CORRECTING and REPLACING – H.B. Fuller Reports Fourth Quarter and Fiscal Year 2017 Results

Fiscal Year 2017 Diluted EPS $1.13, Fiscal Year Adjusted Diluted EPS $2.451a;
Excluding Impacts of the Royal Transaction, Fiscal Year Adjusted Diluted EPS $2.501b
Fiscal Year 2018 Adjusted Diluted EPS Guidance set at $3.10 to $3.40

ST. PAUL, Minn., Jan. 24, 2018 (GLOBE NEWSWIRE) -- In a release issued under the same headline yesterday by H.B. Fuller Company (NYSE:FUL), please note that throughout the release, some numbers were inaccurate. The corrected release follows:

H.B. Fuller Company (NYSE:FUL) today reported financial results for the fourth quarter and fiscal year that ended December 2, 2017 and initiated guidance for fiscal 2018. In October 2017, the Company acquired Royal Adhesives & Sealants, LLC (“Royal”), which had net revenue of $658 million during the 2017 fiscal year ended December 2, 2017.

Items of Note for 2018 Guidance:

  • More than 30 percent revenue growth versus 2017 fiscal year; 6 to 7 percent revenue growth on a pro forma basis2;
  • Adjusted EBITDA3 of approximately $465 million, an increase of about 60 percent versus 2017 and approximately 13 percent growth versus 2017 on a pro forma basis2;
  • Adjusted diluted EPS1a in the range of $3.10 to $3.40, an increase of 24 percent to 36 percent versus 2017;
  • Core tax rate of between 25 and 27 percent, reflecting an estimate based on the recently passed legislation;
  • Cash flow from operating activities of approximately $290 million. Capital expenditures planned at approximately $90 million;
  • Free cash flow4 of approximately $200 million of which approximately $170 million will be used to repay debt.

Items of Note for the Fourth Quarter of 2017:

  • Our acquisition of Royal has expanded our position in markets that require highly specified adhesive solutions;
  • Net revenue growth of 18 percent versus the fourth quarter of 2016. Adjusting for the Royal acquisition and the extra week in the fourth quarter of 2016, constant currency revenue5 growth was 12 percent, with organic revenue growth of 8 percent and organic volume growth of 6 percent;
  • Net loss was $7.6 million in the fourth quarter of 2017; adjusted net income, excluding the impact of the Royal transaction, was $38.9 million, or $0.751 per diluted share;
  • Adjusted EBITDA3 margin, excluding the impact of the Royal transaction, was up sequentially to 13.1 percent;
  • Cash flow from operations for the 2017 fiscal year was $136 million. Excluding the impact of Royal, cash flow from operations was $120 million in the fourth quarter and $197 million for the 2017 fiscal year;
  • Adjusting for the extra week in the fourth quarter of 2016, organic volume growth for Engineering Adhesives was 19 percent in the quarter; Asia Pacific grew volume approximately 10 percent versus last year; the Americas and EIMEA had solid mid-single digit volume growth and Construction Products saw improved top-line trends versus prior periods this year;
  • Construction Products adjusted EBITDA3 margin was up 550 basis points versus the prior year’s fourth quarter and back to double digits.

Fiscal 2018 Guidance:
We are introducing an adjusted EPS1a guidance range for 2018 of between $3.10 and $3.40. Adjusted EBITDA3 for fiscal year 2018 is expected to be approximately $465 million. Organic growth on proforma revenue2 is expected to be 6 to 7 percent for 2018 versus the 2017 fiscal year which reflects good volume growth, favorable foreign currency translation and further pricing to offset continued raw material inflation. Our core tax rate is expected to be between 25 and 27 percent, which reflects our current estimate of the impact of the recently passed tax legislation. We expect capital expenditures to be around $90 million, which includes approximately $15 million for integration related capital expenditures.

“Our 2018 guidance reflects a step change in performance as a result of the continuation of the strong underlying growth and profit improvement in our existing business combined with continued success of the Royal business which we acquired in the fourth quarter,” said Jim Owens, H.B. Fuller President and Chief Executive Officer. “Integration activities are well under way and are going very smoothly and we are excited about the cost synergy and growth opportunities that combining these two great companies will create. The combined businesses will create solid organic growth, sizable margin improvement and significant increases in free cash flow for H.B. Fuller.”

This guidance excludes between $15 and $20 million, pre-tax, of expenses required to integrate the Royal business and other businesses acquired in 2017, between $7 and $10 million of expenses, pre-tax, related to Project ONE ERP development costs as well as other items that cannot reasonably be estimated at this time. 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.

Fourth Quarter 2017 Results:
Net loss for the fourth quarter of 2017 was $7.6 million, or a loss of $0.15 per diluted share, versus net income of $39.1 million, or $0.76 per diluted share, in last year’s fourth quarter. Adjusted diluted earnings per share in the fourth quarter of 2017, excluding the impact of the Royal transaction, were $0.751b versus the prior year’s adjusted result of $0.741a, which included an extra week. Adjusting for the extra week in 2016, adjusted earnings per share were up 9 percent as strong volume growth was offset by higher year-over-year raw material costs.

Net revenue for the fourth quarter of 2017 was $678.2 million, up 18 percent versus the fourth quarter of 2016. Adjusting for the extra week in 2016 and excluding the impact of Royal, revenue was up 12 percent as higher volume, pricing and acquisitions all positively impacted net revenue growth. Organic revenue, defined as constant currency revenue less the impact from acquisitions, was up 8 percent year-over-year.

Gross profit margin was 24.7 percent. Adjusted gross profit margin6, excluding the impact of the Royal transaction, was 26.5 percent. Margins remained lower year-over-year due to continued increasing raw material costs relative to the timing of additional price increases. Selling, General and Administrative (SG&A) expense was $151.1 million. Adjusted SG&A expense7, excluding the impact of the Royal transaction, was $101.5 million, down versus the prior year, due to one fewer operating week as well as good overall expense control.

“We had continued strong revenue performance and excellent cash flow performance in the fourth quarter as organic growth was again very strong,” said Mr. Owens. “The pricing actions we implemented early in the year had a positive impact on our margins, however, as a result of Hurricane Harvey and continued environmental controls in China, raw materials continued to increase during the fourth quarter. We have implemented additional pricing actions that will offset inflation in the first half of 2018. Engineering Adhesives, Asia Pacific and Americas all delivered double digit sales growth, with results above our long term targets. Adjusting for the Royal acquisition, we had by far our strongest cash flow quarter of the year. Most importantly, we completed the transformative and complementary acquisition of Royal Adhesives which is accelerating our strategy by combining their strong presence in specified adhesive applications with our global reach and focus.”

Balance Sheet and Cash Flow:
At the end of the fourth quarter of 2017, cash balances totaled $194 million with total debt of $2,452 million. This compares to third quarter 2017 cash and debt levels of $120 million and $799 million, respectively. Sequentially, net debt was up by approximately $1,579 million dollars, reflecting the purchase price of Royal offset by strong cash flow from operations. Cash flow from operations for the 2017 fiscal year was $136 million. Excluding the impact of Royal, cash flow from operations was $120 million in the fourth quarter and $197 million for the 2017 fiscal year, reflecting strong topline growth and good working capital management, offset by restructuring charges. Capital expenditures were $19 million in the fourth quarter of 2017 and $55 million for the 2017 fiscal year.

Year-To-Date Results:
Net income for the 2017 fiscal year was $58.2 million, or $1.13 per diluted share, versus net income of $124.1 million, or $2.42 per diluted share, in the 2016 fiscal year. Adjusted diluted earnings per share in the 2017 fiscal year, excluding the impact of the Royal transaction, were $2.501b. Adjusting for the extra week last year, adjusted diluted earnings per share were up 3 percent year-over-year.

Net revenue for the 2017 fiscal year was $2,306.0 million, up 10 percent versus the 2016 fiscal year. Adjusting for Royal and the extra week in 2016, constant currency revenue5 grew by 10.6 percent year-over-year and organic revenue, defined as constant currency revenue less the impact from acquisitions, was up 7 percent.

Conference Call:
The Company will host an investor conference call to discuss fourth quarter results on Wednesday, January 24, 2017, 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 under the Investor Relations section of the Company’s 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 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 Company:
For 130 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 2017 net revenue of $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, 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 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 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 3, 2016, and its SEC 10-Q filing for the quarter ended September 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)
13 Weeks Ended Percent of 14 Weeks Ended Percent of
December 2, 2017 Net Revenue December 3, 2016 Net Revenue
Net revenue$678,200 100.0% $574,907 100.0%
Cost of sales (510,464) (75.3%) (407,086) (70.8%)
Gross profit 167,736 24.7 % 167,821 29.2 %
Selling, general and administrative expenses (151,126) (22.3%) (106,495) (18.6%)
Special charges, net - 0.0 % (1,856) (0.3%)
Other income (expense), net (24,401) (3.6%) 54 0.0 %
Interest expense (19,073) (2.8%) (7,645) (1.3%)
Income (loss) before income taxes and income from equity method investments (26,864) (4.0%) 51,879 9.0 %
Income taxes 17,092 2.5 % (14,873) (2.6%)
Income from equity method investments 2,228 0.3 % 2,221 0.4 %
Net income (loss) including non-controlling interests (7,544) (1.1%) 39,227 6.8 %
Net income (loss) attributable to non-controlling interests (14) (0.0%) (93) (0.0%)
Net income (loss) attributable to H.B. Fuller$(7,558) (1.1%) $39,134 6.8 %
Basic income (loss) per common share attributable to H.B. Fuller$(0.15) $0.78
Diluted income (loss) per common share attributable to H.B. Fuller$(0.15) $0.76
Weighted-average common shares outstanding:
Basic 50,356 50,180
Diluted 51,724 51,378
Dividends declared per common share$0.15 $0.14


Selected Balance Sheet Information (subject to change prior to the filing of the Company's Annual Report on Form 10-K)
December 2, 2017 December 3, 2016 November 28, 2015
Cash & cash equivalents$194,398 $142,245 $119,168
Trade accounts receivable, net 473,700 351,130 364,704
Inventories 359,505 247,399 248,504
Trade payables 268,467 162,964 177,864
Total assets 4,365,276 2,058,254 2,042,252
Total debt 2,451,910 705,657 722,863


H.B. FULLER COMPANY AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
In thousands, except per share amounts (unaudited)
52 Weeks Ended Percent of 53 Weeks EndedPercent of
December 2, 2017 Net Revenue December 3, 2016Net Revenue
Net revenue$2,306,043 100.0 % $2,094,605 100.0 %
Cost of sales (1,702,873) (73.8%) (1,484,802)(70.9%)
Gross profit 603,170 26.2 % 609,803 29.1 %
Selling, general and administrative expenses (477,030) (20.7%) (407,638)(19.5%)
Special charges - 0.0 % 168 0.0 %
Other income (expense), net (23,740) (1.0%) (7,549)(0.3%)
Interest expense (43,701) (1.9%) (27,359)(1.3%)
Income from continuing operations before income taxes and income from equity method investments 58,699 2.5 % 167,425 8.0 %
Income taxes (9,086) (0.4%) (50,436)(2.4%)
Income from equity method investments 8,677 0.4 % 7,393 0.3 %
Net income including non-controlling interests 58,290 2.5 % 124,382 5.9 %
Net income attributable to non-controlling interests (48) (0.0%) (254)(0.0%)
Net income attributable to H.B. Fuller$58,242 2.5 % $124,128 5.9 %
Basic income per common share attributable to H.B. Fuller$1.16 $2.48
Diluted income per common share attributable to H.B. Fullera$1.13 $2.42
Weighted-average common shares outstanding:
Basic 50,370 50,136
Diluted 51,619 51,270
Dividends declared per common share$0.59 $0.55
a Income per share amounts may not add due to rounding


H.B. FULLER COMPANY AND SUBSIDIARIES
REGULATION G RECONCILIATION – Income Statement
In thousands, except per share amounts (unaudited)
Less Adjusted
Adjusted Adjusted Excluding Royal % of
13 Weeks Ended Add 13 Weeks Ended Royal 13 Weeks Ended Net
December 2, 2017 Adjustments December 2, 2017 Results December 2, 2017 Revenue
Net revenue $678,200 $- $678,200 $77,034 $601,166 100.0 %
Cost of sales (510,464) 12,566 (497,898) (55,858) (442,040) (73.5%)
Gross profit 167,736 12,566 180,302 21,176 159,126 26.5%6
Selling, general and administrative expenses (151,126) 33,893 (117,233) (15,769) (101,464)7(16.9%)
Other income (expense), net (24,401) 25,966 1,565 1,087 478 0.1 %
Interest expense (19,073) - (19,073) (10,286) (8,787) (1.5%)
Income (loss) before income taxes and income from equity method investments (26,864) 72,425 45,561 (3,792) 49,353 8.2 %
Income taxes 17,092 (28,318) (11,226) 1,437 (12,663) (2.1%)
- Effective tax rate 63.6% 24.6% 37.9% 25.7%
Income from equity method investments 2,228 - 2,228 - 2,228 0.4 %
Net income (loss) including non-controlling interests (7,544) 44,107 36,563 (2,355) 38,918 6.5 %
Net income attributable to non-controlling interests (14) - (14) - (14) (0.0%)
Net income (loss) attributable to H.B. Fuller $(7,558) $44,107 $36,549 $(2,355) $38,904 6.5 %
Basic income (loss) per common share attributable to H.B. Fuller$(0.15) $0.88 $0.73 $(0.05) $0.77
Diluted income (loss) per common share attributable to H.B. Fuller$(0.15) $0.85 $0.71 1a $(0.05) $ 0.75 1b
Weighted-average common shares outstanding:
Basic 50,356 50,356 50,356 50,356 50,356
Diluted 51,724 51,724 51,724 51,724 51,724


H.B. FULLER COMPANY AND SUBSIDIARIES
REGULATION G RECONCILIATION – Income Statement
In thousands, except per share amounts (unaudited)
% of Adjusted % of
14 Weeks Ended Net 14 Weeks Ended Net
December 3, 2016 Revenue Adjustments December 3, 2016 Revenue
Net revenue $574,907 100.0 % $- $574,907 100.0 %
Cost of sales (407,086) (70.8%) (543) (406,543) (70.7%)
Gross profit 167,821 29.2 % 543 168,364 29.3 %
Selling, general and administrative expenses (106,495) (18.6%) 2,520 (109,015) (19.0%)
Special charges, net (1,856) (0.3%) (1,856) - 0.0 %
Other income (expense), net 54 - - 54 0.0 %
Interest expense (7,645) (1.3%) (58) (7,587) (1.3%)
Income before income taxes and income from equity method investments 51,879 9.0 % (63) 51,816 9.0 %
Income taxes (14,873) (2.6%) 1,161 (16,034) (2.8%)
- Effective tax rate 28.7% 30.9%
Income from equity method investments 2,221 0.4 % - 2,221 0.4 %
Net income including non-controlling interests 39,227 6.8 % (1,224) 38,003 6.6 %
Net income attributable to non-controlling interests (93) - - (93) (0.0%)
Net income attributable to H.B. Fuller $39,134 6.8 % $(1,224) $37,910 6.6 %
Basic income per common share attributable to H.B. Fuller$0.78 $(0.02) $0.76
Diluted income per common share attributable to H.B. Fuller$0.76 $(0.02) $ 0.74 1
Weighted-average common shares outstanding:
Basic 50,180 50,180 50,180
Diluted 51,378 51,378 51,378


H.B. FULLER COMPANY AND SUBSIDIARIES
REGULATION G RECONCILIATION – Income Statement
In thousands, except per share amounts (unaudited)
Less Adjusted
Adjusted Adjusted Excluding Royal % of
52 Weeks Ended Add 52 Weeks Ended Royal 52 Weeks Ended Net
December 2, 2017 Adjustments December 2, 2017 Results December 2, 2017 Revenue
Net revenue $2,306,043 $- $2,306,043 $77,034 $2,229,009 100.0 %
Cost of sales (1,702,873) 26,520 (1,676,353) 55,858 (1,620,495) (72.7%)
Gross profit 603,170 26,520 629,690 (21,176) 608,514 27.3 %
Selling, general and administrative expenses (477,030) 52,734 (424,296) 15,769 (408,527) (18.3%)
Other income (expense), net (23,740) 26,179 2,439 1,087 1,352 0.1 %
Interest expense (43,701) - (43,701) 10,286 (33,415) (1.5%)
Income from continuing operations before income taxes and income from equity method investments 58,699 105,433 164,132 (3,792) 167,924 7.5 %
Income taxes (9,086) (37,114) (46,200) 1,437 (47,637) (2.1%)
-Effective tax rate 15.5% 35.2% 28.1% 37.9% 28.4%
Income from equity method investments 8,677 - 8,677 - 8,677 0.4 %
Net income including non-controlling interests 58,290 68,319 126,609 (2,355) 128,964 5.8 %
Net income attributable to non-controlling interests (48) - (48) - (48) (0.0%)
Net income attributable to H.B. Fuller $58,242 $68,319 $126,561 $(2,355) $128,916 5.8 %
Basic income per common share attributable to H.B. Fullera$1.16 $1.36 2.51 $(0.05) $2.56
Diluted income per common share attributable to H.B. Fuller$1.13 $1.32 2.45 1a $(0.05) $ 2.50 1b
Weighted-average common shares outstanding:
Basic 50,370 50,370 50,370 50,370 50,370
Diluted 51,619 51,619 51,619 51,619 51,619
a Income per share amounts may not add due to rounding


H.B. FULLER COMPANY AND SUBSIDIARIES
REGULATION G RECONCILIATION – Income Statement
In thousands, except per share amounts (unaudited)
% of Adjusted % of
53 Weeks Ended Net 53 Weeks Ended Net
December 3, 2016 Revenue Adjustments December 3, 2016 Revenue
Net revenue $2,094,605 100.0 % $- $2,094,605 100.0 %
Cost of sales (1,484,802) (70.9%) (4,442) (1,480,360) (70.7%)
Gross profit 609,803 29.1 % 4,442 614,245 29.3 %
Selling, general and administrative expenses (407,638) (19.5%) 697 (408,335) (19.5%)
Special charges. net 168 0.0 % 168 - 0.0%
Other income (expense), net (7,549) (0.3%) (684) (6,865) (0.3%)
Interest expense (27,359) (1.3%) (280) (27,079) (1.3%)
Income before income taxes and income from equity method investments 167,425 8.0 % 4,541 171,966 8.2 %
Income taxes (50,436) (2.4%) 1,656 (52,092) (2.4%)
- Effective tax rate 30.1% -36.5% 30.3%
Income from equity method investments 7,393 0.3 % - 7,393 0.3 %
Net income including non-controlling interests 124,382 5.9 % 2,885 127,267 6.1 %
Net income attributable to non-controlling interests (254) - - (254) (0.0%)
Net income attributable to H.B. Fuller $124,128 5.9 % $2,885 $127,013 6.1 %
Basic income per common share attributable to H.B. Fullera $2.48 $0.06 $2.53
Diluted income per common share attributable to H.B. Fullera $2.42 $0.06 $2.48
Weighted-average common shares outstanding:
Basic 50,136 50,136 50,136
Diluted 51,270 51,270 51,270
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)
13 Weeks ended December 2, 2017 14 Weeks ended December 3, 2016
Income Income
before IncomeDiluteda before Income Diluted
Income Tax TaxesEPS Income Tax Taxes EPS
GAAP Earnings $(24,650) $(17,092)$(0.15) $54,007 $14,873 $0.76
Acquisition project costsb 15,298 4,195 0.21 500 141 0.01
Make-whole cost on debt repaymentc 25,535 8,937 0.32 - - -
Advisory/financing feesd 28,499 9,975 0.36 - - -
Tonsan call option agreemente (1,705) - (0.03) (5,173) - (0.10)
Organizational realignmentf 1,018 230 0.02 3,066 544 0.05
Otherg 3,780 4,981 (0.02) 1,544 476 0.02
Adjusted Earnings $47,775 11,226 0.71 $53,944 $16,034 $0.74
Adjusted Royal results 3,792 1,437 0.05
Adjusted earnings excluding Royal $ 51,567 12,663 0.75
52 Weeks ended December 2, 2017 53 Weeks ended December 3, 2016
Income Income
before IncomeDiluted before Income Diluted
Income Tax TaxesEPS Income Tax Taxes EPSa
GAAP Earnings $67,328 $9,086 $1.13 $174,564 $50,436 $2.42
Acquisition project costsb 20,493 5,993 0.28 2,633 640 0.04
Make-whole cost on debt repaymentc 25,535 8,937 0.32 - - -
Advisory/financing feesd 33,879 11,858 0.43 - - -
Tonsan call option agreemente (3,945) - (0.08) (5,370) - (0.10)
Organizational realignmentf 19,963 4,343 0.30 3,633 57 0.07
Otherg 9,508 5,983 0.08 3,645 959 0.05
Adjusted Earnings $172,761 46,200 2.45 $179,105 $52,092 $2.48
Adjusted Royal results 3,792 1,437 0.05
Adjusted earnings excluding Royal $ 176,553 47,637 2.50
a Income per share amounts may not add due to rounding
b Costs related to integrating and accounting for acquisitions
c Cash costs related to make whole payments associated with the early repayment of certain debt in conjunction with the Royal Transaction
d Cash costs related to transaction advisory costs and costs for arranging financing in conjunction with the Royal Transaction
e Non-cash costs related to accretion and revaluation of the Tonsan call option agreement
f Costs related to Organizational Realignment to Support 2020 Strategic Plan, Construction Products facility combination, EIMEA restructuring announced November 2015, business integration and Special Charges
g Costs related to Project One development costs, discrete tax items and other corporate costs


H.B. FULLER COMPANY AND SUBSIDIARIES
SEGMENT FINANCIAL INFORMATION
In thousands (unaudited)
13 Weeks Ended 14 Weeks Ended
December 2, 2017 December 3, 2016
Net Revenue
Americas Adhesives$234,887 $217,639
EIMEA 151,765 150,328
Asia Pacific 74,107 70,361
Construction Products 58,634 64,235
Engineering Adhesives 81,773 72,344
Royal Adhesives 77,034 -
Total H.B. Fuller $678,200 $574,907
Segment Operating Income 8
Americas Adhesives$24,827 $31,936
EIMEA 10,091 14,502
Asia Pacific 5,898 6,111
Construction Products 461 (2,147)
Engineering Adhesives 7,974 10,924
Royal Adhesives (32,641) -
Total H.B. Fuller $16,610 $61,326
Depreciation and Amortization Expense
Americas Adhesives$5,779 $5,016
EIMEA 5,304 5,120
Asia Pacific 1,958 1,862
Construction Products 4,277 4,074
Engineering Adhesives 3,733 4,374
Royal Adhesives 6,760 -
Total H.B. Fuller $27,811 $20,446
EBITDA 3
Americas Adhesives$30,607 $36,952
EIMEA 15,395 19,622
Asia Pacific 7,856 7,973
Construction Products 4,738 1,927
Engineering Adhesives 11,707 15,298
Royal Adhesives (25,881) -
Total H.B. Fuller $44,422 $81,772
Segment Operating Margin 8
Americas Adhesives 10.6% 14.7%
EIMEA 6.6% 9.6%
Asia Pacific 8.0% 8.7%
Construction Products 0.8% (3.3%)
Engineering Adhesives 9.8% 15.1%
Royal Adhesives (42.4%) -
Total H.B. Fuller 2.4% 10.7%
EBITDA Margin 3
Americas Adhesives 13.0% 17.0%
EIMEA 10.1% 13.1%
Asia Pacific 10.6% 11.3%
Construction Products 8.1% 3.0%
Engineering Adhesives 14.3% 21.1%
Royal Adhesives (33.6%) -
Total H.B. Fuller 6.5% 14.2%
Adjusted EBITDA 3
Americas Adhesives$35,818 $37,336
EIMEA 17,524 21,039
Asia Pacific 8,586 8,177
Construction Products 5,938 2,967
Engineering Adhesives 10,848 10,235
Royal Adhesives 12,167 -
Total H.B. Fuller $90,881 $79,754
Adjusted EBITDA Margin 3
Americas Adhesives 15.2% 17.2%
EIMEA 11.5% 14.0%
Asia Pacific 11.6% 11.6%
Construction Products 10.1% 4.6%
Engineering Adhesives 13.3% 14.1%
Royal Adhesives 15.8% -
Total H.B. Fuller 13.4% 13.9%


H.B. FULLER COMPANY AND SUBSIDIARIES
SEGMENT FINANCIAL INFORMATION
In thousands (unaudited)
52 Weeks Ended 53 Weeks Ended
December 2, 2017 December 3, 2016
Net Revenue
Americas Adhesives$888,552 $806,062
EIMEA 548,439 545,135
Asia Pacific 264,191 241,827
Construction Products 238,513 256,346
Engineering Adhesives 289,314 245,235
Royal Adhesives 77,034 -
Total H.B. Fuller $2,306,043 $2,094,605
Segment Operating Income 8
Americas Adhesives$98,979 $125,979
EIMEA 29,870 40,121
Asia Pacific 15,350 15,410
Construction Products (1,120) 3,265
Engineering Adhesives 20,453 17,390
Royal Adhesives (37,392) -
Total H.B. Fuller $126,140 $202,165
Depreciation and Amortization Expense
Americas Adhesives$21,171 $18,979
EIMEA 19,845 21,441
Asia Pacific 8,135 7,484
Construction Products 16,316 14,977
Engineering Adhesives 15,088 14,804
Royal Adhesives 6,760 -
Total H.B. Fuller $87,315 $77,685
EBITDA 3
Americas Adhesives$120,150 $144,958
EIMEA 49,714 61,562
Asia Pacific 23,484 22,894
Construction Products 15,196 18,242
Engineering Adhesives 35,542 32,194
Royal Adhesives (30,631) -
Total H.B. Fuller $213,455 $279,850
Segment Operating Margin 8
Americas Adhesives 11.1% 15.6%
EIMEA 5.4% 7.4%
Asia Pacific 5.8% 6.4%
Construction Products (0.5%) 1.3%
Engineering Adhesives 7.1% 7.1%
Royal Adhesives (48.5%) -
Total H.B. Fuller 5.5% 9.7%
EBITDA Margin 3
Americas Adhesives 13.5% 18.0%
EIMEA 9.1% 11.3%
Asia Pacific 8.9% 9.5%
Construction Products 6.4% 7.1%
Engineering Adhesives 12.3% 13.1%
Royal Adhesives (39.8%) -
Total H.B. Fuller 9.3% 13.4%
Adjusted EBITDA 3
Americas Adhesives$134,249 $145,890
EIMEA 62,280 63,912
Asia Pacific 26,487 24,061
Construction Products 22,942 19,473
Engineering Adhesives 34,070 27,607
Royal Adhesives 12,167 -
Total H.B. Fuller $292,195 $280,943
Adjusted EBITDA Margin 3
Americas Adhesives 15.1% 18.1%
EIMEA 11.4% 11.7%
Asia Pacific 10.0% 9.9%
Construction Products 9.6% 7.6%
Engineering Adhesives 11.8% 11.3%
Royal Adhesives 15.8% -
Total H.B. Fuller 12.7% 13.4%


H.B. FULLER COMPANY AND SUBSIDIARIES
SEGMENT FINANCIAL INFORMATION
NET REVENUE GROWTH
(unaudited)
13 Weeks Ended December 2, 2017
Americas
Adhesives
EIMEA Asia Pacific Construction
Products
Engineering
Adhesives
Total HBF
Price0.9% 5.4% 0.5% 0.1% 0.5% 1.9%
Volume5.0% 4.0% 10.4% (1.7%) 19.3% 6.5%
Mix0.1% 0.6% 0.2% (0.4%) (0.7%) 0.1%
Acquisition8.8
% - - - - 3.3
%
Constant Currency Growth 514.8% 10.0% 11.1% (2.0%) 19.1% 11.8%
F/X0.2% (1.9%) 1.3% 0.4% 1.1% (0.1%)
Royal Impact- - - - - 13.4%
Extra Week(7.1%) (7.1%) (7.1%) (7.1%) (7.1%) (7.1%)
7.9% 1.0% 5.3% (8.7%) 13.1% 18.0%
52 Weeks Ended December 2, 2017
Americas
Adhesives
EIMEA Asia Pacific Construction
Products
Engineering
Adhesives
Total HBF
Price(0.4%) 4.5% (0.6%) 0.0% (1.2%) 0.8%
Volume6.1% 4.6% 11.1% (4.9%) 20.3% 6.1%
Mix(0.8%) 0.1% (0.5%) (0.3%) (0.5%) (0.4%)
Acquisition7.6% - 2.8% - 3.2% 4.1%
Constant Currency Growth 512.5% 9.2% 12.8% (5.2%) 21.8% 10.6%
F/X(0.3%) (6.6%) (1.6%) 0.2% (1.8%) (2.2%)
Royal Impact- - - - - 3.7%
Extra Week(2.0%) (2.0%) (2.0%) (2.0%) (2.0%) (2.0%)
10.2% 0.6% 9.2% (7.0%) 18.0% 10.1%


H.B. FULLER COMPANY AND SUBSIDIARIES
REGULATION G RECONCILIATION - EBITDA
In thousands (unaudited)
13 Weeks Ended 14 Weeks Ended
December 2, 2017 December 3, 2016
Net income (loss) including non-controlling interests$(7,544) $39,227
Income from equity method investments (2,228) (2,221)
Income taxes (17,092) 14,873
Interest expense 19,073 7,645
Other income (expense), net 24,401 (54)
Special charges - 1,856
Segment Operating Income8 16,610 61,326
Depreciation expense 14,697 12,460
Amortization expense 13,115 7,986
EBITDA3$44,422 $81,772
Non-recurring costs 46,459 (2,018)
Adjusted EBITDA3$90,881 $79,754
Less: Adjusted Royal EBITDA$(12,167)
$78,714
Adjusted EBITDA margin3 on core HB Fuller 13.1% 13.9%
52 Weeks Ended 53 Weeks Ended
December 2, 2017 December 3, 2016
Net income including non-controlling interests$58,290 $124,382
Income from equity method investments (8,677) (7,393)
Income taxes 9,086 50,436
Interest expense 43,701 27,359
Other income (expense), net 23,740 7,549
Special charges - (168)
Segment Operating Income8 126,140 202,165
Depreciation expense 51,072 49,190
Amortization expense 36,243 28,495
EBITDA3$213,455 $279,850
Non-recurring costs 78,740 1,093
Adjusted EBITDA3$292,195 $280,943
Less: Adjusted Royal EBITDA$(12,167)
$280,028
Adjusted EBITDA margin3 on core HB Fuller 12.6% 13.4%


H.B. FULLER COMPANY AND SUBSIDIARIES
PROFORMA FINANCIAL MEASURES
In thousands (unaudited)
Royal Royal Royal H.B. Fuller Proforma
12/4/16 - 10/20/17 - 52 weeks ended - Standalone Combined2
10/19/17 12/2/17 December 2017 December 2017 December 2017
Net income (loss)$17,565 $(31,486) $(13,921) $89,777 $75,856
Income from equity method investments - - - (8,677) (8,677)
Income taxes 7,735 (16,147) (8,412) 25,232 16,820
Interest expense 39,306 10,286 49,592 33,415 83,007
Other income (expense), net - (45) (45) 23,785 23,740
Segment Operating Income8$64,606 $(37,392) $27,214 $163,532 $190,746
Depreciation expense$9,354 $1,712 11,066 $49,360 60,426
Amortization expense 34,175 5,049 39,224 31,194 70,418
EBITDA3$108,135 $(30,631) $77,504 $244,086 $321,590
Non-recurring costs$12,670 $42,798 55,468 $35,942 91,410
Adjusted EBITDA3$120,805 $12,167 $132,972 $280,028 $413,000
Net Revenue$580,719 $77,034 $657,753 $2,229,009 $2,886,762


H.B. FULLER COMPANY AND SUBSIDIARIES
OPERATING CASH FLOW RECONCILIATION
In thousands (unaudited)
13 Weeks Ended 52 Weeks Ended
December 2, 2017 December 2, 2017
Cash Flow from Operations$ 65,532 $ 136,337
Make-whole cost on debt restructuring 25,535 25,535
Advisory/financing fees 28,499 33,879
Net Royal cash flow impact 752 803
Cash flow from operations, excluding the Royal acquisition$ 120,318 $ 196,554


1a Adjusted diluted earnings per share (EPS) is a non-GAAP financial measure and excludes the following costs included on the adjusted earnings per share reconciliation table above: special charges related to the “business integration”; organizational realignment to support the 2020 strategic plan as announced in December 2016; restructuring in EIMEA related to operational efficiency improvement projects; combining Construction Products facilities in Illinois; Project ONE development costs; the closing of a facility in the Philippines; integrating and accounting for past and present acquisitions and all transaction related costs of the Royal transaction.
1bAdjusted diluted earnings per share excluding Royal (EPS) is a non-GAAP financial measure and excludes the costs included on the adjusted earnings per share reconciliation table above in addition to the income generated from operating the business for 6 weeks.
2Proforma financial results represent combined 2017 fiscal year financial results of H.B. Fuller on a standalone basis, the Royal business for the period under prior ownership and the 6 weeks under H.B. Fuller ownership. The proforma results are presented to provide the reader with a baseline to evaluate 2018 financial guidance.
3EBITDA 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 operating 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.
4Free cash flow is a non-GAAP financial measure defined as cash flow from operating activities less capital expenditures.
5Constant 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.
6Adjusted 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; restructuring in EIMEA related to operational efficiency improvement projects; combining Construction Products facilities in Illinois; the closing of a facility in the Philippines; integrating and accounting for past and present acquisitions; and all impacts related to the Royal transaction, including the income generated from operating the business for 6 weeks. Adjusted gross profit margin is defined as adjusted gross profit divided by adjusted net revenue.
7Adjusted 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; restructuring in EIMEA related to operational efficiency improvement projects; combining Construction Products facilities in Illinois; Project ONE development costs; integrating and accounting for past and present acquisitions; and all impacts related to the Royal transaction, including the income generated from operating the business for 6 weeks.
8Segment operating income is defined as gross profit less SG&A expense. Segment operating margin is defined as segment operating income divided by net revenue.
9Segment financial information excludes all impacts related to the Royal transaction, including the income generated from operating the business for 6 weeks.

Maximillian Marcy
Investor Relations Contact
651-236-5062

Source:H.B. Fuller Company