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H.B. Fuller Reports Third Quarter 2015 Results

Third Quarter Adjusted Diluted EPS $0.611, Up 45 Percent From Prior Year;

Third Quarter Diluted EPS $0.52;

Fourth Quarter 2015 Adjusted Diluted EPS Guidance Set at $0.70

ST. PAUL, Minn., Sept. 23, 2015 (GLOBE NEWSWIRE) -- H.B. Fuller Company (NYSE:FUL) today reported financial results for the third quarter that ended August 29, 2015.

Items of Note for the Third Quarter of 2015:

  • Adjusted EBITDA margin2 of 13.8 percent, up 330 basis points year-over-year, on track to achieve 15 percent adjusted EBITDA margin during 2016 fiscal year;
  • Operating cash flow and free cash flow improved substantially compared to prior year; cash flow from operations of $37 million in the third quarter and $153 million year-to-date;
  • Constant currency revenue increased 6.7 percent compared to the prior year, driven by strong growth in Construction Products and Asia Pacific operating segments;
  • Adjusted gross profit margin3 increased 360 basis points year-over-year;
  • Adjusted Selling, General and Administrative (SG&A) expenses4 were tightly controlled at 18.3 percent of adjusted net revenue5.

Third Quarter 2015 Results:

Net income for the third quarter of 2015 was $26.8 million, or $0.52 per diluted share, versus net income of $4.0 million, or $0.08 per diluted share, in last year's third quarter. Adjusted diluted earnings per share in the third quarter of 2015 were $0.611, up 45 percent versus the prior year's adjusted result of $0.421.

Net revenue for the third quarter of 2015 was $524.1 million, down 0.5 percent versus the third quarter of 2014. Higher volume and higher average selling prices positively impacted net revenue growth by 6.2 and 0.5 percentage points, respectively. Foreign currency translation negatively impacted net revenue growth by 7.2 percentage points. Constant currency revenue grew by 6.7 percent year-over-year.

Adjusted gross profit margin3 was up 360 basis points versus the prior year. Adjusted SG&A expense4 was up about 4 percent versus last year but, excluding the SG&A added by the Tonsan acquisition, adjusted SG&A expense was down 6 percent versus the same period last year. Adjusted EBITDA2 in the third quarter was $72 million and 13.8 percent of adjusted net revenue5, up 31 percent and 330 basis points, respectively, from the prior year. Special charges and non-recurring items were significantly reduced in the current quarter versus the prior year, driving substantial improvement of year-over-year GAAP earnings.

Our adjusted EPS for the third quarter fell short of our internal forecasts that formed the basis of the earnings guidance we provided at the end of the second quarter. The primary driver of the lower than expected earnings was lower than expected revenue in the Americas operating segment. Revenue generation in the Americas operating segment is running below prior year levels primarily due to generally weak end market conditions and some residual negative effects of the Project ONE implementation in North America last year. In addition, our forecast for our full-year core tax rate increased slightly and this reduced our EPS in the quarter relative to our forecast. Because both of these factors are expected to persist into the fourth quarter, we have also adjusted our EPS expectations for the fourth quarter.

In the first half of the year, our Americas operating segment revenue was 2.5 percent below the prior year on a constant currency basis; constant currency revenue in the third quarter was down nearly 7 percent year-over-year. The year-over-year comparison was impacted by unusually strong third quarter revenue in the prior year. When adjusting the base year to reflect more normal seasonal patterns, we estimate that this year's third quarter revenue was roughly in line with the first half trend. Our forecast for the third quarter assumed a change in trend on the Americas revenue performance, and that has not yet occurred.

Our adjusted third quarter EPS was up 45 percent relative to last year, reflecting the cumulative impact of operational improvements across all of our operating segments and the benefit of effective price management and raw material cost management, all despite the negative impact of the strong US dollar. Our Americas, Asia Pacific and Construction Products segments posted historically high adjusted EBITDA margins2 in the third quarter and each posted significant increases in adjusted EBITDA2 as well. Our EIMEA segment improved sequentially and further gains are expected in the fourth quarter.

"We continue to drive steady improvements in our business," said Jim Owens, H.B. Fuller president and chief executive officer. "We posted an adjusted EBITDA margin of nearly 14 percent in the third quarter and we expect further margin improvement in the fourth quarter. The operational problems that hampered us a year ago are largely behind us. Our focus for the final quarter of this year is to re-establish growth momentum in the Americas and EIMEA operating segments and drive productivity gains across our manufacturing network. We expect a strong finish in the fourth quarter providing strong momentum for the 2016 fiscal year."

Balance Sheet and Cash Flow:

At the end of the third quarter of 2015, we had cash totaling $86 million and total debt of $728 million. This compares to second quarter 2015 cash and debt levels of $79 million and $737 million, respectively. Sequentially, net debt was down by $16 million. Cash flow from operations was positive $37 million in the third quarter and $153 million for the year-to-date. Capital expenditures were $10 million in the third quarter and $49 million for the year-to-date.

Year-To-Date Results:

Income from continuing operations for the first nine months of 2015 was $63.3 million, or $1.22 per diluted share, versus income from continuing operations of $39.4 million, or $0.76 per diluted share, in the first nine months of 2014. Adjusted total diluted earnings per share in the first nine months of 2015 were $1.531, down versus the prior year's result of $1.691. Lower revenue progression in the Americas and a higher core tax rate were key drivers of the year-over-year decline in adjusted diluted EPS.

Net revenue for the first nine months of 2015 was $1,535.6 million, down 1.4 percent versus the first nine months of 2014. Higher volume and higher average selling prices positively impacted net revenue growth by 4.4 and 0.6 percentage points, respectively. Constant currency revenue grew by 5.0 percent year-over-year. Foreign currency translation negatively impacted net revenue growth by 6.4 percentage points, or about $100 million in the first nine months of 2015. We anticipate that foreign currency translation will negatively impact full year net revenue by about $115 million versus last year.

Fiscal 2015 Outlook:

We are updating our earnings guidance for the 2015 fiscal year primarily to reflect lower revenue expectation in the Americas operating segment and a slightly higher tax rate. Our current target for full-year adjusted EBITDA is about $270 million, just slightly below our original guidance provided at the beginning of the fiscal year, with a full-year EBITDA margin of about 13 percent and second half EBITDA margin above 14 percent. Our revised and updated adjusted earnings per diluted share estimate for fiscal year 2015 is $2.23, with adjusted EPS of $0.70 in the fourth quarter. We expect revenue of about $2.075 billion for the full year; fourth quarter revenue is expected to be approximately $540 million.

Conference Call:

The Company will host an investor conference call to discuss third quarter 2015 results on Thursday, September 24, 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.

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 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)
13 Weeks Ended Percent of 13 Weeks Ended Percent of
August 29, 2015 Net Revenue August 30, 2014 Net Revenue
Net revenue $ 524,133 100.0% $ 526,765 100.0%
Cost of sales (377,293) (72.0%) (401,611) (76.2%)
Gross profit 146,840 28.0% 125,154 23.8%
Selling, general and administrative expenses (98,297) (18.8%) (96,779) (18.4%)
Special charges, net (1,297) (0.2%) (12,343) (2.3%)
Other income (expense), net (1,040) (0.2%) (289) (0.1%)
Interest expense (6,448) (1.2%) (5,292) (1.0%)
Income before income taxes and income from equity method investments 39,758 7.6% 10,451 2.0%
Income taxes (14,372) (2.7%) (8,035) (1.5%)
Income from equity method investments 1,500 0.3% 1,668 0.3%
Net income including non-controlling interests 26,886 5.1% 4,084 0.8%
Net income attributable to non-controlling interests (79) (0.0%) (97) (0.0%)
Net income attributable to H.B. Fuller $ 26,807 5.1% $ 3,987 0.8%
Basic income per common share attributable to H.B. Fuller $ 0.53 $ 0.08
Diluted income per common share attributable to H.B. Fuller $ 0.52 $ 0.08
Weighted-average common shares outstanding:
Basic 50,421 50,053
Diluted 51,530 51,297
Dividends declared per common share $ 0.13 $ 0.12
Selected Balance Sheet Information (subject to change prior to filing of the Company's Quarterly Report on Form 10-Q)
August 29, 2015 November 29, 2014 August 30, 2014
Cash & cash equivalents $ 85,821 $ 77,569 $ 75,544
Trade accounts receivable, net 341,932 341,307 345,104
Inventories 266,896 251,290 281,265
Trade payables 170,602 174,494 212,491
Total assets 2,068,638 1,869,006 1,937,518
Total debt 727,578 574,884 562,901
H.B. FULLER COMPANY AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
In thousands, except per share amounts (unaudited)
39 Weeks Ended Percent of 39 Weeks Ended Percent of
August 29, 2015 Net Revenue August 30, 2014 Net Revenue
Net revenue $ 1,535,556 100.0% $ 1,556,780 100.0%
Cost of sales (1,123,573) (73.2%) (1,155,926) (74.3%)
Gross profit 411,983 26.8% 400,854 25.7%
Selling, general and administrative expenses (293,712) (19.1%) (289,950) (18.6%)
Special charges (4,592) (0.3%) (37,615) (2.4%)
Other income (expense), net (1,246) (0.1%) (1,543) (0.1%)
Interest expense (18,765) (1.2%) (14,178) (0.9%)
Income from continuing operations before income taxes and income from equity method investments 93,668 6.1% 57,568 3.7%
Income taxes (34,528) (2.2%) (23,414) (1.5%)
Income from equity method investments 4,157 0.3% 5,205 0.3%
Income from continuing operations 63,297 4.1% 39,359 2.5%
Loss from discontinued operations (1,300) (0.1%) -- (0.0%)
Net income including non-controlling interests 61,997 4.0% 39,359 2.5%
Net income attributable to non-controlling interests (308) (0.0%) (264) 0.0%
Net income attributable to H.B. Fuller $ 61,689 4.0% $ 39,095 2.5%
Basic income per common share attributable to H.B. Fullera
Income from continuing operations 1.25 0.78
Loss from discontinued operations (0.03) --
$ 1.23 $ 0.78
Diluted income per common share attributable to H.B. Fullera
Income from continuing operations 1.22 0.76
Loss from discontinued operations (0.03) --
$ 1.20 $ 0.76
Weighted-average common shares outstanding:
Basic 50,318 49,973
Diluted 51,460 51,242
Dividends declared per common share $ 0.38 $ 0.34
a Income per share amounts may not add due to rounding
H.B. FULLER COMPANY AND SUBSIDIARIES
SEGMENT FINANCIAL INFORMATION
In thousands (unaudited)
13 Weeks Ended 13 Weeks Ended
August 29, 2015 August 30, 2014
Net Revenue:
Americas Adhesives $ 218,844 $ 237,657
EIMEA 147,434 177,478
Asia Pacific 95,877 63,847
Construction Products 61,978 47,783
Total H.B. Fuller $ 524,133 $ 526,765
Segment Operating Income:6
Americas Adhesives $ 33,549 $ 21,854
EIMEA 4,553 3,139
Asia Pacific 6,921 897
Construction Products 3,520 2,485
Total H.B. Fuller $ 48,543 $ 28,375
Depreciation Expense:
Americas Adhesives $ 4,174 $ 4,353
EIMEA 4,079 4,594
Asia Pacific 2,598 1,340
Construction Products 1,060 918
Total H.B. Fuller $ 11,911 $ 11,205
Amortization Expense:
Americas Adhesives $ 1,268 $ 1,394
EIMEA 1,566 1,924
Asia Pacific 1,926 462
Construction Products 2,139 1,954
Total H.B. Fuller $ 6,899 $ 5,734
EBITDA:7
Americas Adhesives $ 38,991 $ 27,601
EIMEA 10,198 9,657
Asia Pacific 11,445 2,699
Construction Products 6,719 5,357
Total H.B. Fuller $ 67,353 $ 45,314
Segment Operating Margin:8
Americas Adhesives 15.3% 9.2%
EIMEA 3.1% 1.8%
Asia Pacific 7.2% 1.4%
Construction Products 5.7% 5.2%
Total H.B. Fuller 9.3% 5.4%
EBITDA Margin:7
Americas Adhesives 17.8% 11.6%
EIMEA 6.9% 5.4%
Asia Pacific 11.9% 4.2%
Construction Products 10.8% 11.2%
Total H.B. Fuller 12.9% 8.6%
Adjusted EBITDA2
Americas Adhesives $ 40,550 $ 33,494
EIMEA 10,503 12,666
Asia Pacific 12,690 3,263
Construction Products 8,462 5,772
Total H.B. Fuller $ 72,205 $ 55,195
Adjusted EBITDA Margin2
Americas Adhesives 18.5% 14.1%
EIMEA 7.1% 7.1%
Asia Pacific 13.2% 5.1%
Construction Products 13.6% 12.1%
Total H.B. Fuller 13.8% 10.5%
H.B. FULLER COMPANY AND SUBSIDIARIES
SEGMENT FINANCIAL INFORMATION
In thousands (unaudited)
39 Weeks Ended 39 Weeks Ended
August 29, 2015 August 30, 2014
Net Revenue:
Americas Adhesives $ 651,313 $ 684,308
EIMEA 446,516 538,693
Asia Pacific 260,971 196,842
Construction Products 176,756 136,937
Total H.B. Fuller $ 1,535,556 $ 1,556,780
Segment Operating Income:6
Americas Adhesives $ 89,146 $ 78,949
EIMEA 5,478 21,735
Asia Pacific 11,760 4,443
Construction Products 11,887 5,777
Total H.B. Fuller $ 118,271 $ 110,904
Depreciation Expense:
Americas Adhesives $ 12,569 $ 12,284
EIMEA 12,561 11,895
Asia Pacific 6,905 3,930
Construction Products 3,276 2,684
Total H.B. Fuller $ 35,311 $ 30,793
Amortization Expense:
Americas Adhesives $ 3,981 $ 4,182
EIMEA 4,926 5,815
Asia Pacific 4,613 1,453
Construction Products 6,526 5,861
Total H.B. Fuller $ 20,046 $ 17,311
EBITDA:7
Americas Adhesives $ 105,696 $ 95,415
EIMEA 22,965 39,445
Asia Pacific 23,278 9,826
Construction Products 21,689 14,322
Total H.B. Fuller $ 173,628 $ 159,008
Segment Operating Margin:8
Americas Adhesives 13.7% 11.5%
EIMEA 1.2% 4.0%
Asia Pacific 4.5% 2.3%
Construction Products 6.7% 4.2%
Total H.B. Fuller 7.7% 7.1%
EBITDA Margin:7
Americas Adhesives 16.2% 13.9%
EIMEA 5.1% 7.3%
Asia Pacific 8.9% 5.0%
Construction Products 12.3% 10.5%
Total H.B. Fuller 11.3% 10.2%
Adjusted EBITDA2
Americas Adhesives $ 108,565 $ 107,034
EIMEA 25,420 47,105
Asia Pacific 28,579 11,851
Construction Products 26,111 15,545
Total H.B. Fuller $ 188,675 $ 181,535
Adjusted EBITDA Margin:2
Americas Adhesives 16.7% 15.6%
EIMEA 5.7% 8.7%
Asia Pacific 11.0% 6.0%
Construction Products 14.7% 11.4%
Total H.B. Fuller 12.3% 11.7%
H.B. FULLER COMPANY AND SUBSIDIARIES
SEGMENT FINANCIAL INFORMATION
NET REVENUE GROWTH
(unaudited)
13 Weeks Ended August 29, 2015
Americas Construction
Adhesives EIMEA Asia Pacific Products Total HBF
Price 1.0% (0.1%) (1.6%) 3.5% 0.5%
Volume (7.8%) 0.7% 58.6% 26.2% 6.2%
Constant Currency Growth (6.8%) 0.6% 57.0% 29.7% 6.7%
F/X (1.1%) (17.5%) (6.8%) 0.0% (7.2%)
(7.9%) (16.9%) 50.2% 29.7% (0.5%)
39 Weeks Ended August 29, 2015
Americas Construction
Adhesives EIMEA Asia Pacific Products Total HBF
Price 0.7% 0.1% (0.5%) 3.6% 0.6%
Volume (4.6%) (1.7%) 37.9% 25.5% 4.4%
Constant Currency Growth (3.9%) (1.6%) 37.4% 29.1% 5.0%
F/X (0.9%) (15.5%) (4.8%) 0.0% (6.4%)
(4.8%) (17.1%) 32.6% 29.1% (1.4%)
H.B. FULLER COMPANY AND SUBSIDIARIES
REGULATION G RECONCILIATION
In thousands (unaudited)
13 Weeks Ended 13 Weeks Ended
August 29, 2015 August 30, 2014
Net income including non-controlling interests $ 26,886 $ 4,084
Income from equity method investments (1,500) (1,668)
Income taxes 14,372 8,035
Interest expense 6,448 5,292
Other income (expense), net 1,040 289
Special charges 1,297 12,343
Segment operating income6 48,543 28,375
Depreciation expense 11,911 11,205
Amortization expense 6,899 5,734
EBITDA7 $ 67,353 $ 45,314
EBITDA margin7 12.9% 8.6%
Non-recurring costs 4,852 9,881
Adjusted EBITDA2 $ 72,205 $ 55,195
Adjusted EBITDA margin2 13.8% 10.5%
39 Weeks Ended 39 Weeks Ended
August 29, 2015 August 30, 2014
Net income including non-controlling interests $ 61,997 $ 39,359
Loss from discontinued operations 1,300 --
Income from equity method investments (4,157) (5,205)
Income taxes 34,528 23,414
Interest expense 18,765 14,178
Other income (expense), net 1,246 1,543
Special charges 4,592 37,615
Segment operating income6 118,271 110,904
Depreciation expense 35,311 30,793
Amortization expense 20,046 17,311
EBITDA7 $ 173,628 $ 159,008
EBITDA margin7 11.3% 10.2%
Non-recurring costs 15,047 22,527
Adjusted EBITDA2 $ 188,675 $ 181,535
Adjusted EBITDA margin2 12.3% 11.7%
H.B. FULLER COMPANY AND SUBSIDIARIES
REGULATION G RECONCILIATION
In thousands (unaudited)
13 Weeks Ended 13 Weeks Ended
August 29, 2015 August 30, 2014
Net revenue $ 524,133 $ 526,765
Cost of sales (377,293) (401,611)
Gross profit 146,840 125,154
Selling, general and administrative expenses (98,297) (96,779)
Segment operating income6 48,543 28,375
Depreciation expense 11,911 11,205
Amortization expense 6,899 5,734
EBITDA7 $ 67,353 $ 45,314
EBITDA margin7 12.9% 8.6%
Non-recurring costs 4,852 9,881
Adjusted EBITDA2 $ 72,205 $ 55,195
Adjusted EBITDA margin2 13.8% 10.5%
39 Weeks Ended 39 Weeks Ended
August 29, 2015 August 30, 2014
Net revenue $ 1,535,556 $ 1,556,780
Cost of sales (1,123,573) (1,155,926)
Gross profit 411,983 400,854
Selling, general and administrative expenses (293,712) (289,950)
Segment operating income6 118,271 110,904
Depreciation expense 35,311 30,793
Amortization expense 20,046 17,311
EBITDA7 $ 173,628 $ 159,008
EBITDA margin7 11.3% 10.2%
Non-recurring costs 15,047 22,527
Adjusted EBITDA2 $ 188,675 $ 181,535
Adjusted EBITDA margin2 12.3% 11.7%
H.B. FULLER COMPANY AND SUBSIDIARIES
REGULATION G RECONCILIATION
In thousands, except per share amounts (unaudited)
% of Adjusted % of
13 Weeks Ended Net 13 Weeks Ended 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%
Basic income (loss) per common share attributable to H.B. Fuller $ 0.53 $ (0.09) $ 0.62
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)
% of Adjusted % of
13 Weeks Ended Net 13 Weeks Ended Net
August 30, 2014 Revenue Adjustments August 30, 2014 Revenue
Net revenue $ 526,765 100.0% $ -- $ 526,765 100.0%
Cost of sales (401,611) (76.2%) (5,337) (396,274) (75.2%)
Gross profit 125,154 23.8% (5,337) 130,491 24.8%
Selling, general and administrative expenses (96,779) (18.4%) (4,543) (92,236) (17.5%)
Acquisition and transformation related costs (1,864)
Workforce reduction costs 55
Facility exit costs (8,802)
Other related costs (1,732)
Special charges, net (12,343) (2.3%) (12,343) -- 0.0%
Other income (expense), net (289) (0.1%) -- (289) (0.1%)
Interest expense (5,292) (1.0%) -- (5,292) (1.0%)
Income before income taxes and income from equity method investments 10,451 2.0% (22,223) 32,674 6.2%
Income taxes (8,035) (1.5%) 4,531 (12,566) (2.4%)
- Effective tax rate 76.9% 20.4% 38.5%
Income from equity method investments 1,668 0.3% -- 1,668 0.3%
Net income including non-controlling interests 4,084 0.8% (17,692) 21,776 4.1%
Net income attributable to non-controlling interests (97) (0.0%) -- (97) (0.0%)
Net income attributable to H.B. Fuller $ 3,987 0.8% $ (17,692) $ 21,679 4.1%
Basic income (loss) per common share attributable to H.B. Fuller $ 0.08 $ (0.35) $ 0.43
Diluted income (loss) per common share attributable to H.B. Fuller $ 0.08 $ (0.34) $ 0.42 1
Weighted-average common shares outstanding:
Basic 50,053 50,053 50,053
Diluted 51,297 51,297 51,297
H.B. FULLER COMPANY AND SUBSIDIARIES
REGULATION G RECONCILIATION
In thousands, except per share amounts (unaudited)
% of Adjusted % of
39 Weeks Ended Net 39 Weeks Ended 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 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 4.1% (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 income 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. Fuller4, a
Income (loss) from continuing operations 1.25 (0.31) 1.56
Loss from discontinued operations (0.03) (0.03) --
Basic income per common share attributable to H.B. Fuller $ 1.23 $ (0.34) $ 1.56
Diluted income per common share attributable to H.B. Fuller4, a
Income (loss) from continuing operations 1.22 (0.30) 1.53
Loss from discontinued operations (0.03) (0.03) --
Diluted income per common share attributable to H.B. Fuller $ 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
REGULATION G RECONCILIATION
In thousands, except per share amounts (unaudited)
% of Adjusted % of
39 Weeks Ended Net 39 Weeks Ended Net
August 30, 2014 Revenue Adjustments August 30, 2014 Revenue
Net revenue $ 1,556,780 100.0% $ -- $ 1,556,780 100.0%
Cost of sales (1,155,926) (74.3%) (12,022) (1,143,904) (73.5%)
Gross profit 400,854 25.7% (12,022) 412,876 26.5%
Selling, general and administrative expenses (289,950) (18.6%) (10,502) (279,448) (18.0%)
Acquisition and transformation related costs (6,150)
Workforce reduction costs (2,903)
Facility exit costs (21,254)
Other related costs (7,308)
Special charges (37,615) (2.4%) (37,615) -- 0.0%
Other income (expense), net (1,543) (0.1%) (1,543) (0.1%)
Interest expense (14,178) (0.9%) (14,178) (0.9%)
Income from continuing operations before income taxes and income from equity method investments 57,568 3.7% (60,139) 117,707 7.6%
Income taxes (23,414) (1.5%) 12,411 (35,825) (2.3%)
- Effective tax rate 40.7% 20.6% 30.4%
Income from equity method investments 5,205 0.3% -- 5,205 0.3%
Net income including non-controlling interests 39,359 2.5% (47,728) 87,087 5.6%
Net loss attributable to non-controlling interests (264) (0.0%) -- (264) (0.0%)
Net income attributable to H.B. Fuller $ 39,095 2.5% $ (47,728) $ 86,823 5.6%
Basic income per common share attributable to H.B. Fuller $ 0.78 $ (0.96) $ 1.74
Diluted income per common share attributable to H.B. Fuller $ 0.76 $ (0.93) $ 1.69 1
Weighted-average common shares outstanding:
Basic 49,973 49,973 49,973
Diluted 51,242 51,242 51,242
H.B. FULLER COMPANY AND SUBSIDIARIES
ADJUSTED EARNING PER SHARE RECONCILIATION
In thousands (unaudited)
13 weeks ended August 29, 2015 13 weeks ended August 30, 2014
Income Income
before Income Diluted before Income Diluted
Income Tax Taxes EPS Income Tax Taxes EPSa
Income from continuing operations $ 41,179 $ 14,372 $ 0.52 $ 12,022 $ 8,035 $ 0.08
Special charges, net 1,297 214 0.02 12,343 1,406 0.21
Acquisition project costsb 572 73 0.01 292 50 --
Construction Productsc 1,743 664 0.02 -- -- --
EIMEA business integration costsd 305 23 0.01 1,896 144 0.03
Project ONEe -- -- -- 7,692 2,931 0.09
Otherf 2,085 594 0.03 -- -- --
Adjusted Earnings $ 47,181 $ 15,940 $ 0.61 $ 34,245 $ 12,566 $ 0.42
39 weeks ended August 29, 2015 39 weeks ended August 30, 2014
Income Income
before Income Diluted before Income Diluted
Income Tax Taxes EPS Income Tax Taxes EPS
Income from continuing operations $ 97,517 $ 34,528 $ 1.22 $ 62,509 $ 23,414 $ 0.76
Special charges, net 4,592 650 0.08 37,615 5,303 0.63
Acquisition project costsb 4,513 553 0.08 1,333 221 0.02
Construction Productsc 4,422 1,685 0.05 -- -- --
EIMEA business integration costsd 2,360 179 0.04 5,392 867 0.09
Project ONEe -- -- -- 15,799 6,020 0.19
Otherf 3,936 1,093 0.06 -- -- --
Adjusted Earnings $ 117,340 $ 38,688 $ 1.53 $ 122,648 $ 35,825 $ 1.69
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

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 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.

3 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.

4 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.

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

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.

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

Source:H.B. Fuller Company