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ST. PAUL, Minn., June 24, 2020 /PRNewswire/ -- H.B. Fuller Company (NYSE: FUL) today reported financial results for its second quarter ended May 30, 2020.
Items of Note for Second Quarter 2020
Summary of Second Quarter 2020 ResultsNet revenue of $675 million decreased 11% compared with the second quarter of 2019. Foreign currency exchange rates and the sale of the surfactants, thickeners and dispersants business negatively impacted revenues by 4% on a combined basis. Organic revenue excluding these impacts was down 7% versus the same period last year. Hygiene, Health and Consumable Adhesives organic revenue increased 7% year over year, with double-digit growth in hygiene, packaging, and health and beauty. Engineering Adhesives and Construction Adhesives organic revenue declined 20% and 15% versus last year, respectively, in-line with the company's planning assumptions for expected impacts related to the COVID-19 pandemic.
Gross profit margin was 27.4%. Adjusted gross profit margin of 27.7% was down 120 basis points versus last year. The decline was due to lower revenues and unfavorable product mix related to impacts from COVID-19, partially offset by favorable raw material costs. Selling, General and Administrative (SG&A) expense was $128 million. Adjusted SG&A expense of $125 million declined 10% compared with the same period last year, driven by cost savings realized from the company's business realignment to three global business units and lower discretionary expenses in the quarter. Additionally, interest expense declined 20% driven by the company's accelerated debt paydown and lower interest rates.
As a result of these factors, net income attributable to H.B. Fuller in the quarter was $32 million, or $0.61 per diluted share. Adjusted net income attributable to H.B. Fuller was $35 million, or $0.68 of adjusted EPS, down from $46 million, or $0.88 of adjusted EPS in the prior year. Adjusted EBITDA was $101 million in the quarter, compared with $121 million in the same period last year, and adjusted EBITDA margin was 14.9% versus 16% in the prior year.
"H.B. Fuller's operating performance in the second quarter was strong as our worldwide team relentlessly focused on supporting customers in producing essential goods," said Jim Owens, president and chief executive officer. "Throughout the quarter, we found new opportunities to grow our business while managing costs and working capital. Our business model of global collaboration with local execution and a culture of customer focus enabled us to meet customer needs faster than competitors and gain share. Our supply chain and sourcing teams were able to meet demand while reducing costs and our technical, sales and office staff around the globe embraced new ways of working to increase productivity while reducing expenses. All of this was accomplished without any employees becoming infected with COVID-19 at work in our 72 factories."
Owens continued, "We realized significant growth in Hygiene, Health and Consumable Adhesives revenues by being the first and fastest to support customers during this crisis. Our restructuring into three global business units has resulted in productivity and efficiency gains that helped deliver EBITDA above our guidance range and enabled us to exceed last year's debt paydown in the quarter while raising our dividend. During the quarter, we also scoped new operational initiatives which will generate $20 to $30 million in additional savings. Despite the challenging economic environment, we expect to continue delivering strong cash flow performance in 2020 by operating efficiently, reducing working capital needs and maintaining our debt paydown momentum, all while ensuring the health and safety of our workforce."
Key Balance Sheet and Cash Flow ItemsAt the end of the second quarter of 2020, the company had cash on hand of $70 million and total debt equal to $1,928 million. This compares to cash and debt levels equal to $79 million and $1,973 million, respectively, at the end of the first quarter of 2020. For the six-month year-to-date period, cash flow from operations increased to $108 million from $77 million for the same period of 2019, driven by improved working capital management. Capital expenditures were $22 million versus $18 million in the second quarter of fiscal 2019, reflecting timing of capital projects and expenditures related to growth initiatives. The company estimates capital investment for the fiscal year totaling $75 to $85 million.
H.B. Fuller has more than adequate liquidity to meet any foreseeable needs, including a $400 million revolving credit facility with a feature that allows for an increase of the facility by $300 million dollars if needed. The company also has ample room under its debt covenants using significantly conservative outlook scenarios.
2020 Planning AssumptionsThe extent of COVID-19's impact on global economic factors and the pace of economic recovery as businesses reopen remains uncertain. The company is providing the following planning assumptions based on current economic projections, order patterns and assumptions for global commercial activity:
The company remains committed to managing working capital and cash costs in order to reduce debt by $200 million in 2020. Contingency plans are available as necessary for adjustments in expenses, working capital and capital expense to achieve this target.
Company Update on COVID-19Throughout the COVID-19 pandemic, H.B. Fuller's factories have remained open and operational. By rapidly implementing health and safety protocols and business continuity plans around the world, the company has been able to successfully protect employees, reinforce its supply chains, and deliver products to customers.
The company also created new ways to collaborate and accelerate productivity during this period. Over the past few years, H.B. Fuller has made considerable investments in technology, analytics platforms and virtual collaboration tools. The company has leveraged these tools to facilitate decision-making, maintain high levels of customer service, pursue new customer relationships, and accelerate its sales cycle through virtual product trials.
"By quickly mobilizing resources upon the outbreak of COVID-19, we were able to mitigate the severity of its impact on our operating and financial results through the first half of the year," said Owens. "At the same time, we have found new and creative ways of working with customers and colleagues around the globe that will extend beyond this crisis. Moving forward, we will continue to leverage electronic tools and new methods of interacting with customers to improve our speed and agility. We are using the critical lessons learned during this crisis to refine our planning so that we are well-prepared for growth opportunities and any potential headwinds as we progress toward a global recovery."
Conference CallThe Company will host an investor conference call to discuss first quarter results on Thursday, June 25, 2020, at 10:30 a.m. EDT. 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 prior to the start of the call to register for the event and install and test any necessary software. Accompanying presentation slides will be available at the link above 30 minutes prior to the call, and 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 July 2, 2020. To access the telephone replay dial 1-877-344-7529 in the US, 855-669-9658 in Canada, and 1-412-317-0088 outside the US and Canada, and enter access code 10144467.
Regulation GThe 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 to the results of other companies. The non-GAAP information provided may not be consistent with the methodologies used by other companies. All non-GAAP information is reconciled with reported GAAP results in the "Regulation G Reconciliation" tables in this press release with the exception of our forward-looking non-GAAP measures contained above in our fiscal 2020 Planning Assumptions, which the company cannot reconcile to forward-looking GAAP results without unreasonable effort.
About H.B. FullerSince 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 2019 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, 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 StatementsCertain statements in this press release 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 consequences of the COVID-19 outbreak and other pandemics; 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, cost savings and operating efficiencies from the Royal transaction or the business realignment 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 more 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. Many of the foregoing risks and uncertainties are, and will be, exacerbated by COVID-19 and any worsening of the global business and economic environment as a result.
Further information about the various risks and uncertainties can be found in the company's SEC 10-K filing for the fiscal year ended November 30, 2019. 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) | |||||||||
Three Months Ended | Percent of | Three Months Ended | Percent of | ||||||
May 30, 2020 | Net Revenue | June 1, 2019 | Net Revenue | ||||||
Net revenue | $ | 674,602 | 100.0% | $ | 759,583 | 100.0% | |||
Cost of sales | (489,701) | (72.6%) | (541,124) | (71.2%) | |||||
Gross profit | 184,901 | 27.4% | 218,459 | 28.8% | |||||
Selling, general and administrative expenses | (127,998) | (19.0%) | (146,079) | (19.2%) | |||||
Other income, net | 3,049 | 0.5% | 2,986 | 0.4% | |||||
Interest expense | (21,644) | (3.2%) | (26,940) | (3.5%) | |||||
Interest income | 2,898 | 0.4% | 3,023 | 0.4% | |||||
Income before income taxes and income from equity method investments | 41,206 | 6.1% | 51,449 | 6.8% | |||||
Income taxes | (11,471) | (1.7%) | (16,441) | (2.2%) | |||||
Income from equity method investments | 1,893 | 0.3% | 1,633 | 0.2% | |||||
Net income including non-controlling interests | 31,628 | 4.7% | 36,641 | 4.8% | |||||
Net (loss) income attributable to non-controlling interests | (15) | (0.0%) | - | 0.0% | |||||
Net income attributable to H.B. Fuller | $ | 31,613 | 4.7% | $ | 36,641 | 4.8% | |||
Basic income per common share attributable to H.B. Fuller | $ | 0.61 | $ | 0.72 | |||||
Diluted income per common share attributable to H.B. Fuller | $ | 0.61 | $ | 0.70 | |||||
Weighted-average common shares outstanding: | |||||||||
Basic | 51,420 | 50,902 | |||||||
Diluted | 52,029 | 52,105 | |||||||
Dividends declared per common share | $ | 0.1625 | $ | 0.160 | |||||
Selected Balance Sheet Information (subject to change prior to filing of the Company's Quarterly Report on Form 10-Q) | ||||||||
May 30, 2020 | November 30, 2019 | June 1, 2019 | ||||||
Cash & cash equivalents | $ | 70,346 | $ | 112,191 | $ | 100,246 | ||
Trade accounts receivable, net | 448,126 | 493,181 | 499,406 | |||||
Inventories | 388,698 | 337,267 | 382,612 | |||||
Trade payables | 319,616 | 298,869 | 299,935 | |||||
Total assets | 3,979,060 | 3,985,734 | 4,149,864 | |||||
Total debt | 1,928,055 | 1,979,116 | 2,193,760 | |||||
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 | |||||||
May 30, 2020 | Net Revenue | June 1, 2019 | Net Revenue | |||||||
Net revenue | $ | 1,321,166 | 100.0% | $ | 1,432,518 | 100.0% | ||||
Cost of sales | (966,003) | (73.1%) | (1,034,134) | (72.2%) | ||||||
Gross profit | 355,163 | 26.9% | 398,384 | 27.8% | ||||||
Selling, general and administrative expenses | (269,507) | (20.4%) | (291,792) | (20.4%) | ||||||
Other income, net | 8,018 | 0.6% | 6,351 | 0.4% | ||||||
Interest expense | (44,401) | (3.4%) | (53,747) | (3.8%) | ||||||
Interest income | 5,816 | 0.4% | 6,076 | 0.4% | ||||||
Income before income taxes and income from equity method investments | 55,089 | 4.2% | 65,272 | 4.6% | ||||||
Income taxes | (17,082) | (1.3%) | (19,581) | (1.4%) | ||||||
Income from equity method investments | 3,527 | 0.3% | 3,198 | 0.2% | ||||||
Net income including non-controlling interests | 41,534 | 3.1% | 48,889 | 3.4% | ||||||
Net loss attributable to non-controlling interests | (26) | (0.0%) | (4) | (0.0%) | ||||||
Net income attributable to H.B. Fuller | $ | 41,508 | 3.1% | $ | 48,885 | 3.4% | ||||
Basic income per common share attributable to H.B. Fuller a | $ | 0.80 | $ | 0.96 | ||||||
Diluted income per common share attributable to H.B. Fuller a | $ | 0.79 | $ | 0.94 | ||||||
Weighted-average common shares outstanding: | ||||||||||
Basic | 51,874 | 50,827 | ||||||||
Diluted | 52,305 | 52,003 | ||||||||
Dividends declared per common share | $ | 0.3225 | $ | 0.315 | ||||||
aIncome 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) | ||||||||||||
Three Months Ended | Six Months Ended | |||||||||||
May 30, 2020 | June 1, 2019 | May 30, 2020 | June 1, 2019 | |||||||||
Net income attributable to H.B. Fuller | $ | 31,613 | $ | 36,641 | $ | 41,508 | $ | 48,885 | ||||
Adjustments: | ||||||||||||
Acquisition related activity | (1,266) | 539 | (998) | 623 | ||||||||
Organizational realignment | 1,550 | 1,444 | 5,154 | 1,794 | ||||||||
Royal restructuring and integration | 1,910 | 4,761 | 5,660 | 9,126 | ||||||||
Tax reform | - | - | (44) | 55 | ||||||||
Project ONE | 855 | 1,236 | 2,582 | 2,049 | ||||||||
Other | 484 | 1,015 | (926) | 623 | ||||||||
Adjusted net income attributable to H.B. Fuller1 | 35,146 | 45,636 | 52,936 | 63,155 | ||||||||
Add: | ||||||||||||
Interest expense | 21,670 | 26,940 | 44,431 | 53,747 | ||||||||
Interest income | (2,898) | (3,023) | (5,816) | (6,076) | ||||||||
Income taxes | 12,692 | 16,371 | 18,284 | 22,421 | ||||||||
Depreciation and amortization expenseA | 34,009 | 35,268 | 68,561 | 70,796 | ||||||||
Adjusted EBITDA1 | 100,619 | 121,192 | 178,396 | 204,043 | ||||||||
Diluted Shares | 52,029 | 52,105 | 52,305 | 52,003 | ||||||||
Adjusted diluted income per common share attributable to H.B. Fuller1 | $ | 0.68 | $ | 0.88 | $ | 1.01 | $ | 1.21 | ||||
Revenue | $ | 674,602 | $ | 759,583 | $ | 1,321,166 | $ | 1,432,518 | ||||
Adjusted EBITDA margin1 | 14.9% | 16.0% | 13.5% | 14.2% | ||||||||
_______________ | |||||||||||||
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 U.S. GAAP. | |||||||||||||
A Depreciation and amortization expense added back for EBITDA is adjusted for amounts already included in Adjusted net income attributable to H.B. Fuller totaling ($63) and ($436) for the three months ended May 30, 2020 and June 1, 2019, respectively and ($96) and ($962) for the six months ended May 30, 2020 and June 1, 2019, respectively | |||||||||||||
H.B. FULLER COMPANY AND SUBSIDIARIES | ||||||||||
SEGMENT FINANCIAL INFORMATION | ||||||||||
In thousands (unaudited) | ||||||||||
Three Months Ended | Six Months Ended | |||||||||
May 30, 2020 | June 1, 2019 | May 30, 2020 | June 1, 2019 | |||||||
Net Revenue: | ||||||||||
Hygiene, Health and Consumable Adhesives | $ | 344,673 | $ | 337,892 | $ | 657,185 | $ | 657,746 | ||
Engineering Adhesives | 236,063 | 303,922 | 484,958 | 568,294 | ||||||
Construction Adhesives | 93,866 | 111,791 | 179,023 | 194,581 | ||||||
Corporate Unallocated | - | 5,978 | - | 11,897 | ||||||
Total H.B. Fuller | $ | 674,602 | $ | 759,583 | $ | 1,321,166 | $ | 1,432,518 | ||
Segment Operating Income: | ||||||||||
Hygiene, Health and Consumable Adhesives | $ | 35,009 | $ | 32,048 | $ | 57,673 | $ | 52,938 | ||
Engineering Adhesives | 20,149 | 39,313 | 35,514 | 61,299 | ||||||
Construction Adhesives | 6,527 | 8,252 | 5,152 | 6,596 | ||||||
Corporate Unallocated | (4,782) | (7,233) | (12,683) | (14,241) | ||||||
Total H.B. Fuller | $ | 56,903 | $ | 72,380 | $ | 85,656 | $ | 106,592 | ||
Adjusted EBITDA1 | ||||||||||
Hygiene, Health and Consumable Adhesives | $ | 48,321 | $ | 44,845 | $ | 84,217 | $ | 78,554 | ||
Engineering Adhesives | 35,172 | 54,795 | 66,087 | 92,369 | ||||||
Construction Adhesives | 16,626 | 18,272 | 25,499 | 26,699 | ||||||
Corporate Unallocated | 500 | 3,280 | 2,593 | 6,421 | ||||||
Total H.B. Fuller | $ | 100,619 | $ | 121,192 | $ | 178,396 | $ | 204,043 | ||
Adjusted EBITDA Margin1 | ||||||||||
Hygiene, Health and Consumable Adhesives | 14.0% | 13.3% | 12.8% | 11.9% | ||||||
Engineering Adhesives | 14.9% | 18.0% | 13.6% | 16.3% | ||||||
Construction Adhesives | 17.7% | 16.3% | 14.2% | 13.7% | ||||||
Corporate Unallocated | NMP | NMP | NMP | NMP | ||||||
Total H.B. Fuller | 14.9% | 16.0% | 13.5% | 14.2% | ||||||
H.B. FULLER COMPANY AND SUBSIDIARIES | |||||||||||||
REGULATION G RECONCILIATION | |||||||||||||
In thousands, except per share amounts (unaudited) | |||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||
May 30, 2020 | June 1, 2019 | May 30, 2020 | June 1, 2019 | ||||||||||
Income before income taxes and income from equity method investments | $ | 41,206 | $ | 51,449 | $ | 55,089 | $ | 65,272 | |||||
Adjustments: | |||||||||||||
Acquisition related activity | (1,725) | 655 | (1,512) | 769 | |||||||||
Organizational realignment | 2,113 | 1,755 | 4,978 | 2,230 | |||||||||
Royal restructuring and integration | 2,603 | 4,625 | 5,589 | 10,543 | |||||||||
Tax reform | - | - | (35) | 75 | |||||||||
Project ONE | 1,165 | 1,503 | 2,540 | 2,604 | |||||||||
Other | 598 | 387 | 1,071 | 889 | |||||||||
Adjusted income before income taxes and income from equity method investments2 | $ | 45,960 | $ | 60,374 | $ | 67,720 | $ | 82,382 | |||||
_______________ | |||||||||||||
2 Adjusted income before income taxes and income from equity investments is a non-GAAP financial measure. Adjusted income before income taxes and income from equity investments is defined as income before income taxes and income from equity investments before the specific adjustments shown above. The table above provides a reconciliation of adjusted income before income taxes and income from equity investments to income before income taxes and income from equity investments, the most directly comparable financial measure determined and reported in accordance with U.S. GAAP. | |||||||||||||
H.B. FULLER COMPANY AND SUBSIDIARIES | |||||||||||||
REGULATION G RECONCILIATION | |||||||||||||
In thousands, except per share amounts (unaudited) | |||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||
May 30, 2020 | June 1, 2019 | May 30, 2020 | June 1, 2019 | ||||||||||
Income taxes | $ | (11,471) | $ | (16,441) | $ | (17,082) | $ | (19,581) | |||||
Adjustments: | |||||||||||||
Acquisition related activity | 459 | (116) | 514 | (146) | |||||||||
Organizational realignment | (562) | (311) | 177 | (436) | |||||||||
Royal restructuring and integration | (693) | 136 | 71 | (1,417) | |||||||||
Tax reform | - | - | (9) | (20) | |||||||||
Project ONE | (310) | (267) | 42 | (555) | |||||||||
Other | (115) | 628 | (1,997) | (266) | |||||||||
Adjusted income taxes3 | $ | (12,692) | $ | (16,371) | $ | (18,284) | $ | (22,421) | |||||
Adjusted income before income taxes and income from equity method investments | $ | 45,960 | $ | 60,374 | $ | 67,720 | $ | 82,382 | |||||
Adjusted effective income tax rate3 | 27.6% | 27.1% | 27.0% | 27.2% | |||||||||
_______________ | |||||||||||||
3 Adjusted income taxes and adjusted effective income tax rate are non-GAAP financial measures. Adjusted income taxes is defined as income taxes before the specific adjustments shown above. Adjusted effective income tax rate is defined as income taxes divided by adjusted income before income taxes and income from equity method investments. The table above provides a reconciliation of adjusted income taxes and adjusted effective income tax rate to income taxes, the most directly comparable financial measure determined and reported in accordance with U.S. GAAP. | |||||||||||||
H.B. FULLER COMPANY AND SUBSIDIARIES | |||||||||||||
REGULATION G RECONCILIATION | |||||||||||||
In thousands (unaudited) | |||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||
May 30, 2020 | June 1, 2019 | May 30, 2020 | June 1, 2019 | ||||||||||
Net revenue | 674,602 | 759,583 | 1,321,166 | 1,432,518 | |||||||||
Gross profit | $ | 184,901 | $ | 218,459 | $ | 355,163 | $ | 398,384 | |||||
Gross profit margin | 27.4% | 28.8% | 26.9% | 27.8% | |||||||||
Adjustments: | |||||||||||||
Organizational realignment | 70 | 195 | 151 | 242 | |||||||||
Royal restructuring and integration | 697 | 1,091 | 1,598 | 2,509 | |||||||||
Other | 981 | - | 991 | (3) | |||||||||
Adjusted gross profit4 | $ | 186,649 | $ | 219,745 | $ | 357,903 | $ | 401,132 | |||||
Adjusted gross profit margin4 | 27.7% | 28.9% | 27.1% | 28.0% | |||||||||
_______________ | |||||||||||||
4 Adjusted gross profit and adjusted gross profit margin are non-GAAP financial measures. Adjusted gross profit and adjusted gross profit margin is defined as gross profit and gross profit margin excluding the specific adjustments shown above. The table above provides a reconciliation of adjusted gross profit and gross profit margin to gross profit and gross profit margin, the most directly comparable financial measure determined and reported in accordance with U.S. GAAP. | |||||||||||||
H.B. FULLER COMPANY AND SUBSIDIARIES | |||||||||||||
REGULATION G RECONCILIATION | |||||||||||||
In thousands (unaudited) | |||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||
May 30, 2020 | June 1, 2019 | May 30, 2020 | June 1, 2019 | ||||||||||
Selling, general and administrative expenses | $ | (127,998) | $ | (146,079) | $ | (269,507) | $ | (291,792) | |||||
Adjustments: | |||||||||||||
Acquisition related activity | (1,725) | 655 | (1,512) | 769 | |||||||||
Organizational realignment | 2,042 | 1,187 | 4,826 | 1,614 | |||||||||
Royal restructuring and integration | 1,932 | 3,511 | 4,043 | 8,010 | |||||||||
Tax reform | - | - | (35) | 75 | |||||||||
Project ONE | 1,166 | 1,503 | 2,541 | 2,604 | |||||||||
Other | (382) | 387 | 80 | 893 | |||||||||
Adjusted selling, general and administrative expenses5 | $ | (124,965) | $ | (138,836) | $ | (259,564) | $ | (277,827) | |||||
_______________ | |||||||||||||
5 Adjusted selling, general and administrative expenses is a non-GAAP financial measure. Adjusted selling, general and administrative expenses is defined as selling, general and administrative expenses excluding the specific adjustments shown above. The table above provides a reconciliation of adjusted selling, general and administrative expenses to selling, general and administrative expenses, the most directly comparable financial measure determined and reported in accordance with U.S. GAAP. | |||||||||||||
H.B. FULLER COMPANY AND SUBSIDIARIES | ||||||||||||||||||
REGULATION G RECONCILIATION | ||||||||||||||||||
In thousands (unaudited) | ||||||||||||||||||
Hygiene,Health andConsumableAdhesives | EngineeringAdhesives | ConstructionAdhesives | Total | CorporateUnallocated | H.B. FullerConsolidated | |||||||||||||
Three Months Ended May 30, 2020 | ||||||||||||||||||
Net income attributable to H.B. Fuller | $ | 36,804 | $ | 21,598 | $ | 7,708 | $ | 66,110 | $ | (34,497) | $ | 31,613 | ||||||
Adjustments: | ||||||||||||||||||
Acquisition related activity | - | - | - | - | (1,266) | (1,266) | ||||||||||||
Organizational realignment | - | - | - | - | 1,550 | 1,550 | ||||||||||||
Royal restructuring and integration | - | - | - | - | 1,910 | 1,910 | ||||||||||||
Project ONE | - | - | - | - | 855 | 855 | ||||||||||||
Other | - | - | - | - | 484 | 484 | ||||||||||||
Adjusted net income attributable to H.B. Fuller1 | 36,804 | 21,598 | 7,708 | 66,110 | (30,964) | 35,146 | ||||||||||||
Add: | ||||||||||||||||||
Interest expense | - | - | - | - | 21,670 | 21,670 | ||||||||||||
Interest income | - | - | - | - | (2,898) | (2,898) | ||||||||||||
Income taxes | - | - | - | - | 12,692 | 12,692 | ||||||||||||
Depreciation and amortization expense | 11,517 | 13,574 | 8,918 | 34,009 | - | 34,009 | ||||||||||||
Adjusted EBITDA1 | $ | 48,321 | $ | 35,172 | $ | 16,626 | $ | 100,119 | $ | 500 | $ | 100,619 | ||||||
Revenue | 344,673 | 236,063 | 93,866 | 674,602 | - | 674,602 | ||||||||||||
Adjusted EBITDA Margin1 | 14.0% | 14.9% | 17.7% | 14.8% | NMP | 14.9% | ||||||||||||
Hygiene,Health andConsumableAdhesives | EngineeringAdhesives | ConstructionAdhesives | Total | CorporateUnallocated | H.B. FullerConsolidated | |||||||||||||
Six Months Ended May 30, 2020 | ||||||||||||||||||
Net income attributable to H.B. Fuller | $ | 61,291 | $ | 38,433 | $ | 7,518 | $ | 107,242 | $ | (65,734) | $ | 41,508 | ||||||
Adjustments: | ||||||||||||||||||
Acquisition related activity | - | - | - | - | (998) | (998) | ||||||||||||
Organizational realignment | - | - | - | - | 5,154 | 5,154 | ||||||||||||
Royal restructuring and integration | - | - | - | - | 5,660 | 5,660 | ||||||||||||
Tax reform | - | - | - | - | (44) | (44) | ||||||||||||
Project ONE | - | - | - | - | 2,582 | 2,582 | ||||||||||||
Other | - | - | - | - | (926) | (926) | ||||||||||||
Adjusted net income attributable to H.B. Fuller1 | 61,291 | 38,433 | 7,518 | 107,242 | (54,306) | 52,936 | ||||||||||||
Add: | ||||||||||||||||||
Interest expense | - | - | - | - | 44,431 | 44,431 | ||||||||||||
Interest income | - | - | - | - | (5,816) | (5,816) | ||||||||||||
Income taxes | - | - | - | - | 18,284 | 18,284 | ||||||||||||
Depreciation and amortization expense | 22,926 | 27,654 | 17,981 | 68,561 | - | 68,561 | ||||||||||||
Adjusted EBITDA1 | $ | 84,217 | $ | 66,087 | $ | 25,499 | $ | 175,803 | $ | 2,593 | $ | 178,396 | ||||||
Revenue | 657,185 | 484,958 | 179,023 | 1,321,166 | - | 1,321,166 | ||||||||||||
Adjusted EBITDA Margin1 | 12.8% | 13.6% | 14.2% | 13.3% | NMP | 13.5% | ||||||||||||
_______________ | ||||||||||||||||||
Note: Adjusted EBITDA is a non-GAAP financial measure. The table above provides a reconciliation of adjusted EBITDA for each segment to net income attributable to H.B. Fuller for each segment, the most directly comparable financial measure determined and reported in accordance with U.S. GAAP. | ||||||||||||||||||
NMP: non-material percentage | ||||||||||||||||||
H.B. FULLER COMPANY AND SUBSIDIARIES | ||||||||||||||||||
REGULATION G RECONCILIATION | ||||||||||||||||||
In thousands (unaudited) | ||||||||||||||||||
Hygiene,Health andConsumableAdhesives | EngineeringAdhesives | ConstructionAdhesives | Total | CorporateUnallocated | H.B. FullerConsolidated | |||||||||||||
Three Months Ended June 1, 2019 | ||||||||||||||||||
Net income attributable to H.B. Fuller | $ | 33,397 | $ | 40,397 | $ | 9,236 | $ | 83,030 | $ | (46,389) | $ | 36,641 | ||||||
Adjustments: | ||||||||||||||||||
Acquisition related activity | - | - | - | - | 539 | 539 | ||||||||||||
Organizational realignment | - | - | - | - | 1,444 | 1,444 | ||||||||||||
Royal Restructuring | - | - | - | - | 4,761 | 4,761 | ||||||||||||
Project ONE | - | - | - | - | 1,236 | 1,236 | ||||||||||||
Other | - | - | - | - | 1,015 | 1,015 | ||||||||||||
Adjusted net income attributable to H.B. Fuller1 | 33,397 | 40,397 | 9,236 | 83,030 | (37,394) | 45,636 | ||||||||||||
Add: | ||||||||||||||||||
Interest expense | - | - | - | - | 26,940 | 26,940 | ||||||||||||
Interest income | - | - | - | - | (3,023) | (3,023) | ||||||||||||
Income taxes | - | - | - | - | 16,371 | 16,371 | ||||||||||||
Depreciation and amortization expense | 11,448 | 14,398 | 9,036 | 34,882 | 386 | 35,268 | ||||||||||||
Adjusted EBITDA1 | $ | 44,845 | $ | 54,795 | $ | 18,272 | $ | 117,912 | $ | 3,280 | $ | 121,192 | ||||||
Revenue | 337,892 | 303,922 | 111,791 | 753,605 | 5,978 | 759,583 | ||||||||||||
Adjusted EBITDA Margin1 | 13.3% | 18.0% | 16.3% | 15.6% | NMP | 16.0% | ||||||||||||
Hygiene,Health andConsumableAdhesives | EngineeringAdhesives | ConstructionAdhesives | Total | CorporateUnallocated | H.B. FullerConsolidated | |||||||||||||
Six Months Ended June 1, 2019 | ||||||||||||||||||
Net income attributable to H.B. Fuller | $ | 55,633 | $ | 63,462 | $ | 8,567 | $ | 127,662 | $ | (78,777) | $ | 48,885 | ||||||
Adjustments: | ||||||||||||||||||
Acquisition related activity | - | - | - | - | - | - | - | 623 | 623 | |||||||||
Organizational realignment | - | - | - | - | - | - | - | 1,794 | 1,794 | |||||||||
Royal Restructuring | - | - | - | - | - | - | - | 9,126 | 9,126 | |||||||||
Tax Reform | - | - | - | - | - | - | - | 55 | 55 | |||||||||
Project ONE | - | - | - | - | - | - | - | 2,049 | 2,049 | |||||||||
Other | - | - | - | - | - | - | - | 623 | 623 | |||||||||
Adjusted net income attributable to H.B. Fuller1 | 55,633 | 63,462 | 8,567 | 127,662 | (64,507) | 63,155 | ||||||||||||
Add: | ||||||||||||||||||
Interest expense | - | - | - | - | 53,747 | 53,747 | ||||||||||||
Interest income | - | - | - | - | (6,076) | (6,076) | ||||||||||||
Income taxes | - | - | - | - | 22,421 | 22,421 | ||||||||||||
Depreciation and amortization expense | 22,921 | 28,907 | 18,132 | 69,960 | 836 | 70,796 | ||||||||||||
Adjusted EBITDA1 | $ | 78,554 | $ | 92,369 | $ | 26,699 | $ | 197,622 | $ | 6,421 | $ | 204,043 | ||||||
Revenue | 657,746 | 568,294 | 194,581 | 1,420,621 | 11,897 | 1,432,518 | ||||||||||||
Adjusted EBITDA Margin1 | 11.9% | 16.3% | 13.7% | 13.9% | NMP | 14.2% | ||||||||||||
_______________ | ||||||||||||||||||
Note: Adjusted EBITDA is a non-GAAP financial measure. The table above provides a reconciliation of adjusted EBITDA for each segment to net income attributable to H.B. Fuller for each segment, the most directly comparable financial measure determined and reported in accordance with U.S. GAAP. | ||||||||||||||||||
NMP: non-material percentage | ||||||||||||||||||
H.B. FULLER COMPANY AND SUBSIDIARIES | ||||
SEGMENT FINANCIAL INFORMATION | ||||
NET REVENUE GROWTH (DECLINE) | ||||
(unaudited) | ||||
Three MonthsEnded | Six MonthsEnded | |||
May 30, 2020 | ||||
Total | Total | |||
Price | (0.5%) | (0.8)% | ||
Volume | (6.8%) | (3.7%) | ||
Organic Growth (Decline) | (7.3%) | (4.5%) | ||
M&A | (0.8%) | (0.8%) | ||
F/X | (3.1%) | (2.5%) | ||
Total H.B. Fuller net revenue | (11.2%) | (7.8%) | ||
Three Months Ended | Six Months Ended | ||||||||||||||
May 30, 2020 | May 30, 2020 | ||||||||||||||
NetRevenue | F/X | M&A | OrganicGrowth(Decline) | NetRevenue | F/X | M&A | OrganicGrowth(Decline) | ||||||||
Hygiene, Health and Consumable Adhesives | 2.0% | (4.8%) | 0.0% | 6.8% | (0.1%) | (3.6%) | 0.0% | 3.5% | |||||||
Engineering Adhesives | (22.3%) | (2.3%) | 0.0% | (20.0%) | (14.7%) | (1.9%) | 0.0% | (12.8%) | |||||||
Construction Adhesives | (16.0%) | (0.7%) | 0.0% | (15.3%) | (8.0)% | (0.6%) | 0.0% | (7.4)% | |||||||
Unallocated Corporate | NMP | 0.0% | NMP | 0.0% | NMP | 0.0% | NMP | 0.0% | |||||||
Total H.B. Fuller | (11.2%) | (3.1%) | (0.8%) | (7.3%) | (7.8%) | (2.5%) | (0.8%) | (4.5%) | |||||||
NMP: non-material percentage | |||||||||||||||
H.B. FULLER COMPANY AND SUBSIDIARIES | ||||||
Consolidated Balance Sheets | ||||||
In thousands (unaudited) | ||||||
May 30, | November 30, | |||||
2020 | 2019 | |||||
Assets | ||||||
Current assets: | ||||||
Cash and cash equivalents | $ | 70,346 | $ | 112,191 | ||
Trade receivables (net of allowances of $13,443 and $10,682, as of May 30, 2020 and November 30, 2019, respectively) | 448,126 | 493,181 | ||||
Inventories | 388,698 | 337,267 | ||||
Other current assets | 100,702 | 90,723 | ||||
Total current assets | 1,007,872 | 1,033,362 | ||||
Property, plant and equipment | 1,340,692 | 1,304,231 | ||||
Accumulated depreciation | (704,997) | (674,418) | ||||
Property, plant and equipment, net | 635,695 | 629,813 | ||||
Goodwill | 1,273,374 | 1,281,808 | ||||
Other intangibles, net | 775,332 | 799,399 | ||||
Other assets | 286,787 | 241,352 | ||||
Total assets | $ | 3,979,060 | $ | 3,985,734 | ||
Liabilities, non-controlling interest and total equity | ||||||
Current liabilities: | ||||||
Notes payable | $ | 19,715 | $ | 15,732 | ||
Current maturities of long-term debt | - | 65,000 | ||||
Trade payables | 319,616 | 298,869 | ||||
Accrued compensation | 56,599 | 78,582 | ||||
Income taxes payable | 20,382 | 23,229 | ||||
Other accrued expenses | 75,450 | 60,745 | ||||
Total current liabilities | 491,762 | 542,157 | ||||
Long-term debt, excluding current maturities | 1,908,340 | 1,898,384 | ||||
Accrued pension liabilities | 81,019 | 80,214 | ||||
Other liabilities | 279,094 | 242,190 | ||||
Total liabilities | 2,760,215 | 2,762,945 | ||||
Commitments and contingencies (Note 15) | ||||||
Equity: | ||||||
H.B. Fuller stockholders' equity: | ||||||
Preferred stock (no shares outstanding) shares authorized – 10,045,900 | - | - | ||||
Common stock, par value $1.00 per share, shares authorized – 160,000,000, shares outstanding – 51,550,524 and 51,241,190, as of May 30, 2020 and November 30, 2019, respectively | 51,551 | 51,241 | ||||
Additional paid-in capital | 138,175 | 130,295 | ||||
Retained earnings | 1,409,158 | 1,384,411 | ||||
Accumulated other comprehensive loss | (380,510) | (343,600) | ||||
Total H.B. Fuller stockholders' equity | 1,218,374 | 1,222,347 | ||||
Non-controlling interest | 471 | 442 | ||||
Total equity | 1,218,845 | 1,222,789 | ||||
Total liabilities, non-controlling interest and total equity | $ | 3,979,060 | $ | 3,985,734 | ||
H.B. FULLER COMPANY AND SUBSIDIARIES | ||||||||
Condensed Consolidated Statements of Cash Flows | ||||||||
In thousands (unaudited) | ||||||||
Six Months Ended | ||||||||
May 30, 2020 | June 1, 2019 | |||||||
Cash flows from operating activities: | ||||||||
Net income including non-controlling interest | $ | 41,534 | $ | 48,889 | ||||
Adjustments to reconcile net income including non-controlling interest to net cash provided by operating activities: | ||||||||
Depreciation | 33,198 | 33,568 | ||||||
Amortization | 35,458 | 38,190 | ||||||
Deferred income taxes | (10,412) | (21,871) | ||||||
Income from equity method investments, net of dividends received | (3,527) | (3,198) | ||||||
(Gain) loss on sale of assets | (24) | 377 | ||||||
Share-based compensation | 9,236 | 14,172 | ||||||
Change in assets and liabilities, net of effects of acquisitions: | ||||||||
Trade receivables, net | 33,867 | (23,692) | ||||||
Inventories | (59,232) | (22,798) | ||||||
Other assets | (13,070) | (21,396) | ||||||
Trade payables | 42,182 | 25,943 | ||||||
Accrued compensation | (21,587) | (17,778) | ||||||
Other accrued expenses | 8,981 | 12,734 | ||||||
Income taxes payable | (2,728) | 13,794 | ||||||
Accrued / prepaid pensions | (2,993) | (5,933) | ||||||
Other liabilities | 24,705 | (1,465) | ||||||
Other | (7,175) | 7,790 | ||||||
Net cash provided by operating activities | 108,413 | 77,326 | ||||||
Cash flows from investing activities: | ||||||||
Purchased property, plant and equipment | (54,533) | (32,192) | ||||||
Purchased businesses, net of cash acquired | (9,500) | (7,914) | ||||||
Purchase of assets | (3,998) | - | ||||||
Purchased business remaining equity | - | (9,870) | ||||||
Proceeds from sale of property, plant and equipment | 1,416 | 45 | ||||||
Cash received from government grant | - | 9,045 | ||||||
Cash payments related to government grant | (2,331) | (1,120) | ||||||
Net cash used in investing activities | (68,946) | (42,006) | ||||||
Cash flows from financing activities: | ||||||||
Repayment of long-term debt | (67,000) | (70,000) | ||||||
Net payment of notes payable | 6,994 | 4,053 | ||||||
Dividends paid | (16,577) | (16,028) | ||||||
Contingent consideration payment | - | (3,610) | ||||||
Proceeds from stock options exercised | 1,557 | 1,837 | ||||||
Repurchases of common stock | (3,246) | (2,807) | ||||||
Net cash used in financing activities | (78,272) | (86,555) | ||||||
Effect of exchange rate changes on cash and cash equivalents | (3,040) | 688 | ||||||
Net change in cash and cash equivalents | (41,845) | (50,547) | ||||||
Cash and cash equivalents at beginning of period | 112,191 | 150,793 | ||||||
Cash and cash equivalents at end of period | $ | 70,346 | $ | 100,246 | ||||
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SOURCE H.B. Fuller Company
