

 $43,140  $40,046  $2,894  $86,080  $(45,476) $40,604 

Adjustments:

                        

Acquisition project costs

  -   -   -   -   999   999 

Organizational realignment

  -   -   -   -   5,250   5,250 

Royal Restructuring

  -   -   -   -   1,894   1,894 

Project One

  -   -   -   -   1,165   1,165 

Other

  -   -   -   -   6,110   6,110 

Adjusted net income attributable to H.B. Fuller 3

  43,140   40,046   2,894   86,080   (30,058)  56,022 

Add:

                        

Interest expense

  -   -   -   -   19,969   19,969 

Interest income

  -   -   -   -   (2,656)  (2,656)

Income taxes

  -   -   -   -   14,122   14,122 

Depreciation and amortization expense

  11,393   14,951   8,905   35,249   -   35,249 

Adjusted EBITDA 3

 $54,533  $54,997  $11,799  $121,329  $1,377  $122,706 

Revenue

  355,413   327,273   94,954   777,640   -   777,640 

Adjusted EBITDA Margin 3

  15.3%   16.8%   12.4%   15.6%  

NMP

   15.8% 

 

52 Weeks Ended:

 

Hygiene, Health

and Consumable

  

Engineering

  

Construction

      

Corporate

  

H.B. Fuller

 

November 28, 2020

 

Adhesives

  

Adhesives

  

Adhesives

  

Total

  

Unallocated

  

Consolidated

 

Net income attributable to H.B. Fuller

 $138,119  $109,813  $15,881  $263,813  $(140,094) $123,719 

Adjustments:

                        

Acquisition project costs

  -   -   -   -   (162)  (162)

Organizational realignment

  -   -   -   -   11,449   11,449 

Royal Restructuring

  -   -   -   -   7,396   7,396 

Tax reform

  -   -   -   -   (26)  (26)

Project One

  -   -   -   -   4,265   4,265 

Other

  -   -   -   -   2,268   2,268 

Adjusted NI attributable to H.B. Fuller 3

  138,119   109,813   15,881   263,813   (114,904)  148,909 

Add:

                        

Interest expense

  -   -   -   -   84,619   84,619 

Interest income

  -   -   -   -   (11,417)  (11,417)

Income taxes

  -   -   -   -   46,456   46,456 

Depreciation and amortization expense

  44,329   58,102   35,811   138,242   -   138,242 

Adjusted EBITDA 3

 $182,448  $167,915  $51,692  $402,055  $4,754  $406,809 

Revenue

  1,332,786   1,088,313   369,170   2,790,269   -   2,790,269 

Adjusted EBITDA Margin 3

  13.7%   15.4%   14.0%   14.4%  

NMP

   14.6% 

 

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

 

13

 

H.B. FULLER COMPANY AND SUBSIDIARIES

  

REGULATION G RECONCILIATION

  

In thousands (unaudited)

  

 

13 Weeks Ended:

 

Hygiene, Health

and Consumable

  

Engineering

  

Construction

      

Corporate

  

H.B. Fuller

 

November 30, 2019

 

Adhesives

  

Adhesives

  

Adhesives

  

Total

  

Unallocated

  

Consolidated

 

Net income attributable to H.B. Fuller

 $31,670  $39,202  $3,435  $74,307  $(42,093) $32,214 

Adjustments:

                        

Acquisition project costs

  -   -   -   -   45   45 

Organizational realignment

  -   -   -   -   6,535   6,535 

Royal Restructuring

  -   -   -   -   1,957   1,957 

Tax reform

  -   -   -   -   76   76 

Project One

  -   -   -   -   937   937 

Other

  -   -   -   -   4,520   4,520 

Adjusted net income attributable to H.B. Fuller 3

  31,670   39,202   3,435   74,307   (28,023)  46,284 

Add:

                        

Interest expense

  -   -   -   -   23,933   23,933 

Interest income

  -   -   -   -   (2,987)  (2,987)

Income taxes

  -   -   -   -   10,246   10,246 

Depreciation and amortization expense

  11,315   14,130   8,894   34,339   363   34,702 

Adjusted EBITDA 3

 $42,985  $53,332  $12,329  $108,646  $3,532  $112,178 

Revenue

  342,120   303,393   93,593   739,106   -   739,106 

Adjusted EBITDA Margin 3

  12.6%   17.6%   13.2%   14.7%  

NMP

   15.2% 

 

 

52 Weeks Ended:

 

Hygiene, Health

and Consumable

  

Engineering

  

Construction

      

Corporate

  

H.B. Fuller

 

November 30, 2019

 

Adhesives

  

Adhesives

  

Adhesives

  

Total

  

Unallocated

  

Consolidated

 

Net income attributable to H.B. Fuller

 $121,237  $140,678  $20,663  $282,578  $(151,761) $130,817 

Adjustments:

                        

Acquisition project costs

  -   -   -   -   2,204   2,204 

Organizational realignment

  -   -   -   -   7,647   7,647 

Royal Restructuring

  -   -   -   -   787   787 

Tax reform

  -   -   -   -   132   132 

Project One

  -   -   -   -   4,115   4,115 

Other

  -   -   -   -   7,964   7,964 

Adjusted net income attributable to H.B. Fuller 3

  121,237   140,678   20,663   282,578   (128,912)  153,666 

Add:

                        

Interest expense

  -   -   -   -   103,287   103,287 

Interest income

  -   -   -   -   (12,178)  (12,178)

Income taxes

  -   -   -   -   47,465   47,465 

Depreciation and amortization expense

  45,448   57,175   35,851   138,474   1,631   140,105 

Adjusted EBITDA 3

 $166,685  $197,853  $56,514  $421,052  $11,293  $432,345 

Revenue

  1,328,286   1,158,403   396,580   2,883,269   13,731   2,897,000 

Adjusted EBITDA Margin 3

  12.5%   17.1%   14.3%   14.6%  

NMP

   14.9% 

 

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

  

 

14

 

H.B. FULLER COMPANY AND SUBSIDIARIES

SEGMENT FINANCIAL INFORMATION

NET REVENUE GROWTH (DECLINE)

(unaudited)

 

  

13 Weeks Ended

  

52 Weeks Ended

 
  

November 28, 2020

 

Price

  (0.3%)  (0.6%)

Volume

  5.0%   (1.0%)

Organic Growth (Decline)

  4.7%   (1.6%)

M&A

  0.0%   (0.5%)

F/X

  0.5%   (1.6%)

Total H.B. Fuller Net Revenue Growth (Decline)

  5.2%   (3.7%)

 

 

 

  

13 Weeks Ended

  

52 Weeks Ended

 
  

November 28, 2020

  

November 28, 2020

 
  

Net Revenue

  

F/X

  

Organic

Growth

(Decline)

  

Net Revenue

  

F/X

  

Organic

Growth

(Decline)

 

Hygiene, Health and Consumable Adhesives

  3.9%   (1.1%)  5.0%   0.3%   (3.0%)  3.3% 

Engineering Adhesives

  7.9%   2.3%   5.6%   (6.1%)  (0.6%)  (5.5%)

Construction Adhesives

  1.5%   0.7%   0.8%   (6.9%)  (0.2%)  (6.7%)

Unallocated

 

NMP

   0.0%   0.0%  

NMP

   0.0%   0.0% 

Total H.B. Fuller

  5.2%   0.5%   4.7%   (3.7%)  (1.6%)  (1.6%)

 

NMP = non-meaningful percentage

 

15

 

CONSOLIDATED BALANCE SHEETS

H.B. Fuller Company and Subsidiaries

(In thousands, except share and per share amounts)

 

  

Fiscal Year Ended

 
  

November 28,

  

November 30,

 
  

2020

  

2019

 

Assets

        

Current assets:

        

Cash and cash equivalents

 $100,534  $112,191 

Trade receivables, net

  514,916   493,181 

Inventories

  323,213   337,267 

Other current assets

  81,113   90,723 

Total current assets

  1,019,776   1,033,362 
         

Property, plant and equipment, net

  670,744   629,813 

Goodwill

  1,312,003   1,281,808 

Other intangibles, net

  755,968   799,399 

Other assets

  278,213   241,352 

Total assets

 $4,036,704  $3,985,734 
         

Liabilities, non-controlling interest and total equity

        

Current liabilities:

        

Notes payable

 $16,925  $15,732 

Current maturities of long-term debt

  -   65,000 

Trade payables

  316,460   298,869 

Accrued compensation

  83,598   78,582 

Income taxes payable

  29,173   23,229 

Other accrued expenses

  83,976   60,745 

Total current liabilities

  530,132   542,157 
         

Long-term debt, net of current maturities

  1,756,985   1,898,384 

Accrued pension liabilities

  88,806   80,214 

Other liabilities

  278,919   242,190 

Total liabilities

  2,654,842   2,762,945 
         
         

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 – 51,906,663 and 51,241,190, for 2020 and 2019, respectively

  51,907   51,241 

Additional paid-in capital

  157,867   130,295 

Retained earnings

  1,474,406   1,384,411 

Accumulated other comprehensive loss

  (302,859)  (343,600)

Total H.B. Fuller stockholders' equity

  1,381,321   1,222,347 

Non-controlling interest

  541   442 

Total equity

  1,381,862   1,222,789 

Total liabilities, non-controlling interest and total equity

 $4,036,704  $3,985,734 

 

16

 

CONSOLIDATED STATEMENTS of CASH FLOWS

H.B. Fuller Company and Subsidiaries

(In thousands)

 

  

Fiscal Years

 
  

November 28,

  

November 30,

  

December 1,

 
  

2020

  

2019

  

2018

 

Cash flows from operating activities:

            

Net income including non-controlling interests

 $123,788  $130,844  $171,232 

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

            

Depreciation

  68,226   67,115   68,636 

Amortization

  70,591   74,091   76,490 

Deferred income taxes

  (24,730)  (29,028)  (47,446)

Income from equity method investments, net of dividends received

  375   (39)  (3,172)

Gain on sale of assets

  86   (24,104)  (3,050)

Share-based compensation

  16,914   24,003   17,113 

Pension and other postretirement benefit plan contributions

  (5,479)  (8,063)  (6,558)

Pension and other postretirement benefit plan income

  (14,763)  (11,300)  (14,332)

Non-cash (gain) loss on mark to market adjustment related to contingent consideration liability

  800   -   1,126 

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

         

Trade receivables, net

  (14,842)  (25,632)  (39,429)

Inventories

  15,708   19,584   (17,068)

Other assets

  38,412   (18,316)  (35,184)

Trade payables

  23,130   11,553   25,401 

Accrued compensation

  2,588   1,342   (306)

Other accrued expenses

  16,361   (1,882)  (4,282)

Income taxes payable

  5,511   21,043   4,048 

Other liabilities

  24,566   448   (21,429)

Other

  (15,683)  37,518   81,522 

Net cash provided by operating activities

  331,559   269,177   253,312 

Cash flows from investing activities:

            

Purchased property, plant and equipment

  (87,288)  (61,982)  (68,263)

Purchased businesses, net of cash acquired

  (9,500)  (8,292)  3,499 

Purchased businesses assets

  (5,623)  -   - 

Purchased business remaining equity

  -   (9,870)  - 

Proceeds from sale of property, plant and equipment

  1,506   11,133   2,923 

Proceeds from sale of business

  -   70,293   - 

Cash received from government grant

  -   8,881   - 

Cash outflow related to government grant

  (8,555)  (2,758)  - 

Net cash (used in) provided by investing activities

  (109,460)  7,405   (61,841)

Cash flows from financing activities:

            

Proceeds from issuance of long-term debt

  300,000   -   - 

Repayment of long-term debt

  (518,000)  (288,600)  (185,750)

Net proceeds from (payments on) notes payable

  4,128   1,662   (13,276)

Dividends paid

  (33,461)  (32,357)  (31,124)

Contingent consideration payment

  (767)  (3,610)  - 

Proceeds from stock options exercised

  12,321   10,885   6,237 

Repurchases of common stock

  (3,432)  (3,026)  (4,688)

Net cash used in financing activities

  (239,211)  (315,046)  (228,601)

Effect of exchange rate changes on cash and cash equivalents

  5,455   (138)  (6,475)

Net change in cash and cash equivalents

  (11,657)  (38,602)  (43,605)

Cash and cash equivalents at beginning of year

  112,191   150,793   194,398 

Cash and cash equivalents at end of year

 $100,534  $112,191  $150,793 

 

17