Form 8-K FULLER H B CO For: Jun 24

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

Current Report

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): June 24, 2015

 

 

H.B. FULLER COMPANY

(Exact name of registrant as specified in its charter)

 

 

 

Minnesota		001-09225		41-0268370
(State or other jurisdiction of incorporation)		(Commission file number)		(I.R.S. Employer Identification No.)

1200 Willow Lake Boulevard

P.O. Box 64683

St. Paul, MN 55164-0683

(Address of principal executive offices, including zip code)

(651) 236-5900

(Registrant’s telephone number, including area code)

Not Applicable

(Former name or former address, if changed since last report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

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Item 2.02.

Results of Operations and Financial Condition.

On June 24, 2015, H.B. Fuller Company (the “Company”) announced its operating results for the second quarter ended May 30, 2015. A copy of the press release that discusses this matter is furnished as Exhibit 99.1 to, and incorporated by reference in, this report.

 

Item 9.01.

Financial Statements and Exhibits.

 

(d)

Exhibits.

 

99.1		Press Release, dated June 24, 2015, issued by H.B. Fuller Company

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.

Date: June 25, 2015

 

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EXHIBIT INDEX

 

Exhibit No.		Description
99.1		Press Release, dated June 24, 2015, issued by H.B. Fuller Company

Exhibit 99.1

 

Worldwide Headquarters		Maximillian Marcy
1200 Willow Lake Boulevard		Investor Relations Contact
St. Paul, Minnesota 55110-5101		651-236-5062

 

 

NEWS		For Immediate Release		June 24, 2015

 

H.B. Fuller Reports Second Quarter 2015 Results

Second Quarter Adjusted Diluted EPS $0.63¹;

Second Quarter Diluted EPS $0.51, Up 28% From Prior Year;

Increase in Expected Core Tax Rate Drives Revision to Fiscal Year 2015 Adjusted Diluted EPS Plan

ST. PAUL, Minn. – H.B. Fuller Company (NYSE: FUL) today reported financial results for the second quarter that ended May 30, 2015.

Items of Note for the Second Quarter of 2015:

 

•

Strong operating cash flow and free cash flow; net debt reduced by $34 million in the quarter;

 

•

Constant currency revenue increased 6.4 percent compared to the prior year, driven by strong growth in Construction Products and Asia Pacific operating segments;

 

•

Adjusted gross profit margin2 increased 100 basis points year-over-year primarily driven by lower raw material cost;

 

•

Adjusted Selling, General and Administrative (SG&A) expenses3 were tightly controlled at 18.1 percent of adjusted net revenue4;

 

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Adjusted EBITDA margin5 of 13.5 percent, up 430 basis points sequentially and substantially improved from the exit rate of last year, on track to achieve 15 percent adjusted EBITDA margin in the second half of 2015.

Second Quarter 2015 Results:

Income from continuing operations for the second quarter of 2015 was $26.5 million, or $0.51 per diluted share, versus income from continuing operations of $20.6 million, or $0.40 per diluted share, in last year’s second quarter. Adjusted diluted earnings per share in the second quarter of 2015 were $0.63¹, down versus the prior year’s adjusted result of $0.78¹. The negative impacts of a stronger US dollar and a higher core tax rate were key drivers of the year-over-year decline in adjusted diluted EPS. In the second quarter we increased our expected full-year 2015 core tax rate due to a revised outlook for the geographic mix of our earnings. The increase in our expected core tax rate reduced adjusted EPS in the second quarter by $0.04 relative to the guidance we provided last quarter.

 

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Net revenue for the second quarter of 2015 was $540.8 million, down 0.6 percent versus the second quarter of 2014. Higher volume and higher average selling prices positively impacted net revenue growth by 5.5 and 0.9 percentage points, respectively. Foreign currency translation negatively impacted net revenue growth by 7.0 percentage points. Constant currency revenue grew by 6.4 percent year-over-year.

Adjusted gross profit margin² was up 100 basis points versus the prior year primarily as the result of raw material cost management. Adjusted SG&A expense³ was well controlled at 18.1 percent of adjusted net revenue⁴. Adjusted SG&A expense³ was up about 9 percent versus last year but, excluding the SG&A added by the Tonsan acquisition, adjusted SG&A expense was down 2 percent versus the same period last year. Adjusted EBITDA⁵ in the second quarter was $73 million and 13.5 percent of adjusted net revenue⁴, up 430 basis points from the prior quarter, despite the negative impacts of a stronger US dollar and lower than expected margins in the EIMEA operating segment.

“Our organization has driven many positive developments in the first half of this year,” said Jim Owens, H.B. Fuller president and chief executive officer. “The newly-acquired Tonsan business is meeting all of our expectations to date and is already helping to improve the overall profit profile of our Asia Pacific operating segment. Our Construction Products segment continues to benefit from new product introductions and meaningful share gains, which have driven a substantial improvement in profitability. The effective management of raw material costs and strong pricing are benefiting the business overall and especially in the Americas operating segment, which delivered over 18 percent adjusted EBITDA margin in the quarter. Our goal for the second half of this year is to extend the successes of the first half and, at the same time, reenergize the growth track in our Americas operating segment and speed up the realization of margin benefits from the European business integration project.”

Balance Sheet and Cash Flow:

At the end of the second quarter of 2015, we had cash totaling $79 million and total debt of $737 million. This compares to first quarter 2015 cash and debt levels of $72 million and $764 million, respectively. Sequentially, net debt was down by $34 million. Cash flow from operations was positive $50 million in the second quarter and $116 million for the year-to-date. Capital expenditures were $11 million in the second quarter and $39 million for the year-to-date.

 

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Year-To-Date Results:

Income from continuing operations for the first half of 2015 was $36.3 million, or $0.70 per diluted share, versus income from continuing operations of $35.3 million, or $0.69 per diluted share, in the first half of 2014. Adjusted total diluted earnings per share in the first half of 2015 were $0.92¹, down versus the prior year’s result of $1.27¹. Negative impacts of a stronger US dollar and a higher core tax rate were key drivers of the year-over-year decline in adjusted diluted EPS.

Net revenue for the first half of 2015 was $1,011.4 million, down 1.8 percent versus the first half of 2014. Higher volume and higher average selling prices positively impacted net revenue growth by 3.4 and 0.7 percentage points, respectively. Constant currency revenue grew by 4.1 percent year-over-year. Foreign currency translation negatively impacted net revenue growth by 5.9 percentage points, or about $60 million in the first half of 2015. We anticipate that foreign currency translation will negatively impact full year net revenue by about $125 million versus last year.

Fiscal 2015 Outlook:

We are updating our earnings guidance for the 2015 fiscal year primarily to reflect an expected increase in our core tax rate. The strong earnings performance in our Americas Adhesives and Construction Products operating segments, combined with the delay in earnings improvement in our EIMEA operating segment, is shifting the mix of our consolidated pre-tax earnings to the United States where our effective tax rate is relatively high. We now expect our full-year core tax rate to be about 34 percent, up 300 basis points from our previous estimate, reducing our expected adjusted diluted earnings per share by about $0.10. Our updated guidance also anticipates higher operating margins for the full year offset by lower revenue. Our current target for full-year adjusted EBITDA is about $275 million, largely in line with our original guidance, with a full-year EBITDA margin of about 13 percent and second half EBITDA margin above 15 percent. Our revised and updated adjusted earnings per diluted share estimate for fiscal year 2015 is $2.45 with revenue of $2.1 billion.

Conference Call:

The Company will host an investor conference call to discuss second quarter 2015 results on Thursday, June 25, 2015, 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.

 

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Regulation G:

The information presented in this earnings release regarding segment operating income, earnings before interest, taxes, depreciation, and amortization (EBITDA), adjusted net revenue, adjusted gross profit margin, adjusted selling, general and administrative expense, adjusted EBITDA and adjusted diluted earnings per share 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.

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 2014 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 29, 2014. 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

 

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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.

 

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H.B. FULLER COMPANY AND SUBSIDIARIES

CONSOLIDATED FINANCIAL INFORMATION

In thousands, except per share amounts (unaudited)

 

		13 Weeks Ended May 30, 2015				Percent of Net Revenue				13 Weeks Ended May 31, 2014				Percent of Net Revenue
Net revenue		$	540,762				100.0	%		$	544,034				100.0	%
Cost of sales			(391,825	)			(72.5	%)			(401,379	)			(73.8	%)
Gross profit			148,937				27.5	%			142,655				26.2	%
Selling, general and administrative expenses			(100,582	)			(18.6	%)			(96,372	)			(17.7	%)
Special charges, net			(934	)			(0.2	%)			(13,538	)			(2.5	%)
Other income (expense), net			(645	)			(0.1	%)			(204	)			(0.0	%)
Interest expense			(6,215	)			(1.1	%)			(4,760	)			(0.9	%)
Income before income taxes and income from equity method investments			40,561				7.5	%			27,781				5.1	%
Income taxes			(15,387	)			(2.8	%)			(8,838	)			(1.6	%)
Income from equity method investments			1,366				0.3	%			1,683				0.3	%
Income from continuing operations			26,540				4.9	%			20,626				3.8	%
Loss from discontinued operations, net of tax			(1,857	)			(0.3	%)			—				0.0	%
Net income including non-controlling interests			24,683				4.6	%			20,626				3.8	%
Net income attributable to non-controlling interests			(68	)			(0.0	%)			(89	)			(0.0	%)
Net income attributable to H.B. Fuller		$	24,615				4.6	%		$	20,537				3.8	%
Basic income per common share attributable to H.B. Fuller
Income from continuing operations			0.53								0.41
Loss from discontinued operations			(0.04	)							—
		$	0.49							$	0.41
Diluted income per common share attributable to H.B. Fullera
Income from continuing operations			0.51								0.40
Loss from discontinued operations			(0.04	)							—
		$	0.48							$	0.40
Weighted-average common shares outstanding:
Basic			50,345								49,956
Diluted			51,471								51,175
Dividends declared per common share		$	0.130							$	0.120

 

a	Income per share amounts may not add due to rounding

Selected Balance Sheet Information (subject to change prior to filing of the Company’s Quarterly Report on Form 10-Q)

 

		May 30, 2015				November 29, 2014				May 31, 2014
Cash & cash equivalents		$	79,463			$	77,569			$	95,044
Trade accounts receivable, net			356,409				341,307				354,436
Inventories			265,620				251,290				281,914
Trade payables			191,930				174,494				222,284
Total assets			2,091,102				1,869,006				1,960,815
Total debt			736,899				574,884				566,050

 

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H.B. FULLER COMPANY AND SUBSIDIARIES

CONSOLIDATED FINANCIAL INFORMATION

In thousands, except per share amounts (unaudited)

 

		26 Weeks Ended May 30, 2015				Percent of Net Revenue				26 Weeks Ended May 31, 2014				Percent of Net Revenue
Net revenue		$	1,011,423				100.0	%		$	1,030,015				100.0	%
Cost of sales			(746,280	)			(73.8	%)			(754,315	)			(73.2	%)
Gross profit			265,143				26.2	%			275,700				26.8	%
Selling, general and administrative expenses			(195,415	)			(19.3	%)			(193,171	)			(18.8	%)
Special charges			(3,295	)			(0.3	%)			(25,272	)			(2.5	%)
Other income (expense), net			(282	)			(0.0	%)			(1,254	)			(0.1	%)
Interest expense			(12,317	)			(1.2	%)			(8,886	)			(0.9	%)
Income from continuing operations before income taxes and income from equity method investments			53,834				5.3	%			47,117				4.6	%
Income taxes			(20,156	)			(2.0	%)			(15,379	)			(1.5	%)
Income from equity method investments			2,657				0.3	%			3,537				0.3	%
Income from continuing operations			36,335				3.6	%			35,275				3.4	%
Loss from discontinued operations			(1,857	)			(0.2	%)			—				0.0	%
Net income including non-controlling interests			34,478				3.4	%			35,275				3.4	%
Net income attributable to non-controlling interests			(153	)			(0.0	%)			(167	)			(0.0	%)
Net income attributable to H.B. Fuller		$	34,325				3.4	%		$	35,108				3.4	%
Basic income per common share attributable to H.B. Fuller
Income from continuing operations			0.72								0.70
Loss from discontinued operations			(0.04	)							—
		$	0.68							$	0.70
Diluted income per common share attributable to H.B. Fullera
Income from continuing operations			0.70								0.69
Loss from discontinued operations			(0.04	)							—
		$	0.67							$	0.69
Weighted-average common shares outstanding:
Basic			50,267								49,933
Diluted			51,425								51,215
Dividends declared per common share		$	0.250							$	0.220

 

a	Income per share amounts may not add due to rounding

 

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H.B. FULLER COMPANY AND SUBSIDIARIES

SEGMENT FINANCIAL INFORMATION

In thousands (unaudited)

 

		13 Weeks Ended May 30, 2015				13 Weeks Ended May 31, 2014
Net Revenue:
Americas Adhesives		$	228,526			$	236,985
EIMEA			151,520				189,656
Asia Pacific			95,101				67,948
Construction Products			65,615				49,445
Total H.B. Fuller		$	540,762			$	544,034
Segment Operating Income:6
Americas Adhesives		$	34,809			$	31,889
EIMEA			1,647				10,156
Asia Pacific			5,325				1,758
Construction Products			6,574				2,480
Total H.B. Fuller		$	48,355			$	46,283
Depreciation Expense:
Americas Adhesives		$	4,231			$	4,131
EIMEA			4,171				4,046
Asia Pacific			2,389				1,329
Construction Products			1,030				918
Total H.B. Fuller		$	11,821			$	10,424
Amortization Expense:
Americas Adhesives		$	1,355			$	1,397
EIMEA			1,638				1,956
Asia Pacific			1,812				495
Construction Products			2,194				1,955
Total H.B. Fuller		$	6,999			$	5,803
EBITDA:7
Americas Adhesives		$	40,395			$	37,417
EIMEA			7,456				16,158
Asia Pacific			9,526				3,582
Construction Products			9,798				5,353
Total H.B. Fuller		$	67,175			$	62,510
Segment Operating Margin:8
Americas Adhesives			15.2	%			13.5	%
EIMEA			1.1	%			5.4	%
Asia Pacific			5.6	%			2.6	%
Construction Products			10.0	%			5.0	%
Total H.B. Fuller			8.9	%			8.5	%
EBITDA Margin:7
Americas Adhesives			17.7	%			15.8	%
EIMEA			4.9	%			8.5	%
Asia Pacific			10.0	%			5.3	%
Construction Products			14.9	%			10.8	%
Total H.B. Fuller			12.4	%			11.5	%
Adjusted EBITDA5
Americas Adhesives		$	41,703			$	43,208
EIMEA			9,553				19,439
Asia Pacific			10,220				5,008
Construction Products			11,906				6,160
Total H.B. Fuller		$	73,382			$	73,815
Adjusted EBITDA Margin5
Americas Adhesives			18.2	%			18.2	%
EIMEA			6.3	%			10.2	%
Asia Pacific			10.7	%			7.4	%
Construction Products			17.9	%			12.5	%
Total H.B. Fuller			13.5	%			13.6	%

 

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H.B. FULLER COMPANY AND SUBSIDIARIES

SEGMENT FINANCIAL INFORMATION

In thousands (unaudited)

 

		26 Weeks Ended				26 Weeks Ended
		May 30, 2015				May 31, 2014
Net Revenue:
Americas Adhesives		$	432,469			$	446,651
EIMEA			299,082				361,215
Asia Pacific			165,094				132,995
Construction Products			114,778				89,154
Total H.B. Fuller		$	1,011,423			$	1,030,015
Segment Operating Income:6
Americas Adhesives		$	55,597			$	57,095
EIMEA			925				18,596
Asia Pacific			4,839				3,546
Construction Products			8,367				3,292
Total H.B. Fuller		$	69,728			$	82,529
Depreciation Expense:
Americas Adhesives		$	8,395			$	7,931
EIMEA			8,482				7,301
Asia Pacific			4,307				2,590
Construction Products			2,216				1,766
Total H.B. Fuller		$	23,400			$	19,588
Amortization Expense:
Americas Adhesives		$	2,713			$	2,789
EIMEA			3,360				3,891
Asia Pacific			2,687				991
Construction Products			4,387				3,907
Total H.B. Fuller		$	13,147			$	11,578
EBITDA:7
Americas Adhesives		$	66,705			$	67,815
EIMEA			12,767				29,788
Asia Pacific			11,833				7,127
Construction Products			14,970				8,965
Total H.B. Fuller		$	106,275			$	113,695
Segment Operating Margin:8
Americas Adhesives			12.9	%			12.8	%
EIMEA			0.3	%			5.1	%
Asia Pacific			2.9	%			2.7	%
Construction Products			7.3	%			3.7	%
Total H.B. Fuller			6.9	%			8.0	%
EBITDA Margin:7
Americas Adhesives			15.4	%			15.2	%
EIMEA			4.3	%			8.2	%
Asia Pacific			7.2	%			5.4	%
Construction Products			13.0	%			10.1	%
Total H.B. Fuller			10.5	%			11.0	%
Adjusted EBITDA5
Americas Adhesives		$	68,014			$	73,540
EIMEA			14,917				34,439
Asia Pacific			15,890				8,588
Construction Products			17,649				9,773
Total H.B. Fuller		$	116,470			$	126,340
Adjusted EBITDA Margin:5
Americas Adhesives			15.7	%			16.5	%
EIMEA			5.0	%			9.5	%
Asia Pacific			9.6	%			6.5	%
Construction Products			15.4	%			11.0	%
Total H.B. Fuller			11.5	%			12.3	%

 

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H.B. FULLER COMPANY AND SUBSIDIARIES

SEGMENT FINANCIAL INFORMATION

NET REVENUE GROWTH

(unaudited)

13 Weeks Ended May 30, 2015

 

		Americas Adhesives				EIMEA				Asia Pacific				Construction Products				Total HBF
Price			1.1	%			0.1	%			(0.3	%)			5.0	%			0.9	%
Volume			(3.9	%)			(2.6	%)			44.5	%			27.7	%			5.5	%
Constant Currency Growth			(2.8	%)			(2.5	%)			44.2	%			32.7	%			6.4	%
F/X			(0.8	%)			(17.6	%)			(4.2	%)			0.0	%			(7.0	%)
			(3.6	%)			(20.1	%)			40.0	%			32.7	%			(0.6	%)

26 Weeks Ended May 30, 2015

 

		Americas Adhesives				EIMEA				Asia Pacific				Construction Products				Total HBF
Price			0.7	%			0.1	%			0.0	%			3.6	%			0.7	%
Volume			(3.2	%)			(2.8	%)			28.0	%			25.1	%			3.4	%
Constant Currency Growth			(2.5	%)			(2.7	%)			28.0	%			28.7	%			4.1	%
F/X			(0.7	%)			(14.5	%)			(3.9	%)			0.0	%			(5.9	%)
			(3.2	%)			(17.2	%)			24.1	%			28.7	%			(1.8	%)

 

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H.B. FULLER COMPANY AND SUBSIDIARIES

REGULATION G RECONCILIATION

In thousands (unaudited)

 

		13 Weeks Ended May 30, 2015				13 Weeks Ended May 31, 2014
Net income including non-controlling interests		$	24,683			$	20,626
Loss from discontinued operations			1,857				—
Income from equity method investments			(1,366	)			(1,683	)
Income taxes			15,387				8,838
Interest expense			6,215				4,760
Other income (expense), net			645				204
Special charges			934				13,538
Segment operating income6			48,355				46,283
Depreciation expense			11,821				10,424
Amortization expense			6,999				5,803
EBITDA7		$	67,175			$	62,510
EBITDA margin7			12.4	%			11.5	%
		26 Weeks Ended May 30, 2015				26 Weeks Ended May 31, 2014
Net income including non-controlling interests		$	34,478			$	35,275
Loss from discontinued operations			1,857				—
Income from equity method investments			(2,657	)			(3,537	)
Income taxes			20,156				15,379
Interest expense			12,317				8,886
Other income (expense), net			282				1,254
Special charges			3,295				25,272
Segment operating income6			69,728				82,529
Depreciation expense			23,400				19,588
Amortization expense			13,147				11,578
EBITDA7		$	106,275			$	113,695
EBITDA margin7			10.5	%			11.0	%

 

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H.B. FULLER COMPANY AND SUBSIDIARIES

REGULATION G RECONCILIATION

In thousands (unaudited)

 

		13 Weeks Ended May 30, 2015				13 Weeks Ended May 31, 2014
Net revenue		$	540,762			$	544,034
Cost of sales			(391,825	)			(401,379	)
Gross profit			148,937				142,655
Selling, general and administrative expenses			(100,582	)			(96,372	)
Segment operating income6			48,355				46,283
Depreciation expense			11,821				10,424
Amortization expense			6,999				5,803
EBITDA7		$	67,175			$	62,510
EBITDA margin7			12.4	%			11.5	%

 

		26 Weeks Ended May 30, 2015				26 Weeks Ended May 31, 2014
Net revenue		$	1,011,423			$	1,030,015
Cost of sales			(746,280	)			(754,315	)
Gross profit			265,143				275,700
Selling, general and administrative expenses			(195,415	)			(193,171	)
Segment operating income6			69,728				82,529
Depreciation expense			23,400				19,588
Amortization expense			13,147				11,578
EBITDA7		$	106,275			$	113,695
EBITDA margin7			10.5	%			11.0	%

 

12

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H.B. FULLER COMPANY AND SUBSIDIARIES

REGULATION G RECONCILIATION

In thousands, except per share amounts (unaudited)

 

						13 Weeks Ended May 30, 2015				% of Net Revenue				Adjustments				Adjusted 13 Weeks Ended May 30, 2015				% of Net Revenue
Net revenue						$	540,762				100.0	%		$	867			$	541,629	4			100.0	%
Cost of sales							(391,825	)			(72.5	%)			(2,882	)			(388,943	)			(71.8	%)
Gross profit							148,937				27.5	%			(3,749	)			152,686				28.2	%2
Selling, general and administrative expenses							(100,582	)			(18.6	%)			(2,458	)			(98,124	)			(18.1	%)3
Acquisition and transformation related costs			(75	)
Workforce reduction costs			270
Facility exit costs			(1,111	)
Other related costs			(18	)
Special charges, net							(934	)			(0.2	%)			(934	)			—				0.0	%
Other income (expense), net							(645	)			(0.1	%)			—				(645	)			(0.1	%)
Interest expense							(6,215	)			(1.1	%)			(230	)			(5,985	)			(1.1	%)
Income before income taxes and income from equity method investments							40,561				7.5	%			(7,371	)			47,932				8.8	%
Income taxes							(15,387	)			(2.8	%)			1,625				(17,012	)			(3.1	%)
- Effective tax rate							37.9	%							22.0	%			35.5	%
Income from equity method investments							1,366				0.3	%			—				1,366				0.3	%
Net income from continuing operations							26,540				4.9	%			(5,746	)			32,286				6.0	%
Loss from discontinued operations							(1,857	)			(0.3	%)			(1,857	)			—				0.0	%
Net income including non-controlling interests							24,683				4.6	%			(7,603	)			32,286				6.0	%
Net income attributable to non-controlling interests							(68	)			(0.0	%)			—				(68	)			(0.0	%)
Net income attributable to H.B. Fuller						$	24,615				4.6	%		$	(7,603	)		$	32,218				5.9	%
Basic income (loss) per common share attributable to H.B. Fuller
Income (loss) from continuing operations						$	0.53							$	(0.11	)		$	0.64
Loss from discontinued operations							(0.04	)							(0.04	)			—
Basic income (loss) per common share attributable to H.B. Fuller						$	0.49							$	(0.15	)		$	0.64
Diluted income (loss) per common share attributable to H.B. Fuller a
Income (loss) from continuing operations						$	0.51							$	(0.11	)		$	0.63	1
Loss from discontinued operations							(0.04	)							(0.04	)			—
Diluted income (loss) per common share attributable to H.B. Fuller						$	0.48							$	(0.15	)		$	0.63
Weighted-average common shares outstanding:
Basic							50,345								50,345				50,345
Diluted							51,471								51,471				51,471

 

a	Income per share amounts may not add due to rounding

 

13

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H.B. FULLER COMPANY AND SUBSIDIARIES

REGULATION G RECONCILIATION

In thousands, except per share amounts (unaudited)

 

						13 Weeks Ended May 31, 2014				% of Net Revenue				Adjustments				Adjusted 13 Weeks Ended May 31, 2014				% of Net Revenue
Net revenue						$	544,034				100.0	%		$	—			$	544,034				100.0	%
Cost of sales							(401,379	)			(73.8	%)			(5,345	)			(396,034	)			(72.8	%)
Gross profit							142,655				26.2	%			(5,345	)			148,000				27.2	%2
Selling, general and administrative expenses							(96,372	)			(17.7	%)			(5,959	)			(90,413	)			(16.6	%)3
Acquisition and transformation related costs			(2,578	)
Workforce reduction costs			(899	)
Facility exit costs			(7,326	)
Other related costs			(2,735	)
Special charges, net							(13,538	)			(2.5	%)			(13,538	)			—				0.0	%
Other income (expense), net							(204	)			(0.0	%)			—				(204	)			(0.0	%)
Interest expense							(4,760	)			(0.9	%)			—				(4,760	)			(0.9	%)
Income before income taxes and income from equity method investments							27,781				5.1	%			(24,842	)			52,623				9.7	%
Income taxes							(8,838	)			(1.6	%)			5,262				(14,100	)			(2.6	%)
- Effective tax rate							31.8	%							21.2	%			26.8	%
Income from equity method investments							1,683				0.3	%			—				1,683				0.3	%
Net income including non-controlling interests							20,626				3.8	%			(19,580	)			40,206				7.4	%
Net income attributable to non-controlling interests							(89	)			(0.0	%)			—				(89	)			(0.0	%)
Net income attributable to H.B. Fuller						$	20,537				3.8	%		$	(19,580	)		$	40,117				7.4	%
Basic income (loss) per common share attributable to H.B. Fuller						$	0.41							$	(0.39	)		$	0.80
Diluted income (loss) per common share attributable to H.B. Fuller						$	0.40							$	(0.38	)		$	0.78	1
Weighted-average common shares outstanding:
Basic							49,956								49,956				49,956
Diluted							51,175								51,175				51,175

 

14

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H.B. FULLER COMPANY AND SUBSIDIARIES

REGULATION G RECONCILIATION

In thousands, except per share amounts (unaudited)

 

						26 Weeks Ended May 30, 2015				% of Net Revenue				Adjustments				Adjusted 26 Weeks Ended May 30, 2015				% of Net Revenue
Net revenue						$	1,011,423				100.0	%		$	867			$	1,012,290	4			100.0	%
Cost of sales							(746,280	)			(73.8	%)			(6,032	)			(740,248	)			(73.1	%)
Gross profit							265,143				26.2	%			(6,899	)			272,042				26.9	%2
Selling, general and administrative expenses							(195,415	)			(19.3	%)			(3,296	)			(192,119	)			(19.0	%)3
Acquisition and transformation related costs			(547	)
Workforce reduction costs			214
Facility exit costs			(2,640	)
Other related costs			(322	)
Special charges, net							(3,295	)			(0.3	%)			(3,295	)			—				0.0	%
Other income (expense), net							(282	)			(0.0	%)			—				(282	)			(0.0	%)
Interest expense							(12,317	)			(1.2	%)			(330	)			(11,987	)			(1.2	%)
Income before income taxes and income from equity method investments							53,834				5.3	%			(13,820	)			67,654				6.7	%
Income taxes							(20,156	)			(2.0	%)			2,592				(22,748	)			(2.2	%)
- Effective tax rate							37.4	%							18.8	%			33.6	%
Income from equity method investments							2,657				0.3	%			—				2,657				0.3	%
Income from continuing operations							36,335				3.6	%			(11,228	)			47,563				4.7	%
Loss from discontinued operations							(1,857	)			(0.2	%)			(1,857	)			—				0.0	%
Net income including non-controlling interests							34,478				3.4	%			(13,085	)			47,563				4.7	%
Net income attributable to non-controlling interests							(153	)			(0.0	%)			—				(153	)			(0.0	%)
Net income attributable to H.B. Fuller						$	34,325				3.4	%		$	(13,085	)		$	47,410				4.7	%
Basic income per common share attributable to H.B. Fuller
Income (loss) from continuing operations							0.72								(0.22	)			0.94
Loss from discontinued operations							(0.04	)							(0.04	)			—
Basic income per common share attributable to H.B. Fuller						$	0.68							$	(0.26	)		$	0.94
Diluted income per common share attributable to H.B. Fuller a
Income (loss) from continuing operations							0.70								(0.22	)			0.92	1
Loss from discontinued operations							(0.04	)							(0.04	)			—
Diluted income per common share attributable to H.B. Fuller						$	0.67							$	(0.25	)		$	0.92
Weighted-average common shares outstanding:
Basic							50,267								50,267				50,267
Diluted							51,425								51,425				51,425

 

a	Income per share amounts may not add due to rounding

 

15

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H.B. FULLER COMPANY AND SUBSIDIARIES

REGULATION G RECONCILIATION

In thousands, except per share amounts (unaudited)

 

						26 Weeks Ended May 31, 2014				% of Net Revenue				Adjustments				Adjusted 26 Weeks Ended May 31, 2014				% of Net Revenue
Net revenue						$	1,030,015				100.0	%		$	—			$	1,030,015				100.0	%
Cost of sales							(754,315	)			(73.2	%)			(6,685	)			(747,630	)			(72.6	%)
Gross profit							275,700				26.8	%			(6,685	)			282,385				27.4	%2
Selling, general and administrative expenses							(193,171	)			(18.8	%)			(5,959	)			(187,212	)			(18.2	%)3
Acquisition and transformation related costs			(4,286	)
Workforce reduction costs			(2,958	)
Facility exit costs			(12,452	)
Other related costs			(5,576	)
Special charges, net							(25,272	)			(2.5	%)			(25,272	)			—				0.0	%
Other income (expense), net							(1,254	)			(0.1	%)							(1,254	)			(0.1	%)
Interest expense							(8,886	)			(0.9	%)							(8,886	)			(0.9	%)
Income from continuing operations before income taxes and income from equity method investments							47,117				4.6	%			(37,916	)			85,033				8.3	%
Income taxes							(15,379	)			(1.5	%)			7,880				(23,259	)			(2.3	%)
- Effective tax rate							32.6	%							20.8	%			27.4	%
Income from equity method investments							3,537				0.3	%			—				3,537				0.3	%
Net income including non-controlling interests							35,275				3.4	%			(30,036	)			65,311				6.3	%
Net loss attributable to non-controlling interests							(167	)			(0.0	%)			—				(167	)			(0.0	%)
Net income attributable to H.B. Fuller						$	35,108				3.4	%		$	(30,036	)		$	65,144				6.3	%
Basic income per common share attributable to H.B. Fuller						$	0.70							$	(0.60	)		$	1.30
Diluted income per common share attributable to H.B. Fullera						$	0.69							$	(0.59	)		$	1.27	1
Weighted-average common shares outstanding:
Basic							49,933								49,933				49,933
Diluted							51,215								51,215				51,215

 

a	Income per share amounts may not add due to rounding

 

16

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H.B. FULLER COMPANY AND SUBSIDIARIES

ADJUSTED EARNING PER SHARE RECONCILIATION

In thousands (unaudited)

 

						13 weeks ended May 30, 2015												13 weeks ended May 31, 2014
						Income before Income Tax				Income Taxes				Diluted EPS				Income before Income Tax				Income Taxes				Diluted EPS
Income from continuing operations						$	41,859			$	15,387			$	0.51			$	29,375			$	8,838			$	0.40
Special charges, net							934				106				0.02				13,538				1,568				0.23
Acquisition project costs			b				694				61				0.01				1,041				170				0.02
Construction Products			c				2,108				803				0.03				—				—				—
EIMEA business integration costs			d				2,055				156				0.04				2,156				434				0.03
Project ONE			e				—				—				—				8,107				3,090				0.10
Other			f				1,580				499				0.02				—				—				—
Adjusted Earnings						$	49,230			$	17,012			$	0.63			$	54,217			$	14,100			$	0.78
						26 weeks ended May 30, 2015												26 weeks ended May 31, 2014
						Income before Income Tax				Income Taxes				Diluted EPSa				Income before Income Tax				Income Taxes				Diluted EPSa
Income from continuing operations						$	56,338			$	20,156			$	0.70			$	50,487			$	15,379			$	0.69
Special charges, net							3,295				436				0.06				25,272				3,897				0.42
Acquisition project costs			b				3,940				480				0.07				1,041				170				0.02
Construction Products			c				2,679				1,021				0.03				—				—				—
EIMEA business integration costs			d				2,055				156				0.04				3,496				723				0.05
Project ONE			e				—				—				—				8,107				3,090				0.10
Other			f				1,851				499				0.03				—				—				—
Adjusted Earnings						$	70,158			$	22,748			$	0.92			$	88,403			$	23,259			$	1.27

 

a	Income per share amounts may not add due to rounding

b	Non-recurring costs related to integrating the Tonsan and ProSpec acquisitions

c	Non-recurring costs related to the ramp up of new business with Lowes and the combination of facilities in Illinois

d	Non-recurring costs related to plant inefficiencies and inventory variances

e	Non-recurring costs related to the initial go-live event under Project ONE in North America in 2014

f	Non-recurring costs related to the completion and start-up of a new electronics facility in Yantai China and other non-recurring items

 

17

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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”; inventory adjustments and plant inefficiencies in EIMEA related to the business integration; integrating the Tonsan and ProSpec acquisitions; combining Construction Products facilities in Illinois; ramping up new business with Lowes; the start-up of a new electronics facility in Yantai China; and the prior year’s implementation of SAP in North America.

2

Adjusted gross profit and adjusted gross profit margin are non-GAAP financial measures. Adjusted gross profit excludes non-recurring costs associated with: integrating the Tonsan acquisition; combining Construction Products facilities in Illinois; ramping up new business with Lowes; the start-up of a new electronics facility in Yantai China; and inventory adjustments and plant inefficiencies in EIMEA related to the business integration. Adjusted gross profit margin is defined as adjusted gross profit divided by adjusted net revenue.

3	Adjusted SG&A expense is a non-GAAP financial measure which excludes non-recurring costs associated with: integrating the Tonsan and ProSpec acquisitions; ramping up new business with Lowes; and the prior year’s implementation of SAP in North America.

4	Adjusted net revenue is a non-GAAP financial measure which excludes non-recurring sales discounts associated with ramping up new business with Lowes.

5

Adjusted EBITDA and adjusted EBITDA margin are non-GAAP financial measures. Adjusted EBITDA excludes non-recurring costs associated with: integrating the Tonsan and ProSpec acquisitions; combining Construction Products facilities in Illinois; ramping up new business with Lowes; the start-up of a new electronics facility in Yantai China; the prior year’s implementation of SAP in North America; and inventory adjustments and plant inefficiencies in EIMEA related to the business integration. Adjusted EBITDA margin is defined as adjusted EBITDA divided by adjusted net revenue.

6	Segment operating income is defined as gross profit less SG&A expense. Items that are reported on the special charges line of the income statement are excluded from the segment operating income calculation.

7

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. On a segment basis it is defined as operating income, plus depreciation expense, plus amortization expense. EBITDA margin is defined as EBITDA divided by net revenue.

8	Segment operating margin is a non-GAAP financial measure defined as gross profit, less SG&A expense, divided by net revenue.

 

18