• H.B. Fuller Reports Third Quarter 2018 Results

    Source: Nasdaq GlobeNewswire / 27 Sep 2018 01:53:07   Europe/London

    Third Quarter Diluted EPS $0.72 and Adjusted Diluted EPS $0.861;
    Fiscal Year 2018 Adjusted Diluted EPS Guidance Updated to $3.05 to $3.20;
    Unfavorable Foreign Exchange Rate Movement Impacted Adjusted EPS by approximately $0.10 in the Second Half of 2018

    ST. PAUL, Minn., Sept. 26, 2018 (GLOBE NEWSWIRE) -- Fuller Company (NYSE:FUL) today reported financial results for the third quarter that ended Sept. 1, 2018.

    Third Quarter 2018 Highlights:

    • Net revenue of $770 million increased 37 percent compared with the third quarter of 2017, including the Royal business which was acquired in October, 2017. Organic revenue increased approximately 5 percent;
    • Net income of $38 million or $0.72 per diluted share, increased compared with $25 million, or $0.49 in the third quarter of 2017; adjusted net income1 of $45 million, or $0.861 per diluted share, increased 34 percent compared with $33 million, or $0.65 in the third quarter of 2017;
    • Adjusted EBITDA1 of $120 million increased 63 percent compared with the third quarter of 2017; adjusted EBITDA margin1 increased to 15.6 percent from 13.1 percent in the same period last year as a result of the Royal acquisition and effective management of our legacy business;
    • The Royal integration continues to progress well with approximately $4 million of incremental cost synergies in the third quarter. On track to realize $15 million of cost synergies in fiscal 2018 and $35 million of savings by 2020, as previously communicated;
    • Cash flow from operations of $84 million increased compared with $38 million in the same period last year. Debt pay down in the quarter was $41 million. On track to meet our $170 million debt reduction goal for the 2018 fiscal year.
     
    Third Quarter 2018 Key Financial Metrics:
            
     Reported Adjusted/Proforma4
     20182017% Change 20182017% Change
    Net Revenue$770,107$562,86937% $770,107$741,9934%
    Operating Income71,13540,18177% 83,32775,78110%
    Net Income37,73025,13850% 44,66633,31834%
    Diluted Earnings per Share0.720.4947% 0.860.6532%
            

    Summary of Third Quarter 2018 Results:
    Net revenue for the third quarter of 2018 was $770.1 million, an increase of 36.8 percent compared with the third quarter of 2017. Organic revenue increased 4.8 percent year-over-year, driven by sales growth in every segment, and double-digit growth in Engineering Adhesives.

    Gross profit margin was 28.2 percent. Adjusted gross profit margin3 of 28.7 percent increased 110 basis points compared with the prior year on a proforma basis including Royal2 in 2017, and increased 40 basis points sequentially, reflecting positive pricing contribution and raw material sourcing synergies. Selling, General and Administrative (SG&A) expense was $146.1 million. Adjusted SG&A expense5 of $137.7 million increased compared with the third quarter of 2017, primarily due to the impact of acquisitions.

    Net income for the third quarter of 2018 was $37.7 million, or $0.72 per diluted share, compared with net income of $25.1 million, or $0.49 per diluted share, in the third quarter of 2017. Adjusted diluted earnings per share were $0.861, an increase of 32 percent compared with $0.65 in the prior year. Adjusted EBITDA1 was $120 million, up 63 percent compared with the prior year, and up 7 percent2 on a proforma basis including Royal in 2017.

    “Our strong third quarter results demonstrated the earnings power of our business as we grew organic revenue by nearly 5 percent and increased profitability in an environment of rising raw materials and currency headwinds,” said Jim Owens, president and chief executive officer. “We continue to grow organically by winning new opportunities in targeted markets and by managing pricing to offset raw materials inflation.

    “Foreign currency shifts in the quarter impacted revenues by approximately two percent and also impacted earnings. Strong sales performance combined with managerial discipline generated adjusted EBITDA of $120 million and operating cash flow of $84 million in the quarter. Free cash flow resulted in debt pay down of $41 million, and we are on track to deliver our committed total reduction of $170 million of debt in 2018,” continued Owens.

    "While foreign currency exchange rate fluctuations and near-term headwinds are impacting the current year results, our overall commitment to achieve $605 million of EBITDA and $600 million of debt pay down by 2020 remains intact and unchanged.”

    EBITDA Calculation Revision:
    In order to conform to SEC interpretations, we modified our EBITDA calculation for 2017 and 2018 to include joint venture earnings as well as non-operating income and expenses. Using our historical methodology, adjusted EBITDA would have been $119.5 million in the third quarter of 2018.  For the full year, this change is expected to impact EBITDA by approximately $6 million. This change has no impact on operating income or earnings per share.

    Balance Sheet and Cash Flow:
    At the end of the third quarter of 2018, the Company had cash on hand of $150 million and total debt equal to $2,364 million, of which approximately 70 percent had a fixed interest rate. This compares to cash and debt levels equal to $129 million and $2,405 million, respectively, in the second quarter of 2018. Cash flow from operations in the third quarter was $84 million compared to $38 million for the same period in 2017, reflecting the increased profitability of the business. Capital expenditures were $13 million in the third quarter of 2018, compared with $8 million in the same period last year.

    Fiscal 2018 Guidance:
    H.B. Fuller is updating its guidance for the 2018 fiscal year. The company is adjusting EPS guidance by $0.10 per share to reflect unfavorable movement in foreign currency exchange rates and narrowing the EPS range to reflect current business conditions. The company now anticipates adjusted EPS of $3.05 to $3.20, compared with the previous range of $3.15 to $3.40; and adjusted EBITDA of $455 to $470 million, compared with previous guidance of approximately $470 million. Revenue growth for the fourth quarter is expected to be approximately 3 percent when compared to 2017 on a proforma basis. The company’s core tax rate, excluding the impact of discrete items, is unchanged and is expected to be between 25 and 27 percent. H.B. Fuller expects to invest a total of approximately $70 million in capital items in 2018.

    This guidance excludes approximately $20 to $25 million of pre-tax expenses required to integrate the Royal business and other businesses acquired in 2017, and between $7 and $8 million of pre-tax expenses related to Project ONE ERP development costs. This guidance also excludes the discrete tax benefit of $35.6 million related to Tax Reform that was recorded in the first quarter, as well as any future discrete tax items. A complete reconciliation of the non-GAAP financial information contained in our 2018 guidance is not being provided in accordance with the “unreasonable efforts” exception of Item 10(e)(1)(i)(B) of Regulation S-K of the Securities and Exchange Commission.

    Conference Call:
    The Company will host an investor conference call to discuss third quarter results on Thursday, September 27, 2018, 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 H.B. Fuller’s Investor Relations website. The event is scheduled to last one hour. For those unable to listen live, an audio replay of the event along with the accompanying presentation will be archived on the Company’s website.

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

    About H.B. Fuller:
    Since 1887, H.B. Fuller has been a leading global adhesives provider focusing on perfecting adhesives, sealants and other specialty chemical products to improve products and lives. With fiscal 2017 net revenue of over $2.3 billion, H.B. Fuller’s commitment to innovation brings together people, products and processes that answer and solve some of the world's biggest challenges. Our reliable, responsive service creates lasting, rewarding connections with customers in electronics, disposable hygiene, medical, transportation, aerospace, clean energy, packaging, construction, woodworking, general industries and other consumer businesses. And, our promise to our people connects them with opportunities to innovate and thrive. For more information, visit us at www.hbfuller.com.

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

     
    H.B. FULLER COMPANY AND SUBSIDIARIES
    CONSOLIDATED FINANCIAL INFORMATION
    In thousands, except per share amounts (unaudited)
              
     Three Months Ended Percent of Three Months Ended Percent of
     September 1, 2018 Net Revenue September 2, 2017 Net Revenue
    Net revenue$770,107  100.0% $562,869  100.0%
    Cost of sales (552,903) (71.8%)  (412,469) (73.3%)
    Gross profit 217,204  28.2%  150,400  26.7%
              
    Selling, general and administrative expenses (146,069) (19.0%)  (110,219) (19.6%)
    Operating income 71,135  9.2%  40,181  7.1%
              
    Other expense (1,375) (0.2%)  (602) (0.1%)
    Interest expense, net (24,924) (3.2%)  (7,348) (1.3%)
    Income before income taxes and income from equity method investments 44,836  5.8%  32,231  5.7%
              
    Income taxes (9,300) (1.2%)  (9,262) (1.6%)
              
    Income from equity method investments 2,200  0.3%  2,170  0.4%
    Net income including non-controlling interests 37,736  4.9%  25,139  4.5%
              
    Net income attributable to non-controlling interests (6) (0.0%)  (1) 0.0%
    Net income attributable to H.B. Fuller$37,730  4.9% $25,138  4.5%
              
    Basic income per common share attributable to H.B. Fuller$0.75    $0.50   
              
    Diluted income per common share attributable to H.B. Fuller$0.72    $0.49   
              
    Weighted-average common shares outstanding:         
    Basic 50,632     50,384   
    Diluted 52,138     51,605   
              
    Dividends declared per common share$0.155    $0.15   
                


     
    Selected Balance Sheet Information (subject to change prior to filing of the Company's Quarterly Report on Form 10-Q)
             
     September 1, 2018 December 2, 2017 September 2, 2017
    Cash & cash equivalents$150,084 $194,398 $119,595
    Trade accounts receivable, net 465,942  473,700  393,054
    Inventories 401,091  359,505  317,968
    Trade payables 256,042  268,467  193,345
    Total assets 4,289,777  4,360,646  2,288,323
    Total debt 2,364,237  2,451,910  798,973
             


     
    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
     September 1, 2018 Net Revenue September 2, 2017 Net Revenue
    Net revenue$2,272,573  100.0% $1,627,843  100.0%
    Cost of sales (1,645,279) (72.4%)  (1,192,409) (73.3%)
    Gross profit 627,294  27.6%  435,434  26.7%
              
    Selling, general and administrative expenses (442,288) (19.5%)  (325,904) (20.0%)
    Operating Income 185,006  8.1%  109,530  6.7%
              
    Other income (expense) 3,508  0.2%  (1,506) (0.1%)
    Interest expense, net (74,651) (3.3%)  (22,461) (1.4%)
    Income before income taxes and income from equity method investments 113,863  5.0%  85,563  5.2%
              
    Income taxes 9,844  0.4%  (26,178) (1.6%)
              
    Income from equity method investments 6,160  0.3%  6,449  0.4%
    Net income including non-controlling interests 129,867  5.7%  65,834  4.0%
              
    Net income attributable to non-controlling interests (4) (0.0%)  (34) (0.0%)
    Net income attributable to H.B. Fuller$129,863  5.7% $65,800  4.0%
              
    Basic income per common share attributable to H.B. Fuller$2.57    $1.31   
              
    Diluted income per common share attributable to H.B. Fuller$2.50    $1.28   
              
    Weighted-average common shares outstanding:         
    Basic 50,551     50,374   
    Diluted 51,961     51,584   
              
    Dividends declared per common share$0.460    $0.44   
                


     
    H.B. FULLER COMPANY AND SUBSIDIARIES
    REGULATION G RECONCILIATION
    In thousands, except per share amounts (unaudited)
                 
      Three Months Ended Nine Months Ended
      September 1, 2018 September 2, 2017 September 1, 2018 September 2, 2017
                 
    Net income attributable to H.B. Fuller $37,730  $25,138  $129,863  $65,800 
                 
    Acquisition project costs  1,544   1,266   2,215   3,363 
    Tonsan call option agreement  110   1,222   (2,059)  (2,241)
    Organizational realignment  879   832   2,311   14,831 
    Royal restructuring and integration  5,164   3,530   14,478   3,530 
    Tax reform  -   -   (35,555)  - 
    Other  (761)  1,330   (1,857)  4,728 
    Adjusted net income attributable to H.B. Fuller  44,666   33,318   109,396   90,011 
                 
    Add:            
    Interest expense, net  24,816   7,276   74,387   22,248 
    Income taxes  14,664   12,971   35,962   34,974 
    Depreciation expense  17,007   12,332   50,801   35,862 
    Amortization expense  19,116   7,899   57,635   23,128 
    Adjusted EBITDA  120,269   73,796   328,181   206,223 
                 
    Diluted Shares  52,138   51,605   51,961   51,584 
    Adjusted diluted income per common share attributable to H.B. Fuller $0.86  $0.65  $2.11  $1.74 
    Revenue $770,107  $562,869  $2,272,573  $1,627,843 
    Adjusted EBITDA margin  15.6%  13.1%  14.4%  12.7%
                 
    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 excluding 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 expense and amortization expense, and excluding acquisition project costs, TONSAN call option agreement, organizational realignment Royal restructuring and integration, the impact from tax reform and other costs, primarily consisting of Project ONE ERP development costs. 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 GAAP.
     


     
    H.B. FULLER COMPANY AND SUBSIDIARIES
    SEGMENT FINANCIAL INFORMATION
    In thousands (unaudited)
          
     Three Months Ended Three Months Ended
     September 1, 2018 September 2, 2017
    Net Revenue:     
    Americas Adhesives$282,490 $230,881
    EIMEA 182,020  137,408
    Asia Pacific 65,944  62,972
    Construction Adhesives 121,140  59,080
    Engineering Adhesives 118,513  72,528
    Total H.B. Fuller$770,107 $562,869
          
    Segment Operating Income:     
    Americas Adhesives$34,816 $25,434
    EIMEA 8,758  8,873
    Asia Pacific 3,694  2,793
    Construction Adhesives 12,767  (698
    Engineering Adhesives 11,100  3,779
    Total H.B. Fuller$71,135 $40,181
          
    Adjusted EBITDA1     
    Americas Adhesives$50,964 $35,361
    EIMEA 19,158  16,808
    Asia Pacific 6,580  5,648
    Construction Adhesives 23,516  4,612
    Engineering Adhesives 19,232  9,799
    Total H.B. Fuller$119,450 $72,228
          
    Adjusted EBITDA Margin1     
    Americas Adhesives 18.0%  15.3%
    EIMEA 10.5%  12.2%
    Asia Pacific 10.0%  9.0%
    Construction Adhesives 19.4%  7.8%
    Engineering Adhesives 16.2%  13.5%
    Total H.B. Fuller 15.5%  12.8%
          
          


     
    H.B. FULLER COMPANY AND SUBSIDIARIES
    SEGMENT FINANCIAL INFORMATION
    In thousands (unaudited)
          
     Nine Months Ended Nine Months Ended
     September 1, 2018 September 2, 2017
    Net Revenue:     
    Americas Adhesives$821,813 $653,665
    EIMEA 554,031  396,674
    Asia Pacific 206,944  190,083
    Construction Products 340,179  179,880
    Engineering Adhesives 349,606  207,541
    Total H.B. Fuller$2,272,573 $1,627,843
          
    Segment Operating Income:     
    Americas Adhesives$84,934 $72,921
    EIMEA 30,636  18,753
    Asia Pacific 11,056  9,423
    Construction Products 25,705  (3,234
    Engineering Adhesives 32,675  11,667
    Total H.B. Fuller$185,006 $109,530
          
    Adjusted EBITDA1     
    Americas Adhesives$127,124 $99,002
    EIMEA 62,554  44,965
    Asia Pacific 19,833  18,438
    Construction Products 59,374  15,947
    Engineering Adhesives 54,404  22,962
    Total H.B. Fuller$323,289 $201,314
          
    Adjusted EBITDA Margin1     
    Americas Adhesives 15.5%  15.1%
    EIMEA 11.3%  11.3%
    Asia Pacific 9.6%  9.7%
    Construction Products 17.5%  8.9%
    Engineering Adhesives 15.6%  11.1%
    Total H.B. Fuller 14.2%  12.4%
          
          


     
    H.B. FULLER COMPANY AND SUBSIDIARIES
    REGULATION G RECONCILIATION
    In thousands, except per share amounts (unaudited)
           
     Three Months Ended Nine Months Ended
     September 1, 2018 September 2, 2017 September 1, 2018 September 2, 2017
                
    Income before income taxes and income from equity method investments$44,836  $32,231  $113,863  $85,563 
                
    Adjustments:           
    Acquisition project costs 2,101   1,944   3,108   5,144 
    Tonsan call option agreement 110   1,222   (2,059)  (2,241)
    Organizational realignment 1,029   1,492   2,211   18,945 
    Royal restructuring and integration 6,496   5,431   20,558   5,431 
    Other 2,564   1,800   1,522   5,728 
    Adjusted income before income taxes and income from equity method investments$57,136  $44,120  $139,203  $118,570 
                
    Adjusted income before income taxes and income from equity investments is a non-GAAP financial measure. 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 GAAP. Adjusted income before income taxes and income from equity investments is defined as adjusted income before income taxes and income from equity investments excluding the specific adjustments shown above. 
                
                
    H.B. FULLER COMPANY AND SUBSIDIARIES
    REGULATION G RECONCILIATION
    In thousands, except per share amounts (unaudited)
                
     Three Months Ended Nine Months Ended
     September 1, 2018 September 2, 2017 September 1, 2018 September 2, 2017
                
    Income Taxes$(9,300) $(9,262) $9,844  $(26,178)
                
    Adjustments:           
    Acquisition project costs (556)  (677)  (892)  (1,780)
    Organizational realignment (150)  (661)  100   (4,114)
    Royal restructuring and integration (1,332)  (1,901)  (6,081)  (1,901)
    Tax reform -   -   (35,555)   
    Other (3,326)  (470)  (3,378)  (1,001)
                    
    Adjusted income taxes$(14,664) $(12,971) $(35,962) $(34,974)
                
    Adjusted income before income taxes and income from equity method investments$57,136  $44,120  $139,203  $118,570 
    Adjusted effective income tax rate 25.7%  29.4%  25.8%  29.5%
                
    Adjusted income taxes and adjusted effective income tax rate are non-GAAP financial measures. 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 GAAP. Adjusted income taxes is defined as income taxes excluding the specific adjustments shown above. Adjusted effective income tax rate is defined as adjusted income taxes divided by adjusted income before income taxes and income from equity method investments.
     


     
    H.B. FULLER COMPANY AND SUBSIDIARIES
    REGULATION G RECONCILIATION
    In thousands (unaudited)
                
     Three Months Ended Nine Months Ended
     September 1,
    2018
     September 2,
    2017
     September 1,
    2018
     September 2,
    2017
                
    Net revenue 770,107   562,869   2,272,573   1,627,843 
                
    Gross profit$217,204  $150,400  $627,294  $435,434 
    Gross profit margin 28.2%  26.7%  27.6%  26.7%
                
    Adjustments:           
    Acquisition project costs 1,822   1,400   1,995   2,942 
    Organizational realignment 615   622   1,212   11,011 
    Royal restructuring and integration 1,395      2,303    
    Tax reform           
    Other           
    Adjusted gross profit$221,036  $152,422  $632,804  $449,387 
    Adjusted gross profit margin 28.7%  27.1%  27.8%  27.6%
                
    Adjusted gross profit and gross profit margin is a non-GAAP financial measures. 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 GAAP. Adjusted gross profit and gross profit margin is defined as adjusted gross profit and gross profit margin excluding the specific adjustments shown above. 
                
                
    H.B. FULLER COMPANY AND SUBSIDIARIES
    REGULATION G RECONCILIATION
    In thousands (unaudited)
                
     Three Months Ended Nine Months Ended
     September 1,
    2018
     September 2,
    2017
     September 1,
    2018
     September 2,
    2017
                
    Selling, general and administrative expenses$(146,069) $(110,219) $(442,288) $(325,904)
                
    Adjustments:           
    Acquisition project costs 279   544   1,113   2,201 
    Tonsan call option agreement 2   1,150   (2,323)  (2,453)
    Organizational realignment 413   870   998   7,934 
    Royal restructuring and integration 5,101   5,431   18,256   5,431 
    Other 2,565   1,800   6,293   5,728 
    Adjusted selling, general and administrative expenses$(137,709) $(100,424) $(417,951) $(307,063)
                
    Adjusted selling, general and administrative expenses is a non-GAAP financial measure. 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 GAAP. Adjusted selling, general and administrative expenses is defined as adjusted selling, general and administrative expenses excluding the specific adjustments shown above. 
     


     
    H.B. FULLER COMPANY AND SUBSIDIARIES
    REGULATION G RECONCILIATION
    In thousands (unaudited)
                             
      Americas    Asia ConstructionEngineering    Corporate H.B. Fuller
      Adhesives EIMEA Pacific Adhesives Adhesives Total Unallocated Consolidated
                             
    Three Months Ended September 1, 2018 $34,816 $8,758 $3,694 $12,767 $11,100  $71,135  $(33,405) $37,730 
    Net income attributable to H.B. Fuller                        
                             
    Adjustments:                        
    Acquisition project costs  2,036  26  12  13  13   2,100   (556)  1,544 
    Tonsan call option agreement  -  -  -  -  2   2   108   110 
    Organizational realignment  7  623  3  393  3   1,029   (150)  879 
    Royal restructuring and integration  2,123  1,286  429  1,902  756   6,496   (1,332)  5,164 
    Other  972  642  306  323  322   2,565   (3,326)  (761)
                             
    Adjusted net income attributable to H.B. Fuller  39,954  11,335  4,444  15,398  12,196   83,327   (38,661)  44,666 
                             
    Add:                        
    Interest expense, net  -  -  -  -  -   -   24,816   24,816 
    Income taxes  -  -  -  -  -   -   14,664   14,664 
    Depreciation expense  4,510  5,492  1,649  2,887  2,469   17,007   -   17,007 
    Amortization expense  6,500  2,331  487  5,231  4,567   19,116   -   19,116 
    Adjusted EBITDA1$ 50,964 $19,158 $6,580 $23,516 $19,232  $119,450  $819  $120,269 
                             
     
      Americas    Asia ConstructionEngineering    Corporate H.B. Fuller
      Adhesives EIMEA Pacific Adhesives Adhesives Total Unallocated Consolidated
                             
    Nine Months Ended
    September 1, 2018
     $84,934 $30,636 $11,056 $25,705 $32,675  $185,006$(55,143) $129,863 
    Net income attributable to H.B. Fuller                        
                             
    Adjustments:                        
    Acquisition project costs  2,878  73  35  37  84   3,107   (892)  2,215 
    Tonsan call option agreement  -  -  -  -  (2,323)  (2,323)  264   (2,059)
    Organizational realignment  187  1,340  5  673  6   2,211   100   2,311 
    Royal restructuring and integration  7,140  4,596  1,524  4,518  2,781   20,559   (6,081)  14,478 
    Tax reform  -  -  -  -  -   -   (35,555)  (35,555)
    Other  2,398  1,570  748  787  790   6,293   (8,150)  (1,857)
                             
    Adjusted net income attributable to H.B. Fuller  97,537  38,215  13,368  31,720  34,013   214,853   (105,457)  109,396 
                             
    Add:                        
    Interest expense  -  -  -  -  -   -   74,387   74,387 
    Income taxes  -  -  -  -  -   -   35,962   35,962 
    Depreciation expense  13,123  16,688  4,975  8,562  7,453   50,801   -   50,801 
    Amortization expense  16,464  7,651  1,490  19,092  12,938   57,635   -   57,635 
    Adjusted EBITDA1$ 127,124 $62,554 $19,833 $59,374 $54,404  $323,289  $4,892  $328,181 
                               


     
    H.B. FULLER COMPANY AND SUBSIDIARIES
    REGULATION G RECONCILIATION
    In thousands (unaudited)
                             
      Americas    Asia ConstructionEngineering     H.B. Fuller
      Adhesives EIMEA Pacific Adhesives Adhesives Total Unallocated Consolidated
                             
    Three Months Ended September 2, 2017 $25,434 $8,873 $2,793 $(698) $3,779  $40,181  $(15,043) $25,138 
    Net income attributable to H.B. Fuller                        
                             
    Adjustments:                        
    Acquisition project costs  1,703  108  43  45   45   1,944   (678)  1,266 
    Tonsan call option agreement  -  -  -  -   1,149   1,149   73   1,222 
    Organizational realignment  283  926  44  164   75   1,492   (660)  832 
    Royal Restructuring  2,059  1,359  647  682   684   5,431   (1,901)  3,530 
    Other  683  450  214  226   227   1,800   (470)  1,330 
                             
    Adjusted net income attributable to H.B. Fuller  30,162  11,716  3,741  419   5,959   51,997   (18,679)  33,318 
                             
    Add:                        
    Interest expense  -  -  -  -   -   -   7,276   7,276 
    Income taxes  -  -  -  -   -   -   12,971   12,971 
    Depreciation expense  3,401  3,955  1,492  1,892   1,592   12,332   -   12,332 
    Amortization expense  1,798  1,137  415  2,301   2,248   7,899   -   7,899 
                                  
    Adjusted EBITDA1  $35,361 $16,808 $5,648 $4,612  $9,799  $72,228  $1,568  $73,796 
                             
                             
                             
      Americas    Asia ConstructionEngineering     H.B. Fuller
      Adhesives EIMEA Pacific Adhesives Adhesives Total Unallocated Consolidated
                             
    Nine Months Ended September 2, 2017 $72,921 $18,753 $9,423 $(3,234) $11,667  $109,530  $(43,730) $65,800 
    Net income attributable to H.B. Fuller                        
                             
    Adjustments:                        
    Acquisition project costs  4,143  430  185  192   193   5,143   (1,780)  3,363 
    Tonsan call option agreement  -  -  -  -   (2,453)  (2,453)  212   (2,241)
    Organizational realignment  2,314  8,459  1,755  5,622   795   18,945   (4,114)  14,831 
    Royal Restructuring  2,059  1,359  647  682   684   5,431   (1,901)  3,530 
    Other  2,172  1,433  683  719   721   5,728   (1,000)  4,728 
                             
    Adjusted net income attributable to H.B. Fuller  83,609  30,434  12,693  3,981   11,607   142,324   (52,313)  90,011 
                             
    Add:                        
    Interest expense, net  -  -  -  -   -   -   22,248   22,248 
    Income taxes  -  -  -  -   -   -   34,974   34,974 
    Depreciation expense  10,434  11,260  4,452  5,054   4,662   35,862   -   35,862 
    Amortization expense  4,959  3,271  1,293  6,912   6,693   23,128   -   23,128 
                                  
    Adjusted EBITDA1  $99,002 $44,965 $18,438 $15,947  $22,962  $201,314  $4,909  $206,223 
                             


     
     H.B. FULLER COMPANY AND SUBSIDIARIES
    SEGMENT FINANCIAL INFORMATION
    NET REVENUE GROWTH
    (unaudited)
                
    Three Months Ended September 1, 2018
                
     Americas
    Adhesives
     EIMEA Asia
    Pacific
     Construction
    Adhesives
     Engineering
    Adhesives
     Total HBF
    Price5.5% 5.1% 1.7% 0.5% 7.0% 4.6%
    Volume(5.0%) 0.4% 1.1% 5.2% 6.1% (0.5%)
    Mix1.2% 0.7% (0.1%) (1.0%) 1.3% 0.7%
    Acquisition24.4% 29.3% 1.9% 100.5% 48.4% 34.2%
      Constant Currency Growth626.1% 35.5% 4.6% 105.2% 62.8% 39.0%
    F/X(3.8%) (3.0%) 0.0% (0.1%) 0.6% (2.2%)
                
     22.3% 32.5% 4.6% 105.1% 63.4% 36.8%
                
                
    Nine Months Ended September 1, 2018
                
     Americas
    Adhesives
     EIMEA Asia
    Pacific
     Construction
    Adhesives
     Engineering
    Adhesives
     Total HBF
    Price3.3% 4.4% 1.1% (0.1%) 6.1% 3.3%
    Volume(3.1%)   (0.1%) 2.4% 0.3% 6.5% (0.2%)
    Mix1.0% 0.4% (0.4%) (0.4%) 1.5% 0.6%
    Acquisition26.1% 29.5% 1.7% 88.8% 49.3% 34.0%
      Constant Currency Growth627.3% 34.2% 4.8% 88.6% 63.4% 37.7%
    F/X(1.6%) 5.5% 4.0% 0.6% 5.1% 1.9%
                
     25.7% 39.7% 8.8% 89.2% 68.5% 39.6%

    __________________________________

    Adjusted net income and adjusted diluted earnings per share (EPS) are non-GAAP financial measures and exclude the following costs: Tax reform impacts; organizational realignment to support the 2020 strategic plan as announced in December 2016; acquisition project costs for integrating and accounting for past and present acquisitions; Royal restructuring and integration activities; and other costs, primarily consisting of Project ONE ERP development costs. Other than items referenced in the press release, we have not included a full reconciliation of adjusted EPS to EPS as part of our guidance because all potential adjustments are not known at this time. 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 is defined as net income before interest, income taxes, depreciation expense and amortization expense, and excluding acquisition project costs, TONSAN call option agreement, organizational realignment Royal restructuring and integration, the impact from tax reform and other costs, primarily consisting of Project ONE ERP development costs. 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. Other than items referenced in the press release, we have not included a full reconciliation of adjusted EBITDA to EBITDA or net income as part of our guidance because all of the potential adjustments are not known at this time.
    2Proforma financial results are provided to reflect the historical combination of H.B. Fuller and Royal as of the comparable prior periods before the acquisition was completed. The proforma results and reconciliations to GAAP outcomes were filed on form 8-K dated March 28, 2018.
    3Adjusted gross profit and adjusted gross profit margin are non-GAAP financial measures. Adjusted gross profit excludes costs associated with: organizational realignment to support the 2020 strategic plan as announced in December 2016; integrating and accounting for past and present acquisitions; and Royal integration activities. Adjusted gross profit margin is defined as adjusted gross profit divided by adjusted net revenue.
    4Revenue and Operating Income in FY 2017 are presented on a Proforma basis and reconciled in the 8-K filed March 28, 2018. Net Income and diluted EPS are adjusted as they were presented during FY 2017 and do not include the impact of Royal in 2017.
    5Adjusted SG&A expense is a non-GAAP financial measure which excludes costs associated with: organizational realignment to support the 2020 strategic plan as announced in December 2016; Project ONE development costs; integrating and accounting for past and present acquisitions; and Royal integration activities.
    6Constant currency revenue is a non-GAAP financial measure defined as changes in revenue due to price, volume, mix and acquisitions and excludes revenue changes driven by foreign currency translation. The schedule above reconciles each component of net revenue growth.
      

    Barbara Doyle
    Investor Relations contact
    651-236-5023

    H.B. Fuller Company

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