ST. PAUL, Minn., June 27, 2018 (GLOBE NEWSWIRE) -- H.B. Fuller Company (NYSE:FUL) today reported financial results for the second quarter that ended June 2, 2018.

Second Quarter 2018 Highlights:

  • Net revenue grew 41 percent in the second quarter of 2018 versus the same period in 2017, driven by the addition of the Royal business. On a proforma basis, including Royal in 2017, net revenue increased 8 percent2, of which half was organic growth. The Engineering Adhesives, EIMEA, and Asia Pacific segments all experienced growth in the double digits;
  • Net income was $44.5 million or $0.86 per diluted share; adjusted net income was $46.4 million, or $0.891 per diluted share, 44 percent higher than the second quarter of 2017;
  • Gross profit margin was 28.2 percent; adjusted gross profit margin3 was 28.3 percent, an increase of 30 basis points versus a proforma second quarter of 20172 and up 190 basis points sequentially, reflecting pricing actions and acquisition-related synergies;
  • Adjusted EBITDA1 was $123 million, in-line with expectations, and up 72 percent versus the second quarter of 2017. On a proforma basis, this represents an increase of 12 percent2 over the same period the previous year with the impact of Royal included;
  • The Royal integration continues to progress well and generated an incremental $4 million in cost synergies in the second quarter, totaling $6 million year-to-date, in-line with expectations. Remain on target to realize a total of $15 million of cost synergies in 2018 and $35 million of savings by 2020, as previously communicated;
  • Cash flow from operations of $54 million in the quarter, slightly ahead of expectations, of which $36 million was used to repay debt. On track to meet our $170 million debt reduction goal for the 2018 fiscal year.

Second Quarter 2018 Key Financial Metrics:

  Reported % Adjusted / Proforma4 %
   2018 2017 Change  2018 2017 Change
Net Revenue $  789,387 $  561,651  41% $  789,387 $  733,743  8%
Operating Income $  77,186 $  43,268  78% $  84,221 $  74,529  13%
Net Income $  44,451 $  25,867  72% $  46,378 $  31,804 46%
Diluted Earnings per Share $  0.86 $  0.50  72% $  0.89 $  0.62  44%
                 

Second Quarter 2018 Results:
Net revenue for the second quarter of 2018 was $789.4 million, an increase of 40.5 percent versus the second quarter of 2017. Proforma organic revenue growth, including Royal, increased approximately three and a half percent year-over-year2, driven by pricing, which made up about three percent, and volume/mix, which comprised about a half of a percent.

Net income for the second quarter of 2018 was $44.5 million, or $0.86 per diluted share, versus net income of $25.9 million, or $0.50 per diluted share, in the second quarter of 2017. Adjusted diluted earnings per share in the second quarter of 2018 was $0.891. Adjusted EBITDA1 was $123 million in the second quarter, in-line with expectations and up 72 percent versus the prior year, or 12 percent2 higher on proforma basis including Royal in 2017.

Gross profit margin was 28.2 percent. Adjusted gross profit margin3 was 28.3 percent, up 30 basis points versus the prior year on a proforma basis including Royal2, reflecting positive pricing contribution and realized raw material synergies. Selling, General and Administrative (SG&A) expense was $145.2 million. Adjusted SG&A expense5 was $139.3 million, an increase versus the second quarter of 2017, due to the impact of acquisitions and foreign currency translation. However, on a proforma basis, including Royal in 20172, adjusted SG&A declined 30 basis points as a percentage of net revenue, due to sales leverage and overall cost controls.

Jim Owens, President and Chief Executive Officer, said, “We had a very strong second quarter, driven by solid revenue growth and robust pricing momentum, which helped us deliver $123 million of EBITDA. We remain committed to strengthening the performance of both the core legacy H.B. Fuller businesses and our recently acquired businesses. The contributions being made to our business by Royal continue to gain traction, and we are pleased that the integration plans and synergy progress remain in-line with our expectations, as do our free cash flow improvement and debt reduction. In addition, we are closely monitoring raw materials inflation, have implemented the appropriate pricing changes needed to offset these cost increases and we continue to focus on volume improvements in all of our businesses and across all regions.

“Organic growth performance was solid at three and a half percent, in-line with our expectations, led by 17 percent growth in Engineering Adhesives as a result of a series of customer wins, strong organic volume growth in Asia Pacific and pricing improvements across nearly all segments. EBITDA margins also increased in all segments as a result of strong pricing and manufacturing and operating cost management, and we expect further improvement throughout the remainder of the year. Our focus on generating free cash flow resulted in debt pay down of $36 million during the quarter, and we continue to expect a total reduction of $170 million of debt in 2018. Our plans to deliver our EBITDA targets for both fiscal year 2018 and 2020 remain firmly on track.

“We look forward to discussing these metrics, our 2020 goals, and most importantly our path to achieving these targets in more detail at our Investor Day on July 19th.”

EBITDA Calculation Revision:
In order to conform with 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 $120 million in the second 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 second quarter of 2018, the Company had cash on hand of $129 million and total debt equal to $2,405 million, of which approximately 70 percent had a fixed interest rate. This compares to cash and debt levels equal to $132 million and $2,441 million, respectively, in the first quarter of 2018. Cash flow from operations in the second quarter was $54 million, reflecting the improving profitability of the businesses. Capital expenditures were $15 million in the second quarter of 2018, compared to $7 million in the same period last year.

Fiscal 2018 Guidance:
The Company is narrowing its guidance for the 2018 fiscal year for adjusted EPS to $3.15 to $3.40, versus the previous range of $3.10 to $3.40. H.B. Fuller is also updating its adjusted EBITDA guidance to approximately $470 million to reflect the impact of the modified calculation of EBITDA. Revenue growth for the remainder of the 2018 fiscal year is expected to be between 5 and 6 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 $80 million in capital items in 2018.

This guidance excludes approximately $20 million of pre-tax expenses required to integrate the Royal business and other businesses acquired in 2017, and between $7 and $10 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 first quarter results on Thursday, June 28, 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 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 proforma net revenue of $2.9 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 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
 June 2, 2018 Net Revenue June 3, 2017 Net Revenue
Net revenue$789,387  100.0% $561,651  100.0%
Cost of sales (567,002) (71.8%)  (415,613) (74.0%)
Gross profit 222,385  28.2%  146,038  26.0%
          
Selling, general and administrative expenses (145,199) (18.4%)  (102,770) (18.3%)
Operating income 77,186  9.8%  43,268  7.7%
          
Other income (expense) 3,850  0.5%  (929) (0.2%)
Interest expense, net (25,223) (3.2%)  (7,329) (1.3%)
Income before income taxes and income from equity method investments 55,813  7.0%  35,010  6.2%
          
Income taxes (13,488) (1.7%)  (11,151) (2.0%)
          
Income from equity method investments 2,139  0.3%  2,005  0.4%
Net income including non-controlling interests 44,464  5.6%  25,864  4.6%
          
Net income attributable to non-controlling interests (13) (0.0%)  3  0.0%
Net income attributable to H.B. Fuller$44,451  5.6% $25,867  4.6%
          
Basic income per common share attributable to H.B. Fuller$0.88    $0.51   
          
Diluted income per common share attributable to H.B. Fuller$0.86    $0.50   
          
Weighted-average common shares outstanding:         
Basic 50,551     50,496   
Diluted 51,846     51,686   
          
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)
         
 June 2, 2018 December 2, 2017 June 3, 2017
Cash & cash equivalents$129,248 $194,398 $94,102
Trade accounts receivable, net 477,655  473,700  378,622
Inventories 404,680  359,505  302,336
Trade payables 263,724  268,467  181,979
Total assets 4,338,897  4,360,646  2,200,236
Total debt 2,404,952  2,451,910  786,109
         


H.B. FULLER COMPANY AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
In thousands, except per share amounts (unaudited)
          
 Six Months Ended Percent of Six Months Ended Percent of
 June 2, 2018 Net Revenue June 3, 2017 Net Revenue
Net revenue$1,502,466  100.0% $1,064,974  100.0%
Cost of sales (1,092,376) (72.7%)  (779,940) (73.2%)
Gross profit 410,090  27.3%  285,034  26.8%
          
Selling, general and administrative expenses (296,219) (19.7%)  (215,685) (20.3%)
Operating income 113,871  7.6%  69,349  6.5%
          
Other income (expense) 4,883  0.3%    (903)   (0.1%)
)Interest expense, net (49,727) (3.3%)  (15,114) (1.4%)
Income before income taxes and income from equity method investments 69,027  4.6%  53,332  5.0%
          
Income taxes 19,144  1.3%  (16,916) (1.6%)
          
Income from equity method investments 3,960  0.3%  4,279  0.4%
Net income including non-controlling interests 92,131  6.1%  40,695  3.8%
          
Net income attributable to non-controlling interests 2  0.0%  (33) (0.0%)
Net income attributable to H.B. Fuller$92,133  6.1% $40,662  3.8%
          
Basic income per common share attributable to H.B. Fuller$1.82    $0.81   
          
Diluted income per common share attributable to H.B. Fuller$1.78    $0.79   
          
Weighted-average common shares outstanding:         
Basic 50,511     50,369   
Diluted 51,872     51,573   
          
Dividends declared per common share$0.305    $0.29   
            


H.B. FULLER COMPANY AND SUBSIDIARIES 
REGULATION G RECONCILIATION 
In thousands, except per share amounts (unaudited) 
               
  Three Months Ended Six Months Ended 
  June 2, 2018 June 3, 2017 June 2, 2018 June 3, 2017  
               
Net income attributable to H.B. Fuller $44,451  $25,867  $92,133  $40,662   
               
Acquisition project costs  297   855   672   1,499   
Tonsan call option agreement  (2,294)  (3,569)  (2,170)  (3,462)  
Organizational realignment  725   6,156   1,432   14,598   
Royal restructuring and integration  4,344   -   9,314   -   
Tax reform  -   -   (35,555)  -   
Other  (1,145)  2,495   (1,095)  3,397   
Adjusted net income attributable to H.B. Fuller  46,378   31,804   64,731   56,694   
               
Add:              
Interest expense, net  25,144   7,258   49,571   14,974   
Income taxes  15,565   12,270   21,298   22,003   
Depreciation expense  16,372   12,012   33,794   23,530   
Amortization expense  19,276   7,874   38,519   15,229   
Adjusted EBITDA  122,735   71,218   207,913   132,430   
               
Diluted Shares  51,846   51,686   51,872   51,573   
Adjusted diluted income per common share attributable to H.B. Fuller $0.89  $0.62  $1.25  $1.10   
Revenue $789,387  $561,651  $1,502,466  $1,064,974   
Adjusted EBITDA margin  15.5%  12.7%  13.8%  12.4%  
               
1) 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)
      
 Three Months Ended Three Months Ended
 June 2, 2018 June 3, 2017
Net Revenue:     
Americas Adhesives$277,992  $229,622 
EIMEA 193,427   135,226 
Asia Pacific 74,326   64,466 
Construction Adhesives 121,795   63,754 
Engineering Adhesives 121,847   68,583 
Total H.B. Fuller$789,387  $561,651 
      
Segment Operating Income:     
Americas Adhesives$32,607  $26,455 
EIMEA 14,040   8,083 
Asia Pacific 5,040   4,751 
Construction Adhesives 11,673   (1,853)
Engineering Adhesives 13,826   5,832 
Total H.B. Fuller$77,186  $43,268 
      
 Adjusted EBITDA1     
 Americas Adhesives$44,412  $34,750 
 EIMEA 24,995   15,034 
 Asia Pacific 7,961   7,038 
 Construction Adhesives 23,356   6,837 
 Engineering Adhesives 19,143   6,417 
 Corporate Unallocated 2,868   1,142 
 Total H.B. Fuller$122,735  $71,218 
      
 Adjusted EBITDA Margin1     
 Americas Adhesives 16.0%  15.1%
 EIMEA 12.9%  11.1%
 Asia Pacific 10.7%  10.9%
 Construction Adhesives 19.2%  10.7%
 Engineering Adhesives 15.7%  9.4%
 Total H.B. Fuller 15.5%  12.7%
      
      


H.B. FULLER COMPANY AND SUBSIDIARIES
SEGMENT FINANCIAL INFORMATION
In thousands (unaudited)
      
      
 Six Months Ended Six Months Ended
 June 2, 2018 June 3, 2017
Net Revenue:     
Americas Adhesives$539,323  $422,784 
EIMEA 372,010   259,265 
Asia Pacific 141,000   127,112 
Construction Products 219,039   120,800 
Engineering Adhesives 231,094   135,013 
Total H.B. Fuller$1,502,466  $1,064,974 
      
Segment Operating Income:     
Americas Adhesives$50,118  $47,488 
EIMEA 21,878   9,880 
Asia Pacific 7,362   6,630 
Construction Products 12,938   (2,536)
Engineering Adhesives 21,575   7,887 
Total H.B. Fuller$113,871  $69,349 
      
 Adjusted EBITDA1     
 Americas Adhesives$76,161  $63,617 
 EIMEA 43,395   28,111 
 Asia Pacific 13,253   12,783 
 Construction Products 35,858   11,327 
 Engineering Adhesives 35,172   13,185 
 Corporate Unallocated 4,073   3,407 
 Total H.B. Fuller$207,913  $132,430 
      
 Adjusted EBITDA Margin1     
 Americas Adhesives 14.1%  15.0%
 EIMEA 11.7%  10.8%
 Asia Pacific 9.4%  10.1%
 Construction Products 16.4%  9.4%
 Engineering Adhesives 15.2%  9.8%
 Total H.B. Fuller 13.8%  12.4%
      
      


H.B. FULLER COMPANY AND SUBSIDIARIES 
REGULATION G RECONCILIATION 
In thousands, except per share amounts (unaudited) 
        
 Three Months Ended Six Months Ended 
 June 2, 2018 June 3, 2017 June 2, 2018 June 3, 2017 
              
Income before income taxes and income from equity method investments$55,813  $35,010  $69,027  $53,332   
              
Adjustments:             
Acquisition project costs 448   1,291   1,007   2,280   
Tonsan call option agreement (2,294)  (3,569)  (2,170)  (3,462)  
Organizational realignment 837   6,795   1,182   18,373   
Royal restructuring and integration 6,544   -   14,063   -   
Other (1,531)  2,539   (1,042)  3,928   
Adjusted income before income taxes and income from equity method investments$59,817  $42,066  $82,067  $74,451   
              
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 before the specific adjustments shown above.  
              
              
              
H.B. FULLER COMPANY AND SUBSIDIARIES 
REGULATION G RECONCILIATION 
In thousands, except per share amounts (unaudited) 
              
 Three Months Ended Six Months Ended 
 June 2, 2018 June 3, 2017 June 2, 2018 June 3, 2017 
              
Income Taxes$(13,488) $(11,151) $19,144  $(16,916)  
              
Adjustments:             
Acquisition project costs (152)  (436)  (336)  (780)  
Organizational realignment (111)  (639)  249   (3,775)  
Royal restructuring and integration (2,200)  -   (4,749)  -   
Tax reform -   -   (35,555)  -   
Other 386   (44)  (51)  (532)  
Adjusted income taxes$(15,565) $(12,270) $(21,298) $(22,003)  
              
Adjusted income before income taxes and income from equity method investments$59,817  $42,066  $82,067  $74,451   
Adjusted effective income tax rate 26.0%  29.2%  26.0%  29.6%  
              
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 before 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 Six Months Ended 
 June 2, 2018 June 3, 2017 June 2, 2018 June 3, 2017 
              
Net revenue 789,387   561,651   1,502,466   1,064,974   
              
Gross profit$222,385  $146,038  $410,090  $285,034   
Gross profit margin 28.2%  26.0%  27.3%  26.8%  
              
Adjustments:             
Acquisition project costs 70   831   173   1,024   
Tonsan call option agreement             
Organizational realignment 431   5,944   597   10,907   
Royal restructuring and integration 619      908      
Adjusted gross profit$223,505  $152,813  $411,768  $296,965   
Adjusted gross profit margin 28.3%  27.2%  27.4%  27.9%  
              
3) Adjusted gross profit and gross profit margin is a non-GAAP financial measure. 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 before the specific adjustments shown above.  
              
              
H.B. FULLER COMPANY AND SUBSIDIARIES 
REGULATION G RECONCILIATION 
In thousands (unaudited) 
              
 Three Months Ended Six Months Ended 
 June 2, 2018 June 3, 2017 June 2, 2018 June 3, 2017 
              
Selling, general and administrative expenses$(145,199) $(102,770) $(296,219) $(215,685)  
              
Adjustments:             
Acquisition project costs 379   459   834   1,255   
Tonsan call option agreement (2,373)  (3,639)  (2,326)  (3,603)  
Organizational realignment 406   851   585   7,465   
Royal restructuring and integration 5,924      13,156      
Other 1,579   2,540   3,729   3,930   
Adjusted selling, general and administrative expenses$(139,284) $(102,559) $(280,241) $(206,638)  
              
5) 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 before 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
June 2, 2018
 $32,607 $14,040 $5,040 $11,673 $13,826  $77,186  $(32,735) $44,451  
 Net income attributable to H.B. Fuller                         
                           
 Adjustments:                         
 Acquisition project costs  352  34  16  17  29   448   (151)  297  
 Tonsan call option agreement  -  -  -  -  (2,373)  (2,373)  79   (2,294) 
 Organizational realignment  54  655  -  129  -   838   (113)  725  
 Royal restructuring and integration  2,137  1,730  555  1,200  922   6,544   (2,200)  4,344  
 Other  610  390  186  196  194   1,576   (2,721)  (1,145) 
                           
 Adjusted net income attributable to H.B. Fuller  35,760  16,849  5,797  13,215  12,598   84,219   (37,841)  46,378  
                           
 Add:                         
 Interest expense, net  -  -  -  -  -   -   25,144   25,144  
 Income taxes  -  -  -  -  -   -   15,565   15,565  
 Depreciation expense  4,144  5,478  1,646  2,654  2,450   16,372   -   16,372  
 Amortization expense  4,508  2,668  518  7,487  4,095   19,276   -   19,276  
 Adjusted EBITDA1$ 44,412 $24,995 $7,961 $23,356 $19,143  $119,867  $2,868  $122,735  
                           
                           
           
   Americas    Asia Construction Engineering    Corporate H.B. Fuller 
   Adhesives EIMEA Pacific Adhesives Adhesives Total Unallocated Consolidated 
                           
 Six Months Ended
June 2, 2018
 $50,118 $21,878 $7,362 $12,938 $21,575  $113,871  $(21,738) $92,133  
 Net income attributable to H.B. Fuller                         
                           
 Adjustments:                         
 Acquisition project costs  843  47  22  24  71   1,007   (335)  672  
 Tonsan call option agreement  -  -  -  -  (2,326)  (2,326)  156   (2,170) 
 Organizational realignment  179  717  3  279  3   1,181   251   1,432  
 Royal restructuring and integration  5,016  3,309  1,095  2,616  2,026   14,062   (4,748)  9,314  
 Tax reform  -           -   -   (35,555)  (35,555) 
 Other  1,429  929  442  464  468   3,732   (4,827)  (1,095) 
                           
 Adjusted net income attributable to H.B. Fuller  57,585  26,880  8,924  16,321  21,817   131,527   (66,796)  64,731  
                           
 Add:                         
 Interest expense, net  -  -  -  -  -   -   49,571   49,571  
 Income taxes  -  -  -  -  -   -   21,298   21,298  
 Depreciation expense  8,613  11,195  3,326  5,675  4,985   33,794   -   33,794  
 Amortization expense  9,964  5,320  1,003  13,862  8,370   38,519   -   38,519  
 Adjusted EBITDA1$ 76,162 $43,395 $13,253 $35,858 $35,172  $203,839  $4,073  $207,913  
                           


 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
June 3, 2017
 $26,456 $8,083 $4,751 $(1,853) $5,832  $43,269  $(17,402) $25,867 
 Net income attributable to H.B. Fuller                        
                          
 Adjustments:                        
 Acquisition project costs  1,027  124  45  47   48   1,291   (436)  855 
 Tonsan call option agreement  -  -  -  -   (3,639)  (3,639)  70   (3,569)
 Organizational realignment  984  1,495  22  4,209   85   6,795   (639)  6,156 
 Other  899  606  302  319   348   2,474   21   2,495 
                          
 Adjusted net income attributable to H.B. Fuller  29,366  10,308  5,120  2,722   2,674   50,190   (18,386)  31,804 
                          
 Add:                        
 Interest expense, net  -  -  -  -   -   -   7,258   7,258 
 Income taxes  -  -  -  -   -   -   12,270   12,270 
 Depreciation expense  3,472  3,671  1,498  1,828   1,543   12,012   -   12,012 
 Amortization expense  1,912  1,055  420  2,287   2,200   7,874   -   7,874 
 Adjusted EBITDA1$ 34,750 $15,034 $7,038 $6,837  $6,417  $70,076  $1,142  $71,218 
                          
                          
           
   Americas    Asia Construction Engineering      H.B. Fuller
   Adhesives EIMEA Pacific Adhesives Adhesives Total Unallocated Consolidated
                          
 Six Months Ended
June 3, 2017
 $47,488 $9,880 $6,630 $(2,536) $7,887  $69,349  $(28,687) $40,662 
 Net income attributable to H.B. Fuller                        
                          
 Adjustments:                        
 Acquisition project costs  1,521  323  142  147   147   2,280   (781)  1,499 
 Tonsan call option agreement  -  -  -  -   (3,603)  (3,603)  141   (3,462)
 Organizational realignment  2,951  7,532  1,711  5,458   721   18,373   (3,775)  14,598 
 Other  1,466  927  470  485   517   3,865   (468)  3,397 
                          
 Adjusted net income attributable to H.B. Fuller  53,426  18,662  8,953  3,554   5,669   90,264   (33,570)  56,694 
                          
 Add:                        
 Interest expense, net  -  -  -  -   -   -   14,974   14,974 
 Income taxes  -  -  -  -   -   -   22,003   22,003 
 Depreciation expense  7,033  7,315  2,950  3,161   3,071   23,530   -   23,530 
 Amortization expense  3,158  2,134  880  4,612   4,445   15,229   -   15,229 
 Adjusted EBITDA1$ 63,617 $28,111 $12,783 $11,327  $13,185  $129,023  $3,407  $132,430 
                          


H.B. FULLER COMPANY AND SUBSIDIARIES
SEGMENT FINANCIAL INFORMATION
NET REVENUE GROWTH
(unaudited)
            
Three Months Ended June 2, 2018
            
 Americas
Adhesives
 EIMEA Asia
Pacific
 Construction
Adhesives
 Engineering
Adhesives
 Total HBF
Price3.0% 4.8% 0.6% (0.6%) 6.8% 3.2%
Volume(5.2%) (1.5%) 7.3% (0.2%) 9.5% (0.5%)
Mix1.2% 0.5% (0.7%) 0.5% 1.2% 0.7%
Acquisition23.2% 29.9% 1.4% 90.4% 52.5% 33.5%
  Constant Currency Growth622.2% 33.7% 8.6% 90.1% 70.0% 36.9%
            
F/X(1.1%) 9.3% 6.6% 0.8% 7.7% 3.6%
            
 21.1% 43.0% 15.2% 90.9% 77.7% 40.5%
            
            
            
            
Six Months Ended June 2, 2018
            
 Americas
Adhesives
 EIMEA Asia
Pacific
 Construction
Adhesives
 Engineering
Adhesives
 Total HBF
Price2.1% 4.0% 0.7% (0.4%) 5.7% 2.6%
Volume(2.0%) (0.5%) 3.0% (2.0%) 7.6% 0.1%
Mix0.9% 0.3% (0.4%) (0.1%) 1.7% 0.6%
Acquisition27.1% 29.7% 1.7% 82.9% 49.8% 33.9%
  Constant Currency Growth628.1% 33.5% 5.0% 80.4% 64.8% 37.2%
            
F/X(0.5%) 10.0% 5.9% 0.9% 6.4% 3.9%
            
 27.6% 43.5% 10.9% 81.3% 71.2% 41.1%
 

 

1   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 referenced in table 1): Tax reform impacts; 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. 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 excludes 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. 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.


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