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H.B. Fuller Company$56.26($.33)(.58%)

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 H.B. Fuller Reports Second Quarter 2017 Results
   Wednesday, June 28, 2017 7:48:27 PM ET

Second Quarter Diluted EPS $0.50,

Second Quarter Adjusted Diluted EPS $0.62;

Fiscal Year 2017 Adjusted Diluted EPS Guidance Narrowed to $2.57 to $2.67

H.B. Fuller Company (FUL ) today reported financial results for the second quarter that ended June 3, 2017.

Items of Note for the Second Quarter of 2017:

-- Net revenue grew 5.5 percent. Constant currency sales growth was nearly 10 percent, with organic volume growth of 4 percent;

-- Net income was $25.9 million in the second quarter of 2017; Adjusted net income was $31.8 million, or $0.62 per diluted share;

-- Adjusted EBITDA margin up 80 basis points sequentially to 12.5 percent despite higher raw materials costs;

-- Constant currency growth for Engineering Adhesives was over 20 percent and adjusted EBITDA increased 48 percent versus the second quarter of 2016;

-- Asia Pacific and EIMEA delivered constant currency growth of 11 and 8 percent, respectively, for the quarter;

-- Construction Products adjusted EBITDA margins returned to double digits, at 10.7 percent, after completing the start up of our Aurora facility.

Second Quarter 2017 Results:

Net income for the second quarter of 2017 was $25.9 million, or $0.50 per diluted share, versus net income of $33.3 million, or $0.65 per diluted share, in last year’s second quarter. Adjusted diluted earnings per share in the second quarter of 2017 were $0.62 versus the prior year’s adjusted result of $0.67. Higher raw material costs were the primary driver of the year-over-year decline.

Net revenue for the second quarter of 2017 was $561.7 million, up 5.5 percent versus the second quarter of 2016. Higher volume, and acquisitions positively impacted net revenue growth, which was offset by negative foreign currency translation. Constant currency revenue grew by nearly 10 percent year over year. Organic revenue, defined as constant currency revenue less the impact from acquisitions, was up 4 percent.

Gross profit margin was 26.0 percent and adjusted gross profit margin was 27.2 percent. During the quarter, margins declined year over year due to increasing raw material costs relative to the timing of price increases. Selling, General and Administrative (SG&A) expense was $102.8 million. Adjusted SG&A expense was $102.6 million, down by approximately 1 percent versus last year, primarily driven by discretionary expense management and restructuring actions, offset by the impact of acquisitions.

"A spike in raw material costs and the timing of our price increases impacted earnings in the second quarter however price increases have been implemented and the underlying performance of our business is in line with expectations for 2017," said Jim Owens, H.B. Fuller president and chief executive officer. "We continued to drive solid growth across most of the businesses, led again by nearly 20 percent volume growth in the strategically important Engineering Adhesives business and strong constant currency growth in Americas, EIMEA and Asia Pacific. All businesses showed solid EBITDA performance in the quarter, including Construction Products, which delivered double digit margins ahead of schedule. Price increases announced early in the quarter were successfully implemented late in the second quarter which will deliver the targeted earnings and cash flow performance for the rest of 2017. We expect 2017 to provide another strong positive step forward in delivering our 2020 strategic commitments for growth, profit and cash flow performance."

Balance Sheet and Cash Flow:

At the end of the second quarter of 2017, we had cash totaling $94 million and total debt of $786 million. This compares to first quarter 2017 cash and debt levels of $117 million and $805 million, respectively. Sequentially, net debt was essentially flat. Cash flow from operations was positive $16 million in the second quarter and $33 million for the first six months, reflecting continued strength in the cash flow performance of the business, offset by restructuring charges and higher inventory balances. Capital expenditures were $7 million in the second quarter of 2017.

Year-To-Date Results:

Net income for the first half of 2017 was $40.7 million, or $0.79 per diluted share, versus net income of $52.2 million, or $1.02 per diluted share, in the first half of 2016. Adjusted total diluted earnings per share in the first half of 2017 were $1.10, up versus the prior year’s result of $1.09.

Net revenue for the first half of 2017 was $1,065.0 million, up 5.8 percent versus the first half of 2016. Higher volume and acquisitions positively impacted net revenue growth offset by negative foreign currency translation and negative mix. Constant currency revenue grew by nearly 10 percent year over year. Organic revenue, defined as constant currency revenue less the impact from acquisitions, was up 5 percent.

Fiscal 2017 Guidance:

We are narrowing our adjusted EPS guidance from our previous range of $2.57 to $2.77 to our new guidance range of $2.57 to $2.67 for fiscal year 2017. Adjusted EBITDA for fiscal year 2017 is expected to be between approximately $290 million and $300 million versus our previous estimate of $300 million. Constant currency growth, on a comparable 52-week basis, is now expected to be around 9 percent for 2017 versus the 2016 fiscal year to reflect more pricing to offset raw material inflation, which will be offset by approximately 3 percentage points of negative foreign currency translation. Our core tax rate, excluding the impact of discrete items, is expected to be between 29 and 30 percent. We still expect to invest approximately $60 million in capital items in 2017.

This guidance excludes between $30 and $35 million, pre-tax, of previously announced restructuring charges, as well as acquisition related costs and Project ONE development costs.

Conference Call:

The Company will host an investor conference call to discuss second quarter results on Thursday, June 29, 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 at www.hbfuller.com under the Investor Relations section. The event is scheduled to last one hour. For those unable to listen live, an audio replay of the event along with the accompanying presentation will be archived on the Company’s website.

Regulation G:

The information presented in this earnings release regarding segment operating income, adjusted 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 2017 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 2016 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 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 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 December 3, 2016. 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
                                                                      June 3, 2017       Net Revenue  May 28, 2016       Net Revenue
Net revenue                                                           $      561,651     100.0 %      $      532,514     100.0 %
Cost of sales                                                                (415,613 )  (74.0 %)            (374,258 )  (70.3 %)
Gross profit                                                                 146,038     26.0  %             158,256     29.7  %
Selling, general and administrative expenses                                 (102,770 )  (18.3 %)            (103,684 )  (19.5 %)
Special charges, net                                                         -           0.0   %             (370     )  (0.1  %)
Other income (expense), net                                                  (110     )  (0.0  %)            (1,565   )  (0.3  %)
Interest expense                                                             (8,148   )  (1.5  %)            (6,597   )  (1.2  %)
Income before income taxes and income from equity method investments         35,010      6.2   %             46,040      8.6   %
Income taxes                                                                 (11,151  )  (2.0  %)            (14,290  )  (2.7  %)
Income from equity method investments                                        2,005       0.4   %             1,640       0.3   %
Net income including non-controlling interests                               25,864      4.6   %             33,390      6.3   %
Net income attributable to non-controlling interests                         3           0.0   %             (59      )  (0.0  %)
Net income attributable to H.B. Fuller                                $      25,867      4.6   %      $      33,331      6.3   %
Basic income per common share attributable to H.B. Fuller             $      0.51                     $      0.66
Diluted income per common share attributable to H.B. Fuller           $      0.50                     $      0.65
Weighted-average common shares outstanding:
Basic                                                                        50,496                          50,145
Diluted                                                                      51,686                          51,253
Dividends declared per common share                                   $      0.15                     $      0.14
Selected Balance Sheet Information (subject to change prior to filing of the Company’s Quarterly Report on Form 10-Q)
                               June 3, 2017                 December 3, 2016             May 28, 2016
Cash & cash equivalents        $             94,102         $             142,245        $             146,022
Trade accounts receivable, net               378,622                      351,130                      355,373
Inventories                                  302,336                      247,399                      261,072
Trade payables                               181,979                      162,964                      161,724
Total assets                                 2,200,236                    2,055,868                    2,064,022
Total debt                                   786,109                      703,271                      719,094
H.B. FULLER COMPANY AND SUBSIDIARIES
CONSOLIDATED FINANCIAL INFORMATION
In thousands, except per share amounts (unaudited)
                                                                      Six Months Ended   Percent of   Six Months Ended   Percent of
                                                                      June 3, 2017       Net Revenue  May 28, 2016       Net Revenue
Net revenue                                                           $     1,064,974    100.0 %      $     1,006,840    100.0 %
Cost of sales                                                               (779,940  )  (73.2 %)           (710,979  )  (70.6 %)
Gross profit                                                                285,034      26.8  %            295,861      29.4  %
Selling, general and administrative expenses                                (215,685  )  (20.3 %)           (203,451  )  (20.2 %)
Special charges                                                             -            0.0   %            (783      )  (0.1  %)
Other income (expense), net                                                 511          0.0   %            (6,647    )  (0.6  %)
Interest expense                                                            (16,528   )  (1.6  %)           (12,905   )  (1.3  %)
Income before income taxes and income from equity method investments        53,332       5.0   %            72,075       7.2   %
Income taxes                                                                (16,916   )  (1.6  %)           (23,050   )  (2.3  %)
Income from equity method investments                                       4,279        0.4   %            3,332        0.3   %
Net income including non-controlling interests                              40,695       3.8   %            52,357       5.2   %
Net income attributable to non-controlling interests                        (33       )  (0.0  %)           (108      )  (0.0  %)
Net income attributable to H.B. Fuller                                $     40,662       3.8   %      $     52,249       5.2   %
Basic income per common share attributable to H.B. Fuller             $     0.81                      $     1.04
Diluted income per common share attributable to H.B. Fuller           $     0.79                      $     1.02
Weighted-average common shares outstanding:
Basic                                                                       50,369                          50,052
Diluted                                                                     51,573                          51,124
Dividends declared per common share                                   $     0.29                      $     0.27
H.B. FULLER COMPANY AND SUBSIDIARIES
REGULATION G RECONCILIATION
In thousands, except per share amounts (unaudited)
                                                                                                                                   Adjusted
                                                                                   Three Months        % of Net                    Three Months        % of Net
                                                                                   Ended                                           Ended
                                                                                   June 3, 2017        Revenue     Adjustments     June 3, 2017        Revenue
Net revenue                                                                        $    561,651        100.0 %     $               $    561,651        100.0 %
Cost of sales                                                                           (415,613 )     (74.0 %)        (6,775 )         (408,838 )     (72.8 %)
Gross profit                                                                            146,038        26.0  %         (6,775 )         152,813        27.2  %
Selling, general and administrative expenses                                            (102,770 )     (18.3 %)        (210   )         (102,560)      (18.3 %)
Other income (expense), net                                                             (110     )     (0.0  %)        -                (110     )     (0.0  %)
Interest expense                                                                        (8,148   )     (1.5  %)        (71    )         (8,077   )     (1.4  %)
Income before income taxes and income from equity method investments                    35,010         6.2   %         (7,056 )         42,066         7.6   %
Income taxes                                                                            (11,151  )     (2.0  %)        1,119            (12,270  )     (2.2  %)
- Effective tax rate                                                                    31.9     %                     15.9   %         29.2     %
Income from equity method investments                                                   2,005          0.4   %                          2,005          0.3   %
Net income including non-controlling interests                                          25,864         4.6   %         (5,937 )         31,801         5.7   %
Net income attributable to non-controlling interests                                    3              0.0   %                          3              0.0   %
Net income attributable to H.B. Fuller                                             $    25,867         4.6   %     $   (5,937 )    $    31,804         5.7   %
Basic income per common share attributable to H.B. Fuller                          $    0.51                       $   (0.12  )    $    0.63
Diluted income per common share attributable to H.B. Fuller                        $    0.50                       $   (0.11  )    $    0.62
Weighted-average common shares outstanding:
Basic                                                                                   50,496                         50,496           50,496
Diluted                                                                                 51,686                         51,686           51,686

a Income per share amounts may not add due to rounding

H.B. FULLER COMPANY AND SUBSIDIARIES
REGULATION G RECONCILIATION
In thousands, except per share amounts (unaudited)
                                                                                                                            Adjusted
                                                                            Three Months        % of Net                    Three Months        % of Net
                                                                            Ended                                           Ended
                                                                            May 28, 2016        Revenue     Adjustments     May 28, 2016        Revenue
Net revenue                                                                 $    532,514        100.0 %     $   -           $    532,514        100.0 %
Cost of sales                                                                    (374,258 )     (70.3 %)        (981   )         (373,277 )     (70.1 %)
Gross profit                                                                     158,256        29.7  %         (981   )         159,237        29.9  %
Selling, general and administrative expenses                                     (103,684 )     (19.5 %)        (183   )         (103,501)      (19.4 %)
Acquisition and transformation related costs         (82               )
Facility exit costs                                  (134              )
Other related costs                                  (154              )
Special charges, net                                                             (370     )     (0.1  %)        (370   )         -              0.0   %
Other income (expense), net                                                      (1,565   )     (0.3  %)                         (1,565   )     (0.3  %)
Interest expense                                                                 (6,597   )     (1.2  %)        (74    )         (6,523   )     (1.2  %)
Income before income taxes and income from equity method investments             46,040         8.6   %         (1,608 )         47,648         8.9   %
Income taxes                                                                     (14,290  )     (2.7  %)        773              (15,063  )     (2.8  %)
- Effective tax rate                                                             31.0     %                     48.1   %         31.6     %
Income from equity method investments                                            1,640          0.3   %         -                1,640          0.3   %
Net income including non-controlling interests                                   33,390         6.3   %         (835   )         34,225         6.4   %
Net income attributable to non-controlling interests                             (59      )     (0.0  %)        -                (59      )     (0.0  %)
Net income attributable to H.B. Fuller                                      $    33,331         6.3   %     $   (835   )    $    34,166         6.4   %
Basic income per common share attributable to H.B. Fuller                   $    0.66                       $   (0.02  )    $    0.68
Diluted income per common share attributable to H.B. Fuller                 $    0.65                       $   (0.02  )    $    0.67
Weighted-average common shares outstanding:
Basic                                                                            50,145                         50,145           50,145
Diluted                                                                          51,253                         51,253           51,253
H.B. FULLER COMPANY AND SUBSIDIARIES
REGULATION G RECONCILIATION
In thousands, except per share amounts (unaudited)
                                                                                                                       Adjusted
                                                                     Six Months           % of Net                     Six Months           % of Net
                                                                     Ended                                             Ended
                                                                     June 3, 2017         Revenue     Adjustments      June 3, 2017         Revenue
Net revenue                                                          $    1,064,974       100.0 %     $                $    1,064,974       100.0 %
Cost of sales                                                             (779,940  )     (73.2 %)        (11,931 )         (768,009  )     (72.1 %)
Gross profit                                                              285,034         26.8  %         (11,931 )         296,965         27.9  %
Selling, general and administrative expenses                              (215,685  )     (20.3 %)        (9,047  )         (206,638)       (19.5 %)
Other income (expense), net                                               511             0.1   %         -                 511             0.1   %
Interest expense                                                          (16,528   )     (1.6  %)        (141    )         (16,387   )     (1.5  %)
Income before income taxes and income from equity method investments      53,332          5.0   %         (21,119 )         74,451          7.0   %
Income taxes                                                              (16,916   )     (1.6  %)        5,087             (22,003   )     (2.1  %)
- Effective tax rate                                                      31.7      %                     24.1    %         29.6      %
Income from equity method investments                                     4,279           0.4   %                           4,279           0.4   %
Net income including non-controlling interests                            40,695          3.8   %         (16,032 )         56,727          5.3   %
Net income attributable to non-controlling interests                      (33       )     (0.0  %)                          (33       )     (0.0  %)
Net income attributable to H.B. Fuller                               $    40,662          3.8   %     $   (16,032 )    $    56,694          5.3   %
Basic income per common share attributable to H.B. Fuller            $    0.81                        $   (0.32   )    $    1.13
Diluted income per common share attributable to H.B. Fuller          $    0.79                        $   (0.31   )    $    1.10
Weighted-average common shares outstanding:
Basic                                                                     50,369                          50,369            50,369
Diluted                                                                   51,573                          51,573            51,573
H.B. FULLER COMPANY AND SUBSIDIARIES
REGULATION G RECONCILIATION
In thousands, except per share amounts (unaudited)
                                                                                                                     Adjusted
                                                                    Six Months           % of Net                    Six Months           % of Net
                                                                    Ended                                            Ended
                                                                    May 28, 2016         Revenue     Adjustments     May 28, 2016         Revenue
Net revenue                                                         $    1,006,840       100.0 %     $   -           $    1,006,840       100.0 %
Cost of sales                                                            (710,979  )     (70.6 %)        (2,872 )         (708,107  )     (70.3 %)
Gross profit                                                             295,861         29.4  %         (2,872 )         298,733         29.7  %
Selling, general and administrative expenses                             (203,451  )     (20.2 %)        (914   )         (202,537)       (20.1 %)
Acquisition and transformation related costs (187                )
Workforce reduction costs                    1
Facility exit costs                          (407                )
Other related costs                          (190                )
Special charges                                                          (783      )     (0.1  %)        (783   )         -               0.0   %
Other income (expense), net                                              (6,647    )     (0.6  %)                         (6,647    )     (0.6  %)
Interest expense                                                         (12,905   )     (1.3  %)        (149   )         (12,756   )     (1.3  %)
Income before income taxes and income from equity method investments     72,075          7.2   %         (4,718 )         76,793          7.7   %
Income taxes                                                             (23,050   )     (2.3  %)        1,002            (24,052   )     (2.4  %)
- Effective tax rate                                                     32.0      %                     21.2   %         31.3      %
Income from equity method investments                                    3,332           0.3   %         -                3,332           0.3   %
Net income including non-controlling interests                           52,357          5.2   %         (3,716 )         56,073          5.6   %
Net loss attributable to non-controlling interests                       (108      )     (0.0  %)        -                (108      )     (0.0  %)
Net income attributable to H.B. Fuller                              $    52,249          5.2   %     $   (3,716 )    $    55,965          5.6   %
Basic income per common share attributable to H.B. Fuller           $    1.04                        $   (0.07  )    $    1.12
Diluted income per common share attributable to H.B. Fuller         $    1.02                        $   (0.07  )    $    1.09
Weighted-average common shares outstanding:
Basic                                                                    50,052                          50,052           50,052
Diluted                                                                  51,124                          51,124           51,124
a  Income per share amounts may not add due to rounding
H.B. FULLER COMPANY AND SUBSIDIARIES
ADJUSTED EARNING PER SHARE RECONCILIATION
In thousands (unaudited)
                              Three Months ended June 3, 2017                                      Three Months ended May 28, 2016
                              Income                                                               Income
                              before                             Income     Diluted                before                   Income                                                                                Diluted
                              Income Tax                         Taxes      EPS                    Income Tax               Taxes                                                                                 EPS
GAAP Earnings                 $         37,018                 $ 11,151     $         0.50         $         47,621       $ 14,290                                                                                $   0.65
Acquisition project costs               2,211                    758                  0.03                   1,287          436                                                                                       0.02
Tonsan call option agreement            (3,569              )    -                    (0.07     )            (1,326    )    -                                                                                         (0.03 )
Organizational Realignment              5,875                    316                  0.11                   932            95                                                                                        0.02
Other                                   2,539                    45                   0.05                   715            242                                                                                       0.01
Adjusted Earnings             $         44,074                 $ 12,270     $         0.62         $         49,229       $ 15,063                                                                                $   0.67
                                                  Six Months ended June 3, 2017                    Six Months ended May 28, 2016
                              Income                                                               Income
                              before                             Income     Diluted                before                   Income                                                                                Diluted
                              Income Tax                         Taxes      EPS                    Income Tax               Taxes                                                                                 EPS
GAAP Earnings                 $         57,578                 $ 16,916     $         0.79         $         75,299       $ 23,050                                                                                $   1.02
Acquisition project costs               3,200                    1,103                0.04                   1,408          476                                                                                       0.02
Tonsan call option agreement            (3,462              )    -                    (0.07     )            (360      )    -                                                                                         (0.01 )
Organizational Realignment              17,453                   3,453                0.27                   2,956          285                                                                                       0.05
Other                                   3,928                    531                  0.07                   715            242                                                                                       0.01
Adjusted Earnings             $         78,697                 $ 22,003     $         1.10         $         80,018       $ 24,053                                                                                $   1.09
b  Costs related to integrating and accounting for past and potential acquisitions
c  Non-cash costs related to accretion and revaluation of the Tonsan call option agreement
d  Costs related to Organizational Realignment to Support 2020 Strategic Plan, Construction Products facility combination, EIMEA restructuring announced November 2015, business integration and Special Charges.
e  Costs related to Project ONE development costs and discrete tax items
H.B. FULLER COMPANY AND SUBSIDIARIES
SEGMENT FINANCIAL INFORMATION
In thousands (unaudited)
                           Three Months Ended     Three Months Ended
                           June 3, 2017           May 28, 2016
Net Revenue:
Americas Adhesives         $      229,622         $      206,147
EIMEA                             135,226                139,897
Asia Pacific                      64,466                 60,119
Construction Products             63,754                 67,634
Engineering Adhesives             68,583                 58,717
Total H.B. Fuller          $      561,651         $      532,514
Segment Operating Income:
Americas Adhesives         $      26,455          $      35,884
EIMEA                             8,083                  11,027
Asia Pacific                      4,751                  3,036
Construction Products             (1,853  )              2,534
Engineering Adhesives             5,832                  2,091
Total H.B. Fuller          $      43,268          $      54,572
Depreciation Expense:
Americas Adhesives         $      3,472           $      3,555
EIMEA                             3,671                  3,878
Asia Pacific                      1,512                  1,540
Construction Products             1,828                  1,329
Engineering Adhesives             1,543                  1,507
Total H.B. Fuller          $      12,026          $      11,809
Amortization Expense:
Americas Adhesives         $      1,872           $      1,019
EIMEA                             1,071                  1,174
Asia Pacific                      428                    291
Construction Products             2,295                  2,325
Engineering Adhesives             2,208                  1,979
Total H.B. Fuller          $      7,874           $      6,788
EBITDA:
Americas Adhesives         $      31,799          $      40,458
EIMEA                             12,825                 16,079
Asia Pacific                      6,691                  4,867
Construction Products             2,270                  6,188
Engineering Adhesives             9,583                  5,577
Total H.B. Fuller          $      63,168          $      73,169
Segment Operating Margin:
Americas Adhesives                11.5    %              17.4    %
EIMEA                             6.0     %              7.9     %
Asia Pacific                      7.4     %              5.0     %
Construction Products             (2.9    %)             3.7     %
Engineering Adhesives             8.5     %              3.6     %
Total H.B. Fuller                 7.7     %              10.2    %
EBITDA Margin:
Americas Adhesives                13.8    %              19.6    %
EIMEA                             9.5     %              11.5    %
Asia Pacific                      10.4    %              8.1     %
Construction Products             3.6     %              9.1     %
Engineering Adhesives             14.0    %              9.5     %
Total H.B. Fuller                 11.2    %              13.7    %
Adjusted EBITDA
Americas Adhesives         $      34,773          $      41,057
EIMEA                             15,050                 16,746
Asia Pacific                      7,046                  5,237
Construction Products             6,844                  6,395
Engineering Adhesives             6,425                  4,337
Total H.B. Fuller          $      70,138          $      73,772
Adjusted EBITDA Margin
Americas Adhesives                15.1    %              19.9    %
EIMEA                             11.1    %              12.0    %
Asia Pacific                      10.9    %              8.7     %
Construction Products             10.7    %              9.5     %
Engineering Adhesives             9.4     %              7.4     %
Total H.B. Fuller                 12.5    %              13.9    %
H.B. FULLER COMPANY AND SUBSIDIARIES
SEGMENT FINANCIAL INFORMATION
In thousands (unaudited)
                           Six Months Ended       Six Months Ended
                           June 3, 2017           May 28, 2016
Net Revenue:
Americas Adhesives         $     422,784          $     389,466
EIMEA                            259,265                264,188
Asia Pacific                     127,112                113,979
Construction Products            120,800                127,708
Engineering Adhesives            135,013                111,499
Total H.B. Fuller          $     1,064,974        $     1,006,840
Segment Operating Income:
Americas Adhesives         $     47,488           $     62,143
EIMEA                            9,880                  17,190
Asia Pacific                     6,630                  6,789
Construction Products            (2,536    )            3,319
Engineering Adhesives            7,887                  2,969
Total H.B. Fuller          $     69,349           $     92,410
Depreciation Expense:
Americas Adhesives         $     7,034            $     7,268
EIMEA                            7,314                  9,209
Asia Pacific                     3,391                  2,926
Construction Products            3,161                  2,602
Engineering Adhesives            3,071                  3,062
Total H.B. Fuller          $     23,971           $     25,067
Amortization Expense:
Americas Adhesives         $     3,158            $     2,036
EIMEA                            2,134                  2,281
Asia Pacific                     880                    592
Construction Products            4,612                  4,648
Engineering Adhesives            4,445                  3,929
Total H.B. Fuller          $     15,229           $     13,486
EBITDA:
Americas Adhesives         $     57,680           $     71,447
EIMEA                            19,328                 28,680
Asia Pacific                     10,901                 10,307
Construction Products            5,237                  10,569
Engineering Adhesives            15,403                 9,960
Total H.B. Fuller          $     108,549          $     130,963
Segment Operating Margin:
Americas Adhesives               11.2      %            16.0      %
EIMEA                            3.8       %            6.5       %
Asia Pacific                     5.2       %            6.0       %
Construction Products            (2.1      %)           2.6       %
Engineering Adhesives            5.8       %            2.7       %
Total H.B. Fuller                6.5       %            9.2       %
EBITDA Margin:
Americas Adhesives               13.6      %            18.3      %
EIMEA                            7.5       %            10.9      %
Asia Pacific                     8.6       %            9.0       %
Construction Products            4.3       %            8.3       %
Engineering Adhesives            11.4      %            8.9       %
Total H.B. Fuller                10.2      %            13.0      %
Adjusted EBITDA
Americas Adhesives         $     63,640           $     72,084
EIMEA                            28,127                 29,256
Asia Pacific                     12,791                 10,690
Construction Products            11,335                 10,791
Engineering Adhesives            13,193                 9,639
Total H.B. Fuller          $     129,086          $     132,460
Adjusted EBITDA Margin
Americas Adhesives               15.1      %            18.5      %
EIMEA                            10.8      %            11.1      %
Asia Pacific                     10.1      %            9.4       %
Construction Products            9.4       %            8.4       %
Engineering Adhesives            9.8       %            8.6       %
Total H.B. Fuller                12.1      %            13.2      %
H.B. FULLER COMPANY AND SUBSIDIARIES
SEGMENT FINANCIAL INFORMATION
NET REVENUE GROWTH
(unaudited)
Three Months Ended June 3, 2017
                          Americas   EIMEA     Asia      Construction   Engineering  Total HBF
                          Adhesives            Pacific   Products       Adhesives
Price                     (1.3 %)    3.7   %   (1.1 %)   (0.3   %)      (2.4  %)     0.0  %
Volume                    1.6  %     4.0   %   7.7  %    (5.0   %)      18.5  %      4.0  %
Mix                       0.8  %     0.4   %   (0.4 %)   (0.8   %)      (1.2  %)     0.2  %
Acquisition               10.7 %     0.0   %   4.8  %    0.0    %       6.8   %      5.4  %
Constant Currency Growth  11.8 %     8.1   %   11.0 %    (6.1   %)      21.7  %      9.6  %
F/X                       (0.4 %)    (11.4 %)  (3.8 %)   0.4    %       (4.9  %)     (4.1 %)
                          11.4 %     (3.3  %)  7.2  %    (5.7   %)      16.8  %      5.5  %
Six Months Ended June 3, 2017
                          Americas   EIMEA     Asia      Construction   Engineering  Total HBF
                          Adhesives            Pacific   Products       Adhesives
Price                     (1.4 %)    3.4   %   (1.6 %)   (0.2   %)      (2.9  %)     (0.2 %)
Volume                    4.1  %     5.1   %   12.5 %    (3.4   %)      21.9  %      6.4  %
Mix                       (1.4 %)    0.1   %   (1.5 %)   (2.1   %)      0.0   %      (1.0 %)
Acquisition               7.7  %     0.0   %   5.8  %    0.0    %       6.7   %      4.4  %
Constant Currency Growth  9.0  %     8.6   %   15.2 %    (5.7   %)      25.7  %      9.6  %
F/X                       (0.4 %)    (10.5 %)  (3.7 %)   0.3    %       (4.6  %)     (3.8 %)
                          8.6  %     (1.9  %)  11.5 %    (5.4   %)      21.1  %      5.8  %
H.B. FULLER COMPANY AND SUBSIDIARIES
REGULATION G RECONCILIATION
In thousands (unaudited)
                                                Three Months Ended  Three Months Ended
                                                June 3, 2017        May 28, 2016
Net income including non-controlling interests  $      25,864       $      33,390
Income from equity method investments                  (2,005  )           (1,640  )
Income taxes                                           11,151              14,290
Interest expense                                       8,148               6,597
Other income (expense), net                            110                 1,565
Special charges                                        -                   370
Segment operating income                               43,268              54,572
Depreciation expense                                   12,026              11,809
Amortization expense                                   7,874               6,788
EBITDA                                          $      63,168       $      73,169
EBITDA margin                                          11.2    %           13.7    %
Restructuring, Acquisition and other costs             6,970               603
Adjusted EBITDA                                 $      70,138       $      73,772
Adjusted EBITDA margin                                 12.5    %           13.9    %
                                                Six Months Ended    Six Months Ended
                                                June 3, 2017        May 28, 2016
Net income including non-controlling interests  $      40,695       $      52,357
Income from equity method investments                  (4,279  )           (3,332  )
Income taxes                                           16,916              23,050
Interest expense                                       16,528              12,905
Other income (expense), net                            (511    )           6,647
Special charges                                        -                   783
Segment operating income                               69,349              92,410
Depreciation expense                                   23,971              25,067
Amortization expense                                   15,229              13,486
EBITDA                                          $      108,549      $      130,963
EBITDA margin                                          10.2    %           13.0    %
Restructuring, Acquisition and other costs             20,537              1,497
Adjusted EBITDA                                 $      129,086      $      132,460
Adjusted EBITDA margin                                 12.1    %           13.2    %

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; and integrating and accounting for past and present acquisitions. We have not included a reconciliation of adjusted EPS to EPS as part of our guidance because all potential adjustments are not known at this time.

Constant 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.

EBITDA is a non-GAAP financial measure defined on a consolidated basis as gross profit, less SG&A expense, plus depreciation expense, plus amortization expense. Adjusted EBITDA excludes items listed on the adjusted earnings per share reconciliation table above. On a segment basis it is defined as operating income, plus depreciation expense, plus amortization expense. Adjusted EBITDA margin is defined as adjusted EBITDA divided by net revenue. We have not included a 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.

Adjusted 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; and integrating and accounting for past and present acquisitions. Adjusted gross profit margin is defined as adjusted gross profit divided by adjusted net revenue.

Adjusted 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; and integrating and accounting for past and present acquisitions.

Segment operating income is defined as gross profit less SG&A expense. Segment operating margin is defined as segment operating income divided by net revenue.

Maximillian Marcy
Investor Relations Contact
651-236-5062

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