H.B. Fuller Reports Fourth Quarter and Fiscal Year 2018 Results

Fourth Quarter Organic Revenue Growth of 4 percent[7]
Fourth Quarter Reported Diluted EPS of $0.79
Adjusted Diluted EPS of $0.90[2]
 increased 27 percent versus Q4’17
Debt pay down of $204 million in 2018 exceeded target
Fiscal Year 2019 Adjusted Diluted EPS Guidance is $3.15 to $3.45

ST. PAUL, Minnesota, Jan. 16, 2019 /PRNewswire/ — H.B. Fuller Company (NYSE: FUL) today reported financial results for the fourth quarter and fiscal year ended Dec. 1, 2018.

Items of Note for Fourth Quarter 2018:

  • Cash flow from operations of $146 million up versus $70 million in the fourth quarter of 2017; debt pay down of $204 million in fiscal 2018, exceeding the company’s target of $170 million;
  • Net revenue of $768 million, up 13 percent versus fourth quarter of 2017. Organic revenue up 4 percent7, driven by pricing and double-digit growth in Engineering Adhesives;
  • Net income of $41 million or $0.79 of earnings per diluted share (EPS), compared with a net loss in the fourth quarter of 2017; adjusted net income of $47 million2, or $0.902 adjusted EPS, up 27 percent;
  • Gross margin up 240 basis points and adjusted gross margin5 up 150 basis points versus fourth quarter of 2017;
  • Adjusted EBITDA of $121 million2 up 30 percent year-over-year, driven by acquisitions, strategic pricing gains and acquisition synergies; up 8 percent on a pro-forma basis for Royal1;
  • Adjusted EBITDA margin of 15.7 percent2 increased compared with fourth quarter 2017 margin of 13.7 percent2, and 14.2 percent, on a pro-forma basis including Royal1;
  • Integration of Royal Adhesives on target with $5 million of incremental cost synergies in the fourth quarter and $15 million of cost synergies in fiscal 2018.

Items of Note for 2019 Guidance:

  • Assumes challenging macroeconomic conditions continue in China and around the globe, the U.S. dollar remains strong and raw materials prices will be generally flat to 2018;
  • Organic revenue growth of 3 to 5 percent, or net revenue growth of 1 to 2 percent reflecting unfavorable foreign currency impact estimated to be 2 to 3 percent;
  • Adjusted diluted EPS of $3.15 to $3.45; up approximately 10 percent at the midpoint;
  • Adjusted EBITDA of $465 to $485 million; up approximately 6 percent at the midpoint;
  • Core tax rate of between 26 and 29 percent;
  • Approximately $100 million of capital expenditures;
  • Debt repayment of $200 million, on-track to the company’s deleveraging targets.
Fourth Quarter 2018 Key Financials:
($ in Millions)ReportedAdjusted/Proforma
20182017% Change20182017% Change
Net Revenue768678+13%7687711-0.3%
Gross Profit Margin27.3%24.9%+240bps28.1%526.6%5+150bps
Net Income41(7)N/A472372+27%
Diluted EPS$0.79($0.13)N/A$0.902$0.712+27%

Summary of Fourth Quarter 2018 Results :
Net revenue for the fourth quarter of 2018 of $768 million increased 13 percent compared with the fourth quarter of 2017. Organic revenue grew 3.8 percent7, driven by pricing improvements and double-digit growth in Engineering Adhesives.

Gross profit margin was 27.3 percent, compared with 24.9 percent in the same period in 2017 and adjusted gross profit margin of 28.1 percent5 increased 150 basis points versus last year, driven by strategic pricing gains, raw material sourcing synergies and lower manufacturing costs. Selling, General and Administrative (SG&A) expense was $140 million compared with $151 million last year. Adjusted SG&A expense of $131 million6 increased compared with $117 million in the fourth quarter of 2017, primarily due to the impact of acquisitions. Adjusted SG&A expense declined by $2 million, on a pro-forma basis for Royal1.

Net income for the fourth quarter of 2018 was $41 million, or $0.79 per diluted share, compared with a net loss of $7 million, or ($0.13) per share in the same period last year, and adjusted net income of $47 million2, or $0.902 adjusted EPS, increased 27 percent compared with $37 million2, or $0.712 adjusted EPS, versus last year. Adjusted EBITDA was $121 million2, up 30 percent compared with the prior year, with increases in all five operating segments. Adjusted EBITDA was up 8 percent on a proforma basis including Royal8.

“Our strategy to gain share in Engineering Adhesives, manage margins through effective pricing and leverage acquisition synergies continues to drive success at H.B. Fuller,” said Jim Owens, president and chief executive officer. “We achieved solid organic revenue growth in the quarter driven by pricing gains and double-digit growth in Engineering Adhesives. Foreign currency exchange rates and slower growth in China impacted our results more than we anticipated in our financial guidance for the fourth quarter. Despite these challenging macroeconomic factors, we increased adjusted EBITDA by 8 percent, doubled cash flow from operations compared with the fourth quarter of last year and paid down $204 million of debt in 2018, exceeding our $170 million target.”

Full Year 2018 Summary:
Net revenue for the 2018 fiscal year of $3,041 million increased 32 percent compared with fiscal 2017. Organic revenue grew by 3.77 percent year-over-year, driven by pricing gains and double-digit growth in Engineering Adhesives.

Gross profit margin of 27.5 percent increased 130 basis points compared with fiscal 2017 and adjusted gross profit margin of 27.9 percent5 increased 60 basis points versus last year. Net income for fiscal 2018 was $171 million, or $3.29 per diluted share, compared with net income of $59 million, or $1.15 per diluted share in fiscal 2017, and adjusted net income of $156 million2, or $3.002 per diluted share, increased 23 percent compared with $1272 million, or $2.452 per diluted share, in fiscal 2017. Adjusted EBITDA of $449 million2 was up 50 percent compared with the prior year, and increased 7 percent on a proforma basis including Royal8.

Balance Sheet and Cash Flow:
At the end of the fourth quarter of 2018, the Company had cash on hand of $151 million and total debt equal to $2,248 million, of which approximately 70 percent had a fixed interest rate. This compares to cash and debt levels equal to $150 million and $2,364 million, respectively, in the third quarter of 2018. Cash flow from operations in the fourth quarter was $146 million compared to $70 million for the same period in 2017, reflecting the increased profitability of the business and improved working capital management. Capital expenditures were $22 million in the fourth quarter of 2018, compared with $19 million in the same period last year.

Financial Guidance:
For fiscal year 2019, the company anticipates adjusted EPS of $3.15 to $3.45 and adjusted EBITDA of $465 to $485 million. Full year organic revenue growth is expected to be 3 to 5 percent compared with 2018, with net revenue growth of approximately 1 to 2 percent including an estimated unfavorable impact from foreign currency exchange rates of 2 to 3 percent. The company’s core tax rate, excluding the impact of discrete items, is expected to be between 26 and 29 percent. H.B. Fuller expects to invest approximately $100 million in capital items in 2019.

“In 2019 we will focus on driving solid organic revenue growth and margin improvement, achieving our committed cost and revenue synergies, and delivering $200 million of debt repayment. Engineering Adhesives will continue to grow into a larger and more profitable part of our business in 2019 and going forward,” Owens said. “In terms of guidance sensitivity, we are projecting a continued strong US dollar and China weakness along with relatively neutral raw material prices outside of China in 2019. Raw material demand and prices are currently declining in China and that trend may expand to the rest of the world if tariff and trade disputes persist. If raw material demand and prices start to decline in the rest of the world, our second half 2019 margins could be favorably impacted, resulting in EPS and EBITDA above the midpoint of our guidance range.

Owens continued, “We estimate that currency fluctuations and China impacted our 2019 guidance by approximately $40 million versus our original long-term forecast. Adjusting for these factors, our underlying EBITDA growth rates in 2018 and 2019 are in line with our original forecast of about 10 to 12 percent, and we anticipate annual EBITDA growth in this range through 2020. These factors impact the time to achieve our $600 million EBITDA target by about a year. We remain on track to meet or exceed our commitment of $600 million in debt paydown by the end of 2020 as a result of strong profit performance, high cash flow conversion rates and our focused capital management programs.”

This guidance excludes approximately $15 to $20 million of pre-tax expenses required to integrate the Royal business and other businesses acquired in 2017, and between $6 and $8 million of pre-tax expenses related to ERP development costs. The company’s guidance could be impacted by further rule making relative to US Tax Reform. A complete reconciliation of the non-GAAP financial information contained in our 2019 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 fourth quarter results on Thursday, January 17, 2019, at 10:30 a.m. Eastern U.S. time. The conference call audio and accompanying presentation slides will be available to interested parties via a simultaneous webcast, and may be accessed from the company’s website at https://investors.hbfuller.com/calendar. Participants should access the webcast 15 minutes prior to the start of the call to register for the event and install and test any necessary software. The webcast and presentation will be archived on the Company’s website. A telephone replay of the conference call will be available approximately 1 hour after the conclusion of the call, through Jan. 31, 2019. To access the telephone replay dial 1-877-344-7529 or 1-412-317-0088 and enter passcode 10127319.

Certain amounts presented in this release and the accompanying financial statements and data are preliminary and are subject to change in the company’s Annual Report on Form 10-K for the year ended December 1, 2018 when it is filed with the Securities and Exchange Commission.

Regulation G:
The information presented in this earnings release regarding segment operating income, adjusted gross profit, adjusted gross profit margin, adjusted selling, general and administrative expense, adjusted income before income taxes and income from equity investments, adjusted income taxes, adjusted effective tax rate, adjusted net income, adjusted diluted earnings per share and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) does not conform to generally accepted accounting principles (GAAP) and should not be construed as an alternative to the reported results determined in accordance with GAAP. Management has included this non-GAAP information to assist in understanding the operating performance of the Company and its operating segments as well as the comparability of results. 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 2019 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 2018 net revenue of over $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 https://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 results 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 on our debt agreements that limit the discretion of management in operating the business or ability to pay dividend; 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; 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, managements’ best estimate 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 EndedPercent of13 Weeks EndedPercent of
December 1, 2018Net RevenueDecember 2, 2017Net Revenue
Net revenue$768,429100.0%$678,200100.0%
Cost of sales(558,829)(72.7%)(509,412)(75.1%)
Gross profit209,60027.3%168,78824.9%
Selling, general and administrative expenses(139,844)(18.2%)(151,126)(22.3%)
Other expense, net(2,324)(0.3%)(26,163)(3.9%)
Interest expense(27,574)(3.6%)(19,073)(2.8%)
Interest income3,0050.4%1,7620.3%
Income (loss) before income taxes and income from equity method investments42,8635.6%(25,812)(3.8%)
Income (taxes) benefit(3,488)(0.5%)16,6912.5%
Income from equity method investments1,9900.3%2,2280.3%
Income (loss) from continuing operations41,3655.4%(6,893)(1.0%)
Net income (loss) including non-controlling interests41,3655.4%(6,893)(1.0%)
Net income attributable to non-controlling interests(20)(0.0%)(14)(0.0%)
Net income (loss) attributable to H.B. Fuller$41,3455.4%$(6,907)(1.0%)
Basic income (loss) per common share attributable to H.B. Fuller
   Income from continuing operations0.82(0.14)
Basic income (loss) per common share attributable to H.B. Fuller$0.82$(0.14)
Diluted income (loss) per common share attributable to H.B. Fuller
   Income from continuing operations0.79(0.13)
Diluted income (loss) per common share attributable to H.B. Fuller$0.79$(0.13)
Weighted-average common shares outstanding:
Basic50,71250,356
Diluted52,01751,724

 

Selected Balance Sheet Information (subject to change prior to filing of the Company’s Annual Report on Form 10-K)
December 1, 2018December 2, 2017December 3, 2016
Cash & cash equivalents$150,793$194,398$142,245
Trade accounts receivable, net485,719473,700351,130
Inventories355,563372,102258,096
Trade payables273,378268,467162,964
Total assets4,175,2714,373,2432,066,565
Total debt2,247,5272,451,910703,271

 

H.B. FULLER COMPANY AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
In thousands, except per share amounts (unaudited)
52 Weeks EndedPercent of52 Weeks EndedPercent of
December 1, 2018Net RevenueDecember 2, 2017Net Revenue
Net revenue$3,041,002100.0%$2,306,043100.0%
Cost of sales(2,204,108)(72.5%)(1,700,973)(73.8%)
Gross profit836,89427.5%605,07026.2%
Selling, general and administrative expenses(582,132)(19.1%)(477,030)(20.7%)
Other income (expense), net1,1840.0%(27,667)(1.2%)
Interest expense(110,994)(3.6%)(43,701)(1.9%)
Interest income11,7740.4%3,9270.2%
Income from continuing operations before income taxes and income from equity method investments156,7265.2%60,5992.6%
Income benefit (taxes)6,3560.2%(9,810)(0.4%)
Income from equity method investments8,1500.3%8,6770.4%
Income from continuing operations171,2325.6%59,4662.6%
Net income including non-controlling interests171,2325.6%59,4662.6%
Net income attributable to non-controlling interests(24)(0.0%)(48)(0.0%)
Net income attributable to H.B. Fuller$171,2085.6%$59,4182.6%
Basic income per common share attributable to H.B. Fuller
   Income from continuing operations3.381.18
Basic income per common share attributable to H.B. Fuller$3.38$1.18
Diluted income per common share attributable to H.B. Fullera
   Income from continuing operations3.291.15
Diluted income per common share attributable to H.B. Fullera$3.29$1.15
Weighted-average common shares outstanding:
Basic50,59150,370
Diluted51,97551,619
Dividends declared per common share$0.615$0.590
a Income per share amounts may not add due to rounding

 

H.B. FULLER COMPANY AND SUBSIDIARIES
REGULATION G RECONCILIATION
In thousands, except per share amounts (unaudited)
13 Weeks Ended52 Weeks Ended
December 1, 2018December 2, 2017December 1, 2018December 2, 2017
Net income attributable to H.B. Fuller$41,345$(6,907)$171,208$59,418
Acquisition project costs6161,8942,8335,258
Tonsan call option agreement3,555(1,705)1,496(3,946)
Organizational realignment4697892,83615,620
Royal restructuring and integration5,93043,89320,35147,423
Tax reform(7,138)(43,276)
Other1,787(1,415)5142,787
Adjusted net income attributable to H.B. Fuller 246,56436,549155,962126,560
Add:
Interest expense27,46817,949110,62442,365
Interest income(3,005)(720)(11,774)(2,886)
Income taxes13,58011,22649,54146,200
Depreciation expense17,10914,69767,91050,559
Amortization expense18,85513,11476,49036,243
Adjusted EBITDA 2120,57192,815448,753299,041
Diluted Shares52,01751,72451,97551,619
Adjusted diluted income per common share attributable to H.B. Fuller 2$0.90$0.71$3.00$2.45
Revenue$768,429$678,200$3,041,002$2,306,043
Adjusted EBITDA margin 215.7%13.7%14.8%13.0%
2 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 GAAP.

 

H.B. FULLER COMPANY AND SUBSIDIARIES
SEGMENT FINANCIAL INFORMATION
In thousands (unaudited)
13 Weeks Ended13 Weeks Ended
December 1, 2018December 2, 2017
Net Revenue:
Americas Adhesives$278,105$254,100
EIMEA184,522171,984
Asia Pacific71,13574,609
Construction Adhesives105,92280,450
Engineering Adhesives128,74597,057
Total H.B. Fuller$768,429$678,200
Segment Operating Income:
Americas Adhesives$30,430$17,579
EIMEA9,42468
Asia Pacific6,9395,402
Construction Adhesives7,212(9,891)
Engineering Adhesives15,7514,504
Total H.B. Fuller$69,756$17,662
Adjusted EBITDA 2
Americas Adhesives$44,988$39,151
EIMEA20,93718,011
Asia Pacific9,3128,461
Construction Adhesives18,4609,389
Engineering Adhesives27,05915,869
Total H.B. Fuller$120,756$90,881
Adjusted EBITDA Margin 2
Americas Adhesives16.2%15.4%
EIMEA11.3%10.5%
Asia Pacific13.1%11.3%
Construction Adhesives17.4%11.7%
Engineering Adhesives21.0%16.4%
Total H.B. Fuller15.7%13.4%

 

H.B. FULLER COMPANY AND SUBSIDIARIES
SEGMENT FINANCIAL INFORMATION
In thousands (unaudited)
52 Weeks Ended52 Weeks Ended
December 1, 2018December 2, 2017
Net Revenue:
Americas Adhesives$1,099,918$907,765
EIMEA738,553568,658
Asia Pacific278,079264,692
Construction Adhesives446,101260,330
Engineering Adhesives478,351304,598
Total H.B. Fuller$3,041,002$2,306,043
Segment Operating Income:
Americas Adhesives$115,363$91,198
EIMEA40,06018,821
Asia Pacific17,99514,826
Construction Adhesives32,917(12,975)
Engineering Adhesives48,42716,170
Total H.B. Fuller$254,762$128,040
Adjusted EBITDA 2
Americas Adhesives$172,112$137,583
EIMEA83,49162,767
Asia Pacific29,14526,362
Construction Adhesives77,83426,393
Engineering Adhesives81,46339,090
Total H.B. Fuller$444,045$292,195
Adjusted EBITDA Margin 2
Americas Adhesives15.6%15.2%
EIMEA11.3%11.0%
Asia Pacific10.5%10.0%
Construction Adhesives17.4%10.1%
Engineering Adhesives17.0%12.8%
Total H.B. Fuller14.6%12.7%

 

H.B. FULLER COMPANY AND SUBSIDIARIES
REGULATION G RECONCILIATION
In thousands, except per share amounts (unaudited)
13 Weeks Ended52 Weeks Ended
December 1, 2018December 2, 2017December 1, 2018December 2, 2017
Income before income taxes and income from equity method investments$42,863$(25,812)$156,726$60,599
Adjustments:
Acquisition project costs8482,8463,9577,990
Tonsan call option agreement3,555(1,705)1,496(3,946)
Organizational realignment5441,0182,84019,963
Royal restructuring and integration8,09466,48628,56671,917
Tax reform305305
Other1,9652,7283,4877,608
Adjusted income before income taxes and income from equity method investments 3$58,174$45,561$197,377$164,131
3 Adjusted income before income taxes and income from equity investments is a non-GAAP financial measure. Adjusted income before income taxes and income from equity investments is defined as income before income taxes and income from equity investments before the specific adjustments shown above. The table above provides a reconciliation of adjusted income before income taxes and income from equity investments to income before income taxes and income from equity investments, the most directly comparable financial measure determined and reported in accordance with GAAP.
H.B. FULLER COMPANY AND SUBSIDIARIES
REGULATION G RECONCILIATION
In thousands, except per share amounts (unaudited)
13 Weeks Ended52 Weeks Ended
December 1, 2018December 2, 2017December 1, 2018December 2, 2017
Income Taxes$(3,488)$16,691$6,356$(9,810)
Adjustments:
Acquisition project costs(232)(952)(1,124)(2,732)
Organizational realignment(75)(230)(4)(4,343)
Royal restructuring and integration(2,164)(22,592)(8,215)(24,494)
Tax reform(7,444)(43,582)
Other(177)(4,143)(2,972)(4,821)
Adjusted income taxes 4$(13,580)$(11,226)$(49,541)$(46,200)
Adjusted income before income taxes and income from equity method investments$58,174$45,561$197,377$164,131
Adjusted effective income tax rate 423.3%24.6%25.1%28.1%
4 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 GAAP.

 

H.B. FULLER COMPANY AND SUBSIDIARIES
REGULATION G RECONCILIATION
In thousands (unaudited)
13 Weeks Ended52 Weeks Ended
December 1, 2018December 2, 2017December 1, 2018December 2, 2017
Net revenue$768,429$678,200$3,041,002$2,306,043
Gross profit$209,600$168,788$836,894$605,070
Gross profit margin27.3%24.9%27.5%26.2%
Adjustments:
Acquisition project costs5261,3442,5214,287
Organizational realignment2354421,53311,452
Royal restructuring and integration2,81010,7815,02710,781
Other2,407(1,052)2,407(1,900)
Adjusted gross profit 5$215,578$180,303$848,382$629,690
Adjusted gross profit margin 528.1%26.6%27.9%27.3%
5 Adjusted gross profit and adjusted gross profit margin are non-GAAP financial measures. Adjusted gross profit and adjusted gross profit margin is defined as gross profit and gross profit margin excluding the specific adjustments shown above. The table above provides a reconciliation of adjusted gross profit and gross profit margin to gross profit and gross profit margin, the most directly comparable financial measure determined and reported in accordance with GAAP.
H.B. FULLER COMPANY AND SUBSIDIARIES
REGULATION G RECONCILIATION
In thousands (unaudited)
13 Weeks Ended52 Weeks Ended
December 1, 2018December 2, 2017December 1, 2018December 2, 2017
Selling, general and administrative expenses$(139,844)$(151,126)$(582,132)$(477,030)
Adjustments:
Acquisition project costs3231,3591,4363,561
Tonsan call option agreement3,450(1,780)1,126(4,233)
Organizational realignment3095771,3088,511
Royal restructuring and integration5,11429,95723,37035,387
Tax reform305305
Other(442)3,7805,8519,508
Adjusted selling, general and administrative expenses 6$(130,785)$(117,233)$(548,736)$(424,296)
6 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 GAAP.

 

H.B. FULLER COMPANY AND SUBSIDIARIES
REGULATION G RECONCILIATION
In thousands (unaudited)
AmericasAsiaConstructionEngineeringCorporateH.B. Fuller
AdhesivesEIMEAPacificAdhesivesAdhesivesTotalUnallocatedConsolidated
13 Weeks Ended

December 1, 2018

$30,430$9,424$6,939$7,212$15,751$69,756$(28,411)$41,345
Net income attributable to H.B. Fuller
Adjustments:
Acquisition project costs79422101210848(232)616
Tonsan call option agreement3,4493,4491063,555
Organizational realignment1236141634544(75)469
Royal restructuring and integration1,6413,0674011,5321,2847,925(1,995)5,930
Tax reform11677363838305(7,443)(7,138)
Other2,024142(97)(2)(102)1,965(178)1,787
Adjusted net income attributable to H.B. Fuller 235,01713,0937,2938,95520,43484,792(38,228)46,564
Add:
Interest expense27,46827,468
Interest income(3,005)(3,005)
Income taxes13,58013,580
Depreciation expense4,5045,4001,5993,0912,51517,10917,109
Amortization expense5,4672,4444206,4144,11018,85518,855
Adjusted EBITDA 2$44,988$20,937$9,312$18,460$27,059$120,756$(185)$120,571
AmericasAsiaConstructionEngineeringCorporateH.B. Fuller
AdhesivesEIMEAPacificAdhesivesAdhesivesTotalUnallocatedConsolidated
52 Weeks Ended

December 1, 2018

$115,363$40,060$17,995$32,917$48,427$254,762$(83,554)$171,208
Net income attributable to H.B. Fuller
Adjustments:
Acquisition project costs3,674954548953,957(1,124)2,833
Tonsan call option agreement1,1261,1263701,496
Organizational realignment1991,701992292,840(4)2,836
Royal restructuring and integration8,7817,6631,9255,9634,06528,397(8,046)20,351
Tax reform11677363838305(43,581)(43,276)
Other4,4221,7126517866878,258(7,744)514
Adjusted net income attributable to H.B. Fuller 2132,55551,30820,66140,67454,447299,645(143,683)155,962
Add:
Interest expense110,624110,624
Interest income(11,774)(11,774)
Income taxes49,54149,541
Depreciation expense17,62622,0886,57411,6539,96967,91067,910
Amortization expense21,93110,0951,91025,50717,04776,49076,490
Adjusted EBITDA 2$172,112$83,491$29,145$77,834$81,463$444,045$4,708$448,753
Note: Adjusted EBITDA is a non-GAAP financial measure. The tables above provide 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.

 

H.B. FULLER COMPANY AND SUBSIDIARIES
REGULATION G RECONCILIATION
In thousands (unaudited)
AmericasAsiaConstructionEngineeringH.B. Fuller
AdhesivesEIMEAPacificAdhesivesAdhesivesTotalUnallocatedConsolidated
13 Weeks Ended

December 2, 2017

$17,579$68$5,402$(9,891)$4,504$17,662$(24,569)$(6,907)
Net income attributable to H.B. Fuller
Adjustments:
Acquisition project costs2,760(71)(34)(35)832,703(809)1,894
Tonsan call option agreement(1,780)(1,780)75(1,705)
Organizational realignment13051435274661,019(230)789
Royal Restructuring10,36210,02462112,2837,44840,7383,15543,893
Other7139464511424762,728(4,143)(1,415)
Adjusted net income attributable to H.B. Fuller 231,54411,4816,4752,77310,79763,070(26,521)36,549
Add:
Interest expense17,94917,949
Interest income(720)(720)
Income taxes11,22611,226
Depreciation expense4,0564,6561,5252,3782,08214,69714,697
Amortization expense3,5511,8744614,2382,99013,11413,114
Adjusted EBITDA 2$39,151$18,011$8,461$9,389$15,869$90,881$1,934$92,815
AmericasAsiaConstructionEngineeringH.B. Fuller
AdhesivesEIMEAPacificAdhesivesAdhesivesTotalUnallocatedConsolidated
52 Weeks Ended

December 2, 2017

$91,198$18,821$14,826$(12,975)$16,170$128,040$(68,622)$59,418
Net income attributable to H.B. Fuller
Adjustments:
Acquisition project costs6,9043121511573237,847(2,589)5,258
Tonsan call option agreement(4,233)(4,233)287(3,946)
Organizational realignment2,4448,9731,7905,89586119,963(4,343)15,620
Royal Restructuring11,85011,22073114,0228,34546,1681,25547,423
Other2,1882,3791,1337111,1977,608(4,821)2,787
Adjusted net income attributable to H.B. Fuller 2114,58441,70518,6317,81022,663205,393(78,833)126,560
Add:
Interest expense42,36542,365
Interest income(2,886)(2,886)
Income taxes46,20046,200
Depreciation expense14,49115,9175,9767,4326,74350,55950,559
Amortization expense8,5085,1451,75511,1519,68436,24336,243
Adjusted EBITDA 2$137,583$62,767$26,362$26,393$39,090$292,195$6,846$299,041
Note: Adjusted EBITDA is a non-GAAP financial measure. The tables above provide 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.

 

H.B. FULLER COMPANY AND SUBSIDIARIES
SEGMENT FINANCIAL INFORMATION
NET REVENUE GROWTH
(unaudited)
13 Weeks Ended December 1, 2018
Americas
Adhesives
EIMEAAsia PacificConstruction
Adhesives
Engineering
Adhesives
Total HBF
Price5.0%4.3%2.4%0.2%2.1%3.5%
Volume(4.0%)(1.5%)(3.1%)(1.0%)15.8%(0.1%)
Mix2.4%0.3%(1.1%)(2.5%)(1.1%)0.4%
Acquisition11.8%12.1%1.1%35.9%19.8%14.7%
  Constant Currency Growth 7 15.2%15.2%(0.7%)32.6%36.6%18.5%
F/X(5.8%)(7.9%)(4.0%)(1.0%)(4.0%)(5.2%)
9.4%7.3%(4.7%)31.6%32.6%13.3%
Organic Revenue Growth 7 3.4%3.1%(1.8%)(3.3%)16.8%3.8%
52 Weeks Ended December 1, 2018
Americas
Adhesives
EIMEAAsia PacificConstruction
Adhesives
Engineering
Adhesives
Total HBF
Price3.8%4.4%1.4%0.0%4.8%3.4%
Volume(3.4%)(0.9%)0.9%(0.2%)9.2%(0.3%)
Mix1.4%0.4%(0.5%)(1.0%)0.7%0.6%
Acquisition22.1%24.3%1.5%72.4%39.9%28.3%
  Constant Currency Growth 7 23.9%28.2%3.3%71.2%54.6%32.0%
F/X(2.7%)1.7%1.8%0.2%2.5%(0.1%)
21.2%29.9%5.1%71.4%57.1%31.9%
Organic Revenue Growth 7 1.8%3.9%1.8%(1.2%)14.7%3.7%
7 Constant currency revenue growth 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. Organic revenue growth is a non-GAAP financial measure defined as constant currency revenue growth less growth from acquisitions.

 

1Proforma results were provided to reflect the historical combination of H.B. Fuller and Royal as of the comparable prior periods before the acquisition was completed in October of 2017. The proforma results and reconciliations to GAAP outcomes were filed on a Form 8-K dated March 28, 2018.

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