Market Overview

H.B. Fuller Reports Fourth Quarter and Fiscal Year 2017 Results

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Fiscal Year 2017 Diluted EPS $1.13, Fiscal Year Adjusted Diluted EPS $2.451a;
Excluding Impacts of the Royal Transaction, Fiscal Year Adjusted Diluted EPS $2.501b
Fiscal Year 2018 Adjusted Diluted EPS Guidance set at $3.10 to $3.40

ST. PAUL, Minn., Jan. 23, 2018 (GLOBE NEWSWIRE) -- H.B. Fuller Company (NYSE:FUL) today reported financial results for the fourth quarter and fiscal year that ended December 2, 2017 and initiated guidance for fiscal 2018. In October 2017, the Company acquired Royal Adhesives & Sealants, LLC ("Royal"), which had net revenue of $658 million during the 2017 fiscal year ended December 2, 2017.

Items of Note for 2018 Guidance:

  • More than 30 percent revenue growth versus 2017 fiscal year; 6 to 7 percent revenue growth on a pro forma basis2;
  • Adjusted EBITDA3 of approximately $465 million, an increase of about 60 percent versus 2017 and approximately 13 percent growth versus 2017 on a pro forma basis2;
  • Adjusted diluted EPS1a in the range of $3.10 to $3.40, an increase of 24 percent to 36 percent versus 2017;
  • Core tax rate of between 25 and 27 percent, reflecting an estimate based on the recently passed legislation;
  • Cash flow from operating activities of approximately $290 million. Capital expenditures planned at approximately $90 million;
  • Free cash flow4 of approximately $200 million of which approximately $170 million will be used to repay debt.

Items of Note for the Fourth Quarter of 2017:

  • Our acquisition of Royal has expanded our position in markets that require highly specified adhesive solutions;
  • Net revenue growth of 18 percent versus the fourth quarter of 2016. Adjusting for the Royal acquisition and the extra week in the fourth quarter of 2016, constant currency revenue5 growth was 12 percent, with organic revenue growth of 10 percent and organic volume growth of 8 percent;
  • Net loss was $7.6 million in the fourth quarter of 2017; adjusted net income, excluding the impact of the Royal transaction, was $38.9 million, or $0.751 per diluted share;
  • Adjusted EBITDA3 margin, excluding the impact of the Royal transaction, was up sequentially to 13.1 percent;
  • Cash flow from operations for the 2017 fiscal year was $136 million. Excluding the impact of Royal, cash flow from operations was $120 million in the fourth quarter and $197 million for the 2017 fiscal year;
  • Adjusting for the extra week in the fourth quarter of 2016, organic volume growth for Engineering Adhesives was 19 percent in the quarter; Asia Pacific and the Americas both grew volume approximately 10 percent versus last year; EIMEA had solid mid-single digit volume growth and Construction Products saw improved top-line trends versus prior periods this year;
  • Construction Products adjusted EBITDA3 margin was up 550 basis points versus the prior year's fourth quarter and back to double digits.

Fiscal 2018 Guidance:
We are introducing an adjusted EPS1a guidance range for 2018 of between $3.10 and $3.40. Adjusted EBITDA3 for fiscal year 2018 is expected to be approximately $465 million. Organic growth on proforma revenue2 is expected to be 6 to 7 percent for 2018 versus the 2017 fiscal year which reflects good volume growth, favorable foreign currency translation and further pricing to offset continued raw material inflation. Our core tax rate is expected to be between 25 and 27 percent, which reflects our current estimate of the impact of the recently passed tax legislation. We expect capital expenditures to be around $90 million, which includes approximately $15 million for integration related capital expenditures.

"Our 2018 guidance reflects a step change in performance as a result of the continuation of the strong underlying growth and profit improvement in our existing business combined with continued success of the Royal business which we acquired in the fourth quarter," said Jim Owens, H.B. Fuller President and Chief Executive Officer. "Integration activities are well under way and are going very smoothly and we are excited about the cost synergy and growth opportunities that combining these two great companies will create. The combined businesses will create solid organic growth, sizable margin improvement and significant increases in free cash flow for H.B. Fuller."

This guidance excludes between $15 and $20 million, pre-tax, of expenses required to integrate the Royal business and other businesses acquired in 2017, between $7 and $10 million of expenses, pre-tax, related to Project ONE ERP development costs as well as other items that cannot reasonably be estimated at this time. 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.

Fourth Quarter 2017 Results:
Net loss for the fourth quarter of 2017 was $7.6 million, or a loss of $0.15 per diluted share, versus net income of $39.1 million, or $0.76 per diluted share, in last year's fourth quarter. Adjusted diluted earnings per share in the fourth quarter of 2017, excluding the impact of the Royal transaction, were $0.751b versus the prior year's adjusted result of $0.741a, which included an extra week. Adjusting for the extra week in 2016, adjusted earnings per share were up 9 percent as strong volume growth was offset by higher year-over-year raw material costs.

Net revenue for the fourth quarter of 2017 was $678.2 million, up 18 percent versus the fourth quarter of 2016. Adjusting for the extra week in 2016 and excluding the impact of Royal, revenue was up 12 percent as higher volume, pricing and acquisitions all positively impacted net revenue growth. Organic revenue, defined as constant currency revenue less the impact from acquisitions, was up 10 percent year-over-year.

Gross profit margin was 24.7 percent. Adjusted gross profit margin6, excluding the impact of the Royal transaction, was 26.5 percent. Margins remained lower year-over-year due to continued increasing raw material costs relative to the timing of additional price increases. Selling, General and Administrative (SG&A) expense was $151.1 million. Adjusted SG&A expense7, excluding the impact of the Royal transaction, was $101.5 million, down versus the prior year, due to one fewer operating week as well as good overall expense control.

"We had continued strong revenue performance and excellent cash flow performance in the fourth quarter as organic growth was again very strong," said Mr. Owens. "The pricing actions we implemented early in the year had a positive impact on our margins, however, as a result of Hurricane Harvey and continued environmental controls in China, raw materials continued to increase during the fourth quarter. We have implemented additional pricing actions that will offset inflation in the first half of 2018. Engineering Adhesives, Asia Pacific and Americas all delivered double digit sales growth, with results above our long term targets. Adjusting for the Royal acquisition, we had by far our strongest cash flow quarter of the year. Most importantly, we completed the transformative and complementary acquisition of Royal Adhesives which is accelerating our strategy by combining their strong presence in specified adhesive applications with our global reach and focus." 

Balance Sheet and Cash Flow:
At the end of the fourth quarter of 2017, cash balances totaled $194 million with total debt of $2,452 million. This compares to third quarter 2017 cash and debt levels of $120 million and $799 million, respectively. Sequentially, net debt was up by approximately $1,579 million dollars, reflecting the purchase price of Royal offset by strong cash flow from operations. Cash flow from operations for the 2017 fiscal year was $136 million. Excluding the impact of Royal, cash flow from operations was $120 million in the fourth quarter and $197 million for the 2017 fiscal year, reflecting strong topline growth and good working capital management, offset by restructuring charges. Capital expenditures were $19 million in the fourth quarter of 2017 and $55 million for the 2017 fiscal year.

Year-To-Date Results:
Net income for the 2017 fiscal year was $58.2 million, or $1.13 per diluted share, versus net income of $124.1 million, or $2.42 per diluted share, in the 2016 fiscal year. Adjusted diluted earnings per share in the 2017 fiscal year, excluding the impact of the Royal transaction, were $2.501b. Adjusting for the extra week last year, adjusted diluted earnings per share were up 3 percent year-over-year.

Net revenue for the 2017 fiscal year was $2,306.0 million, up 10 percent versus the 2016 fiscal year. Adjusting for Royal and the extra week in 2016, constant currency revenue5 grew by 10.6 percent year-over-year and organic revenue, defined as constant currency revenue less the impact from acquisitions, was up 7 percent.

Conference Call:
The Company will host an investor conference call to discuss fourth quarter results on Wednesday, January 24, 2017, at 9:30 a.m. Central U.S. time (10:30 a.m. Eastern U.S. time). The conference call audio and accompanying presentation slides will be available to all interested parties via a simultaneous webcast under the Investor Relations section of the Company's 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 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 Company:
For 130 years, H.B. Fuller has been a leading global adhesives provider focusing on perfecting adhesives, sealants and other specialty chemical products to improve products and lives. With fiscal 2017 net revenue of $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, clean energy, packaging, construction, woodworking, general industries and other consumer businesses. And our promise to our people connects them with opportunities to innovate and thrive. For more information, visit us at www.hbfuller.com and subscribe to our blog.

Safe Harbor for Forward-Looking Statements:
Certain statements in this document may be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to various risks and uncertainties, including but not limited to the following: 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 3, 2016, and its SEC 10-Q filing for the quarter ended September 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)
                   
  13 Weeks Ended   Percent of   14 Weeks Ended   Percent of
  December 2, 2017   Net Revenue   December 3, 2016   Net Revenue
Net revenue $ 678,200     100.0 %   $ 574,907     100.0 %
Cost of sales   (510,464 )   (75.3 %)     (407,086 )   (70.8 %)
Gross profit   167,736     24.7 %     167,821     29.2 %
                   
Selling, general and administrative expenses   (151,126 )   (22.3 %)     (106,495 )   (18.6 %)
Special charges, net   -     0.0 %     (1,856 )   (0.3 %)
Other income (expense), net   (24,401 )   (3.6 %)     54     0.0 %
Interest expense   (19,073 )   (2.8 %)     (7,645 )   (1.3 %)
Income (loss) before income taxes and income from equity method investments   (26,864 )   (4.0 %)     51,879     9.0 %
                   
Income taxes   17,092     2.5 %     (14,873 )   (2.6 %)
                   
Income from equity method investments   2,228     0.3 %     2,221     0.4 %
Net income (loss) including non-controlling interests   (7,544 )   (1.1 %)     39,227     6.8 %
                   
Net income (loss) attributable to non-controlling interests   (14 )   (0.0 %)     (93 )   (0.0 %)
Net income (loss) attributable to H.B. Fuller $ (7,558 )   (1.1 %)   $ 39,134     6.8 %
                   
Basic income (loss) per common share attributable to H.B. Fuller $ (0.15 )       $ 0.78      
                   
Diluted income (loss) per common share attributable to H.B. Fuller $ (0.15 )       $ 0.76      
                   
Weighted-average common shares outstanding:                  
Basic   50,356           50,180      
Diluted   51,724           51,378      
                   
Dividends declared per common share $ 0.15         $ 0.14      
                       


Selected Balance Sheet Information (subject to change prior to the filing of the Company's Annual Report on Form 10-K)
                 
  December 2, 2017   December 3, 2016   November 28, 2015
Cash & cash equivalents $ 194,398   $ 142,245   $ 119,168
Trade accounts receivable, net   473,700     351,130     364,704
Inventories   359,505     247,399     248,504
Trade payables   268,467     162,964     177,864
Total assets   4,365,276     2,058,254     2,042,252
Total debt   2,451,910     705,657     722,863
                 


 
H.B. FULLER COMPANY AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
In thousands, except per share amounts (unaudited)
                 
  52 Weeks Ended   Percent of   53 Weeks Ended Percent of
  December 2, 2017   Net Revenue   December 3, 2016 Net Revenue
Net revenue $ 2,306,043     100.0 %   $ 2,094,605   100.0 %
Cost of sales   (1,702,873 )   (73.8 %)     (1,484,802 ) (70.9 %)
Gross profit   603,170     26.2 %     609,803   29.1 %
                 
Selling, general and administrative expenses   (477,030 )   (20.7 %)     (407,638 ) (19.5 %)
Special charges   -     0.0 %     168   0.0 %
Other income (expense), net   (23,740 )   (1.0 %)     (7,549 ) (0.3 %)
Interest expense   (43,701 )   (1.9 %)     (27,359 ) (1.3 %)
Income from continuing operations before income taxes and income from equity method investments   58,699     2.5 %     167,425   8.0 %
                 
Income taxes   (9,086 )   (0.4 %)     (50,436 ) (2.4 %)
                 
Income from equity method investments   8,677     0.4 %     7,393   0.3 %
Net income including non-controlling interests   58,290     2.5 %     124,382   5.9 %
                 
Net income attributable to non-controlling interests   (48 )   (0.0 %)     (254 ) (0.0 %)
Net income attributable to H.B. Fuller $ 58,242     2.5 %   $ 124,128   5.9 %
                 
Basic income per common share attributable to H.B. Fuller $ 1.16         $ 2.48    
                 
Diluted income per common share attributable to H.B. Fullera $ 1.13         $ 2.42    
                 
Weighted-average common shares outstanding:                
Basic   50,370           50,136    
Diluted   51,619           51,270    
                 
Dividends declared per common share $ 0.59         $ 0.55    
                 
a   Income per share amounts may not add due to rounding        
         


     
H.B. FULLER COMPANY AND SUBSIDIARIES    
REGULATION G RECONCILIATION – Income Statement    
In thousands, except per share amounts (unaudited)    
                        Less    Adjusted    
                  Adjusted   Adjusted    Excluding Royal   % of
      13 Weeks Ended   Add   13 Weeks Ended   Royal    13 Weeks Ended   Net
      December 2, 2017   Adjustments   December 2, 2017   Results   December 2, 2017   Revenue
Net revenue     $ 678,200     $ -     $ 678,200     $ 77,034     $ 601,166     100.0 %
Cost of sales       (510,464 )       12,566       (497,898 )     (55,858 )     (442,040 )   (73.5 %)
Gross profit       167,736       12,566       180,302       21,176       159,126     26.5%6
                                     
Selling, general and administrative expenses   (151,126 )       33,893       (117,233 )     (15,769 )     (101,464 ) 7 (16.9 %)
Other income (expense), net       (24,401 )       25,966       1,565       1,087       478     0.1 %
Interest expense       (19,073 )     -       (19,073 )     (10,286 )     (8,787 )   (1.5 %)
Income (loss) before income taxes and income from equity method investments   (26,864 )     72,425       45,561       (3,792 )     49,353     8.2 %
                                     
Income taxes       17,092         (28,318 )     (11,226 )     1,437       (12,663 )   (2.1 %)
- Effective tax rate       63.6 %           24.6 %     37.9 %     25.7 %    
                                     
Income from equity method investments   2,228       -       2,228       -       2,228     0.4 %
Net income (loss) including non-controlling interests   (7,544 )     44,107       36,563       (2,355 )     38,918     6.5 %
                                     
Net income attributable to non-controlling interests   (14 )     -       (14 )     -       (14 )   (0.0 %)
Net income (loss) attributable to H.B. Fuller   $ (7,558 )   $ 44,107     $ 36,549     $ (2,355 )   $ 38,904     6.5 %
                                     
                                     
Basic income (loss) per common share attributable to H.B. Fuller $ (0.15 )   $ 0.88     $ 0.73     $ (0.05 )   $ 0.77      
                                     
Diluted income (loss) per common share attributable to H.B. Fuller $ (0.15 )   $ 0.85     $ 0.71  1a   $ (0.05 )   $  0.75  1b    
                                     
Weighted-average common shares outstanding:                                  
Basic       50,356       50,356       50,356       50,356       50,356      
Diluted       51,724       51,724       51,724       51,724       51,724      
                                               


     
H.B. FULLER COMPANY AND SUBSIDIARIES    
REGULATION G RECONCILIATION – Income Statement    
In thousands, except per share amounts (unaudited)    
                           
          % of         Adjusted   % of
    14 Weeks Ended   Net       14 Weeks Ended   Net
    December 3, 2016   Revenue   Adjustments   December 3, 2016   Revenue
Net revenue   $ 574,907     100.0 %   $ -     $ 574,907     100.0 %
Cost of sales     (407,086 )   (70.8 %)     (543 )     (406,543 )   (70.7 %)
Gross profit     167,821     29.2 %     543       168,364     29.3 %
                           
Selling, general and administrative expenses     (106,495 )   (18.6 %)     2,520       (109,015 )   (19.0 %)
Special charges, net     (1,856 )   (0.3 %)     (1,856 )     -     0.0 %
Other income (expense), net     54     -       -       54     0.0 %
Interest expense     (7,645 )   (1.3 %)     (58 )     (7,587 )   (1.3 %)
Income before income taxes and income from equity method investments     51,879     9.0 %     (63 )     51,816     9.0 %
                           
Income taxes     (14,873 )   (2.6 %)     1,161       (16,034 )   (2.8 %)
- Effective tax rate     28.7 %               30.9 %    
                           
Income from equity method investments     2,221     0.4 %     -       2,221     0.4 %
Net income including non-controlling interests   39,227     6.8 %     (1,224 )     38,003     6.6 %
                           
Net income attributable to non-controlling interests     (93 )   -       -       (93 )   (0.0 %)
Net income attributable to H.B. Fuller   $ 39,134     6.8 %   $ (1,224 )   $ 37,910     6.6 %
                           
                           
Basic income per common share attributable to H.B. Fuller $ 0.78         $ (0.02 )   $ 0.76      
                           
Diluted income per common share attributable to H.B. Fuller $ 0.76         $ (0.02 )   $  0.74  1    
                           
Weighted-average common shares outstanding:                          
Basic     50,180           50,180       50,180      
Diluted     51,378           51,378       51,378      
                                 


     
H.B. FULLER COMPANY AND SUBSIDIARIES    
REGULATION G RECONCILIATION – Income Statement    
In thousands, except per share amounts (unaudited)    
                      Less    Adjusted      
                Adjusted   Adjusted   Excluding Royal   % of  
    52 Weeks Ended   Add   52 Weeks Ended   Royal    52 Weeks Ended   Net  
    December 2, 2017   Adjustments   December 2, 2017   Results   December 2, 2017   Revenue  
Net revenue   $ 2,306,043     $ -     $ 2,306,043     $ 77,034     $ 2,229,009     100.0 %  
Cost of sales     (1,702,873 )       26,520        (1,676,353 )       55,858       (1,620,495 )   (72.7 %)  
Gross profit     603,170       26,520       629,690       (21,176 )     608,514     27.3 %  
                                     
Selling, general and administrative expenses   (477,030 )     52,734       (424,296 )       15,769       (408,527 )   (18.3 %)  
Other income (expense), net     (23,740 )     26,179       2,439       1,087       1,352     0.1 %  
Interest expense     (43,701 )     -       (43,701 )       10,286       (33,415 )   (1.5 %)  
Income from continuing operations before income taxes and income from equity method investments   58,699       105,433       164,132       (3,792 )     167,924     7.5 %  
                                     
Income taxes     (9,086 )     (37,114 )     (46,200 )     1,437       (47,637 )   (2.1 %)  
-Effective tax rate     15.5 %     35.2 %     28.1 %     37.9 %     28.4 %      
                                     
Income from equity method investments     8,677       -       8,677       -       8,677     0.4 %  
Net income including non-controlling interests   58,290       68,319       126,609       (2,355 )     128,964     5.8 %  
                                     
Net income attributable to non-controlling interests   (48 )     -       (48 )     -       (48 )   (0.0 %)  
Net income attributable to H.B. Fuller   $ 58,242     $ 68,319     $ 126,561     $ (2,355 )   $ 128,916     5.8 %  
                                     
                                     
Basic income per common share attributable to H.B. Fullera $ 1.16     $ 1.36       2.51     $ (0.05 )   $ 2.56        
                                     
Diluted income per common share attributable to H.B. Fuller $ 1.13     $ 1.32       2.45  1a   $ (0.05 )   $  2.50  1b      
                                     
Weighted-average common shares outstanding:                                  
Basic     50,370       50,370       50,370       50,370       50,370        
Diluted     51,619       51,619       51,619       51,619       51,619        
                                     
a   Income per share amounts may not add due to rounding    
     


     
H.B. FULLER COMPANY AND SUBSIDIARIES    
REGULATION G RECONCILIATION – Income Statement    
In thousands, except per share amounts (unaudited)    
                           
          % of         Adjusted   % of
    53 Weeks Ended   Net       53 Weeks Ended   Net
    December 3, 2016   Revenue   Adjustments   December 3, 2016   Revenue
Net revenue   $ 2,094,605     100.0 %   $ -     $ 2,094,605     100.0 %
Cost of sales     (1,484,802 )   (70.9 %)     (4,442 )     (1,480,360 )   (70.7 %)
Gross profit     609,803     29.1 %     4,442       614,245     29.3 %
                           
Selling, general and administrative expenses     (407,638 )   (19.5 %)     697       (408,335 )   (19.5 %)
Special charges. net     168       0.0 %     168       -       0.0 %
Other income (expense), net     (7,549 )   (0.3 %)     (684 )     (6,865 )   (0.3 %)
Interest expense     (27,359 )   (1.3 %)     (280 )     (27,079 )   (1.3 %)
Income before income taxes and income from equity method investments     167,425     8.0 %     4,541       171,966     8.2 %
                           
Income taxes     (50,436 )   (2.4 %)     1,656       (52,092 )   (2.4 %)
- Effective tax rate     30.1 %         -36.5 %     30.3 %    
                           
Income from equity method investments     7,393     0.3 %     -       7,393     0.3 %
Net income including non-controlling interests   124,382     5.9 %     2,885       127,267     6.1 %
                           
Net income attributable to non-controlling interests     (254 )   -       -       (254 )   (0.0 %)
Net income attributable to H.B. Fuller   $ 124,128     5.9 %   $ 2,885     $ 127,013     6.1 %
                           
Basic income per common share attributable to H.B. Fullera   $ 2.48         $ 0.06     $ 2.53      
                           
Diluted income per common share attributable to H.B. Fullera   $ 2.42         $ 0.06     $ 2.48      
                           
Weighted-average common shares outstanding:                        
Basic     50,136           50,136       50,136      
Diluted     51,270           51,270       51,270      
                           
a   Income per share amounts may not add due to rounding    
     


 
H.B. FULLER COMPANY AND SUBSIDIARIES
ADJUSTED EARNING PER SHARE RECONCILIATION
In thousands (unaudited)
                                   
    13 Weeks ended December 2, 2017   14 Weeks ended December 3, 2016
    Income             Income            
    before     Income Diluteda   before     Income   Diluted
    Income Tax     Taxes EPS   Income Tax     Taxes   EPS
GAAP Earnings   $ (24,650 )   $ (17,092 ) $ (0.15 )   $ 54,007     $ 14,873   $ 0.76  
                                   
Acquisition project costs b   15,298       4,195     0.21       500       141     0.01  
Make-whole cost on debt repayment c   25,535       8,937     0.32       -       -     -  
Advisory/financing fees d   28,499       9,975     0.36       -       -     -  
Tonsan call option agreement e   (1,705 )     -     (0.03 )     (5,173 )     -     (0.10 )
Organizational realignment f   1,018       230     0.02       3,066       544     0.05  
Other g   3,780       4,981     (0.02 )     1,544       476     0.02  
Adjusted Earnings   $ 47,775       11,226     0.71     $ 53,944     $ 16,034   $ 0.74  
                                   
Adjusted Royal results       3,792         1,437       0.05                    
Adjusted earnings excluding Royal   $   51,567         12,663       0.75                    
                                   
                                   
    52 Weeks ended December 2, 2017   53 Weeks ended December 3, 2016
    Income             Income            
    before     Income Diluted   before     Income   Diluted
    Income Tax     Taxes EPS   Income Tax     Taxes   EPSa
GAAP Earnings   $ 67,328     $ 9,086   $ 1.13     $ 174,564     $ 50,436   $ 2.42  
                                   
Acquisition project costs b   20,493       5,993     0.28       2,633       640     0.04  
Make-whole cost on debt repayment c   25,535       8,937     0.32       -       -     -  
Advisory/financing fees d   33,879       11,858     0.43       -       -     -  
Tonsan call option agreement e   (3,945 )     -     (0.08 )     (5,370 )     -       (0.10 )
Organizational realignment f   19,963       4,343     0.30       3,633       57     0.07  
Other g   9,508       5,983     0.08       3,645       959     0.05  
Adjusted Earnings   $ 172,761       46,200     2.45     $ 179,105     $ 52,092   $ 2.48  
                                   
Adjusted Royal results       3,792         1,437       0.05                    
Adjusted earnings excluding Royal   $   176,553         47,637       2.50                    
                                   
a   Income per share amounts may not add due to rounding
b   Costs related to integrating and accounting for acquisitions
c   Cash costs related to make whole payments associated with the early repayment of certain debt in conjunction with the Royal Transaction
d   Cash costs related to transaction advisory costs and costs for arranging financing in conjunction with the Royal Transaction
e   Non-cash costs related to accretion and revaluation of the Tonsan call option agreement
f   Costs related to Organizational Realignment to Support 2020 Strategic Plan, Construction Products facility combination, EIMEA restructuring announced November 2015, business integration and Special Charges
g   Costs related to Project One development costs, discrete tax items and other corporate costs
                                   


 
H.B. FULLER COMPANY AND SUBSIDIARIES
SEGMENT FINANCIAL INFORMATION
In thousands (unaudited)
           
  13 Weeks Ended   14 Weeks Ended
  December 2, 2017   December 3, 2016
Net Revenue          
Americas Adhesives $ 234,887     $ 217,639  
EIMEA   151,765       150,328  
Asia Pacific   74,107       70,361  
Construction Products   58,634       64,235  
Engineering Adhesives   81,773       72,344  
Royal Adhesives   77,034       -  
Total H.B. Fuller $ 678,200     $ 574,907  
           
Segment Operating Income 8          
Americas Adhesives $ 24,827     $ 31,936  
EIMEA   10,091       14,502  
Asia Pacific   5,898       6,111  
Construction Products   461       (2,147 )
Engineering Adhesives   7,974       10,924  
Royal Adhesives   (32,641 )     -  
Total H.B. Fuller $ 16,610     $ 61,326  
           
Depreciation and Amortization Expense          
Americas Adhesives $ 5,779     $ 5,016  
EIMEA   5,304       5,120  
Asia Pacific   1,958       1,862  
Construction Products   4,277       4,074  
Engineering Adhesives   3,733       4,374  
Royal Adhesives   6,760       -  
Total H.B. Fuller $ 27,811     $ 20,446  
           
EBITDA 3          
Americas Adhesives $ 30,607     $ 36,952  
EIMEA   15,395       19,622  
Asia Pacific   7,856       7,973  
Construction Products   4,738       1,927  
Engineering Adhesives   11,707       15,298  
Royal Adhesives   (25,881 )     -  
Total H.B. Fuller $ 44,422     $ 81,772  
           
Segment Operating Margin 8          
Americas Adhesives   10.6 %     14.7 %
EIMEA   6.6 %     9.6 %
Asia Pacific   8.0 %     8.7 %
Construction Products   0.8 %     (3.3 %)
Engineering Adhesives   9.8 %     15.1 %
Royal Adhesives   (42.4 %)     -  
Total H.B. Fuller   2.4 %     10.7 %
           
EBITDA Margin 3          
Americas Adhesives   13.0 %     17.0 %
EIMEA   10.1 %     13.1 %
Asia Pacific   10.6 %     11.3 %
Construction Products   8.1 %     3.0 %
Engineering Adhesives   14.3 %     21.1 %
Royal Adhesives   (33.6 %)     -  
Total H.B. Fuller   6.5 %     14.2 %
           
Adjusted EBITDA 3          
Americas Adhesives $ 35,818     $ 37,336  
EIMEA   17,524       21,039  
Asia Pacific   8,586       8,177  
Construction Products   5,938       2,967  
Engineering Adhesives   10,848       10,235  
Royal Adhesives   12,167       -  
Total H.B. Fuller $ 90,881     $ 79,754  
           
Adjusted EBITDA Margin 3          
Americas Adhesives   15.2 %     17.2 %
EIMEA   11.5 %     14.0 %
Asia Pacific   11.6 %     11.6 %
Construction Products   10.1 %     4.6 %
Engineering Adhesives   13.3 %     14.1 %
Royal Adhesives   15.8 %     -  
Total H.B. Fuller   13.4 %     13.9 %
           
           


 
H.B. FULLER COMPANY AND SUBSIDIARIES
SEGMENT FINANCIAL INFORMATION
In thousands (unaudited)
           
  52 Weeks Ended   53 Weeks Ended
  December 2, 2017   December 3, 2016
Net Revenue          
Americas Adhesives $ 888,552     $ 806,062  
EIMEA   548,439       545,135  
Asia Pacific   264,191       241,827  
Construction Products   238,513       256,346  
Engineering Adhesives   289,314       245,235  
Royal Adhesives   77,034       -  
Total H.B. Fuller $ 2,306,043     $ 2,094,605  
           
Segment Operating Income 8          
Americas Adhesives $ 98,979     $ 125,979  
EIMEA   29,870       40,121  
Asia Pacific   15,350       15,410  
Construction Products   (1,120 )     3,265  
Engineering Adhesives   20,453       17,390  
Royal Adhesives   (37,392 )     -  
Total H.B. Fuller $ 126,140     $ 202,165  
           
Depreciation and Amortization Expense          
Americas Adhesives $ 21,171     $ 18,979  
EIMEA   19,845       21,441  
Asia Pacific   8,135       7,484  
Construction Products   16,316       14,977  
Engineering Adhesives   15,088       14,804  
Royal Adhesives   6,760       -  
Total H.B. Fuller $ 87,315     $ 77,685  
           
EBITDA 3          
Americas Adhesives $ 120,150     $ 144,958  
EIMEA   49,714       61,562  
Asia Pacific   23,484       22,894  
Construction Products   15,196       18,242  
Engineering Adhesives   35,542       32,194  
Royal Adhesives   (30,631 )     -  
Total H.B. Fuller $ 213,455     $ 279,850  
           
Segment Operating Margin 8          
Americas Adhesives   11.1 %     15.6 %
EIMEA   5.4 %     7.4 %
Asia Pacific   5.8 %     6.4 %
Construction Products   (0.5 %)     1.3 %
Engineering Adhesives   7.1 %     7.1 %
Royal Adhesives   (48.5 %)     -  
Total H.B. Fuller   5.5 %     9.7 %
           
EBITDA Margin 3          
Americas Adhesives   13.5 %     18.0 %
EIMEA   9.1 %     11.3 %
Asia Pacific   8.9 %     9.5 %
Construction Products   6.4 %     7.1 %
Engineering Adhesives   12.3 %     13.1 %
Royal Adhesives   (39.8 %)     -  
Total H.B. Fuller   9.3 %     13.4 %
           
Adjusted EBITDA 3          
Americas Adhesives $ 134,249     $ 145,890  
EIMEA   62,280       63,912  
Asia Pacific   26,487       24,061  
Construction Products   22,942       19,473  
Engineering Adhesives   34,070       27,607  
Royal Adhesives   12,167       -  
Total H.B. Fuller $ 292,195     $ 280,943  
           
Adjusted EBITDA Margin 3          
Americas Adhesives   15.1 %     18.1 %
EIMEA   11.4 %     11.7 %
Asia Pacific   10.0 %     9.9 %
Construction Products   9.6 %     7.6 %
Engineering Adhesives   11.8 %     11.3 %
Royal Adhesives   15.8 %     -  
Total H.B. Fuller   12.7 %     13.4 %
           
           


 
 H.B. FULLER COMPANY AND SUBSIDIARIES
SEGMENT FINANCIAL INFORMATION
NET REVENUE GROWTH
(unaudited)
                             
13 Weeks Ended December 2, 2017
                             
  Americas
Adhesives
  EIMEA   Asia Pacific   Construction
Products
  Engineering
Adhesives
      Total HBF  
Price 0.9 %   5.4 %   0.5 %   0.1 %   0.5 %       1.9 %  
Volume 9.5 %   4.0 %   10.4 %   (1.7 %)   19.3 %       8.2 %  
Mix 0.1 %   0.6 %   0.2 %   (0.4 %)   (0.7 %)       0.1 %  
Acquisition 4.3 %   -     -     -     -         1.6 %  
  Constant Currency Growth 5 14.8 %   10.0 %   11.1 %   (2.0 %)   19.1 %       11.8 %  
                             
F/X 0.2 %     (1.9 %)   1.3 %   0.4 %   1.1 %       (0.1 %)  
Royal Impact -     -     -     -     -         13.4 %  
Extra Week (7.1 %)   (7.1 %)   (7.1 %)   (7.1 %)   (7.1 %)       (7.1 %)  
  7.9 %   1.0 %   5.3 %   (8.7 %)   13.1 %       18.0 %  
                             
                             
                             
52 Weeks Ended December 2, 2017
                             
  Americas
Adhesives
  EIMEA   Asia Pacific   Construction
Products
  Engineering
Adhesives
      Total HBF  
Price (0.4 %)   4.5 %   (0.6 %)   0.0 %   (1.2 %)       0.8 %  
Volume 6.1 %   4.6 %   11.1 %   (4.9 %)   20.3 %       6.1 %  
Mix (0.8 %)   0.1 %   (0.5 %)   (0.3 %)   (0.5 %)       (0.4 %)  
Acquisition 7.6 %   -     2.8 %   -     3.2 %       4.1 %  
  Constant Currency Growth 5 12.5 %   9.2 %   12.8 %   (5.2 %)   21.8 %       10.6 %  
                             
F/X (0.3 %)     (6.6 %)   (1.6 %)   0.2 %   (1.8 %)       (2.2 %)  
Royal Impact -     -     -     -     -         3.7 %  
Extra Week (2.0 %)   (2.0 %)   (2.0 %)   (2.0 %)   (2.0 %)       (2.0 %)  
  10.2 %   0.6 %   9.2 %   (7.0 %)   18.0 %       10.1 %  
                             


 
H.B. FULLER COMPANY AND SUBSIDIARIES
REGULATION G RECONCILIATION - EBITDA
In thousands (unaudited)
           
           
  13 Weeks Ended   14 Weeks Ended
  December 2, 2017   December 3, 2016
Net income (loss) including non-controlling interests $ (7,544 )   $ 39,227  
           
Income from equity method investments   (2,228 )     (2,221 )
Income taxes   (17,092 )     14,873  
Interest expense   19,073       7,645  
Other income (expense), net   24,401       (54 )
Special charges   -       1,856  
Segment Operating Income8   16,610       61,326  
           
Depreciation expense   14,697       12,460  
Amortization expense   13,115       7,986  
EBITDA3 $ 44,422     $ 81,772  
           
Non-recurring costs   46,459       (2,018 )
Adjusted EBITDA3 $ 90,881     $ 79,754  
           
Less: Adjusted Royal EBITDA $ (12,167 )      
  $ 78,714        
           
Adjusted EBITDA margin3 on core HB Fuller   13.1 %     13.9 %
           
           
           
  52 Weeks Ended   53 Weeks Ended
  December 2, 2017   December 3, 2016
Net income including non-controlling interests $ 58,290     $ 124,382  
           
Income from equity method investments   (8,677 )     (7,393 )
Income taxes   9,086       50,436  
Interest expense   43,701       27,359  
Other income (expense), net   23,740       7,549  
Special charges   -       (168 )
Segment Operating Income8   126,140       202,165  
           
Depreciation expense   51,072       49,190  
Amortization expense   36,243       28,495  
EBITDA3 $ 213,455     $ 279,850  
           
Non-recurring costs   78,740         1,093  
Adjusted EBITDA3 $ 292,195     $ 280,943  
           
Less: Adjusted Royal EBITDA $ (12,167 )      
  $ 280,028        
           
Adjusted EBITDA margin3 on core HB Fuller   12.6 %     13.4 %
               


 
H.B. FULLER COMPANY AND SUBSIDIARIES
PROFORMA FINANCIAL MEASURES
In thousands (unaudited)
                   
  Royal   Royal   Royal   H.B. Fuller   Proforma
  12/4/16 -   10/20/17 -   52 weeks ended -   Standalone   Combined2
  10/19/17   12/2/17   December 2017   December 2017   December 2017
                   
Net income (loss) $ 17,565   $ (31,486 )   $ (13,921 )   $ 89,777     $ 75,856  
                   
Income from equity method investments   -     -       -       (8,677 )     (8,677 )
Income taxes   7,735     (16,147 )     (8,412 )     25,232       16,820  
Interest expense   39,306     10,286       49,592       33,415       83,007  
Other income (expense), net   -     (45 )     (45 )     23,785       23,740  
Segment Operating Income8 $ 64,606   $ (37,392 )   $ 27,214     $ 163,532     $ 190,746  
                   
Depreciation expense $ 9,354   $ 1,712       11,066     $ 49,360       60,426  
Amortization expense   34,175     5,049       39,224       31,194       70,418  
EBITDA3 $ 108,135   $ (30,631 )   $ 77,504     $ 244,086     $ 321,590  
                   
Non-recurring costs $ 12,670   $ 42,798       55,468     $ 35,942       91,410  
Adjusted EBITDA3 $ 120,805   $ 12,167     $ 132,972     $ 280,028     $ 413,000  
                   
Net Revenue $ 580,719   $ 77,034     $ 657,753     $ 2,229,009     $ 2,886,762  
                   


 
H.B. FULLER COMPANY AND SUBSIDIARIES
OPERATING CASH FLOW RECONCILIATION
In thousands (unaudited)
       
  13 Weeks Ended   52 Weeks Ended
  December 2, 2017   December 2, 2017
       
Cash Flow from Operations $  65,532   $  136,337
       
Make-whole cost on debt restructuring    25,535      25,535
Advisory/financing fees    28,499      33,879
Net Royal cash flow impact   752     803
       
Cash flow from operations, excluding the Royal acquisition $  120,318   $  196,554
       


             
             
1a  Adjusted diluted earnings per share (EPS) is a non-GAAP financial measure and excludes the following costs included on the adjusted earnings per share reconciliation table above: special charges related to the "business integration"; organizational realignment to support the 2020 strategic plan as announced in December 2016; restructuring in EIMEA related to operational efficiency improvement projects; combining Construction Products facilities in Illinois; Project ONE development costs; the closing of a facility in the Philippines; integrating and accounting for past and present acquisitions and all transaction related costs of the Royal transaction.
1b Adjusted diluted earnings per share excluding Royal (EPS) is a non-GAAP financial measure and excludes the costs included on the adjusted earnings per share reconciliation table above in addition to the income generated from operating the business for 6 weeks.
2 Proforma financial results represent combined 2017 fiscal year financial results of H.B. Fuller on a standalone basis, the Royal business for the period under prior ownership and the 6 weeks under H.B. Fuller ownership. The proforma results are presented to provide the reader with a baseline to evaluate 2018 financial guidance.
3 EBITDA is a non-GAAP financial measure defined on a consolidated basis as gross profit, less SG&A expense, plus depreciation expense, plus amortization expense. Adjusted EBITDA excludes operating items listed on the adjusted earnings per share reconciliation table above. On a segment basis it is defined as operating income, plus depreciation expense, plus amortization expense. Adjusted EBITDA margin is defined as adjusted EBITDA divided by net revenue.
4 Free cash flow is a non-GAAP financial measure defined as cash flow from operating activities less capital expenditures.
5 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.
6 Adjusted gross profit and adjusted gross profit margin are non-GAAP financial measures. Adjusted gross profit excludes costs associated with: organizational realignment to support the 2020 strategic plan as announced in December 2016; restructuring in EIMEA related to operational efficiency improvement projects; combining Construction Products facilities in Illinois; the closing of a facility in the Philippines; integrating and accounting for past and present acquisitions; and all impacts related to the Royal transaction, including the income generated from operating the business for 6 weeks. Adjusted gross profit margin is defined as adjusted gross profit divided by adjusted net revenue.
7 Adjusted SG&A expense is a non-GAAP financial measure which excludes costs associated with: organizational realignment to support the 2020 strategic plan as announced in December 2016; restructuring in EIMEA related to operational efficiency improvement projects; combining Construction Products facilities in Illinois; Project ONE development costs; integrating and accounting for past and present acquisitions; and all impacts related to the Royal transaction, including the income generated from operating the business for 6 weeks.
8 Segment operating income is defined as gross profit less SG&A expense. Segment operating margin is defined as segment operating income divided by net revenue.
9 Segment financial information excludes all impacts related to the Royal transaction, including the income generated from operating the business for 6 weeks.
   

Maximillian Marcy
Investor Relations Contact
651-236-5062

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