Net income of $22 million
Adjusted EBITDA of $110 million, at the
high-end of the Company's guidance
Pricing and raw material management results in
year-on-year gross profit and EBITDA margin expansion
Lower working capital and improved margins
drove higher cash flow from operations year-on-year
H.B. Fuller Company (NYSE: FUL) today reported financial results
for its first quarter that ended March 4, 2023.
First Quarter 2023 Noteworthy Items:
- Net revenue of $809 million, down 5.5% year-on-year, in-line
with Company expectations; organic revenue decreased 2.5%
year-on-year, driven by lower volume, offset by favorable
pricing;
- Gross margin was 26.5%; adjusted gross margin of 26.9%
increased 190 basis points year-on-year, driven by the combined
effect of pricing and raw material cost developments;
- Net Income was $22 million; adjusted EBITDA was $110 million,
at the high end of Company expectations, and adjusted EBITDA margin
expanded year-on-year to 13.6%;
- Reported EPS (diluted) was $0.39; adjusted EPS (diluted) was
$0.55, down versus the prior year, driven by lower volume, higher
interest expense, and unfavorable foreign currency exchange;
excluding the impacts of higher interest expense and unfavorable
foreign currency, adjusted EPS (diluted) was up approximately 6%
year-on-year;
- Cash flow from operations in the first quarter, historically
our lowest cash flow quarter, improved $23 million
year-on-year;
- Initiated strategic restructuring to align cost structure to
drive ongoing margin expansion and align with Construction
Adhesives market demand, expected to generate annualized pre-tax
run-rate cost savings of approximately $30 to $35 million;
- Successfully completed a refinancing of a majority of
outstanding debt, improving overall liquidity, extending
maturities, and securing advantageous interest rate spreads.
Summary of First Quarter 2023 Results:
Net revenue for the first quarter of fiscal 2023 was $809
million, down 5.5% versus the first quarter of fiscal 2022. Organic
revenue declined 2.5% year-on-year, driven by lower volume, mostly
offset by favorable pricing. Volume declined 10.8% due to continued
customer destocking actions in Construction Adhesives and generally
slower economic demand conditions across all three global business
units. Pricing actions favorably impacted organic growth by 8.3
percentage points. Foreign currency translation reduced net revenue
growth by 4.9 percentage points and acquisitions increased net
revenue growth by 1.9 percentage points.
Consolidated organic growth was impacted by continued customer
destocking and demand weakness affecting Construction Adhesives;
however, the benefits of the Company’s geographic and end market
diversification led to stable consolidated organic sales
year-on-year. This was driven by Hygiene, Health and Consumable and
Engineering Adhesives, which, on a combined basis, continued to
generate positive organic growth in the first quarter.
Gross profit in the first quarter of fiscal 2023 was $215
million. Adjusted gross profit was $217 million. Adjusted gross
profit margin of 26.9% increased 190 basis points year-on-year.
Pricing actions, net of raw material cost developments, drove the
increase in adjusted gross margin year-on-year and more than offset
the impact of reduced operating leverage due to lower volume.
Selling, general and administrative (SG&A) expense was $155
million in the first quarter of fiscal 2023 and adjusted SG&A
was $149 million, up approximately 3% year-on-year as higher wage
inflation offset good cost management and the favorable impact of
exchange.
Net income attributable to H.B. Fuller for the first quarter of
fiscal 2023 was $22 million, or $0.39 per diluted share. Adjusted
net income attributable to H.B. Fuller for the first quarter of
fiscal 2023 was $31 million. Adjusted EPS was $0.55 per diluted
share, down year-on-year due to higher interest expense and
unfavorable foreign currency impacts, which combined to reduce
diluted earnings per share by approximately $0.28 year-on-year in
the first quarter. Excluding the impacts of these items, adjusted
EPS (diluted) was up approximately 6% year-on-year.
Adjusted EBITDA in the first quarter of fiscal 2023 was $110
million, at the high end of Company guidance and relatively flat
with the first quarter of last year and up approximately 6% on a
constant currency basis. Adjusted EBITDA margin increased 40 basis
points year-on-year to 13.6%, driven by favorable pricing
actions/raw material cost developments versus the prior year’s
first quarter, offset somewhat by the impacts of lower volume and
inflation.
“Despite challenging demand conditions, particularly in
Construction Adhesives, our team executed exceptionally well to
deliver solid first quarter results that were in-line with our
expectations,” said Celeste Mastin, H.B. Fuller president and chief
executive officer. “The diversification of our portfolio enabled us
to deliver stable organic sales and diligent management of price
and raw material dynamics drove significant gross margin
improvement year-on-year and sequentially. Overall, this resulted
in strong adjusted EBITDA performance and led to higher adjusted
EBITDA margin year-on-year.
“Consistent with our strategic focus of continuously improving
operational efficiency, we are implementing prudent and decisive
actions to align our cost structure with lower volume expectations
for 2023. These actions will lower our cost structure and improve
the capacity utilization of our manufacturing network, allowing us
to more effectively meet market needs and expand margins in-line
with our long-term strategic plan.
“As we look ahead, we remain confident we will achieve our
full-year guidance. We began to see margin expansion, driven by a
combination of favorable price and raw material dynamics, and we
expect this benefit to accelerate as we progress through the year
and meaningfully benefit adjusted EBITDA margin. With our unique
advantages and a more optimized cost structure, we are well
positioned to continue creating value for shareholders and achieve
our financial expectations for the year and beyond.”
Balance Sheet and Cash Flow Items:
During the first quarter, the Company successfully completed a
refinancing of most of its debt. This extended maturities and
improved liquidity, while maintaining favorable pricing. Net debt
at the end of the first quarter of fiscal 2023 was $1,748 million,
up $63 million sequentially versus the fourth quarter.
Cash flow from operations in the first quarter was $6 million,
up $23 million year-on-year, reflecting lower net working capital
requirements.
Restructuring:
During the first quarter, the Company initiated a restructuring
plan to better align its cost structure with the current economic
outlook, including high inflation and lower market demand. These
actions are also consistent with the Company’s longer-term
strategic objectives of improving gross profit and EBITDA margins
and increasing return on invested capital (ROIC). The restructuring
is focused on reducing both manufacturing costs and SG&A and is
heavily weighted to Construction Adhesives.
As a result of these actions the Company expects to incur, on a
pre-tax basis, one-time costs of approximately $15 to $20 million
and generate approximately $30 to $35 million in annualized cost
savings once the plan is fully implemented, with approximately $10
million of savings expected to be realized in fiscal 2023.
Fiscal 2023 Outlook:
- The Company continues to expect adjusted EBITDA for fiscal 2023
to be in the range of $580 million to $610 million, equating to
growth of approximately 9% to 15% versus fiscal year 2022;
- Adjusted EPS (diluted) is now expected to be in the range of
$4.10 to $4.50, equating to growth of between 3% to 13%
year-on-year and fully diluted shares outstanding is now expected
to be approximately 56 million;
- Revenue for fiscal 2023 is now expected to be down 1% to 4%
versus 2022; organic revenue for fiscal 2023 is now expected to be
in the range of down 1% to up 1%, reflecting expected demand
weakness in Construction Adhesives;
- Foreign currency translation is now expected to unfavorably
impact net revenue growth by between 1% and 2% in fiscal year
2023;
- Operating cash flow in fiscal 2023 is still expected to be
between $300 million and $350 million.
Conference Call:
The Company will hold a conference call on March 30, 2023, at
9:30 a.m. CT (10:30 a.m. ET) to discuss its results. Interested
parties may listen to the conference call on a live webcast. The
webcast, along with a supplemental presentation, may be accessed
from the Company’s website at https://investors.hbfuller.com.
Participants must register prior to accessing the webcast using
this link and should do so at least 10 minutes prior to the start
of the call to install and test any necessary software and audio
connections. A telephone replay of the conference call will be
available from 12:30 p.m. CT on March 30, 2023, to 10:59 p.m. CT on
April 6, 2023. To access the telephone replay dial 1-800-770-2030
(toll free) or 1-647-362-9199, and enter Conference ID:
6370505.
Regulation G
The information presented in this earnings release regarding
consolidated and segment organic revenue growth, 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
U.S. generally accepted accounting principles (U.S. GAAP) and
should not be construed as an alternative to the reported results
determined in accordance with U.S. 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 U.S. 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
2023 Outlook, which the Company cannot reconcile to forward-looking
GAAP results without unreasonable effort.
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 2022 net revenue of $3.75 billion, H.B. Fuller’s commitment
to innovation and sustainable adhesive solutions 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. 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 press release may be considered
forward-looking statements within the meaning of the federal
securities laws, including Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of
1934, as amended. Such statements often address expected future
business and financial performance, financial condition, and other
matters, and often contain words or phrases such as “anticipate,”
“believe,” “estimate,” “expect,” “intend,” “may,” “opportunity,”
“outlook,” “plan,” “project,” “seek,” “should,” “strategy,”
"target," “will,” “will be,” “will continue,” “will likely result,”
“would” and similar expressions, and variations or negatives of
these words or phrases. These statements are subject to various
risks and uncertainties that could cause our actual results to
differ materially from those in the forward-looking statements,
including but not limited to the following: the consequences of the
COVID-19 outbreak and other pandemics on our operations and
financial results; the impact on the supply chain, raw material
costs and pricing of our products due to the Russia-Ukraine war;
the impact on our margins and product demand due to inflationary
pressures; the substantial amount of debt we have incurred to
finance our acquisition of Royal, our ability to repay or refinance
our debt or to 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, the effect of debt covenants that
limit the discretion of management in operating the business or in
paying dividends; our ability to pay dividends and to pursue growth
opportunities if we continue to pay dividends according to the
current dividend policy; our ability to achieve expected synergies,
cost savings and operating efficiencies from our restructuring
initiatives and operational improvement projects within the
expected time frames or at all; our ability to effectively
implement Project ONE; uncertain political and economic conditions;
fluctuations in product demand; competing products and pricing; our
geographic and product mix; availability and price of raw
materials; disruptions to our relationships with our major
customers and suppliers; failures in our information technology
systems; regulatory compliance across our global footprint; trade
policies and economic sanctions impacting our markets; changes in
tax laws and tariffs; devaluations and other foreign exchange rate
fluctuations; the impact of litigation and investigations,
including for product liability and environmental matters;
impairment charges on our goodwill or long-lived assets; the effect
of new accounting pronouncements and accounting charges and
credits; and similar matters.
Additional information about these various risks and
uncertainties can be found in the “Risk Factors” section of our
Form 10-K filings, and any updates to the risk factors in our Form
10-Q and 8-K filings with the SEC, but there may be other risks and
uncertainties that we are unable to identify at this time or that
we do not currently expect to have a material impact on the
business. You should not place undue reliance on forward-looking
statements, which speak only as of the date they are made. We do
not undertake to update or revise any forward-looking statements,
except as required by law.
H.B. FULLER COMPANY AND
SUBSIDIARIES
CONSOLIDATED FINANCIAL
INFORMATION
In thousands, except per share
amounts (unaudited)
Three Months
Ended
March 4, 2023
Three Months Ended
February 26, 2022
Percent of
Net Revenue
Percent of
Net Revenue
Net revenue
$
809,183
100.0
%
$
856,482
100.0
%
Cost of sales
(594,374
)
(73.5
)%
(643,589
)
(75.1
)%
Gross profit
214,809
26.5
%
212,893
24.9
%
Selling, general and administrative
expenses
(154,542
)
(19.1
)%
(155,894
)
(18.2
)%
Other income, net
2,604
0.3
%
6,142
0.7
%
Interest expense
(33,069
)
(4.1
)%
(18,196
)
(2.1
)%
Interest income
667
0.1
%
1,940
0.2
%
Income before income taxes and income from
equity method investments
30,469
3.8
%
46,885
5.5
%
Income taxes
(9,733
)
(1.2
)%
(10,148
)
(1.2
)%
Income from equity method investments
1,180
0.1
%
1,583
0.2
%
Net income including non-controlling
interest
21,916
2.7
%
38,320
4.5
%
Net income attributable to non-controlling
interest
(27
)
(0.0
)%
(14
)
(0.0
)%
Net income attributable to H.B. Fuller
$
21,889
2.7
%
$
38,306
4.5
%
Basic income per common share attributable
to H.B. Fuller
$
0.40
$
0.72
Diluted income per common share
attributable to H.B. Fuller
$
0.39
$
0.69
Weighted-average common shares
outstanding:
Basic
54,174
53,353
Diluted
55,919
55,395
Dividends declared per common share
$
0.190
$
0.168
H.B. FULLER COMPANY AND
SUBSIDIARIES
REGULATION G
RECONCILIATION
In thousands, except per share
amounts (unaudited)
Three Months Ended
March 4,
February 26,
2023
2022
Net income attributable to H.B. Fuller
$
21,889
$
38,306
Adjustments:
Acquisition project costs1
2,235
5,857
Organizational realignment2
2,944
1,629
Royal restructuring and integration3
-
398
Project One
2,172
3,204
Other4
3,073
1,166
Discrete tax items5
846
(2,901
)
Income tax effect on adjustments6
(2,400
)
(3,510
)
Adjusted net income attributable to H.B.
Fuller7
30,759
44,149
Add:
Interest expense
30,380
18,210
Interest income
(667
)
(1,951
)
Adjusted Income taxes
11,286
16,559
Depreciation and Amortization expense8
37,914
35,797
Adjusted EBITDA7
$
109,672
$
112,764
Diluted Shares
55,919
55,395
Adjusted diluted income per common share
attributable to H.B. Fuller7
$
0.55
$
0.80
Revenue
$
809,183
$
856,482
Adjusted EBITDA margin7
13.6
%
13.2
%
1 Acquisition project costs include costs
related to integrating and accounting for acquisitions.
2 Organizational realignment includes
costs incurred as a direct result of the organizational realignment
program, including compensation for employees supporting the
program, consulting expense and operational inefficiencies related
to the closure of production facilities and consolidation of
business activities.
3 Royal restructuring and integration
program includes costs incurred as a direct result of the Royal
restructuring and integration program including compensation for
employees supporting the program, consulting expense and
operational inefficiencies related to the closure of production
facilities and consolidation of business activities.
4 Other includes costs incurred for
COVID-19 testing, vaccinations and exceptional medical claims, and
non-cash gains and losses related to legal entity
consolidations.
5 Discrete tax items are related to
various foreign tax matters, offset by excess tax benefit related
to US stock compensation.
6 Represents the difference between income
taxes on net income before income taxes and income from equity
method investments reported in accordance with U.S. GAAP and
adjusted net income before income taxes and income from equity
method investments.
7 Adjusted net income attributable to H.B.
Fuller, adjusted diluted income per common share attributable to
H.B. Fuller, adjusted EBITDA and adjusted EBITDA margin are
non-GAAP financial measures. Adjusted net income attributable to
H.B. Fuller is defined as net income 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.
8 Depreciation and amortization expense
added back for EBITDA is adjusted for amounts already included in
adjusted net income attributable to H.B. Fuller totaling ($18) and
($158) for the three months ended March 4, 2023 and February 26,
2022, respectively.
H.B. FULLER COMPANY AND
SUBSIDIARIES
SEGMENT FINANCIAL
INFORMATION
In thousands
(unaudited)
Three Months Ended
March 4,
February 26,
2023
2022
Net Revenue:
Hygiene, Health and Consumable
Adhesives
$
383,528
$
389,538
Engineering Adhesives
333,067
353,977
Construction Adhesives
92,588
112,967
Corporate unallocated
-
-
Total H.B. Fuller
$
809,183
$
856,482
Segment Operating Income
(Loss):
Hygiene, Health and Consumable
Adhesives
$
45,146
$
32,213
Engineering Adhesives
32,475
32,572
Construction Adhesives
(9,634
)
4,356
Corporate unallocated
(7,720
)
(12,142
)
Total H.B. Fuller
$
60,267
$
56,999
Adjusted EBITDA7
Hygiene, Health and Consumable
Adhesives
$
59,719
$
46,598
Engineering Adhesives
49,876
49,879
Construction Adhesives
2,845
15,877
Corporate unallocated
(2,768
)
410
Total H.B. Fuller
$
109,672
$
112,764
Adjusted EBITDA Margin7
Hygiene, Health and Consumable
Adhesives
15.6
%
12.0
%
Engineering Adhesives
15.0
%
14.1
%
Construction Adhesives
3.1
%
14.1
%
Corporate unallocated
NMP
NMP
Total H.B. Fuller
13.6
%
13.2
%
NMP = non-meaningful percentage
H.B. FULLER COMPANY AND
SUBSIDIARIES
REGULATION G
RECONCILIATION
In thousands, except per share
amounts (unaudited)
Three Months Ended
March 4,
February 26,
2023
2022
Income before income taxes and income from
equity method investments
$
30,469
$
46,885
Adjustments:
Acquisition project costs1
2,235
5,857
Organizational realignment2
2,944
1,629
Royal restructuring and integration3
-
398
Project One
2,172
3,204
Other4
3,073
1,166
Adjusted income before income taxes and
income from equity method investments9
$
40,893
$
59,139
9 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
March 4,
February 26,
2023
2022
Income Taxes
$
(9,733
)
$
(10,148
)
Adjustments:
Acquisition project costs1
(514
)
(1,678
)
Organizational realignment2
(678
)
(466
)
Royal restructuring and integration3
-
(114
)
Project One
(500
)
(918
)
Other4
139
(3,235
)
Adjusted income taxes10
$
(11,286
)
$
(16,559
)
Adjusted income before income taxes and
income from equity method investments
$
40,893
$
59,139
Adjusted effective income tax rate10
27.6
%
28.0
%
10 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
March 4,
February 26,
2023
2022
Net revenue
$
809,183
$
856,482
Gross profit
$
214,809
$
212,893
Gross profit margin
26.5
%
24.9
%
Adjustments:
Acquisition project costs1
43
662
Organizational realignment2
2,321
263
Royal restructuring and integration3
-
233
Project One
-
-
Other4
107
378
Adjusted gross profit11
$
217,280
$
214,429
Adjusted gross profit margin11
26.9
%
25.0
%
11 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 adjusted 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
March 4,
February 26,
2023
2022
Selling, general and administrative
expenses
$
(154,542
)
$
(155,894
)
Adjustments:
Acquisition project costs1
2,191
5,195
Organizational realignment2
622
1,354
Royal restructuring and integration3
-
179
Project One
2,172
3,204
Other4
263
675
Adjusted selling, general and
administrative expenses12
$
(149,294
)
$
(145,287
)
12 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
Three Months Ended:
and Consumable
Engineering
Construction
Corporate
H.B. Fuller
March 4, 2023
Adhesives
Adhesives
Adhesives
Total
Unallocated
Consolidated
Net income attributable to H.B. Fuller
$
47,707
$
34,350
$
(7,531
)
$
74,526
$
(52,637
)
$
21,889
Adjustments:
Acquisition project costs1
-
-
-
-
2,235
2,235
Organizational realignment2
-
-
-
-
2,944
2,944
Royal Restructuring and integration3
-
-
-
-
-
-
Project One
-
-
-
-
2,172
2,172
Other4
-
-
-
-
3,073
3,073
Discrete tax items5
-
-
-
-
846
846
Income tax effect on adjustments6
-
-
-
-
(2,400
)
(2,400
)
Adjusted net income attributable to H.B.
Fuller7
47,707
34,350
(7,531
)
74,526
(43,767
)
30,759
Add:
Interest expense
-
-
-
-
30,380
30,380
Interest income
-
-
-
-
(667
)
(667
)
Adjusted Income taxes
-
-
-
-
11,286
11,286
Depreciation and amortization expense8
12,012
15,526
10,376
37,914
-
37,914
Adjusted EBITDA7
$
59,719
$
49,876
$
2,845
$
112,440
$
(2,768
)
$
109,672
Revenue
$
383,528
$
333,067
$
92,588
$
809,183
-
$
809,183
Adjusted EBITDA Margin7
15.6
%
15.0
%
3.1
%
13.9
%
NMP
13.6
%
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-meaningful percentage
H.B. FULLER COMPANY AND
SUBSIDIARIES
REGULATION G
RECONCILIATION
In thousands
(unaudited)
Hygiene, Health
Three Months Ended:
and Consumable
Engineering
Construction
Corporate
H.B. Fuller
February 26, 2022
Adhesives
Adhesives
Adhesives
Total
Unallocated
Consolidated
Net income attributable to H.B. Fuller
$
35,137
$
34,737
$
6,683
$
76,557
$
(38,251
)
$
38,306
Adjustments:
Acquisition project costs1
-
-
-
-
5,857
5,857
Organizational realignment2
-
-
-
-
1,629
1,629
Royal Restructuring and integration3
-
-
-
-
398
398
Project One
-
-
-
-
3,204
3,204
Other4
-
-
-
-
1,166
1,166
Discrete tax items5
-
-
-
-
(2,901
)
(2,901
)
Income tax effect on adjustments6
-
-
-
-
(3,510
)
(3,510
)
Adjusted net income attributable to H.B.
Fuller7
35,137
34,737
6,683
76,557
(32,408
)
44,149
Add:
Interest expense
-
-
-
-
18,210
18,210
Interest income
-
-
-
-
(1,951
)
(1,951
)
Adjusted Income taxes
-
-
-
-
16,559
16,559
Depreciation and amortization expense8
11,461
15,142
9,194
35,797
-
35,797
Adjusted EBITDA7
$
46,598
$
49,879
$
15,877
$
112,354
$
410
$
112,764
Revenue
$
389,538
$
353,977
$
112,967
$
856,482
-
$
856,482
Adjusted EBITDA Margin7
12.0
%
14.1
%
14.1
%
13.1
%
NMP
13.2
%
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-meaningful percentage
H.B. FULLER COMPANY AND
SUBSIDIARIES
SEGMENT FINANCIAL
INFORMATION
NET REVENUE GROWTH
(DECLINE)
(unaudited)
Three Months Ended
March 4, 2023
Price
8.3
%
Volume
(10.8
)%
Organic Growth13
(2.5
)%
M&A
1.9
%
Constant currency
(0.6
)%
F/X
(4.9
)%
Total H.B. Fuller Net Revenue Decline
(5.5
)%
Revenue growth versus 2022
Three Months Ended
March 4, 2023
Net
Constant
Organic
Revenue
F/X
Currency
M&A
Growth13
Hygiene, Health and Consumable
Adhesives
(1.5
)%
(6.2
)%
4.7
%
0.2
%
4.5
%
Engineering Adhesives
(5.9
)%
(4.5
)%
(1.4
)%
1.5
%
(2.9
)%
Construction Adhesives
(18.0
)%
(1.5
)%
(16.5
)%
9.3
%
(25.8
)%
Total H.B. Fuller
(5.5
)%
(4.9
)%
(0.6
)%
1.9
%
(2.5
)%
13 We use the term “organic revenue” to
refer to net revenue, excluding the effect of foreign currency
changes and acquisitions and divestitures. Organic growth reflects
adjustments for the impact of period-over-period changes in foreign
currency exchange rates on revenues and the revenues associated
with acquisitions and divestitures.
CONSOLIDATED BALANCE
SHEETS
H.B. Fuller Company and
Subsidiaries
(In thousands, except share and
per share amounts)
March 4,
December 3,
2023
2022
Assets
Current assets:
Cash and cash equivalents
$
125,482
$
79,910
Trade receivables (net of allowances of
$11,121 and $10,939, as of March 4, 2023 and December 3, 2022,
respectively)
566,358
607,365
Inventories
526,041
491,781
Other current assets
123,034
120,319
Total current assets
1,340,915
1,299,375
Property, plant and equipment
1,623,489
1,579,738
Accumulated depreciation
(866,468
)
(846,071
)
Property, plant and equipment,
net
757,021
733,667
Goodwill
1,391,057
1,392,627
Other intangibles, net
697,104
702,092
Other assets
349,639
335,868
Total assets
$
4,535,736
$
4,463,629
Liabilities, non-controlling interest
and total equity
Current liabilities
Notes payable
$
28,208
$
28,860
Trade payables
450,203
460,669
Accrued compensation
51,920
108,328
Income taxes payable
16,348
18,530
Other accrued expenses
96,497
89,345
Total current liabilities
643,176
705,732
Long-term debt
1,845,281
1,736,256
Accrued pension liabilities
53,742
52,561
Other liabilities
359,410
358,286
Total liabilities
$
2,901,609
$
2,852,835
Commitments and contingencies (Note
12)
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 – 53,818,698
and 53,676,576 as of March 4, 2023 and December 3, 2022,
respectively
$
53,819
$
53,677
Additional paid-in capital
272,820
266,491
Retained earnings
1,752,943
1,741,359
Accumulated other comprehensive loss
(446,116
)
(451,357
)
Total H.B. Fuller stockholders' equity
1,633,466
1,610,170
Non-controlling interest
661
624
Total equity
1,634,127
1,610,794
Total liabilities, non-controlling
interest and total equity
$
4,535,736
$
4,463,629
CONSOLIDATED STATEMENTS of
CASH FLOWS
H.B. Fuller Company and
Subsidiaries
(In thousands)
Three Months Ended
March 4, 2023
February 26, 2022
Cash flows from operating
activities:
Net income including non-controlling
interest
$
21,916
$
38,320
Adjustments to reconcile net income
including non-controlling interest to net cash (used in) provided
by operating activities:
Depreciation
19,248
18,163
Amortization
18,683
17,792
Deferred income taxes
(5,746
)
(6,020
)
Income from equity method investments, net
of dividends received
(1,180
)
(1,583
)
Debt issuance costs write-off
2,689
-
Loss on mark to market adjustment on
contingent consideration liability
139
-
Gain on sale or disposal of assets
(4
)
(13
)
Share-based compensation
4,527
5,091
Pension and other post-retirement benefit
plan activity
(3,476
)
(5,361
)
Change in assets and liabilities, net of
effects of acquisitions:
Trade receivables, net
55,407
13,283
Inventories
(33,800
)
(87,419
)
Other assets
(28,947
)
(3,195
)
Trade payables
8,996
46,464
Accrued compensation
(57,000
)
(44,066
)
Other accrued expenses
(6,414
)
(6,839
)
Income taxes payable
(2,235
)
6,698
Other liabilities
(3,085
)
(8,810
)
Other
15,827
(178
)
Net cash provided by (used in)
operating activities
5,545
(17,673
)
Cash flows from investing
activities:
Purchased property, plant and
equipment
(47,604
)
(48,883
)
Purchased businesses, net of cash
acquired
(16,723
)
(229,314
)
Proceeds from sale of property, plant and
equipment
611
22
Cash received from government grant
-
3,928
Net cash used in investing
activities
(63,716
)
(274,247
)
Cash flows from financing
activities:
Proceeds from issuance of long-term
debt
1,300,000
307,500
Repayment of long-term debt
(1,176,650
)
-
Payment of debt issuance costs
(10,214
)
(400
)
Net payment of notes payable
(881
)
(7,604
)
Dividends paid
(10,222
)
(8,881
)
Contingent consideration payment
-
(5,000
)
Proceeds from stock options exercised
3,595
5,754
Repurchases of common stock
(2,448
)
(3,577
)
Net cash provided by financing
activities
103,180
287,792
Effect of exchange rate changes on cash
and cash equivalents
563
5,853
Net change in cash and cash
equivalents
45,572
1,725
Cash and cash equivalents at beginning of
period
79,910
61,786
Cash and cash equivalents at end of
period
$
125,482
$
63,511
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230329005704/en/
Steven Brazones Investor Relations Contact 651-236-5060
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