H.B. Fuller Reports Third Quarter 2016 Results

 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:          
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:          
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.

CONTACT: Maximillian Marcy
Investor Relations Contact
651-236-5062