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H.B. Fuller Reports First Quarter 2024 Results

Reported EPS (diluted) of $0.55; Adjusted EPS (diluted) of $0.67, up 22% year-on-year

Net income of $31 million; Adjusted EBITDA of $123 million up 12% and Adjusted EBITDA margin up 160 basis points year-on-year

Cash flow from operations increased $42 million year-on-year

H.B. Fuller Company (NYSE: FUL) today reported financial results for its first quarter that ended March 2, 2024.

First Quarter 2024 Noteworthy Items:

  • Net revenue was $810 million, up slightly year-on-year; organic revenue decreased modestly year-on-year due primarily to anticipated pricing changes;
  • Gross profit margin was 29.5%; adjusted gross profit margin was 30.1%, up 320 basis points year-on-year, driven principally by favorable net pricing and raw material cost impact and restructuring benefits;
  • Net income was $31 million; adjusted EBITDA was $123 million, up 12% year-on-year; adjusted EBITDA margin expanded 160 basis points year-on-year to 15.2%;
  • Reported EPS (diluted) was $0.55; adjusted EPS (diluted) was $0.67, up 22% versus the prior year, driven by strong operating income growth;
  • Net working capital, as a percentage of annualized net revenue, decreased 270 basis points year-on-year from 19.8% to 17.1%;
  • Cash flow from operations increased $42 million year-on-year to $47 million, driven by reductions in net working capital requirements and improved profitability.

Summary of First Quarter 2024 Results:

The Company’s net revenue for the first quarter of fiscal 2024 was $810 million, up 0.2% versus the first quarter of fiscal 2023. Organic revenue declined 4.2% year-on-year, with pricing adjustments reducing organic revenue by 3.3% and volume reducing organic revenue by 0.9%. Foreign currency translation reduced net revenue by 0.6% and acquisitions increased net revenue by 5.0%.

Gross profit in the first quarter of fiscal 2024 was $239 million. Adjusted gross profit was $244 million. Adjusted gross profit margin of 30.1% increased 320 basis points year-on-year. Favorable net pricing and raw material cost actions and restructuring benefits principally drove the year-on-year increase in adjusted gross profit margin.

Selling, general and administrative (SG&A) expense was $172 million in the first quarter of fiscal 2024 and adjusted SG&A was $165 million versus $149 million in the first quarter of fiscal 2023. The impact of acquisitions as well as inflation in wages and services and higher variable compensation expense, partially offset by restructuring savings, drove the year-on-year increase in adjusted SG&A.

Net income attributable to H.B. Fuller for the first quarter of fiscal 2024 was $31 million, or $0.55 per diluted share. Adjusted net income attributable to H.B. Fuller for the first quarter of fiscal 2024 was $38 million. Adjusted EPS was $0.67 per diluted share, up 22% year-on-year driven by strong operating income growth.

Adjusted EBITDA in the first quarter of fiscal 2024 was $123 million, up 12% year-on-year driven principally by favorable net pricing and raw material cost developments, ramping restructuring savings, and benefits from the 2023 collection of acquisitions. Adjusted EBITDA margin increased 160 basis points year-on-year to 15.2%.

“We are off to a good start to the year, with first quarter financial results largely consistent with our expectations. Our team is maintaining commercial discipline, proactively innovating to create win-win opportunities for our customers and pricing to that value, while also driving synergy realization and restructuring savings. As a result, we continue to drive strong adjusted EBITDA growth, margin expansion, and robust cash flow in a highly dynamic market environment,” said Celeste Mastin, H.B. Fuller president and chief executive officer.

“Looking ahead, we remain on track for another year of strong profit growth, continued margin expansion, and improved volume trends in fiscal 2024. As we continue to strengthen the portfolio through targeted organic investments and complete new highly synergistic strategic acquisitions, we are confident in our ability to achieve our long-term growth and profitability goals.”

Balance Sheet and Working Capital:

Net debt at the end of the first quarter of fiscal 2024 was $1,665.5 million, essentially flat sequentially versus the fourth quarter and down $82 million year-on-year. Flat net debt and growth in adjusted EBITDA, reduced the ratio of net debt-to-adjusted EBITDA from 2.9X to 2.8X sequentially from the fourth quarter of fiscal 2023.

Net working capital in the first quarter of fiscal 2024 declined $25 million sequentially versus the fourth quarter and $87 million year-on-year. As a percentage of annualized net revenue, net working capital decreased 270 basis points year-on-year, to 17.1%.

Fiscal 2024 Outlook:

As a result of our good start to the year, which was largely consistent with our expectations, we are reiterating our previously communicated financial guidance for fiscal 2024:

  • Net revenue growth is expected to be in the range of up 2% to 6% with organic revenue flat to up 3% year-on-year;
  • Adjusted EBITDA is expected to be in the range of $610 million to $640 million, equating to growth of approximately 5% to 10% year-on-year;
  • Adjusted EPS (diluted) is expected to be in the range of $4.15 to $4.45, equating to year-on-year growth of between 7% and 15%;
  • Operating cash flow is expected to be between $300 million and $350 million.

Conference Call:

The Company will hold a conference call on March 28, 2024, at 9:30 a.m. CT (10:30 a.m. ET) to discuss its results. Interested parties may listen to the conference call on a live webcast. The webcast, along with a supplemental presentation, may be accessed from the Company’s website at https://investors.hbfuller.com. Participants must register prior to accessing the webcast using this link and should do so at least 10 minutes prior to the start of the call to install and test any necessary software and audio connections. A telephone replay of the conference call will be available from 12:30 p.m. CT on March 28, 2024, to 10:59 p.m. CT on April 4, 2024. To access the telephone replay dial 1-800-770-2030 (toll free) or 1-647-362-9199, and enter Conference ID: 6370505.

Regulation G

The information presented in this earnings release regarding consolidated and segment organic revenue growth, operating income, adjusted gross profit, adjusted gross profit margin, adjusted selling, general and administrative expense, adjusted income before income taxes and income from equity investments, adjusted income taxes, adjusted effective tax rate, adjusted net income, adjusted diluted earnings per share, adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA), adjusted EBITDA margin, net debt, net debt-to-adjusted EBITDA, trailing twelve months adjusted EBITDA, net working capital, annualized net revenue and net working capital as a percentage of annualized net revenue does not conform to U.S. generally accepted accounting principles (U.S. GAAP) and should not be construed as an alternative to the reported results determined in accordance with U.S. GAAP. Management has included this non-GAAP information to assist in understanding the operating performance of the Company and its operating segments as well as the comparability of results to the results of other companies. The non-GAAP information provided may not be consistent with the methodologies used by other companies. All non-GAAP information is reconciled with reported U.S. GAAP results in the “Regulation G Reconciliation” tables in this press release with the exception of our forward-looking non-GAAP measures contained above in our Fiscal 2024 Outlook, which the Company cannot reconcile to forward-looking GAAP results without unreasonable effort.

About H.B. Fuller

As the largest pureplay adhesives company in the world, H.B. Fuller’s (NYSE: FUL) innovative, functional coatings, adhesives and sealants enhance the quality, safety and performance of products people use every day. Founded in 1887, with 2023 revenue of $3.5 billion, our mission to Connect What Matters is brought to life by more than 7,000 global team members who collaborate with customers across more than 30 market segments in over 140 countries to develop highly specified solutions that enable customers to bring world-changing innovations to their end markets. Learn more at www.hbfuller.com.

Safe Harbor for Forward-Looking Statements

Certain statements in this press release may be considered forward-looking statements within the meaning of the federal securities laws, including Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements often address expected future business and financial performance, financial condition, and other matters, and often contain words or phrases such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “opportunity,” “outlook,” “plan,” “project,” “seek,” “should,” “strategy,” “target,” “will,” “will be,” “will continue,” “will likely result,” “would” and similar expressions, and variations or negatives of these words or phrases. These statements are subject to various risks and uncertainties that could cause our actual results to differ materially from those in the forward-looking statements, including but not limited to the following: the availability and pricing of raw materials; the impact of potential cybersecurity attacks and security breaches; the impact on the supply chain, raw material costs and pricing of our products due to military conflict, including between Russia and Ukraine and Israel and Hamas; the consequences of the COVID-19 outbreak and other pandemics on our operations and financial results; the impact on our margins and product demand due to inflationary pressures; the substantial amount of debt we have incurred to finance our acquisition of Royal, our ability to repay or refinance our debt or to incur additional debt in the future, our need for a significant amount of cash to service and repay the debt and to pay dividends on our common stock, and the effect of debt covenants that limit the discretion of management in operating the business or in paying dividends; our ability to pay dividends and to pursue growth opportunities if we continue to pay dividends according to our current dividend policy; our ability to acquire and integrate complementary businesses; our ability to achieve expected synergies, cost savings and operating efficiencies from our restructuring initiatives and operational improvement projects within the expected time frames or at all; our ability to effectively implement Project ONE; uncertain political and economic conditions; fluctuations in product demand; competing products and pricing; our geographic and product mix; disruptions to our relationships with our major customers and suppliers; failures in our information technology systems; regulatory compliance across our global footprint; trade policies and economic sanctions impacting our markets; changes in tax laws and tariffs; devaluations and other foreign exchange rate fluctuations; the impact of litigation and investigations, including for product liability and environmental matters; impairment charges on our goodwill or long-lived assets; the effect of new accounting pronouncements and accounting charges and credits; and similar matters.

Additional information about these various risks and uncertainties can be found in the “Risk Factors” section of our Form 10-K filings, and any updates to the risk factors in our Form 10-Q and 8-K filings with the SEC, but there may be other risks and uncertainties that we are unable to identify at this time or that we do not currently expect to have a material impact on the business. You should not place undue reliance on forward-looking statements, which speak only as of the date they are made. We do not undertake to update or revise any forward-looking statements, except as required by law.

H.B. FULLER COMPANY AND SUBSIDIARIES

CONSOLIDATED FINANCIAL INFORMATION

In thousands, except per share amounts (unaudited)

 

 

 

Three Months Ended

 

 

Percent of

 

 

Three Months Ended

 

 

Percent of

 

 

 

March 2,

2024

 

 

Net Revenue

 

 

March 4,

2023

 

 

Net Revenue

 

Net revenue

 

$

810,419

 

 

 

100.0

%

 

$

809,183

 

 

 

100.0

%

Cost of sales

 

 

(571,182

)

 

 

(70.5

)%

 

 

(594,374

)

 

 

(73.5

)%

Gross profit

 

 

239,237

 

 

 

29.5

%

 

 

214,809

 

 

 

26.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

 

(172,362

)

 

 

(21.3

)%

 

 

(154,542

)

 

 

(19.1

)%

Other income, net

 

 

1,501

 

 

 

0.2

%

 

 

2,604

 

 

 

0.3

%

Interest expense

 

 

(31,901

)

 

 

(3.9

)%

 

 

(33,069

)

 

 

(4.1

)%

Interest income

 

 

1,307

 

 

 

0.2

%

 

 

667

 

 

 

0.1

%

Income before income taxes and income from equity method investments

 

 

37,782

 

 

 

4.7

%

 

 

30,469

 

 

 

3.8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income taxes

 

 

(7,814

)

 

 

(1.0

)%

 

 

(9,733

)

 

 

(1.2

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from equity method investments

 

 

1,044

 

 

 

0.1

%

 

 

1,180

 

 

 

0.1

%

Net income including non-controlling interest

 

 

31,012

 

 

 

3.8

%

 

 

21,916

 

 

 

2.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to non-controlling interest

 

 

(21

)

 

 

(0.0

)%

 

 

(27

)

 

 

(0.0

)%

Net income attributable to H.B. Fuller

 

$

30,991

 

 

 

3.8

%

 

$

21,889

 

 

 

2.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

$

0.57

 

 

 

 

 

 

$

0.40

 

 

 

 

 

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

 

$

0.55

 

 

 

 

 

 

$

0.39

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

54,702

 

 

 

 

 

 

 

54,174

 

 

 

 

 

Diluted

 

 

56,573

 

 

 

 

 

 

 

55,919

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends declared per common share

 

$

0.205

 

 

 

 

 

 

$

0.190

 

 

 

 

 

H.B. FULLER COMPANY AND SUBSIDIARIES

REGULATION G RECONCILIATION

In thousands, except per share amounts (unaudited)

 

 

 

Three Months Ended

 

 

 

March 2,

 

 

March 4,

 

 

 

2024

 

 

2023

 

 

 

 

 

 

 

 

 

 

Net income attributable to H.B. Fuller

 

$

30,991

 

 

$

21,889

 

Adjustments:

 

 

 

 

 

 

 

 

Acquisition project costs1

 

 

2,043

 

 

 

2,235

 

Organizational realignment2

 

 

7,262

 

 

 

2,944

 

Project One

 

 

3,213

 

 

 

2,172

 

Other3

 

 

-

 

 

 

3,073

 

Discrete tax items4

 

 

(2,527

)

 

 

846

 

Income tax effect on adjustments5

 

 

(3,290

)

 

 

(2,400

)

Adjusted net income attributable to H.B. Fuller6

 

 

37,692

 

 

 

30,759

 

 

 

 

 

 

 

 

 

 

Add:

 

 

 

 

 

 

 

 

Interest expense

 

 

31,901

 

 

 

30,380

 

Interest income

 

 

(1,307

)

 

 

(667

)

Adjusted Income taxes

 

 

13,631

 

 

 

11,286

 

Depreciation and Amortization expense7

 

 

41,101

 

 

 

37,914

 

Adjusted EBITDA6

 

 

123,018

 

 

 

109,672

 

 

 

 

 

 

 

 

 

 

Diluted Shares

 

 

56,573

 

 

 

55,919

 

Adjusted diluted income per common share attributable to H.B. Fuller6

 

$

0.67

 

 

$

0.55

 

Revenue

 

$

810,419

 

 

$

809,183

 

Adjusted EBITDA margin6

 

 

15.2

%

 

 

13.6

%

1 Acquisition project costs include costs related to integrating and accounting for acquisitions.

2 Organizational realignment includes costs incurred as a direct result of the organizational realignment program, including compensation for employees supporting the program, consulting expense and operational inefficiencies related to the closure of production facilities and consolidation of business activities.

3 Other expenses for the three months ended March 4, 2023 are primarily related to the write-off of unamortized debt fees and non-cash gains and losses related to legal entity consolidations.

4 Discrete tax items for the three months ended March 2, 2024 are related to various foreign tax matters as well as excess tax benefit related to U.S. stock compensation. Discrete tax items for the three months ended March 4, 2023 are related to various foreign tax matters offset by excess tax benefit related to U.S. stock compensation.

5 The income tax effect on adjustments represents the difference between income taxes on net income before income taxes and income from equity method investments reported in accordance with U.S. GAAP and adjusted net income before income taxes and income from equity method investments.

6 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.

7 Depreciation and amortization expense added back for EBITDA is adjusted for amounts already included in adjusted net income attributable to H.B. Fuller totaling ($2,422) and ($18) for the three months ended March 2, 2024 and March 4, 2023, respectively.

H.B. FULLER COMPANY AND SUBSIDIARIES

SEGMENT FINANCIAL INFORMATION

In thousands (unaudited)

 

 

 

Three Months Ended

 

 

 

March 2,

 

 

March 4,

 

 

 

2024

 

 

2023

 

Net Revenue:

 

 

 

 

 

 

 

 

Hygiene, Health and Consumable Adhesives

 

$

367,693

 

 

$

383,528

 

Engineering Adhesives

 

 

328,766

 

 

 

333,067

 

Construction Adhesives

 

 

113,960

 

 

 

92,588

 

Corporate unallocated

 

 

-

 

 

 

-

 

Total H.B. Fuller

 

$

810,419

 

 

$

809,183

 

 

 

 

 

 

 

 

 

 

Segment Operating Income (Loss):

 

 

 

 

 

 

 

 

Hygiene, Health and Consumable Adhesives

 

$

46,877

 

 

$

45,146

 

Engineering Adhesives

 

 

34,834

 

 

 

32,475

 

Construction Adhesives

 

 

(2,619

)

 

 

(9,634

)

Corporate unallocated

 

 

(12,217

)

 

 

(7,720

)

Total H.B. Fuller

 

$

66,875

 

 

$

60,267

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA6

 

 

 

 

 

 

 

 

Hygiene, Health and Consumable Adhesives

 

$

62,258

 

 

$

59,719

 

Engineering Adhesives

 

 

52,347

 

 

 

49,876

 

Construction Adhesives

 

 

9,567

 

 

 

2,845

 

Corporate unallocated

 

 

(1,154

)

 

 

(2,768

)

Total H.B. Fuller

 

$

123,018

 

 

$

109,672

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA Margin6

 

 

 

 

 

 

 

 

Hygiene, Health and Consumable Adhesives

 

 

16.9

%

 

 

15.6

%

Engineering Adhesives

 

 

15.9

%

 

 

15.0

%

Construction Adhesives

 

 

8.4

%

 

 

3.1

%

Corporate unallocated

 

NMP

 

 

NMP

 

Total H.B. Fuller

 

 

15.2

%

 

 

13.6

%

 

 

 

 

 

 

 

 

 

NMP = non-meaningful percentage

 

 

 

 

 

 

 

 

H.B. FULLER COMPANY AND SUBSIDIARIES

REGULATION G RECONCILIATION

In thousands, except per share amounts (unaudited)

 

 

 

Three Months Ended

 

 

 

March 2,

 

 

March 4,

 

 

 

2024

 

 

2023

 

Income before income taxes and income from equity method investments

 

$

37,782

 

 

$

30,469

 

 

 

 

 

 

 

 

 

 

Adjustments:

 

 

 

 

 

 

 

 

Acquisition project costs1

 

 

2,043

 

 

 

2,235

 

Organizational realignment2

 

 

7,262

 

 

 

2,944

 

Project One

 

 

3,213

 

 

 

2,172

 

Other3

 

 

-

 

 

 

3,073

 

Adjusted income before income taxes and income from equity method investments8

 

$

50,300

 

 

$

40,893

 

8 Adjusted income before income taxes and income from equity investments is a non-GAAP financial measure. Adjusted income before income taxes and income from equity investments is defined as income before income taxes and income from equity investments before the specific adjustments shown above. The table above provides a reconciliation of adjusted income before income taxes and income from equity investments to income before income taxes and income from equity investments, the most directly comparable financial measure determined and reported in accordance with U.S. GAAP.

H.B. FULLER COMPANY AND SUBSIDIARIES

REGULATION G RECONCILIATION

In thousands, except per share amounts (unaudited)

 

 

 

Three Months Ended

 

 

 

March 2,

 

 

March 4,

 

 

 

2024

 

 

2023

 

Income Taxes

 

$

(7,814

)

 

$

(9,733

)

 

 

 

 

 

 

 

 

 

Adjustments:

 

 

 

 

 

 

 

 

Acquisition project costs1

 

 

(537

)

 

 

(514

)

Organizational realignment2

 

 

(1,908

)

 

 

(678

)

Project One

 

 

(845

)

 

 

(500

)

Other3

 

 

(2,527

)

 

 

139

 

Adjusted income taxes9

 

$

(13,631

)

 

$

(11,286

)

 

 

 

 

 

 

 

 

 

Adjusted income before income taxes and income from equity method investments

 

$

50,300

 

 

$

40,893

 

Adjusted effective income tax rate9

 

 

27.1

%

 

 

27.6

%

9 Adjusted income taxes and adjusted effective income tax rate are non-GAAP financial measures. Adjusted income taxes is defined as income taxes before the specific adjustments shown above. Adjusted effective income tax rate is defined as income taxes divided by adjusted income before income taxes and income from equity method investments. The table above provides a reconciliation of adjusted income taxes and adjusted effective income tax rate to income taxes, the most directly comparable financial measure determined and reported in accordance with U.S. GAAP.

H.B. FULLER COMPANY AND SUBSIDIARIES

REGULATION G RECONCILIATION

In thousands (unaudited)

 

 

 

Three Months Ended

 

 

 

March 2,

 

 

March 4,

 

 

 

2024

 

 

2023

 

 

 

 

 

 

 

 

 

 

Net revenue

 

$

810,419

 

 

$

809,183

 

 

 

 

 

 

 

 

 

 

Gross profit

 

$

239,237

 

 

$

214,809

 

Gross profit margin

 

 

29.5

%

 

 

26.5

%

 

 

 

 

 

 

 

 

 

Adjustments:

 

 

 

 

 

 

 

 

Acquisition project costs1

 

 

81

 

 

 

43

 

Organizational realignment2

 

 

4,411

 

 

 

2,321

 

Other3

 

 

-

 

 

 

107

 

Adjusted gross profit10

 

$

243,729

 

 

$

217,280

 

Adjusted gross profit margin10

 

 

30.1

%

 

 

26.9

%

10 Adjusted gross profit and adjusted gross profit margin are non-GAAP financial measures. Adjusted gross profit and adjusted gross profit margin is defined as gross profit and gross profit margin excluding the specific adjustments shown above. The table above provides a reconciliation of adjusted gross profit and gross profit margin to gross profit and gross profit margin, the most directly comparable financial measure determined and reported in accordance with U.S. GAAP.

H.B. FULLER COMPANY AND SUBSIDIARIES

REGULATION G RECONCILIATION

In thousands (unaudited)

 

 

 

Three Months Ended

 

 

 

March 2,

 

 

March 4,

 

 

 

2024

 

 

2023

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

$

(172,362

)

 

$

(154,542

)

 

 

 

 

 

 

 

 

 

Adjustments:

 

 

 

 

 

 

 

 

Acquisition project costs1

 

 

1,962

 

 

 

2,191

 

Organizational realignment2

 

 

2,551

 

 

 

622

 

Project ONE

 

 

3,213

 

 

 

2,172

 

Other3

 

 

-

 

 

 

263

 

Adjusted selling, general and administrative expenses11

 

$

(164,636

)

 

$

(149,294

)

11 Adjusted selling, general and administrative expenses is a non-GAAP financial measure. Adjusted selling, general and administrative expenses is defined as selling, general and administrative expenses excluding the specific adjustments shown above. The table above provides a reconciliation of adjusted selling, general and administrative expenses to selling, general and administrative expenses, the most directly comparable financial measure determined and reported in accordance with U.S. GAAP.

H.B. FULLER COMPANY AND SUBSIDIARIES

REGULATION G RECONCILIATION

In thousands (unaudited)

 

 

Hygiene, Health

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended:

and Consumable

 

 

Engineering

 

 

Construction

 

 

 

 

 

 

Corporate

 

 

H.B. Fuller

 

March 2, 2024

Adhesives

 

 

Adhesives

 

 

Adhesives

 

 

Total

 

 

Unallocated

 

 

Consolidated

 

Net income attributable to H.B. Fuller

$

48,372

 

 

$

35,886

 

 

$

(1,187

)

 

$

83,071

 

 

$

(52,080

)

 

$

30,991

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquisition project costs1

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,043

 

 

 

2,043

 

Organizational realignment2

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

7,262

 

 

 

7,262

 

Project One

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

3,213

 

 

 

3,213

 

Discrete tax items4

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2,527

)

 

 

(2,527

)

Income tax effect on adjustments5

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(3,290

)

 

 

(3,290

)

Adjusted net income attributable to H.B. Fuller6

 

48,372

 

 

 

35,886

 

 

 

(1,187

)

 

 

83,071

 

 

 

(45,379

)

 

 

37,692

 

Add:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

31,901

 

 

 

31,901

 

Interest income

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,307

)

 

 

(1,307

)

Adjusted Income taxes

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

13,631

 

 

 

13,631

 

Depreciation and amortization expense7

 

13,886

 

 

 

16,461

 

 

 

10,754

 

 

 

41,101

 

 

 

-

 

 

 

41,101

 

Adjusted EBITDA6

$

62,258

 

 

$

52,347

 

 

$

9,567

 

 

$

124,172

 

 

$

(1,154

)

 

$

123,018

 

Revenue

$

367,693

 

 

$

328,766

 

 

$

113,960

 

 

$

810,419

 

 

 

-

 

 

$

810,419

 

Adjusted EBITDA Margin6

 

16.9

%

 

 

15.9

%

 

 

8.4

%

 

 

15.3

%

 

NMP

 

 

 

15.2

%

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

NMP = Non-meaningful percentage

H.B. FULLER COMPANY AND SUBSIDIARIES

REGULATION G RECONCILIATION

In thousands (unaudited)

           

 

Hygiene, Health

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended:

and Consumable

 

 

Engineering

 

 

Construction

 

 

 

 

 

 

Corporate

 

 

H.B. Fuller

 

March 4, 2023

Adhesives

 

 

Adhesives

 

 

Adhesives

 

 

Total

 

 

Unallocated

 

 

Consolidated

 

Net income attributable to H.B. Fuller

$

47,707

 

 

$

34,350

 

 

$

(7,531

)

 

$

74,526

 

 

$

(52,637

)

 

$

21,889

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquisition project costs1

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,235

 

 

 

2,235

 

Organizational realignment2

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,944

 

 

 

2,944

 

Project One

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,172

 

 

 

2,172

 

Other3

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

3,073

 

 

 

3,073

 

Discrete tax items4

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

846

 

 

 

846

 

Income tax effect on adjustments5

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2,400

)

 

 

(2,400

)

Adjusted net income attributable to H.B. Fuller6

 

47,707

 

 

 

34,350

 

 

 

(7,531

)

 

 

74,526

 

 

 

(43,767

)

 

 

30,759

 

Add:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

30,380

 

 

 

30,380

 

Interest income

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(667

)

 

 

(667

)

Adjusted Income taxes

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

11,286

 

 

 

11,286

 

Depreciation and amortization expense7

 

12,012

 

 

 

15,526

 

 

 

10,376

 

 

 

37,914

 

 

 

-

 

 

 

37,914

 

Adjusted EBITDA6

$

59,719

 

 

$

49,876

 

 

$

2,845

 

 

$

112,440

 

 

$

(2,768

)

 

$

109,672

 

Revenue

$

383,528

 

 

$

333,067

 

 

$

92,588

 

 

$

809,183

 

 

 

-

 

 

$

809,183

 

Adjusted EBITDA Margin6

 

15.6

%

 

 

15.0

%

 

 

3.1

%

 

 

13.9

%

 

NMP

 

 

 

13.6

%

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

H.B. FULLER COMPANY AND SUBSIDIARIES

SEGMENT FINANCIAL INFORMATION

NET REVENUE GROWTH (DECLINE)

(unaudited)

 

Revenue growth versus 2023

 

Three Months

Ended

 

 

 

March 2, 2024

 

Price

 

 

(3.3

)%

Volume

 

 

(0.9

)%

Organic Growth12

 

 

(4.2

)%

M&A

 

 

5.0

%

Constant currency

 

 

0.8

%

F/X

 

 

(0.6

)%

Total H.B. Fuller Net Revenue Change

 

 

0.2

%

Revenue growth versus 2023

Three Months Ended

 

 

March 2, 2024

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Constant

 

 

 

 

 

 

Organic

 

 

Net Revenue

 

 

F/X

 

 

Currency

 

 

M&A

 

 

Growth12

 

Hygiene, Health and Consumable Adhesives

 

(4.1

)%

 

 

(0.5

)%

 

 

(3.6

)%

 

 

5.8

%

 

 

(9.4

)%

Engineering Adhesives

 

(1.3

)%

 

 

(0.9

)%

 

 

(0.4

)%

 

 

1.9

%

 

 

(2.3

)%

Construction Adhesives

 

23.1

%

 

 

0.1

%

 

 

23.0

%

 

 

12.7

%

 

 

10.3

%

Total H.B. Fuller

 

0.2

%

 

 

(0.6

)%

 

 

0.8

%

 

 

5.0

%

 

 

(4.2

)%

 

12 We use the term “organic revenue” to refer to net revenue, excluding the effect of foreign currency changes and acquisitions and divestitures. Organic growth reflects adjustments for the impact of period-over-period changes in foreign currency exchange rates on revenues and the revenues associated with acquisitions and divestitures.

H.B. FULLER COMPANY AND SUBSIDIARIES

REGULATION G RECONCILIATION

In thousands (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trailing Twelve

 

 

 

 

 

 

 

Three Months Ended

 

 

Months15 Ended

 

 

Year Ended

 

 

 

June 3,

2023

 

 

September 2,

2023

 

 

December 2,

2023

 

 

March 2,

2024

 

 

March 2,

2024

 

 

December 2,

2023

 

Net income attributable to H.B. Fuller

 

$

40,401

 

 

$

37,627

 

 

$

44,991

 

 

$

30,991

 

 

$

154,010

 

 

$

144,906

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquisition project costs1

 

 

2,919

 

 

 

6,480

 

 

 

4,765

 

 

 

2,043

 

 

 

16,207

 

 

 

16,874

 

Organizational realignment2

 

 

5,690

 

 

 

10,421

 

 

 

10,549

 

 

 

7,262

 

 

 

33,922

 

 

 

29,900

 

Project One

 

 

2,681

 

 

 

2,734

 

 

 

2,193

 

 

 

3,213

 

 

 

10,821

 

 

 

9,815

 

Other

 

 

521

 

 

 

503

 

 

 

(3,903

)

 

 

-

 

 

 

(2,879

)

 

 

(611

)

Discrete tax items13

 

 

2,042

 

 

 

6,243

 

 

 

16,955

 

 

 

(2,527

)

 

 

22,713

 

 

 

26,085

 

Income tax effect on adjustments5

 

 

(2,172

)

 

 

(4,875

)

 

 

(1,158

)

 

 

(3,290

)

 

 

(11,495

)

 

 

(10,604

)

Adjusted net income attributable to H.B. Fuller6

 

 

52,082

 

 

 

59,133

 

 

 

74,392

 

 

 

37,692

 

 

 

223,299

 

 

 

216,365

 

Add:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

33,131

 

 

 

35,105

 

 

 

33,297

 

 

31,901

 

 

133,434

 

 

 

131,913

 

Interest income

 

 

(932

)

 

 

(1,128

)

 

 

(1,217

)

 

(1,307

)

 

(4,584

)

 

 

(3,943

)

Adjusted Income taxes

 

 

19,421

 

 

 

20,862

 

 

 

26,477

 

 

13,631

 

 

80,391

 

 

 

78,047

 

Depreciation and Amortization expense14

 

 

39,063

 

 

 

41,826

 

 

 

39,653

 

 

41,101

 

 

161,643

 

 

 

158,456

 

Adjusted EBITDA6

 

$

142,765

 

 

$

155,798

 

 

$

172,602

 

 

$

123,018

 

 

$

594,184

 

 

$

580,838

 

13 Discrete tax items for the three months ended June 3, 2023 are related to various foreign tax matters offset by an excess benefit related to U.S. stock compensation. Discrete tax items for the three months ended September 2, 2023 are related to various U.S. and foreign tax matters offset by an excess benefit related to U.S. stock compensation. Discrete tax items for the three months ended March 2, 2024 are related to various foreign tax matters as well as excess tax benefit related to U.S. stock compensation. Discrete tax items for the three months and year ended December 2, 2023 are related to the tax impact of withholding tax recorded on earnings that are no longer permanently reinvested, as well as other various U.S. and foreign tax matters.

14 Depreciation and amortization expense added back for EBITDA is adjusted for amounts already included in adjusted net income attributable to H.B. Fuller. Depreciation and amortization expense added back was $18 for the three months ended June 3, 2023, ($348) for the three months ended September 2, 2023, ($1,036) for the three months ended December 2, 2023, ($2,422) for the three months ended March 2, 2024 and ($1,384) for the year ended December 2, 2023.

15 Trailing twelve months adjusted EBITDA is a non-GAAP financial measure and is defined as adjusted EBITDA for the twelve-month period ended on the date presented. The table above provides a reconciliation of trailing twelve month adjusted EBITDA to net income attributable to H.B. Fuller for the trailing twelve-month period presented, 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)

 

 

 

March 2, 2024

 

 

December 2, 2023

 

 

March 4, 2023

 

Total debt

 

$

1,830,797

 

 

$

1,838,431

 

 

$

1,873,489

 

Less: Cash and cash equivalents

 

 

165,249

 

 

 

179,453

 

 

 

125,482

 

Net debt16

 

$

1,665,548

 

 

$

1,658,978

 

 

$

1,748,007

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trailing twelve months Adjusted EBITDA15

 

$

594,183

 

 

 

580,838

 

 

 

 

 

Net Debt-to-Adjusted EBITDA16

 

 

2.8

 

 

 

2.9

 

 

 

 

 

16 Net debt and net debt-to-adjusted EBITDA are non-GAAP financial measures. Net debt is defined as total debt less cash and cash equivalents. Net debt-to-adjusted EBITDA is defined as net debt divided by trailing twelve months adjusted EBITDA. The calculation of both of these non-GAAP financial measures is shown in the table above. The table above provides a reconciliation of each of these non-GAAP financial measures to total debt, 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)

 

 

 

March 2, 2024

 

 

March 4, 2023

 

 

December 2, 2023

 

Trade receivables, net

 

$

525,689

 

 

$

566,358

 

 

$

577,932

 

Inventory

 

 

490,179

 

 

 

526,041

 

 

 

442,040

 

Trade payables

 

 

460,649

 

 

 

450,203

 

 

 

439,700

 

Net working capital17

 

$

555,219

 

 

$

642,196

 

 

$

580,272

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net revenue three months ended

 

$

810,419

 

 

$

809,183

 

 

 

 

 

Annualized net revenue17

 

 

3,241,676

 

 

 

3,236,732

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net working capital as a percentage of annualized revenue17

 

 

17.1

%

 

 

19.8

%

 

 

 

 

17 Net working capital, annualized net revenue and net working capital as a percentage of annualized net revenue are non-GAAP financial measures. Net working capital is defined as trade receivables, net plus inventory less trade payables. Annualized net revenue is defined as net revenue for the quarter multiplied by four. Net working capital as a percentage of annualized net revenue is net working capital divided by annualized net revenue. The calculation of each of these non-GAAP financial measures is shown in the table above. The table above provides a reconciliation of each of these non-GAAP financial measures to the most directly comparable financial measure determined and reported in accordance with U.S. GAAP.

CONSOLIDATED BALANCE SHEETS

H.B. Fuller Company and Subsidiaries

(In thousands, except share and per share amounts)

 

 

 

March 2,

 

 

December 2,

 

 

 

2024

 

 

2023

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

165,249

 

 

$

179,453

 

Trade receivables (net of allowances of $11,658 and $11,080, as of March 2, 2024 and December 2, 2023, respectively)

 

 

525,689

 

 

 

577,932

 

Inventories

 

 

490,179

 

 

 

442,040

 

Other current assets

 

 

115,731

 

 

 

112,678

 

Total current assets

 

 

1,296,848

 

 

 

1,312,103

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment

 

 

1,772,088

 

 

 

1,755,035

 

Accumulated depreciation

 

 

(949,189

)

 

 

(930,380

)

Property, plant and equipment, net

 

 

822,899

 

 

 

824,655

 

 

 

 

 

 

 

 

 

 

Goodwill

 

 

1,486,784

 

 

 

1,486,512

 

Other intangibles, net

 

 

702,307

 

 

 

729,140

 

Other assets

 

 

373,135

 

 

 

371,165

 

Total assets

 

$

4,681,973

 

 

$

4,723,575

 

 

 

 

 

 

 

 

 

 

Liabilities, non-controlling interest and total equity

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Notes payable

 

$

1,544

 

 

$

1,841

 

Trade payables

 

 

460,649

 

 

 

439,700

 

Accrued compensation

 

 

63,116

 

 

 

95,680

 

Income taxes payable

 

 

49,516

 

 

 

47,688

 

Other accrued expenses

 

 

78,352

 

 

 

107,902

 

Total current liabilities

 

 

653,177

 

 

 

692,811

 

 

 

 

 

 

 

 

 

 

Long-term debt

 

 

1,829,253

 

 

 

1,836,590

 

Accrued pension liabilities

 

 

50,529

 

 

 

50,189

 

Other liabilities

 

 

380,769

 

 

 

388,072

 

Total liabilities

 

$

2,913,728

 

 

$

2,967,662

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies (Note 12)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

 

 

H.B. Fuller stockholders' equity:

 

 

 

 

 

 

 

 

Preferred stock (no shares outstanding) shares authorized – 10,045,900

 

 

-

 

 

 

-

 

Common stock, par value $1.00 per share, shares authorized – 160,000,000, shares outstanding – 54,437,953 and 54,092,987 as of March 2, 2024 and December 2, 2023, respectively

 

$

54,438

 

 

$

54,093

 

Additional paid-in capital

 

 

309,624

 

 

 

301,485

 

Retained earnings

 

 

1,862,252

 

 

 

1,842,507

 

Accumulated other comprehensive loss

 

 

(458,789

)

 

 

(442,880

)

Total H.B. Fuller stockholders' equity

 

 

1,767,525

 

 

 

1,755,205

 

Non-controlling interest

 

 

720

 

 

 

708

 

Total equity

 

 

1,768,245

 

 

 

1,755,913

 

Total liabilities, non-controlling interest and total equity

 

$

4,681,973

 

 

$

4,723,575

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

H.B. Fuller Company and Subsidiaries

(In thousands)

 

 

 

Three Months Ended

 

 

 

March 2, 2024

 

 

March 4, 2023

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income including non-controlling interest

 

$

31,012

 

 

$

21,916

 

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

 

 

 

 

 

 

 

 

Depreciation

 

 

23,168

 

 

 

19,248

 

Amortization

 

 

20,355

 

 

 

18,683

 

Deferred income taxes

 

 

(5,658

)

 

 

(5,746

)

Income from equity method investments, net of dividends received

 

 

(1,044

)

 

 

(1,180

)

Debt issuance costs write-off

 

 

-

 

 

 

2,689

 

Loss on fair value adjustment on contingent consideration liability

 

 

-

 

 

 

139

 

Gain on sale or disposal of assets

 

 

(86

)

 

 

(4

)

Share-based compensation

 

 

5,088

 

 

 

4,527

 

Pension and other post-retirement benefit plan activity

 

 

(2,126

)

 

 

(3,476

)

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

 

 

 

 

 

 

 

 

Trade receivables, net

 

 

56,886

 

 

 

55,407

 

Inventories

 

 

(50,189

)

 

 

(33,800

)

Other assets

 

 

(9,064

)

 

 

(28,947

)

Trade payables

 

 

27,640

 

 

 

8,996

 

Accrued compensation

 

 

(31,862

)

 

 

(57,000

)

Other accrued expenses

 

 

(12,040

)

 

 

(6,414

)

Income taxes payable

 

 

(5,121

)

 

 

(2,235

)

Other liabilities

 

 

(399

)

 

 

(3,085

)

Other

 

 

791

 

 

 

15,827

 

Net cash provided by operating activities

 

 

47,351

 

 

 

5,545

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchased property, plant and equipment

 

 

(43,293

)

 

 

(47,604

)

Purchased businesses, net of cash acquired

 

 

-

 

 

 

(16,723

)

Proceeds from sale of property, plant and equipment

 

 

568

 

 

 

611

 

Net cash used in investing activities

 

 

(42,725

)

 

 

(63,716

)

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from issuance of long-term debt

 

 

195,000

 

 

 

1,300,000

 

Repayment of long-term debt

 

 

(203,250

)

 

 

(1,176,650

)

Payment of debt issuance costs

 

 

-

 

 

 

(10,214

)

Net payment of notes payable

 

 

(276

)

 

 

(881

)

Dividends paid

 

 

(11,151

)

 

 

(10,222

)

Proceeds from stock options exercised

 

 

8,977

 

 

 

3,595

 

Repurchases of common stock

 

 

(6,208

)

 

 

(2,448

)

Net cash (used in) provided by financing activities

 

 

(16,908

)

 

 

103,180

 

 

 

 

 

 

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

 

 

(1,922

)

 

 

563

 

Net change in cash and cash equivalents

 

 

(14,204

)

 

 

45,572

 

Cash and cash equivalents at beginning of period

 

 

179,453

 

 

 

79,910

 

Cash and cash equivalents at end of period

 

$

165,249

 

 

$

125,482

 

 

Contacts

Steven Brazones

Investor Relations Contact

651-236-5060

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