H.B. Fuller Reports Third Quarter 2018 Results - H.B. Fuller (NYSE:FUL)

Third Quarter Diluted EPS $0.72 and Adjusted Diluted EPS $0.86¹;
Fiscal Year 2018 Adjusted Diluted EPS Guidance Updated to $3.05 to $3.20;
Unfavorable Foreign Exchange Rate Movement Impacted Adjusted EPS by approximately $0.10 in the Second Half of 2018

ST. PAUL, Minn., Sept. 26, 2018 (GLOBE NEWSWIRE) -- Fuller Company FUL today reported financial results for the third quarter that ended Sept. 1, 2018.

Third Quarter 2018 Highlights:

Net revenue of $770 million increased 37 percent compared with the third quarter of 2017, including the Royal business which was acquired in October, 2017. Organic revenue increased approximately 5 percent;
Net income of $38 million or $0.72 per diluted share, increased compared with $25 million, or $0.49 in the third quarter of 2017; adjusted net income¹ of $45 million, or $0.86¹ per diluted share, increased 34 percent compared with $33 million, or $0.65 in the third quarter of 2017;
Adjusted EBITDA¹ of $120 million increased 63 percent compared with the third quarter of 2017; adjusted EBITDA margin¹ increased to 15.6 percent from 13.1 percent in the same period last year as a result of the Royal acquisition and effective management of our legacy business;
The Royal integration continues to progress well with approximately $4 million of incremental cost synergies in the third quarter. On track to realize $15 million of cost synergies in fiscal 2018 and $35 million of savings by 2020, as previously communicated;
Cash flow from operations of $84 million increased compared with $38 million in the same period last year. Debt pay down in the quarter was $41 million. On track to meet our $170 million debt reduction goal for the 2018 fiscal year.


Third Quarter 2018 Key Financial Metrics:

	Reported			Adjusted/Proforma⁴
	2018	2017	% Change	2018	2017	% Change
Net Revenue	$770,107	$562,869	37%	$770,107	$741,993	4%
Operating Income	71,135	40,181	77%	83,327	75,781	10%
Net Income	37,730	25,138	50%	44,666	33,318	34%
Diluted Earnings per Share	0.72	0.49	47%	0.86	0.65	32%

Summary of Third Quarter 2018 Results:
Net revenue for the third quarter of 2018 was $770.1 million, an increase of 36.8 percent compared with the third quarter of 2017. Organic revenue increased 4.8 percent year-over-year, driven by sales growth in every segment, and double-digit growth in Engineering Adhesives.

Gross profit margin was 28.2 percent. Adjusted gross profit margin³ of 28.7 percent increased 110 basis points compared with the prior year on a proforma basis including Royal² in 2017, and increased 40 basis points sequentially, reflecting positive pricing contribution and raw material sourcing synergies. Selling, General and Administrative (SG&A) expense was $146.1 million. Adjusted SG&A expense⁵ of $137.7 million increased compared with the third quarter of 2017, primarily due to the impact of acquisitions.

Net income for the third quarter of 2018 was $37.7 million, or $0.72 per diluted share, compared with net income of $25.1 million, or $0.49 per diluted share, in the third quarter of 2017. Adjusted diluted earnings per share were $0.86¹, an increase of 32 percent compared with $0.65 in the prior year. Adjusted EBITDA¹ was $120 million, up 63 percent compared with the prior year, and up 7 percent² on a proforma basis including Royal in 2017.

"Our strong third quarter results demonstrated the earnings power of our business as we grew organic revenue by nearly 5 percent and increased profitability in an environment of rising raw materials and currency headwinds," said Jim Owens, president and chief executive officer. "We continue to grow organically by winning new opportunities in targeted markets and by managing pricing to offset raw materials inflation.

"Foreign currency shifts in the quarter impacted revenues by approximately two percent and also impacted earnings. Strong sales performance combined with managerial discipline generated adjusted EBITDA of $120 million and operating cash flow of $84 million in the quarter. Free cash flow resulted in debt pay down of $41 million, and we are on track to deliver our committed total reduction of $170 million of debt in 2018," continued Owens.

"While foreign currency exchange rate fluctuations and near-term headwinds are impacting the current year results, our overall commitment to achieve $605 million of EBITDA and $600 million of debt pay down by 2020 remains intact and unchanged."

EBITDA Calculation Revision:
In order to conform to SEC interpretations, we modified our EBITDA calculation for 2017 and 2018 to include joint venture earnings as well as non-operating income and expenses. Using our historical methodology, adjusted EBITDA would have been $119.5 million in the third quarter of 2018. For the full year, this change is expected to impact EBITDA by approximately $6 million. This change has no impact on operating income or earnings per share.

Balance Sheet and Cash Flow:
At the end of the third quarter of 2018, the Company had cash on hand of $150 million and total debt equal to $2,364 million, of which approximately 70 percent had a fixed interest rate. This compares to cash and debt levels equal to $129 million and $2,405 million, respectively, in the second quarter of 2018. Cash flow from operations in the third quarter was $84 million compared to $38 million for the same period in 2017, reflecting the increased profitability of the business. Capital expenditures were $13 million in the third quarter of 2018, compared with $8 million in the same period last year.

Fiscal 2018 Guidance:
H.B. Fuller is updating its guidance for the 2018 fiscal year. The company is adjusting EPS guidance by $0.10 per share to reflect unfavorable movement in foreign currency exchange rates and narrowing the EPS range to reflect current business conditions. The company now anticipates adjusted EPS of $3.05 to $3.20, compared with the previous range of $3.15 to $3.40; and adjusted EBITDA of $455 to $470 million, compared with previous guidance of approximately $470 million. Revenue growth for the fourth quarter is expected to be approximately 3 percent when compared to 2017 on a proforma basis. The company's core tax rate, excluding the impact of discrete items, is unchanged and is expected to be between 25 and 27 percent. H.B. Fuller expects to invest a total of approximately $70 million in capital items in 2018.

This guidance excludes approximately $20 to $25 million of pre-tax expenses required to integrate the Royal business and other businesses acquired in 2017, and between $7 and $8 million of pre-tax expenses related to Project ONE ERP development costs. This guidance also excludes the discrete tax benefit of $35.6 million related to Tax Reform that was recorded in the first quarter, as well as any future discrete tax items. A complete reconciliation of the non-GAAP financial information contained in our 2018 guidance is not being provided in accordance with the "unreasonable efforts" exception of Item 10(e)(1)(i)(B) of Regulation S-K of the Securities and Exchange Commission.

Conference Call:
The Company will host an investor conference call to discuss third quarter results on Thursday, September 27, 2018, at 9:30 a.m. Central U.S. time (10:30 a.m. Eastern U.S. time). The conference call audio and accompanying presentation slides will be available to all interested parties via a simultaneous webcast at H.B. Fuller's Investor Relations website. 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 income before taxes, income from equity investments, adjusted income tax and adjusted effective tax rate, 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 2018 outlook, which are unknown or have not yet occurred.

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 2017 net revenue of over $2.3 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 www.hbfuller.com.

Safe Harbor for Forward-Looking Statements:
Certain statements in this document may be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to various risks and uncertainties, including but not limited to the following: the Royal transaction may involve unexpected costs or liabilities; our business or stock price may suffer as a result of uncertainty surrounding the transaction; 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 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 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; risks that the transaction disrupts current plans and operations and the potential difficulties in employee retention as a result of the 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 2, 2017. 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 1, 2018			Net Revenue		September 2, 2017			Net Revenue
Net revenue	$	770,107		100.0	%	$	562,869		100.0	%
Cost of sales		(552,903	)	(71.8	%)		(412,469	)	(73.3	%)
Gross profit		217,204		28.2	%		150,400		26.7	%

Selling, general and administrative expenses		(146,069	)	(19.0	%)		(110,219	)	(19.6	%)
Operating income		71,135		9.2	%		40,181		7.1	%

Other expense		(1,375	)	(0.2	%)		(602	)	(0.1	%)
Interest expense, net		(24,924	)	(3.2	%)		(7,348	)	(1.3	%)
Income before income taxes and income from equity method investments		44,836		5.8	%		32,231		5.7	%

Income taxes		(9,300	)	(1.2	%)		(9,262	)	(1.6	%)

Income from equity method investments		2,200		0.3	%		2,170		0.4	%
Net income including non-controlling interests		37,736		4.9	%		25,139		4.5	%

Net income attributable to non-controlling interests		(6	)	(0.0	%)		(1	)	0.0	%
Net income attributable to H.B. Fuller	$	37,730		4.9	%	$	25,138		4.5	%

Basic income per common share attributable to H.B. Fuller	$	0.75				$	0.50

Diluted income per common share attributable to H.B. Fuller	$	0.72				$	0.49

Weighted-average common shares outstanding:
Basic		50,632					50,384
Diluted		52,138					51,605

Dividends declared per common share	$	0.155				$	0.15


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

	September 1, 2018		December 2, 2017		September 2, 2017
Cash & cash equivalents	$	150,084	$	194,398	$	119,595
Trade accounts receivable, net		465,942		473,700		393,054
Inventories		401,091		359,505		317,968
Trade payables		256,042		268,467		193,345
Total assets		4,289,777		4,360,646		2,288,323
Total debt		2,364,237		2,451,910		798,973


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 1, 2018			Net Revenue		September 2, 2017			Net Revenue
Net revenue	$	2,272,573		100.0	%	$	1,627,843		100.0	%
Cost of sales		(1,645,279	)	(72.4	%)		(1,192,409	)	(73.3	%)
Gross profit		627,294		27.6	%		435,434		26.7	%

Selling, general and administrative expenses		(442,288	)	(19.5	%)		(325,904	)	(20.0	%)
Operating Income		185,006		8.1	%		109,530		6.7	%

Other income (expense)		3,508		0.2	%		(1,506	)	(0.1	%)
Interest expense, net		(74,651	)	(3.3	%)		(22,461	)	(1.4	%)
Income before income taxes and income from equity method investments		113,863		5.0	%		85,563		5.2	%

Income taxes		9,844		0.4	%		(26,178	)	(1.6	%)

Income from equity method investments		6,160		0.3	%		6,449		0.4	%
Net income including non-controlling interests		129,867		5.7	%		65,834		4.0	%

Net income attributable to non-controlling interests		(4	)	(0.0	%)		(34	)	(0.0	%)
Net income attributable to H.B. Fuller	$	129,863		5.7	%	$	65,800		4.0	%

Basic income per common share attributable to H.B. Fuller	$	2.57				$	1.31

Diluted income per common share attributable to H.B. Fuller	$	2.50				$	1.28

Weighted-average common shares outstanding:
Basic		50,551					50,374
Diluted		51,961					51,584

Dividends declared per common share	$	0.460				$	0.44


H.B. FULLER COMPANY AND SUBSIDIARIES
REGULATION G RECONCILIATION
In thousands, except per share amounts (unaudited)

	Three Months Ended						Nine Months Ended
	September 1, 2018			September 2, 2017			September 1, 2018			September 2, 2017

Net income attributable to H.B. Fuller	$	37,730		$	25,138		$	129,863		$	65,800

Acquisition project costs		1,544			1,266			2,215			3,363
Tonsan call option agreement		110			1,222			(2,059	)		(2,241	)
Organizational realignment		879			832			2,311			14,831
Royal restructuring and integration		5,164			3,530			14,478			3,530
Tax reform		-			-			(35,555	)		-
Other		(761	)		1,330			(1,857	)		4,728
Adjusted net income attributable to H.B. Fuller		44,666			33,318			109,396			90,011

Add:
Interest expense, net		24,816			7,276			74,387			22,248
Income taxes		14,664			12,971			35,962			34,974
Depreciation expense		17,007			12,332			50,801			35,862
Amortization expense		19,116			7,899			57,635			23,128
Adjusted EBITDA		120,269			73,796			328,181			206,223

Diluted Shares		52,138			51,605			51,961			51,584
Adjusted diluted income per common share attributable to H.B. Fuller	$	0.86		$	0.65		$	2.11		$	1.74
Revenue	$	770,107		$	562,869		$	2,272,573		$	1,627,843
Adjusted EBITDA margin		15.6	%		13.1	%		14.4	%		12.7	%

Adjusted net income attributable to H.B. Fuller, adjusted diluted income per common share attributable to H.B. Fuller, adjusted EBITDA and adjusted EBITDA margin are non-GAAP financial measures. Adjusted net income attributable to H.B. Fuller is defined as net income excluding 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 expense and amortization expense, and excluding acquisition project costs, TONSAN call option agreement, organizational realignment Royal restructuring and integration, the impact from tax reform and other costs, primarily consisting of Project ONE ERP development costs. 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 GAAP.


H.B. FULLER COMPANY AND SUBSIDIARIES
SEGMENT FINANCIAL INFORMATION
In thousands (unaudited)

	Three Months Ended		Three Months Ended
	September 1, 2018		September 2, 2017
Net Revenue:
Americas Adhesives	$	282,490	$	230,881
EIMEA		182,020		137,408
Asia Pacific		65,944		62,972
Construction Adhesives		121,140		59,080
Engineering Adhesives		118,513		72,528
Total H.B. Fuller	$	770,107	$	562,869

Segment Operating Income:
Americas Adhesives	$	34,816	$	25,434
EIMEA		8,758		8,873
Asia Pacific		3,694		2,793
Construction Adhesives		12,767		(698
Engineering Adhesives		11,100		3,779
Total H.B. Fuller	$	71,135	$	40,181

Adjusted EBITDA¹
Americas Adhesives	$	50,964	$	35,361
EIMEA		19,158		16,808
Asia Pacific		6,580		5,648
Construction Adhesives		23,516		4,612
Engineering Adhesives		19,232		9,799
Total H.B. Fuller	$	119,450	$	72,228

Adjusted EBITDA Margin¹
Americas Adhesives		18.0%		15.3%
EIMEA		10.5%		12.2%
Asia Pacific		10.0%		9.0%
Construction Adhesives		19.4%		7.8%
Engineering Adhesives		16.2%		13.5%
Total H.B. Fuller		15.5%		12.8%


H.B. FULLER COMPANY AND SUBSIDIARIES
SEGMENT FINANCIAL INFORMATION
In thousands (unaudited)

	Nine Months Ended		Nine Months Ended
	September 1, 2018		September 2, 2017
Net Revenue:
Americas Adhesives	$	821,813	$	653,665
EIMEA		554,031		396,674
Asia Pacific		206,944		190,083
Construction Products		340,179		179,880
Engineering Adhesives		349,606		207,541
Total H.B. Fuller	$	2,272,573	$	1,627,843

Segment Operating Income:
Americas Adhesives	$	84,934	$	72,921
EIMEA		30,636		18,753
Asia Pacific		11,056		9,423
Construction Products		25,705		(3,234
Engineering Adhesives		32,675		11,667
Total H.B. Fuller	$	185,006	$	109,530

Adjusted EBITDA¹
Americas Adhesives	$	127,124	$	99,002
EIMEA		62,554		44,965
Asia Pacific		19,833		18,438
Construction Products		59,374		15,947
Engineering Adhesives		54,404		22,962
Total H.B. Fuller	$	323,289	$	201,314

Adjusted EBITDA Margin¹
Americas Adhesives		15.5%		15.1%
EIMEA		11.3%		11.3%
Asia Pacific		9.6%		9.7%
Construction Products		17.5%		8.9%
Engineering Adhesives		15.6%		11.1%
Total H.B. Fuller		14.2%		12.4%


H.B. FULLER COMPANY AND SUBSIDIARIES
REGULATION G RECONCILIATION
In thousands, except per share amounts (unaudited)

	Three Months Ended						Nine Months Ended
	September 1, 2018			September 2, 2017			September 1, 2018			September 2, 2017

Income before income taxes and income from equity method investments	$	44,836		$	32,231		$	113,863		$	85,563

Adjustments:
Acquisition project costs		2,101			1,944			3,108			5,144
Tonsan call option agreement		110			1,222			(2,059	)		(2,241	)
Organizational realignment		1,029			1,492			2,211			18,945
Royal restructuring and integration		6,496			5,431			20,558			5,431
Other		2,564			1,800			1,522			5,728
Adjusted income before income taxes and income from equity method investments	$	57,136		$	44,120		$	139,203		$	118,570

Adjusted income before income taxes and income from equity investments is a non-GAAP financial measure. 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 GAAP. Adjusted income before income taxes and income from equity investments is defined as adjusted income before income taxes and income from equity investments excluding the specific adjustments shown above.


H.B. FULLER COMPANY AND SUBSIDIARIES
REGULATION G RECONCILIATION
In thousands, except per share amounts (unaudited)

	Three Months Ended						Nine Months Ended
	September 1, 2018			September 2, 2017			September 1, 2018			September 2, 2017

Income Taxes	$	(9,300	)	$	(9,262	)	$	9,844		$	(26,178	)

Adjustments:
Acquisition project costs		(556	)		(677	)		(892	)		(1,780	)
Organizational realignment		(150	)		(661	)		100			(4,114	)
Royal restructuring and integration		(1,332	)		(1,901	)		(6,081	)		(1,901	)
Tax reform		-			-			(35,555	)
Other		(3,326	)		(470	)		(3,378	)		(1,001	)

Adjusted income taxes	$	(14,664	)	$	(12,971	)	$	(35,962	)	$	(34,974	)

Adjusted income before income taxes and income from equity method investments	$	57,136		$	44,120		$	139,203		$	118,570
Adjusted effective income tax rate		25.7	%		29.4	%		25.8	%		29.5	%

Adjusted income taxes and adjusted effective income tax rate are non-GAAP financial measures. 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 GAAP. Adjusted income taxes is defined as income taxes excluding the specific adjustments shown above. Adjusted effective income tax rate is defined as adjusted income taxes divided by adjusted income before income taxes and income from equity method investments.


H.B. FULLER COMPANY AND SUBSIDIARIES
REGULATION G RECONCILIATION
In thousands (unaudited)

	Three Months Ended						Nine Months Ended
	September 1, 2018			September 2, 2017			September 1, 2018			September 2, 2017

Net revenue		770,107			562,869			2,272,573			1,627,843

Gross profit	$	217,204		$	150,400		$	627,294		$	435,434
Gross profit margin		28.2	%		26.7	%		27.6	%		26.7	%

Adjustments:
Acquisition project costs		1,822			1,400			1,995			2,942
Organizational realignment		615			622			1,212			11,011
Royal restructuring and integration		1,395						2,303
Tax reform
Other
Adjusted gross profit	$	221,036		$	152,422		$	632,804		$	449,387
Adjusted gross profit margin		28.7	%		27.1	%		27.8	%		27.6	%

Adjusted gross profit and gross profit margin is a non-GAAP financial measures. 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 GAAP. Adjusted gross profit and gross profit margin is defined as adjusted gross profit and gross profit margin excluding the specific adjustments shown above.


H.B. FULLER COMPANY AND SUBSIDIARIES
REGULATION G RECONCILIATION
In thousands (unaudited)

	Three Months Ended						Nine Months Ended
	September 1, 2018			September 2, 2017			September 1, 2018			September 2, 2017

Selling, general and administrative expenses	$	(146,069	)	$	(110,219	)	$	(442,288	)	$	(325,904	)

Adjustments:
Acquisition project costs		279			544			1,113			2,201
Tonsan call option agreement		2			1,150			(2,323	)		(2,453	)
Organizational realignment		413			870			998			7,934
Royal restructuring and integration		5,101			5,431			18,256			5,431
Other		2,565			1,800			6,293			5,728
Adjusted selling, general and administrative expenses	$	(137,709	)	$	(100,424	)	$	(417,951	)	$	(307,063	)

Adjusted selling, general and administrative expenses is a non-GAAP financial measure. 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 GAAP. Adjusted selling, general and administrative expenses is defined as adjusted selling, general and administrative expenses excluding the specific adjustments shown above.


H.B. FULLER COMPANY AND SUBSIDIARIES
REGULATION G RECONCILIATION
In thousands (unaudited)

		Americas				Asia		Construction		Engineering						Corporate			H.B. Fuller
		Adhesives		EIMEA		Pacific		Adhesives		Adhesives			Total			Unallocated			Consolidated

Three Months Ended September 1, 2018		$	34,816	$	8,758	$	3,694	$	12,767	$	11,100		$	71,135		$	(33,405	)	$	37,730
Net income attributable to H.B. Fuller

Adjustments:
Acquisition project costs			2,036		26		12		13		13			2,100			(556	)		1,544
Tonsan call option agreement			-		-		-		-		2			2			108			110
Organizational realignment			7		623		3		393		3			1,029			(150	)		879
Royal restructuring and integration			2,123		1,286		429		1,902		756			6,496			(1,332	)		5,164
Other			972		642		306		323		322			2,565			(3,326	)		(761	)

Adjusted net income attributable to H.B. Fuller			39,954		11,335		4,444		15,398		12,196			83,327			(38,661	)		44,666

Add:
Interest expense, net			-		-		-		-		-			-			24,816			24,816
Income taxes			-		-		-		-		-			-			14,664			14,664
Depreciation expense			4,510		5,492		1,649		2,887		2,469			17,007			-			17,007
Amortization expense			6,500		2,331		487		5,231		4,567			19,116			-			19,116
Adjusted EBITDA¹	$		50,964	$	19,158	$	6,580	$	23,516	$	19,232		$	119,450		$	819		$	120,269


		Americas				Asia		Construction		Engineering						Corporate			H.B. Fuller
		Adhesives		EIMEA		Pacific		Adhesives		Adhesives			Total			Unallocated			Consolidated

Nine Months Ended September 1, 2018		$	84,934	$	30,636	$	11,056	$	25,705	$	32,675		$	185,006		$	(55,143	)	$	129,863
Net income attributable to H.B. Fuller

Adjustments:
Acquisition project costs			2,878		73		35		37		84			3,107			(892	)		2,215
Tonsan call option agreement			-		-		-		-		(2,323	)		(2,323	)		264			(2,059	)
Organizational realignment			187		1,340		5		673		6			2,211			100			2,311
Royal restructuring and integration			7,140		4,596		1,524		4,518		2,781			20,559			(6,081	)		14,478
Tax reform			-		-		-		-		-			-			(35,555	)		(35,555	)
Other			2,398		1,570		748		787		790			6,293			(8,150	)		(1,857	)

Adjusted net income attributable to H.B. Fuller			97,537		38,215		13,368		31,720		34,013			214,853			(105,457	)		109,396

Add:
Interest expense			-		-		-		-		-			-			74,387			74,387
Income taxes			-		-		-		-		-			-			35,962			35,962
Depreciation expense			13,123		16,688		4,975		8,562		7,453			50,801			-			50,801
Amortization expense			16,464		7,651		1,490		19,092		12,938			57,635			-			57,635
Adjusted EBITDA¹	$		127,124	$	62,554	$	19,833	$	59,374	$	54,404		$	323,289		$	4,892		$	328,181


H.B. FULLER COMPANY AND SUBSIDIARIES
REGULATION G RECONCILIATION
In thousands (unaudited)

	Americas				Asia		Construction			Engineering									H.B. Fuller
	Adhesives		EIMEA		Pacific		Adhesives			Adhesives			Total			Unallocated			Consolidated

Three Months Ended September 2, 2017	$	25,434	$	8,873	$	2,793	$	(698	)	$	3,779		$	40,181		$	(15,043	)	$	25,138
Net income attributable to H.B. Fuller

Adjustments:
Acquisition project costs		1,703		108		43		45			45			1,944			(678	)		1,266
Tonsan call option agreement		-		-		-		-			1,149			1,149			73			1,222
Organizational realignment		283		926		44		164			75			1,492			(660	)		832
Royal Restructuring		2,059		1,359		647		682			684			5,431			(1,901	)		3,530
Other		683		450		214		226			227			1,800			(470	)		1,330

Adjusted net income attributable to H.B. Fuller		30,162		11,716		3,741		419			5,959			51,997			(18,679	)		33,318

Add:
Interest expense		-		-		-		-			-			-			7,276			7,276
Income taxes		-		-		-		-			-			-			12,971			12,971
Depreciation expense		3,401		3,955		1,492		1,892			1,592			12,332			-			12,332
Amortization expense		1,798		1,137		415		2,301			2,248			7,899			-			7,899

Adjusted EBITDA¹	$	35,361	$	16,808	$	5,648	$	4,612		$	9,799		$	72,228		$	1,568		$	73,796



	Americas				Asia		Construction			Engineering									H.B. Fuller
	Adhesives		EIMEA		Pacific		Adhesives			Adhesives			Total			Unallocated			Consolidated

Nine Months Ended September 2, 2017	$	72,921	$	18,753	$	9,423	$	(3,234	)	$	11,667		$	109,530		$	(43,730	)	$	65,800
Net income attributable to H.B. Fuller

Adjustments:
Acquisition project costs		4,143		430		185		192			193			5,143			(1,780	)		3,363
Tonsan call option agreement		-		-		-		-			(2,453	)		(2,453	)		212			(2,241	)
Organizational realignment		2,314		8,459		1,755		5,622			795			18,945			(4,114	)		14,831
Royal Restructuring		2,059		1,359		647		682			684			5,431			(1,901	)		3,530
Other		2,172		1,433		683		719			721			5,728			(1,000	)		4,728

Adjusted net income attributable to H.B. Fuller		83,609		30,434		12,693		3,981			11,607			142,324			(52,313	)		90,011

Add:
Interest expense, net		-		-		-		-			-			-			22,248			22,248
Income taxes		-		-		-		-			-			-			34,974			34,974
Depreciation expense		10,434		11,260		4,452		5,054			4,662			35,862			-			35,862
Amortization expense		4,959		3,271		1,293		6,912			6,693			23,128			-			23,128

Adjusted EBITDA¹	$	99,002	$	44,965	$	18,438	$	15,947		$	22,962		$	201,314		$	4,909		$	206,223


H.B. FULLER COMPANY AND SUBSIDIARIES
SEGMENT FINANCIAL INFORMATION
NET REVENUE GROWTH
(unaudited)

Three Months Ended September 1, 2018

	Americas Adhesives		EIMEA		Asia Pacific		Construction Adhesives		Engineering Adhesives		Total HBF
Price	5.5	%	5.1	%	1.7	%	0.5	%	7.0	%	4.6	%
Volume	(5.0	%)	0.4	%	1.1	%	5.2	%	6.1	%	(0.5	%)
Mix	1.2	%	0.7	%	(0.1	%)	(1.0	%)	1.3	%	0.7	%
Acquisition	24.4	%	29.3	%	1.9	%	100.5	%	48.4	%	34.2	%
Constant Currency Growth⁶	26.1	%	35.5	%	4.6	%	105.2	%	62.8	%	39.0	%
F/X	(3.8	%)	(3.0	%)	0.0	%	(0.1	%)	0.6	%	(2.2	%)

	22.3	%	32.5	%	4.6	%	105.1	%	63.4	%	36.8	%


Nine Months Ended September 1, 2018

	Americas Adhesives		EIMEA		Asia Pacific		Construction Adhesives		Engineering Adhesives		Total HBF
Price	3.3	%	4.4	%	1.1	%	(0.1	%)	6.1	%	3.3	%
Volume	(3.1	%)	(0.1	%)	2.4	%	0.3	%	6.5	%	(0.2	%)
Mix	1.0	%	0.4	%	(0.4	%)	(0.4	%)	1.5	%	0.6	%
Acquisition	26.1	%	29.5	%	1.7	%	88.8	%	49.3	%	34.0	%
Constant Currency Growth⁶	27.3	%	34.2	%	4.8	%	88.6	%	63.4	%	37.7	%
F/X	(1.6	%)	5.5	%	4.0	%	0.6	%	5.1	%	1.9	%

	25.7	%	39.7	%	8.8	%	89.2	%	68.5	%	39.6	%

__________________________________

¹	Adjusted net income and adjusted diluted earnings per share (EPS) are non-GAAP financial measures and exclude the following costs: Tax reform impacts; organizational realignment to support the 2020 strategic plan as announced in December 2016; acquisition project costs for integrating and accounting for past and present acquisitions; Royal restructuring and integration activities; and other costs, primarily consisting of Project ONE ERP development costs. Other than items referenced in the press release, we have not included a full reconciliation of adjusted EPS to EPS as part of our guidance because all potential adjustments are not known at this time. 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 is defined as net income before interest, income taxes, depreciation expense and amortization expense, and excluding acquisition project costs, TONSAN call option agreement, organizational realignment Royal restructuring and integration, the impact from tax reform and other costs, primarily consisting of Project ONE ERP development costs. 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. Other than items referenced in the press release, we have not included a full 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.
²	Proforma financial results are provided to reflect the historical combination of H.B. Fuller and Royal as of the comparable prior periods before the acquisition was completed. The proforma results and reconciliations to GAAP outcomes were filed on form 8-K dated March 28, 2018.
³	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; integrating and accounting for past and present acquisitions; and Royal integration activities. Adjusted gross profit margin is defined as adjusted gross profit divided by adjusted net revenue.
⁴	Revenue and Operating Income in FY 2017 are presented on a Proforma basis and reconciled in the 8-K filed March 28, 2018. Net Income and diluted EPS are adjusted as they were presented during FY 2017 and do not include the impact of Royal in 2017.
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; Project ONE development costs; integrating and accounting for past and present acquisitions; and Royal integration activities.
⁶	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.

Barbara Doyle
Investor Relations contact
651-236-5023

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