H.B. Fuller Reports Third Quarter 2024 Results

9/25/24 4:05:00 PM ET

Home Furnishings

Industrials

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Reported EPS (diluted) of $0.98; Adjusted EPS (diluted) of $1.13, up 7% year-on-year

Net income of $55 million; Adjusted EBITDA of $165 million, up 6% year-on-year

Adjusted EBITDA margin of 18.0%, up 70 basis points year-on-year

H.B. Fuller Company (NYSE:FUL) today reported financial results for its third quarter that ended August 31, 2024.

Third Quarter 2024 Noteworthy Items:

Net income was $55 million; adjusted EBITDA was $165 million, up 6% year-on-year; adjusted EBITDA margin expanded 70 basis points year-on-year to 18.0%;
Reported EPS (diluted) was $0.98; adjusted EPS (diluted) was $1.13, up 7% versus the prior year;
Net revenue was $918 million, up 1.9% year-on-year including organic volume growth of 3.0%;
Gross profit margin was 30.0%; adjusted gross profit margin was 30.4%, up 40 basis points year-on-year;
Net working capital, as a percentage of annualized net revenue, decreased 200 basis points year-on-year from 18.1% to 16.1%;
Repurchased 407,400 shares year-to-date, including 225,000 shares in the quarter;
Acquired HS Butyl Limited, the UK's largest manufacturer and distributor of high-quality butyl tapes, expanding H.B. Fuller's position in the global waterproofing tape market.

Summary of Third Quarter 2024 Results:

The Company's net revenue for the third quarter of fiscal 2024 was $918 million, up 1.9% versus the third quarter of fiscal 2023. Organic revenue increased slightly year-on-year, with pricing adjustments reducing organic revenue by 2.6% and volume increasing organic revenue by 3.0%. Foreign currency translation reduced net revenue by 1.5% and acquisitions increased net revenue by 3.0%.

Gross profit in the third quarter of fiscal 2024 was $276 million. Adjusted gross profit was $279 million. Adjusted gross profit margin of 30.4% increased 40 basis points year-on-year. Volume leverage, restructuring savings, and the benefit from acquisitions primarily drove the year-on-year increase in adjusted gross profit.

Selling, general and administrative (SG&A) expense was $171 million in the third quarter of fiscal 2024 and adjusted SG&A was $164 million versus $159 million in the third quarter of fiscal 2023. The impact of acquisitions and inflation in wages and services drove most of the year-on-year increase in adjusted SG&A.

Net income attributable to H.B. Fuller for the third quarter of fiscal 2024 was $55 million, or $0.98 per diluted share. Adjusted net income attributable to H.B. Fuller for the third quarter of fiscal 2024 was $64 million. Adjusted EPS was $1.13 per diluted share, up 7% year-on-year.

Adjusted EBITDA in the third quarter of fiscal 2024 was $165 million, up 6% year-on-year, driven principally by volume growth, restructuring savings, and benefits from recent acquisitions. Adjusted EBITDA margin increased 70 basis points year-on-year to 18.0%.

H.B. Fuller President and CEO Celeste Mastin said, "In the third quarter, we continued to advance our strategy and expand EBITDA margins through volume growth, restructuring actions, and the acquisition of highly profitable, fast-growing businesses. At the same time, we continue to navigate a dynamic macroeconomic environment across our portfolio. Our volume growth during the quarter was impacted by slowing market demand in certain durable goods markets in EA, and we are adjusting our full year outlook accordingly. While this quarter's volume growth was at the low end of our expectations, we have a clear and focused strategy and a highly engaged team that is well equipped to execute and drive business success. We remain on track to deliver upon our long-term EBITDA margin and organic growth targets."

Balance Sheet and Working Capital:

Net debt at the end of the third quarter of fiscal 2024 was $1,890 million, up $100 million year-on-year. The ratio of net debt-to-adjusted EBITDA was 3.1X, consistent with the second quarter.

Net working capital in the third quarter of fiscal 2024 decreased $64 million year-on-year. As a percentage of annualized net revenue, net working capital decreased 200 basis points year-on-year to 16.1%.

Fiscal 2024 Outlook:

As a result of our year-to-date performance and current macroeconomic conditions, we are updating our previously communicated financial guidance for fiscal 2024 as follows:

Net revenue growth is now expected to be up approximately 2% with organic revenue flat year-on-year;
Adjusted EBITDA is now expected to be in the range of $610 million to $620 million, equating to year-on-year growth of between 5% and 7%;
Adjusted EPS (diluted) is now expected be in the range of $4.10 to $4.20, equating to year-on-year growth of between 6% and 9%;
Operating cash flow is now expected to be between $325 million and $350 million.

Conference Call:

The Company will hold a conference call on September 26, 2024, 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 September 26, 2024, to 10:59 p.m. CT on October 3, 2024. To access the telephone replay dial 1-800-770-2030 (toll free) or 1-609-800-9909, 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, adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA), adjusted EBITDA margin, net debt, net debt-to-adjusted EBITDA, trailing twelve months adjusted EBITDA, net working capital, annualized net revenue and net working capital as a percentage of annualized net revenue 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 2024 Outlook, which the Company cannot reconcile to forward-looking GAAP results without unreasonable effort.

About H.B. Fuller:

As the largest pureplay adhesives company in the world, H.B. Fuller's (NYSE:FUL) innovative, functional coatings, adhesives and sealants enhance the quality, safety and performance of products people use every day. Founded in 1887, with 2023 revenue of $3.5 billion, our mission to Connect What Matters is brought to life by more than 7,000 global team members who collaborate with customers across more than 30 market segments in over 140 countries to develop highly specified solutions that enable customers to bring world-changing innovations to their end markets. Learn more at 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 availability and pricing of raw materials; the impact of potential cybersecurity attacks and security breaches; the impact on the supply chain, raw material costs and pricing of our products due to military conflict, including between Russia and Ukraine and Israel and Hamas; the consequences of the COVID-19 outbreak and other pandemics on our operations and financial results; 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, and 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 our current dividend policy; our ability to acquire and integrate complementary businesses; 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; 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 August 31, 2024			Percent of Net Revenue			Three Months Ended September 2, 2023			Percent of Net Revenue
Net revenue	$	917,927			100.0	%	$	900,634			100.0	%
Cost of sales		(642,198	)		(70.0	)%		(637,162	)		(70.7	)%
Gross profit		275,729			30.0	%		263,472			29.3	%

Selling, general and administrative expenses		(171,388	)		(18.7	)%		(172,153	)		(19.1	)%
Other income, net		2,148			0.2	%		1,555			0.2	%
Interest expense		(35,288	)		(3.8	)%		(35,105	)		(3.9	)%
Interest income		1,092			0.1	%		1,128			0.1	%
Income before income taxes and income from equity method investments		72,293			7.9	%		58,897			6.5	%

Income taxes		(18,264	)		(2.0	)%		(22,231	)		(2.5	)%

Income from equity method investments		1,310			0.1	%		984			0.1	%
Net income including non-controlling interest		55,339			6.0	%		37,650			4.2	%

Net income attributable to non-controlling interest		22			0.0	%		(23	)		(0.0	)%
Net income attributable to H.B. Fuller	$	55,361			6.0	%	$	37,627			4.2	%

Basic income per common share attributable to H.B. Fuller	$	1.01					$	0.69
Diluted income per common share attributable to H.B. Fuller	$	0.98					$	0.67

Weighted-average common shares outstanding:
Basic		54,975						54,394
Diluted		56,650						56,033

Dividends declared per common share	$	0.223					$	0.205

H.B. FULLER COMPANY AND SUBSIDIARIES

CONSOLIDATED FINANCIAL INFORMATION

In thousands, except per share amounts (unaudited)

	Nine Months Ended August 31, 2024			Percent of Net Revenue			Nine Months Ended September 2, 2023			Percent of Net Revenue
Net revenue	$	2,645,452			100.0	%	$	2,608,055			100.0	%
Cost of sales		(1,848,435	)		(69.9	)%		(1,873,000	)		(71.8	)%
Gross profit		797,017			30.1	%		735,055			28.2	%

Selling, general and administrative expenses		(525,204	)		(19.9	)%		(493,320	)		(18.9	)%

Other income, net		7,282			0.3	%		4,764			0.2	%
Interest expense		(99,504	)		(3.8	)%		(101,305	)		(3.9	)%
Interest income		3,597			0.1	%		2,726			0.1	%
Income before income taxes and income from equity method investments		183,188			6.9	%		147,920			5.7	%

Income taxes		(48,496	)		(1.8	)%		(51,255	)		(2.0	)%

Income from equity method investments		2,955			0.1	%		3,322			0.1	%
Net income including non-controlling interest		137,647			5.2	%		99,987			3.8	%

Net income attributable to non-controlling interest		(32	)		(0.0	)%		(71	)		(0.0	)%
Net income attributable to H.B. Fuller	$	137,615			5.2	%	$	99,916			3.8	%


Basic income per common share attributable to H.B. Fuller	$	2.51					$	1.84
Diluted income per common share attributable to H.B. Fuller	$	2.43					$	1.79

Weighted-average common shares outstanding:
Basic		54,874						54,279
Diluted		56,620						55,890

Dividends declared per common share	$	0.651					$	0.600

H.B. FULLER COMPANY AND SUBSIDIARIES

REGULATION G RECONCILIATION

In thousands, except per share amounts (unaudited)

	Three Months Ended						Nine Months Ended
	August 31,			September 2,			August 31,			September 2,
	2024			2023			2024			2023

Net income attributable to H.B. Fuller	$	55,361		$	37,627		$	137,615		$	99,916

Adjustments:
Acquisition project costs¹		3,474			6,480			6,984			11,634
Organizational realignment²		9,471			10,421			24,038			19,055
Project One³		3,154			2,734			9,213			7,587
Other⁴		(2,904	)		503			(2,021	)		4,098
Discrete tax items⁵		(2,937	)		6,243			(4,147	)		9,131
Income tax effect on adjustments⁶		(1,624	)		(4,875	)		(6,472	)		(9,447	)
Adjusted net income attributable to H.B. Fuller⁷		63,995			59,133			165,210			141,974

Add:
Interest expense		35,287			35,105			99,502			98,615
Interest income		(1,090	)		(1,128	)		(3,594	)		(2,726	)
Adjusted Income taxes		22,825			20,862			59,114			51,569
Depreciation and Amortization expense⁸		44,235			41,826			125,288			118,803
Adjusted EBITDA⁷		165,252			155,798			445,520			408,235

Diluted Shares		56,650			56,033			56,620			55,890
Adjusted diluted income per common share attributable to H.B. Fuller⁷	$	1.13		$	1.06		$	2.92		$	2.54
Revenue	$	917,927		$	900,634		$	2,645,452		$	2,608,055
Adjusted EBITDA margin⁷		18.0	%		17.3	%		16.8	%		15.7	%

¹ Acquisition project costs include costs related to evaluating, acquiring and integrating business acquisitions. Acquisition project costs include $2,457 and $1,757 in transaction costs (primarily consulting and professional fees, representations and warranties insurance premiums and employee acquisition-related travel expenses) and $1,017 and $4,723 in purchase accounting costs (primarily professional fees for valuation services, inventory step-up cost and the impact of changes to contingent consideration liabilities after the completion of the purchase price allocation) for the three months ended August 31, 2024 and September 2, 2023, respectively. Acquisition project costs include $5,135 and $5,498 in transaction costs (primarily consulting and professional fees, representations and warranties insurance premiums and employee acquisition related travel expenses), $1,272 and $6,136 in purchase accounting costs (primarily professional fees for valuation services, inventory step-up cost and the impact of changes to contingent consideration liabilities after the completion of the purchase price allocation) and $577 and $0 in business integration costs (primarily costs of transition services agreements and, for the three months ended March 2, 2024, retention bonuses paid to employees of the acquired entities) for the nine months ended August 31, 2024 and September 2, 2023, respectively.

² Organizational realignment includes costs incurred as a direct result of the organizational realignment program, including professional fees related to legal entity and business structure changes, employee retention and severance costs, and facility rationalization costs related to the closure of production facilities and consolidation of business activities. Facility rationalization costs include plant closure costs, the impact of accelerated depreciation, and, for the three months ended March 2, 2024, operational inefficiencies. Organizational realignment includes $2,939 and $139 in professional fees related to legal entity and business structure changes, $5,363 and $8,798 in employee severance and other related costs, and $1,169 and $1,484 related to facility rationalization costs for the three months ended August 31, 2024 and September 2, 2023, respectively. Organizational realignment includes $6,915 and $3,863 in professional fees related to legal entity and business structure changes, $9,721 and $13,708 in employee severance and other related costs, and $7,402 and $1,484 related to facility rationalization costs for the nine months ended August 31, 2024 and September 2, 2023, respectively.

³ Project One includes non-capitalizable project costs related implementing our global Enterprise Resource Planning system, including upgrading to SAP S/4HANA®, which will upgrade and standardize our information system.

⁴ Other includes a gain from insurance recoveries and a loss from the write-off of a cost method investment for the three and nine months ended August 31, 2024. Other includes the write-off of unamortized debt fees and non-cash gains and losses related to legal entity consolidations for fiscal 2023.

⁵ Discrete tax items for the three and nine months ended August 31, 2024 are related to various foreign tax matters as well as excess tax benefit related to U.S. stock compensation. Discrete tax items for fiscal 2023 are related to various foreign tax matters offset by excess tax benefit related to U.S. stock compensation.

⁶ The income tax effect on adjustments 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 $194 and ($348) for the three months ended August 31, 2024 and September 2, 2023, respectively and ($3,425) and ($348) for the nine months ended August 31, 2024 and September 2, 2023, respectively.

H.B. FULLER COMPANY AND SUBSIDIARIES

SEGMENT FINANCIAL INFORMATION

In thousands (unaudited)

	Three Months Ended						Nine Months Ended
	August 31,			September 2,			August 31,			September 2,
	2024			2023			2024			2023
Net Revenue:
Hygiene, Health and Consumable Adhesives	$	389,854		$	402,388		$	1,150,658		$	1,190,402
Engineering Adhesives		374,923			365,862			1,077,206			1,063,009
Construction Adhesives		153,150			132,384			417,588			354,644
Corporate unallocated		-			-			-			-
Total H.B. Fuller	$	917,927		$	900,634		$	2,645,452		$	2,608,055

Segment Operating Income (Loss):
Hygiene, Health and Consumable Adhesives	$	49,782		$	52,737		$	147,147		$	149,474
Engineering Adhesives		52,865			52,931			139,522			129,806
Construction Adhesives		12,543			5,853			20,342			2,189
Corporate unallocated		(10,849	)		(20,202	)		(35,198	)		(39,734	)
Total H.B. Fuller	$	104,341		$	91,319		$	271,813		$	241,735

Adjusted EBITDA⁷
Hygiene, Health and Consumable Adhesives	$	64,320		$	69,172		$	191,793		$	194,125
Engineering Adhesives		73,968			70,723			195,133			181,758
Construction Adhesives		25,119			18,519			57,314			39,584
Corporate unallocated		1,845			(2,616	)		1,280			(7,232	)
Total H.B. Fuller	$	165,252		$	155,798		$	445,520		$	408,235

Adjusted EBITDA Margin⁷
Hygiene, Health and Consumable Adhesives		16.5	%		17.2	%		16.7	%		16.3	%
Engineering Adhesives		19.7	%		19.3	%		18.1	%		17.1	%
Construction Adhesives		16.4	%		14.0	%		13.7	%		11.2	%
Corporate unallocated	NMP			NMP			NMP			NMP
Total H.B. Fuller		18.0	%		17.3	%		16.8	%		15.7	%

NMP = non-meaningful percentage

H.B. FULLER COMPANY AND SUBSIDIARIES

REGULATION G RECONCILIATION

In thousands, except per share amounts (unaudited)

	Three Months Ended					Nine Months Ended
	August 31,			September 2,		August 31,			September 2,
	2024			2023		2024			2023
Income before income taxes and income from equity method investments	$	72,293		$	58,897	$	183,188		$	147,920

Adjustments:
Acquisition project costs¹		3,474			6,480		6,984			11,634
Organizational realignment²		9,471			10,421		24,038			19,055
Project One³		3,154			2,734		9,213			7,587
Other⁴		(2,904	)		503		(2,021	)		4,098
Adjusted income before income taxes and income from equity method investments⁹	$	85,488		$	79,035	$	221,402		$	190,294

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						Nine Months Ended
	August 31,			September 2,			August 31,			September 2,
	2024			2023			2024			2023
Income Taxes	$	(18,264	)	$	(22,231	)	$	(48,496	)	$	(51,255	)

Adjustments:
Acquisition project costs¹		(428	)		(1,569	)		(1,147	)		(2,620	)
Organizational realignment²		(1,166	)		(2,523	)		(3,984	)		(4,247	)
Project One³		(388	)		(662	)		(1,587	)		(1,655	)
Other⁴		(2,579	)		6,123			(3,900	)		8,208
Adjusted income taxes¹⁰	$	(22,825	)	$	(20,862	)	$	(59,114	)	$	(51,569	)

Adjusted income before income taxes and income from equity method investments	$	85,488		$	79,035		$	221,402		$	190,294
Adjusted effective income tax rate¹⁰		26.7	%		26.4	%		26.7	%		27.1	%

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						Nine Months Ended
	August 31,			September 2,			August 31,			September 2,
	2024			2023			2024			2023

Net revenue	$	917,927		$	900,634		$	2,645,452		$	2,608,055

Gross profit	$	275,729		$	263,472		$	797,017		$	735,055
Gross profit margin		30.0	%		29.3	%		30.1	%		28.2	%

Adjustments:
Acquisition project costs¹		927			1,516			1,000			2,617
Organizational realignment²		2,799			4,961			10,679			9,972
Project One³		-			-			13			-
Other⁴		-			318			-			479
Adjusted gross profit¹¹	$	279,455		$	270,267		$	808,709		$	748,123
Adjusted gross profit margin¹¹		30.4	%		30.0	%		30.6	%		28.7	%

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 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						Nine Months Ended
	August 31,			September 2,			August 31,			September 2,
	2024			2023			2024			2023

Selling, general and administrative expenses	$	(171,388	)	$	(172,153	)	$	(525,204	)	$	(493,320	)

Adjustments:
Acquisition project costs¹		2,524			5,066			5,962			9,119
Organizational realignment²		6,307			5,460			12,322			9,083
Project One³		3,154			2,734			9,200			7,587
Other⁴		(4,871	)		149			(3,988	)		880
Adjusted selling, general and administrative expenses¹²	$	(164,274	)	$	(158,744	)	$	(501,708	)	$	(466,651	)

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)

Three Months Ended:	Hygiene, Health and Consumable			Engineering			Construction						Corporate			H.B. Fuller
August 31, 2024	Adhesives			Adhesives			Adhesives			Total			Unallocated			Consolidated
Net income attributable to H.B. Fuller	$	51,280		$	53,918		$	13,974		$	119,172		$	(63,811	)	$	55,361
Adjustments:
Acquisition project costs¹		-			-			-			-			3,474			3,474
Organizational realignment²		-			-			-			-			9,471			9,471
Project One³		-			-			-			-			3,154			3,154
Other⁴		-			-			-			-			(2,904	)		(2,904	)
Discrete tax items⁵		-			-			-			-			(2,937	)		(2,937	)
Income tax effect on adjustments⁶		-			-			-			-			(1,624	)		(1,624	)
Adjusted net income attributable to H.B. Fuller⁷		51,280			53,918			13,974			119,172			(55,177	)		63,995
Add:
Interest expense		-			-			-			-			35,287			35,287
Interest income		-			-			-			-			(1,090	)		(1,090	)
Adjusted Income taxes		-			-			-			-			22,825			22,825
Depreciation and amortization expense⁸		13,040			20,050			11,145			44,235			-			44,235
Adjusted EBITDA⁷	$	64,320		$	73,968		$	25,119		$	163,407		$	1,845		$	165,252
Revenue	$	389,854		$	374,923		$	153,150		$	917,927			-		$	917,927
Adjusted EBITDA Margin⁷		16.5	%		19.7	%		16.4	%		17.8	%	NMP				18.0	%

Nine Months Ended	Hygiene, Health and Consumable			Engineering			Construction						Corporate			H.B. Fuller
August 31, 2024	Adhesives			Adhesives			Adhesives			Total			Unallocated			Consolidated
Net income attributable to H.B. Fuller	$	151,636		$	142,681		$	24,635		$	318,952		$	(181,337	)	$	137,615
Adjustments:
Acquisition project costs¹		-			-			-			-			6,984			6,984
Organizational realignment²		-			-			-			-			24,038			24,038
Project One³		-			-			-			-			9,213			9,213
Other⁴		-			-			-			-			(2,021	)		(2,021	)
Discrete tax items⁵		-			-			-			-			(4,147	)		(4,147	)
Income tax effect on adjustments⁶		-			-			-			-			(6,472	)		(6,472	)
Adjusted net income attributable to H.B. Fuller⁷		151,636			142,681			24,635			318,952			(153,742	)		165,210
Add:
Interest expense		-			-			-			-			99,502			99,502
Interest income		-			-			-			-			(3,594	)		(3,594	)
Adjusted Income taxes		-			-			-			-			59,114			59,114
Depreciation and amortization expense⁸		40,157			52,452			32,679			125,288			-			125,288
Adjusted EBITDA⁷	$	191,793		$	195,133		$	57,314		$	444,240		$	1,280		$	445,520
Revenue		1,150,658			1,077,206			417,588			2,645,452			-			2,645,452
Adjusted EBITDA Margin⁷		16.7	%		18.1	%		13.7	%		16.8	%	NMP				16.8	%

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)

Three Months Ended:	Hygiene, Health and Consumable			Engineering			Construction						Corporate			H.B. Fuller
September 2, 2023	Adhesives			Adhesives			Adhesives			Total			Unallocated			Consolidated
Net income attributable to H.B. Fuller	$	54,568		$	54,256		$	7,764		$	116,588		$	(78,961	)	$	37,627
Adjustments:
Acquisition project costs¹		-			-			-			-			6,480			6,480
Organizational realignment²		-			-			-			-			10,421			10,421
Project One³		-			-			-			-			2,734			2,734
Other⁴		-			-			-			-			503			503
Discrete tax items⁵		-			-			-			-			6,243			6,243
Income tax effect on adjustments⁶		-			-			-			-			(4,875	)		(4,875	)
Adjusted net income attributable to H.B. Fuller⁷		54,568			54,256			7,764			116,588			(57,455	)		59,133
Add:
Interest expense		-			-			-			-			35,105			35,105
Interest income		-			-			-			-			(1,128	)		(1,128	)
Adjusted Income taxes		-			-			-			-			20,862			20,862
Depreciation and amortization expense⁸		14,604			16,467			10,755			41,826			-			41,826
Adjusted EBITDA⁷	$	69,172		$	70,723		$	18,519		$	158,414		$	(2,616	)	$	155,798
Revenue	$	402,388		$	365,862		$	132,384		$	900,634			-		$	900,634
Adjusted EBITDA Margin⁷		17.2	%		19.3	%		14.0	%		17.6	%	NMP				17.3	%

Nine Months Ended	Hygiene, Health and Consumable			Engineering			Construction						Corporate			H.B. Fuller
September 2, 2023	Adhesives			Adhesives			Adhesives			Total			Unallocated			Consolidated
Net income attributable to H.B. Fuller	$	154,966		$	133,778		$	7,920		$	296,664		$	(196,748	)	$	99,916
Adjustments:
Acquisition project costs¹		-			-			-			-			11,634			11,634
Organizational realignment²		-			-			-			-			19,055			19,055
Project One³		-			-			-			-			7,587			7,587
Other⁴		-			-			-			-			4,098			4,098
Discrete tax items⁵		-			-			-			-			9,131			9,131
Income tax effect on adjustments⁶		-			-			-			-			(9,447	)		(9,447	)
Adjusted net income attributable to H.B. Fuller⁷		154,966			133,778			7,920			296,664			(154,690	)		141,974
Add:
Interest expense		-			-			-			-			98,615			98,615
Interest income		-			-			-			-			(2,726	)		(2,726	)
Adjusted Income taxes		-			-			-			-			51,569			51,569
Depreciation and amortization expense⁸		39,159			47,980			31,664			118,803			-			118,803
Adjusted EBITDA⁷	$	194,125		$	181,758		$	39,584		$	415,467		$	(7,232	)	$	408,235
Revenue	$	1,190,402		$	1,063,009		$	354,644		$	2,608,055			-		$	2,608,055
Adjusted EBITDA Margin⁷		16.3	%		17.1	%		11.2	%		15.9	%	NMP				15.7	%

NMP = Non-meaningful percentage

H.B. FULLER COMPANY AND SUBSIDIARIES

SEGMENT FINANCIAL INFORMATION

NET REVENUE GROWTH (DECLINE)

(unaudited)

	Three Months Ended			Nine Months Ended
	August 31, 2024			August 31, 2024
Price		(2.6	)%		(3.1	)%
Volume		3.0	%		1.9	%
Organic Growth¹³		0.4	%		(1.2	)%
M&A		3.0	%		3.9	%
Constant currency		3.4	%		2.7	%
F/X		(1.5	)%		(1.3	)%
Total H.B. Fuller Net Revenue		1.9	%		1.4	%

Revenue growth versus 2023	Three Months Ended
	August 31, 2024


	Net Revenue			F/X			Constant Currency			M&A			Organic Growth¹³
Hygiene, Health and Consumable Adhesives		(3.1	)%		(2.6	)%		(0.5	)%		0.0	%		(0.5	)%
Engineering Adhesives		2.5	%		(0.8	)%		3.3	%		5.3	%		(2.0	)%
Construction Adhesives		15.7	%		(0.1	)%		15.8	%		5.6	%		10.2	%
Total H.B. Fuller		1.9	%		(1.5	)%		3.4	%		3.0	%		0.4	%

Revenue growth versus 2023	Nine Months Ended
	August 31, 2024


	Net Revenue			F/X			Constant Currency			M&A			Organic Growth¹³
Hygiene, Health and Consumable Adhesives		(3.3	)%		(1.7	)%		(1.6	)%		3.2	%		(4.8	)%
Engineering Adhesives		1.3	%		(1.2	)%		2.5	%		3.2	%		(0.7	)%
Construction Adhesives		17.7	%		0.0	%		17.7	%		8.7	%		9.0	%
Total H.B. Fuller		1.4	%		(1.3	)%		2.7	%		3.9	%		(1.2	)%

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.

H.B. FULLER COMPANY AND SUBSIDIARIES

REGULATION G RECONCILIATION

In thousands (unaudited)

	Three Months Ended															Trailing Twelve Months¹⁶ Ended						Year Ended
	September 2, 2023			December 2, 2023			March 2, 2024			June 1, 2024			August 31, 2024			August 31, 2024			June 1, 2024			December 2, 2023

Net income attributable to H.B. Fuller	$	37,627		$	44,991		$	30,991		$	51,264		$	55,361		$	182,607		$	164,873		$	144,906

Adjustments:
Acquisition project costs¹		6,480			4,765			2,043			1,467			3,474			11,749			14,755			16,874
Organizational realignment²		10,421			10,549			7,262			7,275			9,471			34,557			35,507			29,900
Project One³		2,734			2,193			3,213			2,845			3,154			11,405			10,985			9,815
Other⁴		503			(3,903	)		-			914			(2,904	)		(5,893	)		(2,486	)		(611	)
Discrete tax items¹⁴		6,243			16,955			(2,527	)		1,317			(2,937	)		12,808			21,988			26,085
Income tax effect on adjustments⁵		(4,875	)		(1,158	)		(3,290	)		(1,558	)		(1,624	)		(7,630	)		(10,881	)		(10,604	)
Adjusted net income attributable to H.B. Fuller⁷		59,133			74,392			37,692			63,524			63,995			239,603			234,741			216,365

Add:
Interest expense		35,105			33,297			31,901			32,313			35,287			132,798			132,616			131,913
Interest income		(1,128	)		(1,217	)		(1,307	)		(1,197	)		(1,090	)		(4,811	)		(4,849	)		(3,943	)
Adjusted Income taxes		20,862			26,477			13,631			22,658			22,825			85,591			83,628			78,047
Depreciation and Amortization expense¹⁵		41,826			39,653			41,101			39,952			44,235			164,941			162,532			158,456
Adjusted EBITDA⁷	$	155,798		$	172,602		$	123,018		$	157,250		$	165,252		$	618,122		$	608,668		$	580,838

¹⁴ Discrete tax items for the three months ended September 2, 2024 are related to various U.S. and foreign tax matters offset by an excess tax benefit related to U.S. stock compensation. Discrete tax items for the three months ended March 2, 2024 are related to various foreign tax matters as well as excess tax benefit related to U.S. stock compensation. Discrete tax items for the three months ended June 1, 2024 are related to various foreign tax matters as well as excess tax benefit related to U.S. stock compensation. Discrete tax items for the three months ended August 31, 2024 are related to various foreign tax matters as well as excess tax benefit related to U.S. stock compensation. Discrete tax items for the three months and year ended December 2, 2023 are related to the tax impact of withholding tax recorded on earnings that are no longer permanently reinvested, as well as other various U.S. and foreign tax matters.

¹⁵ Depreciation and amortization expense added back for EBITDA is adjusted for amounts already included in adjusted net income attributable to H.B. Fuller. Depreciation and amortization expense added back was $348 for the three months ended September 2, 2023, ($1,036) for the three months ended December 2, 2023, ($2,422) for the three months ended March 2, 2024, ($1,198) for the three months ended June 1, 2024, $194 for the three months ended August 31, 2024 and ($1,384) for the year ended December 2, 2023.

¹⁶ Trailing twelve months adjusted EBITDA is a non-GAAP financial measure and is defined as adjusted EBITDA for the twelve-month period ended on the date presented. The table above provides a reconciliation of trailing twelve month adjusted EBITDA to net income attributable to H.B. Fuller for the trailing twelve-month period presented, 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)

	June 1, 2024		August 31, 2024		December 2, 2023		September 2, 2023
Total debt	$	2,024,916	$	2,021,070	$	1,838,431	$	1,885,021
Less: Cash and cash equivalents		114,823		131,412		179,453		94,934
Net debt¹⁷	$	1,910,093	$	1,889,658	$	1,658,978	$	1,790,087

Trailing twelve months Adjusted EBITDA¹⁶	$	608,668	$	618,122		580,838
Net Debt-to-Adjusted EBITDA¹⁷		3.1		3.1		2.9

¹⁷ Net debt and net debt-to-adjusted EBITDA are non-GAAP financial measures. Net debt is defined as total debt less cash and cash equivalents. Net debt-to-adjusted EBITDA is defined as net debt divided by trailing twelve months adjusted EBITDA. The calculations of these non-GAAP financial measures are shown in the table above. The table above provides a reconciliation of each of these non-GAAP financial measures to total debt, 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)

	August 31, 2024			September 2, 2023			December 2, 2023
Trade receivables, net	$	574,781		$	576,060		$	577,932
Inventory		509,029			472,641			442,040
Trade payables		493,550			394,914			439,700
Net working capital¹⁸	$	590,260		$	653,787		$	580,272

Net revenue three months ended	$	917,927		$	900,634
Annualized net revenue¹⁸		3,671,708			3,602,536

Net working capital as a percentage of annualized revenue¹⁸		16.1	%		18.1	%

¹⁸ Net working capital, annualized net revenue and net working capital as a percentage of annualized net revenue are non-GAAP financial measures. Net working capital is defined as trade receivables, net plus inventory less trade payables. Annualized net revenue is defined as net revenue for the three months ended on the date presented multiplied by four. Net working capital as a percentage of annualized net revenue is net working capital divided by annualized net revenue. The calculations of these non-GAAP financial measures are shown in the table above. The table above provides a reconciliation of each of these non-GAAP financial measures to the most directly comparable financial measure determined and reported in accordance with U.S. GAAP.

CONSOLIDATED BALANCE SHEETS

H.B. Fuller Company and Subsidiaries

(In thousands, except share and per share amounts)

	August 31,			December 2,
	2024			2023
Assets
Current assets:
Cash and cash equivalents	$	131,412		$	179,453
Trade receivables (net of allowances of $13,389 and $11,080, as of August 31, 2024 and December 2, 2023, respectively)		574,781			577,932
Inventories		509,029			442,040
Other current assets		115,070			112,678
Total current assets		1,330,292			1,312,103

Property, plant and equipment		1,855,203			1,755,035
Accumulated depreciation		(993,884	)		(930,380	)
Property, plant and equipment, net		861,319			824,655

Goodwill		1,591,709			1,486,512
Other intangibles, net		806,148			729,140
Other assets		388,777			371,165
Total assets	$	4,978,245		$	4,723,575

Liabilities, non-controlling interest and total equity
Current liabilities
Notes payable	$	797		$	1,841
Trade payables		493,550			439,700
Accrued compensation		83,861			95,680
Income taxes payable		39,244			47,688
Other accrued expenses		87,495			107,902
Total current liabilities		704,947			692,811

Long-term debt		2,020,273			1,836,590
Accrued pension liabilities		51,739			50,189
Other liabilities		359,565			388,072
Total liabilities	$	3,136,524		$	2,967,662

Commitments and contingencies (Note 13)

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 – 54,612,541 and 54,092,987 as of August 31, 2024 and December 2, 2023, respectively	$	54,613		$	54,093
Additional paid-in capital		316,324			301,485
Retained earnings		1,944,380			1,842,507
Accumulated other comprehensive loss		(474,326	)		(442,880	)
Total H.B. Fuller stockholders' equity		1,840,991			1,755,205
Non-controlling interest		730			708
Total equity		1,841,721			1,755,913
Total liabilities, non-controlling interest and total equity	$	4,978,245		$	4,723,575

CONSOLIDATED STATEMENTS of CASH FLOWS

H.B. Fuller Company and Subsidiaries

(In thousands)

	Nine Months Ended
	August 31, 2024			September 2, 2023
Cash flows from operating activities:
Net income including non-controlling interest	$	137,647		$	99,987
Adjustments to reconcile net income including non-controlling interest to net cash provided by operating activities:
Depreciation		66,990			60,518
Amortization		61,723			58,633
Deferred income taxes		(45,998	)		(30,064	)
(Income) loss from equity method investments, net of dividends received		622			260
Gain from Insurance Proceeds		(7,264	)		-
Equity Investment Impairment Loss		1,966			-
Debt issuance costs write-off		-			2,689
Loss on fair value adjustment on contingent consideration liability		-			2,893
Gain on sale or disposal of assets		(501	)		(78	)
Share-based compensation		17,662			16,279
Pension and other post-retirement benefit plan activity		(6,671	)		(8,890	)
Change in assets and liabilities, net of effects of acquisitions:
Trade receivables, net		26,373			79,495
Inventories		(62,206	)		38,212
Other assets		(39,025	)		(30,901	)
Trade payables		49,705			(74,443	)
Accrued compensation		(11,566	)		(33,796	)
Other accrued expenses		(5,244	)		(6,992	)
Income taxes payable		(17,873	)		24,461
Other liabilities		856			12,408
Other		49,591			6,023
Net cash provided by operating activities		216,787			216,694

Cash flows from investing activities:
Purchased property, plant and equipment		(112,799	)		(109,545	)
Purchased businesses, net of cash acquired		(274,067	)		(194,248	)
Proceeds from sale of property, plant and equipment		1,048			4,257
Net cash used in investing activities		(385,818	)		(299,536	)

Cash flows from financing activities:
Proceeds from issuance of long-term debt		1,732,900			1,333,000
Repayment of long-term debt		(1,556,135	)		(1,184,900	)
Payment of debt issuance costs		(3,493	)		(10,214	)
Net payment of notes payable		(1,014	)		(18,000	)
Dividends paid		(35,440	)		(32,319	)
Proceeds from stock options exercised		34,161			11,251
Repurchases of common stock		(39,371	)		(2,560	)
Net cash provided by financing activities		131,608			96,258

Effect of exchange rate changes on cash and cash equivalents		(10,618	)		1,608
Net change in cash and cash equivalents		(48,041	)		15,024
Cash and cash equivalents at beginning of period		179,453			79,910
Cash and cash equivalents at end of period	$	131,412		$	94,934

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Date	Price Target	Rating	Analyst
3/19/2024	$88.00	Buy	Vertical Research
10/17/2023	$80.00	Outperform → Neutral	Robert W. Baird
9/11/2023	$78.00	Neutral	Citigroup
2/3/2023	$72.00 → $85.00	Neutral → Buy	Citigroup
6/24/2022	$70.00 → $52.00	Neutral → Underweight	JP Morgan
4/18/2022	$72.00 → $85.00	Hold → Buy	Deutsche Bank
4/14/2022	$85.00	Neutral → Outperform	Robert W. Baird
1/21/2022	$75.00 → $73.00	Overweight → Neutral	JP Morgan

H.B. Fuller Reports Third Quarter 2024 Results

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