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

1/24/2018, 4:49 AM (Source: GlobeNewswire)

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

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

Items of Note for 2018 Guidance:

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

Items of Note for the Fourth Quarter of 2017:

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

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

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

This guidance excludes between $15 and $20 million, pre-tax, of expenses required to integrate the Royal business and other businesses acquired in 2017, between $7 and $10 million of expenses, pre-tax, related to Project ONE ERP development costs as well as other items that cannot reasonably be estimated at this time. A complete reconciliation of the non-GAAP financial information contained in our 2018 guidance is not being provided in accordance with the “unreasonable efforts” exception of Item 10(e)(1)(i)(B) of Regulation S-K of the Securities and Exchange Commission.

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

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

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

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

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

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

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

Conference Call:
The Company will host an investor conference call to discuss fourth quarter results on Wednesday, January 24, 2017, at 9:30 a.m. Central U.S. time (10:30 a.m. Eastern U.S. time). The conference call audio and accompanying presentation slides will be available to all interested parties via a simultaneous webcast under the Investor Relations section of the Company’s website. The event is scheduled to last one hour. For those unable to listen live, an audio replay of the event along with the accompanying presentation will be archived on the Company’s website.

Regulation G:
The information presented in this earnings release regarding segment operating income, adjusted gross profit, adjusted selling, general and administrative expense, adjusted diluted earnings per share, earnings before interest, taxes, depreciation, and amortization (EBITDA) and constant currency revenue does not conform to generally accepted accounting principles (GAAP) and should not be construed as an alternative to the reported results determined in accordance with GAAP. Management has included this non-GAAP information to assist in understanding the operating performance of the Company and its operating segments as well as the comparability of results. The non-GAAP information provided may not be consistent with the methodologies used by other companies. All non-GAAP information is reconciled with reported GAAP results in the tables below with the exception of our forward looking non-GAAP measures contained in our fiscal 2018 outlook, which are unknown or have not yet occurred.

About H.B. Fuller Company:
For 130 years, H.B. Fuller has been a leading global adhesives provider focusing on perfecting adhesives, sealants and other specialty chemical products to improve products and lives. With fiscal 2017 net revenue of $2.3 billion, H.B. Fuller’s commitment to innovation brings together people, products and processes that answer and solve some of the world’s biggest challenges. Our reliable, responsive service creates lasting, rewarding connections with customers in electronics, disposable hygiene, medical, transportation, clean energy, packaging, construction, woodworking, general industries and other consumer businesses. And our promise to our people connects them with opportunities to innovate and thrive. For more information, visit us at www.hbfuller.com and subscribe to our blog.

Safe Harbor for Forward-Looking Statements:
Certain statements in this document may be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to various risks and uncertainties, including but not limited to the following: the Royal transaction may involve unexpected costs or liabilities; our business or stock price may suffer as a result of uncertainty surrounding the transaction; the substantial amount of debt we have incurred to finance our acquisition of Royal, our ability to repay or refinance it or incur additional debt in the future, our need for a significant amount of cash to service and repay the debt and to pay dividends on our common stock, and the effect of restrictions contained in our debt agreements that limit the discretion of management in operating the business or ability to pay dividends; various risks to stockholders of not receiving dividends and risks to our ability to pursue growth opportunities if we continue to pay dividends according to the current dividend policy; we may be unable to achieve expected synergies and operating efficiencies from the transaction within the expected time frames or at all; we may be unable to successfully integrate Royal’s operations into our own, or such integration may be more difficult, time consuming or costly than expected; following the transaction, revenues may be lower than expected, and operating costs, customer loss and business disruption (including, without limitation, difficulties in maintaining relationships with employees, customers, clients or suppliers) may be greater than expected; risks that the transaction disrupts current plans and operations and the potential difficulties in employee retention as a result of the transaction; the ability to effectively implement Project ONE; political and economic conditions; product demand; competitive products and pricing; costs of and savings from restructuring initiatives; geographic and product mix; availability and price of raw materials; the Company’s relationships with its major customers and suppliers; changes in tax laws and tariffs; devaluations and other foreign exchange rate fluctuations; the impact of litigation and environmental matters; the effect of new accounting pronouncements and accounting charges and credits; and similar matters. Further information about the various risks and uncertainties can be found in the Company’s SEC 10-K filing for the fiscal year ended December 3, 2016, and its SEC 10-Q filing for the quarter ended September 2, 2017. All forward-looking information represents management’s best judgment as of this date based on information currently available that in the future may prove to have been inaccurate. Additionally, the variety of products sold by the Company and the regions where the Company does business make it difficult to determine with certainty the increases or decreases in net revenue resulting from changes in the volume of products sold, currency impact, changes in product mix, and selling prices. However, management’s best estimates of these changes as well as changes in other factors have been included.

 
H.B. FULLER COMPANY AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
In thousands, except per share amounts (unaudited)
          
 13 Weeks Ended Percent of 14 Weeks Ended Percent of
 December 2, 2017 Net Revenue December 3, 2016 Net Revenue
Net revenue$678,200  100.0% $574,907  100.0%
Cost of sales (510,464) (75.3%)  (407,086) (70.8%)
Gross profit 167,736  24.7 %  167,821  29.2 %
          
Selling, general and administrative expenses (151,126) (22.3%)  (106,495) (18.6%)
Special charges, net -  0.0 %  (1,856) (0.3%)
Other income (expense), net (24,401) (3.6%)  54  0.0 %
Interest expense (19,073) (2.8%)  (7,645) (1.3%)
Income (loss) before income taxes and income from equity method investments (26,864) (4.0%)  51,879  9.0 %
          
Income taxes 17,092  2.5 %  (14,873) (2.6%)
          
Income from equity method investments 2,228  0.3 %  2,221  0.4 %
Net income (loss) including non-controlling interests (7,544) (1.1%)  39,227  6.8 %
          
Net income (loss) attributable to non-controlling interests (14) (0.0%)  (93) (0.0%)
Net income (loss) attributable to H.B. Fuller$(7,558) (1.1%) $39,134  6.8 %
          
Basic income (loss) per common share attributable to H.B. Fuller$(0.15)   $0.78   
          
Diluted income (loss) per common share attributable to H.B. Fuller$(0.15)   $0.76   
          
Weighted-average common shares outstanding:         
Basic 50,356     50,180   
Diluted 51,724     51,378   
          
Dividends declared per common share$0.15    $0.14   
            


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


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


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


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


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


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


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


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


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


 
 H.B. FULLER COMPANY AND SUBSIDIARIES
SEGMENT FINANCIAL INFORMATION
NET REVENUE GROWTH
(unaudited)
               
13 Weeks Ended December 2, 2017
               
 Americas
Adhesives
 EIMEA Asia Pacific Construction
Products
 Engineering
Adhesives
   Total HBF 
Price0.9% 5.4% 0.5% 0.1% 0.5%   1.9% 
Volume9.5% 4.0% 10.4% (1.7%) 19.3%   8.2% 
Mix0.1% 0.6% 0.2% (0.4%) (0.7%)   0.1% 
Acquisition4.3% -  -  -  -    1.6% 
  Constant Currency Growth 514.8% 10.0% 11.1% (2.0%) 19.1%   11.8% 
               
F/X0.2%   (1.9%) 1.3% 0.4% 1.1%   (0.1%) 
Royal Impact-  -  -  -  -    13.4% 
Extra Week(7.1%) (7.1%) (7.1%) (7.1%) (7.1%)   (7.1%) 
 7.9% 1.0% 5.3% (8.7%) 13.1%   18.0% 
               
               
               
52 Weeks Ended December 2, 2017
               
 Americas
Adhesives
 EIMEA Asia Pacific Construction
Products
 Engineering
Adhesives
   Total HBF 
Price(0.4%) 4.5% (0.6%) 0.0% (1.2%)   0.8% 
Volume6.1% 4.6% 11.1% (4.9%) 20.3%   6.1% 
Mix(0.8%) 0.1% (0.5%) (0.3%) (0.5%)   (0.4%) 
Acquisition7.6% -  2.8% -  3.2%   4.1% 
  Constant Currency Growth 512.5% 9.2% 12.8% (5.2%) 21.8%   10.6% 
               
F/X(0.3%)   (6.6%) (1.6%) 0.2% (1.8%)   (2.2%) 
Royal Impact-  -  -  -  -    3.7% 
Extra Week(2.0%) (2.0%) (2.0%) (2.0%) (2.0%)   (2.0%) 
 10.2% 0.6% 9.2% (7.0%) 18.0%   10.1% 
               


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


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


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


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

Maximillian Marcy
Investor Relations Contact
651-236-5062

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