Third Quarter Diluted EPS $0.64;
Third Quarter Adjusted Diluted EPS $0.641;
Adjusted EPS Guidance Range Narrowed to $2.45-$2.501
ST. PAUL, Minn., Sept. 21, 2016 (GLOBE NEWSWIRE) -- H.B. Fuller Company (NYSE:FUL) today reported financial results for the third quarter that ended August 27, 2016.
Items of Note for the Third Quarter of 2016:
- Volume growth was 12 percent in the Engineering Adhesives segment, above 10 percent in the Asia Pacific segment and positive in our EIMEA segment. Volume was flat in Americas Adhesives year-over-year, reflecting expected sequential improvement;
- Gross profit margin was 28.5 percent, an improvement of 50 basis points versus the prior year’s third quarter, reflecting effective management of pricing and raw material costs;
- Net income was $32.7 million; adjusted net income was $33.1 million, or $0.641 per diluted share, an increase of 5 percent versus the prior year;
- Adjusted EBITDA margin2 was 13.4 percent; EIMEA segment adjusted EBITDA2 margin was 10.4 percent in the quarter, up over 200 basis points from the prior year;
- Cash flow from operating activities of $63 million, driven by solid net income performance; on track to deliver over $200 million in cash flow from operations for the 2016 fiscal year.
Third Quarter 2016 Results:
Net income for the third quarter of 2016 was $32.7 million, or $0.64 per diluted share, versus net income of $26.8 million, or $0.52 per diluted share, in last year’s third quarter. Adjusted diluted earnings per share in the third quarter of 2016 were $0.641, up 5 percent versus the prior year’s adjusted result of $0.611. Adjusted EBITDA2 was $68.7 million in the third quarter, or 13.4 percent of net revenue.
Net revenue for the third quarter of 2016 was $512.9 million, down 2.2 percent versus the third quarter of 2015. Higher volume/mix positively impacted net revenue growth by 0.9 percentage points. Lower average selling prices and negative foreign currency translation negatively impacted net revenue growth by 2.1 and 1.0 percentage points, respectively.
During the quarter we maintained margins through effective management of pricing and raw material costs. Gross profit margin increased 50 basis points versus the prior year. Selling, General and Administrative (SG&A) expense was down by approximately 0.6 percent versus last year, primarily due to well controlled discretionary expenses, the favorable impact of exchange and lower variable compensation, offset by selective investments for growth.
”We continued to deliver improving financial results in-line with our long term goals,” said Jim Owens, H.B. Fuller president and chief executive officer. “Volume growth remained robust in both the Asia Pacific and Engineering Adhesives segments and we delivered the volume improvements we committed to in the Americas Adhesive segment, reflecting continued sequential improvements. Our cash flow was strong, we began the integration of Cyberbond, an important strategic acquisition, and managed earnings in-line with our strategic commitments with EPS up 14 percent year-to-date and EBITDA margin up 90 basis points for the first nine months of the year. We are confident that we will continue to drive our business performance toward the long-term goals committed to in our 2020 strategic plan.”
Year-To-Date Results:
Net income for the first nine months of 2016 was $85.0 million, or $1.66 per diluted share, versus income from continuing operations of $63.3 million, or $1.22 per diluted share, in the first nine months of 2015. Adjusted diluted earnings per share in the first nine months of 2016 were $1.741, up 14 percent versus the prior year’s result of $1.531. Foreign currency losses were unusually high in the first nine months of this year, reducing adjusted EPS by about $0.10 per share relative to the same period last year.
Net revenue for the first nine months of 2016 was $1,519.7 million, down 1.0 percent versus the first nine months of 2015. Higher volume/mix positively impacted net revenue growth by 2.5 percentage points. Lower average selling prices and negative foreign currency translation negatively impacted net revenue growth by 1.3 and 2.2 percentage points, respectively. Constant currency revenue3 grew by 1.2 percent year-over-year.
Balance Sheet and Cash Flow:
At the end of the third quarter of 2016, we had cash totaling $133 million and total debt of $712 million. This compares to second quarter 2016 cash and debt levels of $146 million and $722 million, respectively. Sequentially, net debt was essentially unchanged. Cash flow from operations was positive $63 million in the third quarter. The strong cash flow result allowed us to fund the acquisition of Cyberbond and maintain our leverage of 2.6 times debt to EBITDA. Capital expenditures were $14 million in the third quarter.
Fiscal 2016 Outlook:
We are narrowing our adjusted EPS guidance range to $2.45 to $2.50 for the 2016 year1. Our previous guidance for 2016 adjusted EPS was $2.45 to $2.60 per share. Currency had a negative $0.05 impact versus previous guidance. Constant currency growth is expected to be around 2 to 3 percent for 2016 versus the 2015 fiscal year. We now expect to generate approximately $280 million of EBITDA in 2016, reflecting a full-year EBITDA margin of approximately 13.5 percent. Our core tax rate, excluding the impact of discrete items, is expected to be about 31.5 percent. We are on track to invest approximately $60 million in capital items in 2016.
Shareholder Rights Plan Expiration:
H.B. Fuller’s shareholder rights plan expired in accordance with its terms on July 31, 2016. In connection with the expiration of the shareholder rights plan, the Company will be taking routine steps to voluntarily deregister the related preferred stock purchase rights under the Securities Exchange Act of 1934, as amended, and to delist these rights from the New York Stock Exchange. These actions are administrative in nature and will have no effect on the Company’s common stock, which continues to be registered under the Securities Exchange Act of 1934, as amended, and listed on the New York Stock Exchange. Shareholders are not required to take any action as a result of the expiration of the shareholder rights plan.
Conference Call:
The Company will host an investor conference call to discuss third quarter 2016 results on Thursday, September 22, 2016, at 9:30 a.m. Central U.S. time (10:30 a.m. Eastern U.S. time). The conference call audio and accompanying presentation slides will be available to all interested parties via a simultaneous webcast at www.hbfuller.com under the Investor Relations section. 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 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 2016 outlook which are unknown and have not yet occurred.
About H.B. Fuller Company:
For over 125 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 2015 net revenue of $2.1 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 packaging, hygiene, general assembly, electronic and assembly materials, paper converting, woodworking, construction, automotive and 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 Company's ability to effectively integrate and operate acquired businesses; 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 November 28, 2015. All forward-looking information represents management's best judgment as of this date based on information currently available that in the future may prove to have been inaccurate. Additionally, the variety of products sold by the Company and the regions where the Company does business make it difficult to determine with certainty the increases or decreases in net revenue resulting from changes in the volume of products sold, currency impact, changes in product mix, and selling prices. However, management's best estimates of these changes as well as changes in other factors have been included.
| H.B. FULLER COMPANY AND SUBSIDIARIES | |||||||||||||||||
| CONSOLIDATED FINANCIAL INFORMATION | |||||||||||||||||
| In thousands, except per share amounts (unaudited) | |||||||||||||||||
| Three Months Ended | Percent of | Three Months Ended | Percent of | ||||||||||||||
| August 27, 2016 | Net Revenue | August 29, 2015 | Net Revenue | ||||||||||||||
| Net revenue | $ | 512,858 | 100.0 | % | $ | 524,133 | 100.0 | % | |||||||||
| Cost of sales | (366,737 | ) | (71.5 | %) | (377,293 | ) | (72.0 | %) | |||||||||
| Gross profit | 146,121 | 28.5 | % | 146,840 | 28.0 | % | |||||||||||
| Selling, general and administrative expenses | (97,692 | ) | (19.0 | %) | (98,297 | ) | (18.8 | %) | |||||||||
| Special charges, net | 2,807 | 0.5 | % | (1,297 | ) | (0.2 | %) | ||||||||||
| Other income (expense), net | (956 | ) | (0.2 | %) | (1,040 | ) | (0.2 | %) | |||||||||
| Interest expense | (6,809 | ) | (1.3 | %) | (6,448 | ) | (1.2 | %) | |||||||||
| Income before income taxes and income from equity method investments | 43,471 | 8.5 | % | 39,758 | 7.6 | % | |||||||||||
| Income taxes | (12,513 | ) | (2.4 | %) | (14,372 | ) | (2.7 | %) | |||||||||
| Income from equity method investments | 1,840 | 0.3 | % | 1,500 | 0.3 | % | |||||||||||
| Net income including non-controlling interests | 32,798 | 6.4 | % | 26,886 | 5.1 | % | |||||||||||
| Net income attributable to non-controlling interests | (53 | ) | (0.0 | %) | (79 | ) | (0.0 | %) | |||||||||
| Net income attributable to H.B. Fuller | $ | 32,745 | 6.4 | % | $ | 26,807 | 5.1 | % | |||||||||
| Basic income per common share attributable to H.B. Fuller | $ | 0.65 | $ | 0.53 | |||||||||||||
| Diluted income per common share attributable to H.B. Fullera | $ | 0.64 | $ | 0.52 | |||||||||||||
| Weighted-average common shares outstanding: | |||||||||||||||||
| Basic | 50,261 | 50,421 | |||||||||||||||
| Diluted | 51,453 | 51,530 | |||||||||||||||
| Dividends declared per common share | $ | 0.14 | $ | 0.13 | |||||||||||||
| Selected Balance Sheet Information (subject to change prior to filing of the Company's Quarterly Report on Form 10-Q) | ||||||||
| August 27, 2016 | November 28, 2015 | August 29, 2015 | ||||||
| Cash & cash equivalents | $ | 133,102 | $ | 119,168 | $ | 85,821 | ||
| Trade accounts receivable, net | 344,305 | 364,704 | 341,932 | |||||
| Inventories | 261,363 | 248,504 | 266,896 | |||||
| Trade payables | 160,836 | 177,864 | 170,602 | |||||
| Total assets | 2,080,393 | 2,042,252 | 2,068,638 | |||||
| Total debt | 711,570 | 722,863 | 727,578 | |||||
| H.B. FULLER COMPANY AND SUBSIDIARIES | |||||||||||||||||
| CONSOLIDATED FINANCIAL INFORMATION | |||||||||||||||||
| In thousands, except per share amounts (unaudited) | |||||||||||||||||
| Nine Months Ended | Percent of | Nine Months Ended | Percent of | ||||||||||||||
| August 27, 2016 | Net Revenue | August 29, 2015 | Net Revenue | ||||||||||||||
| Net revenue | $ | 1,519,698 | 100.0 | % | $ | 1,535,556 | 100.0 | % | |||||||||
| Cost of sales | (1,077,716 | ) | (70.9 | %) | (1,123,573 | ) | (73.2 | %) | |||||||||
| Gross profit | 441,982 | 29.1 | % | 411,983 | 26.8 | % | |||||||||||
| Selling, general and administrative expenses | (301,143 | ) | (19.8 | %) | (293,712 | ) | (19.1 | %) | |||||||||
| Special charges | 2,024 | 0.1 | % | (4,592 | ) | (0.3 | %) | ||||||||||
| Other income (expense), net | (7,603 | ) | (0.5 | %) | (1,246 | ) | (0.1 | %) | |||||||||
| Interest expense | (19,714 | ) | (1.3 | %) | (18,765 | ) | (1.2 | %) | |||||||||
| Income from continuing operations before income taxes and income from equity method investments | 115.546 | 7.6 | % | 93,668 | 6.1 | % | |||||||||||
| Income taxes | (35,563 | ) | (2.3 | %) | (34,528 | ) | (2.2 | %) | |||||||||
| Income from equity method investments | 5,172 | 0.3 | % | 4,157 | 0.3 | % | |||||||||||
| Income from continuing operations | 85,155 | 5.6 | % | 63,297 | 4.1 | % | |||||||||||
| Loss from discontinued operations | - | 0.0 | % | (1,300 | ) | (0.1 | %) | ||||||||||
| Net income including non-controlling interests | 85,155 | 5.6 | % | 61,997 | 4.0 | % | |||||||||||
| Net income attributable to non-controlling interests | (161 | ) | (0.0 | %) | (308 | ) | (0.0 | %) | |||||||||
| Net income attributable to H.B. Fuller | $ | 84,994 | 5.6 | % | $ | 61,689 | 4.0 | % | |||||||||
| Basic income per common share attributable to H.B. Fullera | |||||||||||||||||
| Income from continuing operations | 1.70 | 1.25 | |||||||||||||||
| Loss from discontinued operations | - | (0.03 | ) | ||||||||||||||
| $ | 1.70 | $ | 1.23 | ||||||||||||||
| Diluted income per common share attributable to H.B. Fullera | |||||||||||||||||
| Income from continuing operations | 1.66 | 1.22 | |||||||||||||||
| Loss from discontinued operations | - | (0.03 | ) | ||||||||||||||
| $ | 1.66 | $ | 1.20 | ||||||||||||||
| Weighted-average common shares outstanding: | |||||||||||||||||
| Basic | 50,122 | 50,318 | |||||||||||||||
| Diluted | 51,234 | 51,460 | |||||||||||||||
| Dividends declared per common share | $ | 0.41 | $ | 0.38 | |||||||||||||
| a Income per share amounts may not add due to rounding | |||||||||||||||||
| H.B. FULLER COMPANY AND SUBSIDIARIES | |||||||||||||||||||||||||||
| REGULATION G RECONCILIATION | |||||||||||||||||||||||||||
| In thousands, except per share amounts (unaudited) | |||||||||||||||||||||||||||
| Adjusted | |||||||||||||||||||||||||||
| Three Months Ended | % of Net | Three Months Ended | % of Net | ||||||||||||||||||||||||
| August 27, 2016 | Revenue | Adjustments | August 27, 2016 | Revenue | |||||||||||||||||||||||
| Net revenue | $ | 512,858 | 100.0 | % | $ | $ | 512,858 | 100.0 | % | ||||||||||||||||||
| Cost of sales | (366,737 | ) | (71.5 | %) | (1,027 | ) | (365,710 | ) | (71.3 | %) | |||||||||||||||||
| Gross profit | 146,121 | 28.5 | % | (1,027 | ) | 147,148 | 28.7 | % | |||||||||||||||||||
| Selling, general and administrative expenses | (97,692 | ) | (19.0 | %) | (908 | ) | (96,784 | ) | (18.8 | %) | |||||||||||||||||
| Acquisition and transformation related costs | (55 | ) | |||||||||||||||||||||||||
| Workforce reduction costs | - | ||||||||||||||||||||||||||
| Facility exit costs | 2,862 | ||||||||||||||||||||||||||
| Other related costs | - | ||||||||||||||||||||||||||
| Special charges, net | 2,807 | 0.5 | % | 2,807 | - | 0.0 | % | ||||||||||||||||||||
| Other income (expense), net | (956 | ) | (0.2 | %) | (684 | ) | (272 | ) | (0.1 | %) | |||||||||||||||||
| Interest expense | (6,809 | ) | (1.3 | %) | (74 | ) | (6,735 | ) | (1.3 | %) | |||||||||||||||||
| Income before income taxes and income from equity method investments | 43,471 | 8.5 | % | 114 | 43,357 | 8.5 | % | ||||||||||||||||||||
| Income taxes | (12,513 | ) | (2.4 | %) | (507 | ) | (12,006 | ) | (2.3 | %) | |||||||||||||||||
| - Effective tax rate | 28.8 | % | 44.7 | % | 27.7 | % | |||||||||||||||||||||
| Income from equity method investments | 1,840 | 0.3 | % | 1,840 | 0.3 | % | |||||||||||||||||||||
| Net income including non-controlling interests | 32,798 | 6.4 | % | (393 | ) | 33,191 | 6.5 | % | |||||||||||||||||||
| Net income attributable to non-controlling interests | (53 | ) | (0.0 | %) | (53 | ) | (0.0 | %) | |||||||||||||||||||
| Net income attributable to H.B. Fuller | $ | 32,745 | 6.4 | % | $ | (393 | ) | $ | 33,138 | 6.5 | % | ||||||||||||||||
| Basic income (loss) per common share attributable to H.B. Fuller | $ | 0.65 | $ | ( 0.01 | ) | $ | 0.66 | ||||||||||||||||||||
| Diluted income (loss) per common share attributable to H.B. Fullera | $ | 0.64 | $ | (0.01 | ) | $ | 0.64 1 | ||||||||||||||||||||
| Weighted-average common shares outstanding: | |||||||||||||||||||||||||||
| Basic | 50,261 | 50,261 | 50,261 | ||||||||||||||||||||||||
| Diluted | 51,453 | 51,453 | 51,453 | ||||||||||||||||||||||||
| a Income per share amounts may not add due to rounding | |||||||||||||||||||||||||||
| H.B. FULLER COMPANY AND SUBSIDIARIES | ||||||||||||||||||||||||||
| REGULATION G RECONCILIATION | ||||||||||||||||||||||||||
| In thousands, except per share amounts (unaudited) | ||||||||||||||||||||||||||
| Adjusted | ||||||||||||||||||||||||||
| Three Months Ended | % of Net | Three Months Ended | % of Net | |||||||||||||||||||||||
| August 29, 2015 | Revenue | Adjustments | August 29, 2015 | Revenue | ||||||||||||||||||||||
| Net revenue | $ | 524,133 | 100.0 | % | $ | 88 | $ | 524,221 | 100.0 | % | ||||||||||||||||
| Cost of sales | (377,293 | ) | (72.0 | %) | (2,141 | ) | (375,152 | ) | (71.6 | %) | ||||||||||||||||
| Gross profit | 146,840 | 28.0 | % | (2,229 | ) | 149,069 | 28.4 | % | ||||||||||||||||||
| Selling, general and administrative expenses | (98,297 | ) | (18.8 | %) | (2,623 | ) | (95,674 | ) | (18.3 | %) | ||||||||||||||||
| Acquisition and transformation related costs | (48 | ) | ||||||||||||||||||||||||
| Workforce reduction costs | (216 | ) | ||||||||||||||||||||||||
| Facility exit costs | (1,043 | ) | ||||||||||||||||||||||||
| Other related costs | 10 | |||||||||||||||||||||||||
| Special charges, net | (1,297 | ) | (0.2 | %) | (1,297 | ) | - | 0.0 | % | |||||||||||||||||
| Other income (expense), net | (1,040 | ) | (0.2 | %) | (1,040 | ) | (0.2 | %) | ||||||||||||||||||
| Interest expense | (6,448 | ) | (1.2 | %) | 146 | (6,594 | ) | (1.3 | %) | |||||||||||||||||
| Income before income taxes and income from equity method investments | 39,758 | 7.6 | % | (6,003 | ) | 45,761 | 8.7 | % | ||||||||||||||||||
| Income taxes | (14,372 | ) | (2.7 | %) | 1,568 | (15,940 | ) | (3.0 | %) | |||||||||||||||||
| - Effective tax rate | 36.1 | % | 26.1 | % | 34.8 | % | ||||||||||||||||||||
| Income from equity method investments | 1,500 | 0.3 | % | - | 1,500 | 0.3 | % | |||||||||||||||||||
| Net income including non-controlling interests | 26,886 | 5.1 | % | (4,435 | ) | 31,321 | 6.0 | % | ||||||||||||||||||
| Net income attributable to non-controlling interests | (79 | ) | (0.0 | %) | - | (79 | ) | (0.0 | %) | |||||||||||||||||
| Net income attributable to H.B. Fuller | $ | 26,807 | 5.1 | % | $ | (4,435 | ) | $ | 31,242 | 6.0 | % | |||||||||||||||
| Income (loss) from continuing operations | $ | 0.53 | $ | (0.09 | ) | $ | 0.62 | |||||||||||||||||||
| Basic income (loss) per common share attributable to H.B. Fuller | $ | 0.53 | $ | (0.09 | ) | $ | 0.62 | |||||||||||||||||||
| Income (loss) from continuing operations | $ | 0.52 | $ | (0.09 | ) | $ | 0.61 1 | |||||||||||||||||||
| Diluted income (loss) per common share attributable to H.B. Fuller | $ | 0.52 | $ | (0.09 | ) | $ | 0.61 1 | |||||||||||||||||||
| Weighted-average common shares outstanding: | ||||||||||||||||||||||||||
| Basic | 50,421 | 50,421 | 50,421 | |||||||||||||||||||||||
| Diluted | 51,530 | 51,530 | 51,530 | |||||||||||||||||||||||
| H.B. FULLER COMPANY AND SUBSIDIARIES | |||||||||||||||||||||||||
| REGULATION G RECONCILIATION | |||||||||||||||||||||||||
| In thousands, except per share amounts (unaudited) | |||||||||||||||||||||||||
| Adjusted | |||||||||||||||||||||||||
| Nine Months Ended | % of Net | Nine Months Ended | % of Net | ||||||||||||||||||||||
| August 27, 2016 | Revenue | Adjustments | August 27, 2016 | Revenue | |||||||||||||||||||||
| Net revenue | $ | 1,519,698 | 100.0 | % | $ | $ | 1,519,698 | 100.0 | % | ||||||||||||||||
| Cost of sales | (1,077,716 | ) | (70.9 | %) | (3,899 | ) | (1,073,817 | ) | (70.7 | %) | |||||||||||||||
| Gross profit | 441,982 | 29.1 | % | (3,899 | ) | 445,881 | 29.3 | % | |||||||||||||||||
| Selling, general and administrative expenses | (301,143 | ) | (19.8 | %) | (1,823 | ) | (299,320 | ) | (19.7 | %) | |||||||||||||||
| Acquisition and transformation related costs | (242 | ) | |||||||||||||||||||||||
| Workforce reduction costs | 1 | ||||||||||||||||||||||||
| Facility exit costs | 2,455 | ||||||||||||||||||||||||
| Other related costs | (190 | ) | |||||||||||||||||||||||
| Special charges | 2,024 | 0.1 | % | 2,024 | - | 0.0 | % | ||||||||||||||||||
| Other income (expense), net | (7,603 | ) | (0.5 | %) | (684 | ) | (6,919 | ) | (0.5 | %) | |||||||||||||||
| Interest expense | (19,714 | ) | (1.3 | %) | (222 | ) | (19,492 | ) | (1.3 | %) | |||||||||||||||
| Income before income taxes and income from equity method investments | 115,546 | 7.6 | % | (4,604 | ) | 120,150 | 7.9 | % | |||||||||||||||||
| Income taxes | (35,563 | ) | (2.3 | %) | 496 | (36,059 | ) | (2.4 | %) | ||||||||||||||||
| - Effective tax rate | 30.8 | % | 10.8 | % | 30.0 | % | |||||||||||||||||||
| Income from equity method investments | 5,172 | 0.3 | % | 5,172 | 0.3 | % | |||||||||||||||||||
| Net income including non-controlling interests | 85,155 | 5.6 | % | (4,108 | ) | 89,263 | 5.9 | % | |||||||||||||||||
| Net income attributable to non-controlling interests | (161 | ) | (0.0 | %) | (161 | ) | (0.0 | %) | |||||||||||||||||
| Net income attributable to H.B. Fuller | $ | 84,994 | 5.6 | % | $ | (4,108 | ) | $ | 89,102 | 5.9 | % | ||||||||||||||
| Basic income per common share attributable to H.B. Fuller | $ | 1.70 | $ | (0.08 | ) | $ | 1.78 1 | ||||||||||||||||||
| Diluted income per common share attributable to H.B. Fuller | $ | 1.66 | $ | (0.08 | ) | $ | 1.74 1 | ||||||||||||||||||
| Weighted-average common shares outstanding: | |||||||||||||||||||||||||
| Basic | 50,122 | 50,122 | 50,122 | ||||||||||||||||||||||
| Diluted | 51,234 | 51,234 | 51,234 | ||||||||||||||||||||||
| H.B. FULLER COMPANY AND SUBSIDIARIES | ||||||||||||||||||||||||||
| REGULATION G RECONCILIATION | ||||||||||||||||||||||||||
| In thousands, except per share amounts (unaudited) | ||||||||||||||||||||||||||
| Adjusted | ||||||||||||||||||||||||||
| Nine Months Ended | % of Net | Nine Months Ended | % of Net | |||||||||||||||||||||||
| August 29, 2015 | Revenue | Adjustments | August 29, 2015 | Revenue | ||||||||||||||||||||||
| Net revenue | $ | 1,535,556 | 100.0 | % | $ | 955 | $ | 1,536,511 | 100.0 | % | ||||||||||||||||
| Cost of sales | (1,123,573 | ) | (73.2 | %) | (8,172 | ) | (1,115,401 | ) | (72.6 | %) | ||||||||||||||||
| Gross profit | 411,983 | 26.8 | % | (9,127 | ) | 421,110 | 27.4 | % | ||||||||||||||||||
| Selling, general and administrative expenses | (293,712 | ) | (19.1 | %) | (5,919 | ) | (287,793 | ) | (18.7 | %) | ||||||||||||||||
| Acquisition and transformation related costs | (595 | ) | ||||||||||||||||||||||||
| Workforce reduction costs | (2 | ) | ||||||||||||||||||||||||
| Facility exit costs | (3,683 | ) | ||||||||||||||||||||||||
| Other related costs | (312 | ) | ||||||||||||||||||||||||
| Special charges | (4,592 | ) | (0.3 | %) | (4,592 | ) | - | 0.0 | % | |||||||||||||||||
| Other income (expense), net | (1,246 | ) | (0.1 | %) | (1,246 | ) | (0.1 | %) | ||||||||||||||||||
| Interest expense | (18,765 | ) | (1.2 | %) | (184 | ) | (18,581 | ) | (1.2 | %) | ||||||||||||||||
| Income from continuing operations before income taxes and income from equity method investments | 93,668 | 6.1 | % | (19,822 | ) | 113,490 | 7.4 | % | ||||||||||||||||||
| Income taxes | (34,528 | ) | (2.2 | %) | 4,160 | (38,688 | ) | (2.5 | %) | |||||||||||||||||
| - Effective tax rate | 36.9 | % | 21.0 | % | 34.1 | % | ||||||||||||||||||||
| Income from equity method investments | 4,157 | 0.3 | % | - | 4,157 | 0.3 | % | |||||||||||||||||||
| Income from continuing operations | 63,297 | (15,662 | ) | 78,959 | 5.1 | % | ||||||||||||||||||||
| Loss from discontinued operations | (1,300 | ) | (0.1 | %) | (1,300 | ) | - | 0.0 | % | |||||||||||||||||
| Net income including non-controlling interests | 61,997 | 4.0 | % | (16,962 | ) | 78,959 | 5.1 | % | ||||||||||||||||||
| Net loss attributable to non-controlling interests | (308 | ) | (0.0 | %) | - | (308 | ) | (0.0 | %) | |||||||||||||||||
| Net income attributable to H.B. Fuller | $ | 61,689 | 4.0 | % | $ | (16,962 | ) | $ | 78,651 | 5.1 | % | |||||||||||||||
| Basic income per common share attributable to H.B. Fullera | ||||||||||||||||||||||||||
| Income from continuing operations | 1.25 | (0.31 | ) | 1.56 | ||||||||||||||||||||||
| Income from discontinued operations | (0.03 | ) | (0.03 | ) | - | |||||||||||||||||||||
| $ | 1.23 | $ | (0.34 | ) | $ | 1.56 | ||||||||||||||||||||
| Diluted income per common share attributable to H.B. Fullera | ||||||||||||||||||||||||||
| Income from continuing operations | 1.22 | (0.30 | ) | 1.53 | ||||||||||||||||||||||
| Income from discontinued operations | (0.03 | ) | (0.03 | ) | - | |||||||||||||||||||||
| $ | 1.20 | $ | (0.33 | ) | $ | 1.53 1 | ||||||||||||||||||||
| Weighted-average common shares outstanding: | ||||||||||||||||||||||||||
| Basic | 50,318 | 50,318 | 50,318 | |||||||||||||||||||||||
| Diluted | 51,460 | 51,460 | 51,460 | |||||||||||||||||||||||
| 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) | ||||||||||||||||||||||||
| Three Months ended August 27, 2016 | Three Months ended August 29, 2015 | |||||||||||||||||||||||
| Income | Income | |||||||||||||||||||||||
| before | Income | Diluted | before | Income | Diluted | |||||||||||||||||||
| Income Tax | Taxes | EPS | Income Tax | Taxes | EPSa | |||||||||||||||||||
| Income from continuing operations | $ | 45,258 | $ | 12,513 | $ | 0.64 | $ | 41,179 | $ | 14,372 | $ | 0.52 | ||||||||||||
| Special charges, net | (2,807 | ) | (804 | ) | (0.04 | ) | 1,297 | 214 | 0.02 | |||||||||||||||
| Acquisition project costsb | 725 | 23 | 0.01 | 572 | 73 | 0.01 | ||||||||||||||||||
| Construction Productsc | - | - | - | 1,743 | 664 | 0.02 | ||||||||||||||||||
| EIMEA business integration costsd | 418 | 32 | 0.01 | 305 | 23 | 0.01 | ||||||||||||||||||
| Tonsan call option agreemente | 163 | - | - | - | - | - | ||||||||||||||||||
| Otherf | 1,387 | 242 | 0.02 | 2,085 | 594 | 0.03 | ||||||||||||||||||
| Adjusted Earnings | $ | 45,144 | $ | 12,006 | $ | 0.64 | $ | 47,181 | $ | 15,940 | $ | 0.61 | ||||||||||||
| Nine Months ended August 27, 2016 | Nine Months ended August 29, 2015 | |||||||||||||||||||||||
| Income | Income | |||||||||||||||||||||||
| before | Income | Diluted | before | Income | Diluted | |||||||||||||||||||
| Income Tax | Taxes | EPS | Income Tax | Taxes | EPS | |||||||||||||||||||
| Income from continuing operations | $ | 120,557 | $ | 35,563 | $ | 1.66 | $ | 97,517 | $ | 34,528 | $ | 1.22 | ||||||||||||
| Special charges, net | (2,024 | ) | (684 | ) | (0.03 | ) | 4,592 | 650 | 0.08 | |||||||||||||||
| Acquisition project costsb | 2,132 | 499 | 0.03 | 4,513 | 553 | 0.08 | ||||||||||||||||||
| Construction Productsc | - | - | - | 4,422 | 1,685 | 0.05 | ||||||||||||||||||
| EIMEA business integration costsd | 2,591 | 197 | 0.05 | 2,360 | 179 | 0.04 | ||||||||||||||||||
| Tonsan call option agreemente | (197 | ) | - | - | - | - | - | |||||||||||||||||
| Otherf | 2,102 | 484 | 0.03 | 3,936 | 1,093 | 0.06 | ||||||||||||||||||
| Adjusted Earnings | $ | 125,161 | $ | 36,059 | $ | 1.74 | $ | 117,340 | $ | 38,688 | $ | 1.53 | ||||||||||||
| a Income per share amounts may not add due to rounding | ||||||||||||||||||||||||
| b Costs related to integrating and accounting for past and potential acquisitions | ||||||||||||||||||||||||
| c Costs related to the ramp up of new business with Lowes and the combination of facilities in Illinois | ||||||||||||||||||||||||
| d Costs related to EIMEA restructuring announced November 2015, plant inefficiencies and inventory variances | ||||||||||||||||||||||||
| e Non-cash costs related to accretion and revaluation of the Tonsan call option agreement | ||||||||||||||||||||||||
| f Costs related to the completion and start-up of a new electronics facility in Yantai China, Project ONE development costs, a planned facility closure in the Philippines and the exit from the windows business in Korea | ||||||||||||||||||||||||
| H.B. FULLER COMPANY AND SUBSIDIARIES | |||||||||
| SEGMENT FINANCIAL INFORMATION | |||||||||
| In thousands (unaudited) | |||||||||
| Three Months Ended | Three Months Ended | ||||||||
| August 27, 2016 | August 29, 2015 | ||||||||
| Net Revenue: | |||||||||
| Americas Adhesives | $ | 198,957 | $ | 206,623 | |||||
| EIMEA | 130,619 | 133,512 | |||||||
| Asia Pacific | 57,488 | 54,645 | |||||||
| Construction Products | 64,402 | 72,404 | |||||||
| Engineering Adhesives | 61,392 | 56,949 | |||||||
| Total H.B. Fuller | $ | 512,858 | $ | 524,133 | |||||
| Segment Operating Income:4 | |||||||||
| Americas Adhesives | $ | 31,900 | $ | 33,617 | |||||
| EIMEA | 8,430 | 5,325 | |||||||
| Asia Pacific | 2,510 | 2,749 | |||||||
| Construction Products | 2,093 | 3,421 | |||||||
| Engineering Adhesives | 3,496 | 3,431 | |||||||
| Total H.B. Fuller | $ | 48,429 | $ | 48,543 | |||||
| Depreciation Expense: | |||||||||
| Americas Adhesives | $ | 3,583 | $ | 3,852 | |||||
| EIMEA | 3,689 | 3,616 | |||||||
| Asia Pacific | 1,569 | 1,402 | |||||||
| Construction Products | 1,327 | 1,411 | |||||||
| Engineering Adhesives | 1,495 | 1,630 | |||||||
| Total H.B. Fuller | $ | 11,663 | $ | 11,911 | |||||
| Amortization Expense: | |||||||||
| Americas Adhesives | $ | 1,075 | $ | 991 | |||||
| EIMEA | 1,143 | 1,131 | |||||||
| Asia Pacific | 536 | 305 | |||||||
| Construction Products | 2,327 | 2,335 | |||||||
| Engineering Adhesives | 1,942 | 2,137 | |||||||
| Total H.B. Fuller | $ | 7,023 | $ | 6,899 | |||||
| EBITDA:2 | |||||||||
| Americas Adhesives | $ | 36,558 | $ | 38,460 | |||||
| EIMEA | 13,262 | 10,072 | |||||||
| Asia Pacific | 4,615 | 4,456 | |||||||
| Construction Products | 5,747 | 7,167 | |||||||
| Engineering Adhesives | 6,933 | 7,198 | |||||||
| Total H.B. Fuller | $ | 67,115 | $ | 67,353 | |||||
| Segment Operating Margin:4 | |||||||||
| Americas Adhesives | 16.0 | % | 16.3 | % | |||||
| EIMEA | 6.5 | % | 4.0 | % | |||||
| Asia Pacific | 4.4 | % | 5.0 | % | |||||
| Construction Products | 3.2 | % | 4.7 | % | |||||
| Engineering Adhesives | 5.7 | % | 6.0 | % | |||||
| Total H.B. Fuller | 9.4 | % | 9.3 | % | |||||
| EBITDA Margin:2 | |||||||||
| Americas Adhesives | 18.4 | % | 18.6 | % | |||||
| EIMEA | 10.2 | % | 7.5 | % | |||||
| Asia Pacific | 8.0 | % | 8.2 | % | |||||
| Construction Products | 8.9 | % | 9.9 | % | |||||
| Engineering Adhesives | 11.3 | % | 12.6 | % | |||||
| Total H.B. Fuller | 13.1 | % | 12.9 | % | |||||
| Adjusted EBITDA2 | |||||||||
| Americas Adhesives | $ | 36,470 | $ | 38,934 | |||||
| EIMEA | 13,616 | 10,692 | |||||||
| Asia Pacific | 5,195 | 4,588 | |||||||
| Construction Products | 5,716 | 9,068 | |||||||
| Engineering Adhesives | 7,732 | 8,923 | |||||||
| Total H.B. Fuller | $ | 68,729 | $ | 72,205 | |||||
| Adjusted EBITDA Margin2 | |||||||||
| Americas Adhesives | 18.3 | % | 18.8 | % | |||||
| EIMEA | 10.4 | % | 8.0 | % | |||||
| Asia Pacific | 9.0 | % | 8.4 | % | |||||
| Construction Products | 8.9 | % | 12.5 | % | |||||
| Engineering Adhesives | 12.6 | % | 15.7 | % | |||||
| Total H.B. Fuller | 13.4 | % | 13.8 | % | |||||
| H.B. FULLER COMPANY AND SUBSIDIARIES | |||||||||
| SEGMENT FINANCIAL INFORMATION | |||||||||
| In thousands (unaudited) | |||||||||
| Nine Months Ended | Nine Months Ended | ||||||||
| August 27, 2016 | August 29, 2015 | ||||||||
| Net Revenue: | |||||||||
| Americas Adhesives | $ | 588,422 | $ | 618,172 | |||||
| EIMEA | 394,807 | 405,044 | |||||||
| Asia Pacific | 171,467 | 167,541 | |||||||
| Construction Products | 192,111 | 206,690 | |||||||
| Engineering Adhesives | 172,891 | 138,109 | |||||||
| Total H.B. Fuller | $ | 1,519,698 | $ | 1,535,556 | |||||
| Segment Operating Income:4 | |||||||||
| Americas Adhesives | $ | 94,043 | $ | 91,021 | |||||
| EIMEA | 25,620 | 8,303 | |||||||
| Asia Pacific | 9,299 | 8,838 | |||||||
| Construction Products | 5,412 | 10,790 | |||||||
| Engineering Adhesives | 6,465 | (681 | ) | ||||||
| Total H.B. Fuller | $ | 140,839 | $ | 118,271 | |||||
| Depreciation Expense: | |||||||||
| Americas Adhesives | $ | 10,852 | $ | 11,688 | |||||
| EIMEA | 12,897 | 11,225 | |||||||
| Asia Pacific | 4,495 | 4,227 | |||||||
| Construction Products | 3,928 | 4,256 | |||||||
| Engineering Adhesives | 4,558 | 3,915 | |||||||
| Total H.B. Fuller | $ | 36,730 | $ | 35,312 | |||||
| Amortization Expense: | |||||||||
| Americas Adhesives | $ | 3,111 | $ | 3,135 | |||||
| EIMEA | 3,424 | 3,578 | |||||||
| Asia Pacific | 1,127 | 1,042 | |||||||
| Construction Products | 6,975 | 7,135 | |||||||
| Engineering Adhesives | 5,872 | 5,156 | |||||||
| Total H.B. Fuller | $ | 20,509 | $ | 20,046 | |||||
| EBITDA:2 | |||||||||
| Americas Adhesives | $ | 108,006 | $ | 105,844 | |||||
| EIMEA | 41,941 | 23,106 | |||||||
| Asia Pacific | 14,921 | 14,107 | |||||||
| Construction Products | 16,315 | 22,181 | |||||||
| Engineering Adhesives | 16,895 | 8,390 | |||||||
| Total H.B. Fuller | $ | 198,078 | $ | 173,628 | |||||
| Segment Operating Margin:4 | |||||||||
| Americas Adhesives | 16.0 | % | 14.7 | % | |||||
| EIMEA | 6.5 | % | 2.0 | % | |||||
| Asia Pacific | 5.4 | % | 5.3 | % | |||||
| Construction Products | 2.8 | % | 5.2 | % | |||||
| Engineering Adhesives | 3.7 | % | (0.5 | %) | |||||
| Total H.B. Fuller | 9.3 | % | 7.7 | % | |||||
| EBITDA Margin:2 | |||||||||
| Americas Adhesives | 18.4 | % | 17.1 | % | |||||
| EIMEA | 10.6 | % | 5.7 | % | |||||
| Asia Pacific | 8.7 | % | 8.4 | % | |||||
| Construction Products | 8.5 | % | 10.7 | % | |||||
| Engineering Adhesives | 9.8 | % | 6.1 | % | |||||
| Total H.B. Fuller | 13.0 | % | 11.3 | % | |||||
| Adjusted EBITDA2 | |||||||||
| Americas Adhesives | $ | 108,554 | $ | 107,268 | |||||
| EIMEA | 42,873 | 26,446 | |||||||
| Asia Pacific | 15,884 | 14,503 | |||||||
| Construction Products | 16,506 | 27,071 | |||||||
| Engineering Adhesives | 17,372 | 13,387 | |||||||
| Total H.B. Fuller | $ | 201,189 | $ | 188,675 | |||||
| Adjusted EBITDA Margin2 | |||||||||
| Americas Adhesives | 18.4 | % | 17.4 | % | |||||
| EIMEA | 10.9 | % | 6.5 | % | |||||
| Asia Pacific | 9.3 | % | 8.7 | % | |||||
| Construction Products | 8.6 | % | 13.0 | % | |||||
| Engineering Adhesives | 10.0 | % | 9.7 | % | |||||
| Total H.B. Fuller | 13.2 | % | 12.3 | % | |||||
| H.B. FULLER COMPANY AND SUBSIDIARIES | ||||||||||||||||||||||||
| SEGMENT FINANCIAL INFORMATION | ||||||||||||||||||||||||
| NET REVENUE GROWTH | ||||||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||||||
| Three Months Ended August 27, 2016 | ||||||||||||||||||||||||
| Americas Adhesives | EIMEA | Asia Pacific | Construction Products | Engineering Adhesives | Total HBF | |||||||||||||||||||
| Price | (3.5 | %) | (2.3 | %) | (1.0 | %) | 0.2 | % | 0.0 | % | (2.1 | %) | ||||||||||||
| Volume / Mix | (0.1 | %) | 0.3 | % | 10.6 | % | (11.2 | %) | 11.8 | % | 0.9 | % | ||||||||||||
| Constant Currency Growth | (3.6 | %) | (2.0 | %) | 9.6 | % | (11.0 | %) | 11.8 | % | (1.2 | %) | ||||||||||||
| F/X | (0.1 | %) | (0.2 | %) | (4.4 | %) | (0.1 | %) | (4.0 | %) | (1.0 | %) | ||||||||||||
| (3.7 | %) | (2.2 | %) | 5.2 | % | (11.1 | %) | 7.8 | % | (2.2 | %) | |||||||||||||
| Nine Months Ended August 27, 2016 | ||||||||||||||||||||||||
| Americas Adhesives | EIMEA | Asia Pacific | Construction Products | Engineering Adhesives | Total HBF | |||||||||||||||||||
| Price | (2.5 | %) | (1.0 | %) | (1.3 | %) | 0.9 | % | (0.6 | %) | (1.3 | %) | ||||||||||||
| Volume / Mix | (1.8 | %) | 2.1 | % | 9.0 | % | (7.5 | %) | 30.6 | % | 2.5 | % | ||||||||||||
| Constant Currency Growth | (4.3 | %) | 1.1 | % | 7.7 | % | (6.6 | %) | 30.0 | % | 1.2 | % | ||||||||||||
| F/X | (0.5 | %) | (3.6 | %) | (5.3 | %) | (0.5 | %) | (4.8 | %) | (2.2 | %) | ||||||||||||
| (4.8 | %) | (2.5 | %) | 2.4 | % | (7.1 | %) | 25.2 | % | (1.0 | %) | |||||||||||||
| H.B. FULLER COMPANY AND SUBSIDIARIES | ||||||||||
| REGULATION G RECONCILIATION | ||||||||||
| In thousands (unaudited) | ||||||||||
| Three Months Ended | Three Months Ended | |||||||||
| August 27, 2016 | August 29, 2015 | |||||||||
| Net income attributable to H.B. Fuller | $ | 32,745 | $ | 26,807 | ||||||
| Net income attributable to non-controlling interests | 53 | 79 | ||||||||
| Income from equity method investments | (1,840 | ) | (1,500 | ) | ||||||
| Income taxes | 12,513 | 14,372 | ||||||||
| Interest expense | 6,809 | 6,448 | ||||||||
| Other income (expense), net | 956 | 1,040 | ||||||||
| Special charges | (2,807 | ) | 1,297 | |||||||
| Segment operating income4 | 48,429 | 48,543 | ||||||||
| Depreciation expense | 11,663 | 11,911 | ||||||||
| Amortization expense | 7,023 | 6,899 | ||||||||
| EBITDA2 | $ | 67,115 | $ | 67,353 | ||||||
| EBITDA margin2 | 13.1 | % | 12.9 | % | ||||||
| Non-recurring costs | 1,614 | 4,852 | ||||||||
| Adjusted EBITDA2 | $ | 68,729 | $ | 72,205 | ||||||
| Adjusted EBITDA margin2 | 13.4 | % | 13.8 | % | ||||||
| Nine Months Ended | Nine Months Ended | |||||||||
| August 27, 2016 | August 29, 2015 | |||||||||
| Net income attributable to H.B. Fuller | $ | 84,994 | $ | 61,689 | ||||||
| Net income attributable to non-controlling interests | 161 | 308 | ||||||||
| Loss from discontinued operations | - | 1,300 | ||||||||
| Income from equity method investments | (5,172 | ) | (4,157 | ) | ||||||
| Income taxes | 35,563 | 34,528 | ||||||||
| Interest expense | 19,714 | 18,765 | ||||||||
| Other income (expense), net | 7,603 | 1,246 | ||||||||
| Special charges | (2,024 | ) | 4,592 | |||||||
| Segment operating income4 | 140,839 | 118,271 | ||||||||
| Depreciation expense | 36,730 | 35,311 | ||||||||
| Amortization expense | 20,509 | 20,046 | ||||||||
| EBITDA2 | $ | 198,078 | $ | 173,628 | ||||||
| EBITDA margin2 | 13.0 | % | 11.3 | % | ||||||
| Non-recurring costs | 3,111 | 15,047 | ||||||||
| Adjusted EBITDA2 | $ | 201,189 | $ | 188,675 | ||||||
| Adjusted EBITDA margin2 | 13.2 | % | 12.3 | % | ||||||
______________________________________
1 Adjusted diluted earnings per share (EPS) is a non-GAAP financial measure and excludes the following non-recurring costs listed on the adjusted earnings per share reconciliation table above: special charges related to the “business integration”; restructuring in EIMEA related to operational efficiency improvement projects; and the start-up of a new electronics facility in Yantai China. We have not included a reconciliation of adjusted EPS to EPS as part of our guidance because the adjustments, if any, are not known at this time.
2 EBITDA is a non-GAAP financial measure defined on a consolidated basis as gross profit, less SG&A expense, plus depreciation expense, plus amortization expense. Adjusted EBITDA excludes items listed on the adjusted earnings per share reconciliation table above. On a segment basis it is defined as operating income, plus depreciation expense, plus amortization expense. Adjusted EBITDA margin is defined as adjusted EBITDA divided by net revenue.
3 Constant currency revenue is a non-GAAP financial measure defined as changes in revenue due to price, volume and mix and excludes revenue changes driven by foreign currency translation. The schedule above reconciles each component of net revenue growth.
4 Segment operating income is defined as gross profit less SG&A expense. Segment operating margin is defined as segment operating income divided by net revenue.