FULLER H B CO

Previous wording

Net revenue in the first quarter of 2024 increased 0.2 percent from the first quarter of 2023. Net revenue increased 5.0 percent due toacquisitions, partially offset by a 3.3 percent decrease in pricing, 0.9 percent decrease due to sales volume and 0.6 percent decrease due to negative currency effect compared to the first quarter of 2023. The negative currency effects were primarily driven by a weaker Turkish lira, Chinese renminbi and Egyptian pound offset by a stronger Euro, Brazilian real and Mexican peso compared to the U.S. dollar. Gross profit margin increased 300 basis points primarily due to lower raw material costs, partially offset by the impact of lower product pricing and sales volume.

Current wording

Net revenue in the second quarter of 2024 increased 2.1 percent from the second quarter of 2023. Net revenue increased 3.9 percent due toacquisitions and 3.3 percent due to sales volume, partially offset by a 3.4 percent decrease in pricing and a 1.7 percent decrease due to negative currency effect compared to the second quarter of 2023. The negative currency effects were primarily driven by aweaker Turkish lira, Chinese renminbi and Egyptian pound offset by a stronger Brazilian real and Mexican peso compared to the U.S. dollar. Gross profit margin increased 220 basis points primarily due to lower raw material costs and higher sales volume partially offset by lower product pricing.

Previous wording

Net income attributable to H.B. Fuller in the first quarter of 2024 was $31.0 million compared to $21.9 million in the first quarter of 2023. Diluted earnings per share for the first quarter of 2024 was $0.55 per share compared to $0.39 per share for the first quarter of 2023.

Current wording

Net income attributable to H.B. Fuller in the second quarter of 2024 was $51.3 million compared to $40.4 million in the second quarter of 2023. Diluted earnings per share for the second quarter of 2024 was $0.91 per share compared to $0.73 per share for the second quarter of 2023.

Previous wording

During the second and third quarters of 2023, the Company approved restructuring plans (the “Plans”) related to organizational changes and other actions to optimize operations and integrate acquired businesses. In implementing the Plans, the Company currently expects to incur costs of approximately $39.1 million to $44.1 million ($30.4 million to $34.4 million after-tax), which include (i) cash expenditures of approximately $28.4 million to $29.6 million ($22.0 million to $23.0 million after tax) for severance and related employee costs globally and (ii) other restructuring costs related to the streamlining of processes and the payment of anticipated income taxes in certain jurisdictions related to the Plans. We have incurred costs of $32.2 million under the Plans as of March 2, 2024. The Plans were implemented in the second quarter of fiscal year 2023 and are currently expected to be completed during fiscal year 2026. The restructuring costs will be spread across the next several fiscal quarters as the measures are implemented with the majority of the charges recognized and cash payments occurring in fiscal 2023 and 2024.

Current wording

During the second and third quarters of 2023, the Company approved restructuring plans (the “Plans”) related to organizational changes and other actions to optimize operations and integrate acquired businesses. In implementing the Plans, the Company currently expects to incur costs of approximately $39.1 million to $44.1 million ($30.4 million to $34.4 million after-tax), which include (i) cash expenditures of approximately $28.4 million to $29.6 million ($22.0 million to $23.0 million after tax) for severance and related employee costs globally and (ii) other restructuring costs related to the streamlining of processes and the payment of anticipated income taxes in certain jurisdictions related to the Plans. We have incurred costs of $37.1 million under the Plans as of June 1, 2024. The Plans were implemented in the second quarter of fiscal year 2023 and are currently expected to be completed during fiscal year 2026. The restructuring costs will be spread across the next several fiscal quarters as the measures are implemented with the majority of the charges recognized and cash payments occurring in fiscal 2023 and 2024.

Previous wording

We review variances in net revenue in terms of changes related to sales volume, product pricing, business acquisitions and divestitures (“M&A”) and changes in foreign currency exchange rates. The following table shows the net revenue variance analysis for the first quarter of 2024 compared to the third quarter and first nine months of 2023:

Current wording

We review variances in net revenue in terms of changes related to sales volume, product pricing, business acquisitions and divestitures (“M&A”) and changes in foreign currency exchange rates. The following table shows the net revenue variance analysis for the second quarter and first six months of 2024 compared to the second quarter and first six months of 2023:

Previous wording

Organic growth was a negative 4.2 percent in the first quarter of 2024 compared to the first quarter of 2023 and consisted of a 9.4 percent decrease in Hygiene, Health and Consumable Adhesives and a 2.3 percent decrease in Engineering Adhesives, partially offset by a 10.3 percent increase in Construction Adhesives. The decrease is drivenby a decrease in product pricing and volume. The 5.0 percent increase from M&A is due to our acquisitions that occurred in the last twelve months. The negative 0.6 percent foreign currency impact was primarily driven by a weaker Turkish lira, Chinese renminbi and Egyptian pound offset by a stronger Euro, Brazilian real and Mexican peso compared to the U.S. dollar.

Current wording

Organic revenue decreased 0.1 percent in the second quarter of 2024 compared to the second quarter of 2023 and consisted of a 7.2 percent increase in Construction Adhesives and a 2.5 percent increase in Engineering Adhesives, offset by a 4.7 percent decrease in Hygiene, Health and Consumable Adhesives. The decrease was drivenby a 3.4 percent decrease in product pricing, partially offset by a 3.3 percent increase in sales volume. The 3.9 percent increase from M&A was due to our acquisitions that occurred in the last twelve months. The negative 1.7 percent foreign currency impact was primarily driven by aweaker Turkish lira, Chinese renminbi and Egyptian pound offset by a stronger Brazilian real and Mexican peso compared to the U.S. dollar.

Previous wording

Gross profit in the first quarter of 2024 increased 11.4 percent and gross profit margin increased 300 basis points compared to the first quarter of 2023. The increase in gross profit margin was primarily due to lower raw material costs, partially offset by the impact of lower sales volume and decreased product pricing.

Current wording

Gross profit in the second quarter of 2024 increased 9.9 percent and gross profit margin increased 220 basis points compared to the second quarter of 2023. The increase in gross profit margin was due to a 280 basis point decrease in raw materials offset by a 70 basis point increase in other manufacturing costs.

Previous wording

SG&A expenses for the first quarter of 2024 compared to the first quarter of 2023 increased 220 basis points as a percentage of net revenue. The increase is due to the impact of acquisitions and higher restructuring and variable compensation costs.

Current wording

SG&A expenses for the second quarter of 2024 compared to the second quarter of 2023 increased 130 basis points as a percentage of net revenue. The increase was due to the impact of acquisitions and higher compensation costs.

Previous wording

Other income, net in the first quarter of 2024 included $4.0 million of net defined benefit pension benefits, partially offset by $2.1 million of currency transaction losses and a $0.4 million loss from the write-off of a cost method investment. Other income, net in the first quarter of 2023 included $6.5 million of net defined benefit pension benefits and $0.2 million of other income, partially offset by $4.1 million of currency transaction losses.

Current wording

Other income, net in the first six months of 2024 included $7.9 million of net defined benefit pension benefits, partially offset by $2.3 million of currency transaction losses, a $0.4 million loss from the write-off of a cost method investment and $0.1 million of other expense. Other income, net in the first six months of 2023 included $10.1 million of net defined benefit pension benefits and $0.7 million of other income, partially offset by $7.6 million of currency transaction losses.

Previous wording

Interest expense in thefirst quarter of 2024 was$31.9 million compared to$33.1 million in thefirst quarter of 2023 and was lower primarily due to lower interest rates and lower debt balances.

Current wording

Interest expense in thesecond quarter of 2024 was$32.3 million compared to$33.1 million in thesecond quarter of 2023 and was lower primarily due to lower interest rates and lower debt balances.

Previous wording

Interest income in the first quarter of 2024 and 2023 was $1.3 million and $0.7 million, respectively, consisting primarily of interest on cross-currency swap activity and other miscellaneous interest income.

Current wording

Interest income in the second quarter of 2024 and 2023 was $1.2 million and $0.9 million, respectively, consisting primarily of interest on cross-currency swap activity and other miscellaneous interest income.

Previous wording

Income tax expense of $7.8 million in the first quarter of 2024 includes $2.5 million of discrete tax benefit. Excluding the discrete tax benefit, the overall effective tax rate was 27.4 percent. The discrete tax benefit relates to various foreign tax matters, as well an excess tax benefit related to U.S. stock compensation. Income tax expense of $9.7 million in the first quarter of 2023 includes $0.8 million of discrete tax expense. Excluding the discrete tax expense, the overall effective tax rate was 29.2 percent. The discrete tax expense relates to various foreign tax matters offset by an excess tax benefit related to U.S. stock compensation.

Current wording

Income tax expense of $30.2 million in the first six months of 2024 includes $1.2 million of discrete tax benefit. Excluding the discrete tax benefit, the overall effective tax rate was 28.4 percent. The discrete tax benefit relates to an excess tax benefit related to U.S. stock compensation offset by various foreign tax matters. Income tax expense of $29.0 million in the first six months of 2023 includes $2.9 million of discrete tax expense. Excluding the discrete tax expense, the overall effective tax rate was 29.4 percent. The discrete tax expense related to various foreign tax matters offset by an excess tax benefit related to U.S. stock compensation.

Previous wording

The income from equity method investments relates to our 50 percent ownership of the Sekisui-Fuller joint venture in Japan. The lower income for the first quarter of 2024 compared to the first quarter of 2023 is due to lower net income in our joint venture and the unfavorable impact of the weakening of the Japanese yen against the U.S. dollar.

Current wording

The income from equity method investments relates to our 50 percent ownership of the Sekisui-Fuller joint venture in Japan. The lower income for the second quarter and first six months of 2024 compared to the second quarter and first six months of 2023 is due to lower net income in our joint venture and the unfavorable impact of the weakening of the Japanese yen against the U.S. dollar.

Previous wording

The net income attributable to H.B. Fuller for the first quarter of 2024 was $31.0 million compared to $21.9 million for the first quarter of 2023. The diluted earnings per share for the first quarter of 2024 was $0.55 per share as compared to $0.39 per share for the first quarter of 2023.

Current wording

The net income attributable to H.B. Fuller for the second quarter of 2024 was $51.3 million compared to $40.4 million for the second quarter of 2023. The diluted earnings per share for the second quarter of 2024 was $0.91 per share as compared to $0.73 per share for the second quarter of 2023.

Previous wording

Net revenue decreased 4.1 percent in the first quarter of 2024 compared to the first quarter of 2023. The decrease in organic growth was attri butable to a decrease in sales volume and product pricing. The 5.8 percent increase in net revenue from M&A was due to the acquisitions of Beardow Adams in the second quarter of 2023 and Adhezion in the third quarter of 2023. The negative currency effect was due to a weaker Turkish lira, Chinese renminbi and Egyptian pound offset by a stronger Brazilian real and Mexican peso compared to the U.S. dollar. As a percentage of net revenue, gross margin increased due to lower raw material costs, partially offset by the impact of lower product pricing and lower sales volume. SG&A expenses as a percentage of net revenue increased due to the impact of acquisitions, lower net revenue and higher variable compensation costs. Segment operating income increased 4.0 percent and segment operating margin as a percentage of net revenue increased 100 basis points compared to thefirst quarter of 2023.

Current wording

Net revenue decreased 3.5 percent in the first six months of 2024 compared to the first six months of 2023. The decrease in organic growth was attri butable to a decrease in product pricing and sales volume. The 4.9 percent increase in net revenue from M&A was due to the acquisitions of Beardow Adams in the second quarter of 2023 and Adhezion in the third quarter of 2023. The negative currency effect was due to a weaker Turkish lira, Egyptian pound, and Chinese renminbi offset by a stronger Brazilian real, Mexican peso and Colombian peso compared to the U.S. dollar. As a percentage of net revenue, raw material costs decreased 390 basis points due to lower raw material costs. Other manufacturing costs as a percentage of net revenue increased 100 basis points due to lower product pricing and lower sales volume. SG&A expenses as a percentage of net revenue increased 240 basis points due to the impact of acquisitions, lower net revenue and higher compensation costs. Segment operating income increased 0.6 percent and segment operating margin as a percentage of net revenue increased 50 basis points compared to thefirst six months of2023.

Previous wording

Net revenue decreased 1.3 percent in thefirst quarter of 2024 compared to thefirst quarter of 2023. The decrease in organic growth was attributable to a decrease in product pricing and sales volume. The 1.9 percent increase in net revenue from M&A was due to the acquisition of Aspen in the first quarter of 2023. The negative currency effect was due to a weaker Chinese renminbi and Turkish lira offset by a stronger Euro compared to the U.S. dollar. Gross margin as a percentage of net revenue increased due to lower raw material costs, partially offset by the impact of lower product pricing and sales volume. SG&A expenses as a percentage of net revenue increased due to lower net revenue and higher variable compensation costs. Segment operating income increased 7.1 percent and segment operating margin increased 80 basis points compared to thefirst quarter of 2023.

Current wording

Net revenue increased 0.7 percent in thefirst six months of2024 compared to thefirst six months of2023. The increase in organic growth was attributable to an increase in sales volume, partially offset by a decrease in product pricing. The 1.9 percent increase in net revenue from M&A was due to the acquisition of Aspen in the first quarter of 2023 and ND Industries in the second quarter of 2024. The negative currency effect was due to a weaker Chinese renminbi and Turkish lira compared to the U.S. dollar. As a percentage of net revenue, raw material costs decreased 350 basis points due to lower raw material costs. Other manufacturing costs as a percentage of net revenue increased 90 basis points due to the impact of lower product pricing, partially offset by increased sales volume. SG&A expenses as a percentage of net revenue increased by 130 basis points due to higher compensation costs. Segment operating income increased 12.7 percent and segment operating margin increased 130 basis points compared to thefirst six months of2023.

Previous wording

Net revenue increased 23.1 percent in the first quarter of 2024 compared to the first quarter of 2023. The increase in organic growth was attributable to an increase in sales volume, partially offset by a slight decrease in product pricing. The 12.7 percent increase in net revenue from M&A was due to the acquisition of XChem in the third quarter of 2023 and Sanglier in the fourth quarter of 2023. Gross margin as a percentage of net revenue increased primarily due to higher sales volume and lower raw material costs partially offset by a slight decrease in product pricing. SG&A expenses as a percentage of net revenue decreased due to higher net revenue partially offset by the impact of acquisitions and higher variable compensation costs. Segment operating loss decreased 72.9 percent and segment operating margin increased 810 basis points compared to thefirst quarter of 2023.

Current wording

Net revenue increased 16.0 percent in the second quarter of 2024 compared to the second quarter of 2023. The increase in organic growth was attributable to an increase in sales volume, partially offset by a decrease in product pricing. The 8.9 percent increase in net revenue from M&A was due to the acquisitions of XChem in the third quarter of 2023 and Sanglier in the fourth quarter of 2023. As a percentage of net revenue, raw material costs decreased 130 basis points due to lower raw material costs. Other manufacturing costs as a percentage of net revenue decreased 60 basis points due to higher sales volume, partially offset by lower product pricing. SG&A expenses as a percentage of net revenue decreased 40 basis points. Segment operating income increased 74.5 percent and segment operating margin increased 230 basis points compared to thesecond quarter of 2023.

Previous wording

Segment operating loss in the first quarter of 2024 increased 58.4 percent compared to the first quarter of 2023 due to higher restructuring and acquisition project costs.

Current wording

Segment operating loss in the second quarter of 2024 increased 2.7 percent compared to the second quarter of 2023 due to higher restructuring and acquisition project costs.

Previous wording

Total cash and cash equivalents as of March 2, 2024 were $165.2 million compared to $179.5 million as of December 2, 2023 and $125.5 million as of March 4, 2023. The majority of the $165.2 million in cash and cash equivalents as of March 2, 2024 was held outside the United States. Total long and short-term debt was $1,830.8 million as of March 2, 2024, $1,838.4 million as of December 2, 2023 and $1,873.5 million as of March 4, 2023. The total debt to total capital ratio as measured by total debt divided by total debt plus total stockholders’ equity was 50.9 percent as of March 2, 2024 as compared to 51.1 percent as of December 2, 2023 and 53.4 percent as of March 4, 2023.

Current wording

Total cash and cash equivalents as of June 1, 2024 were $114.8 million compared to $179.5 million as of December 2, 2023 and $103.2 million as of June 3, 2023. The majority of the $114.8 million in cash and cash equivalents as of June 1, 2024 was held outside the United States. Total long and short-term debt was $2,024.9 million as of June 1, 2024, $1,838.4 million as of December 2, 2023 and $1,882.3 million as of June 3, 2023. The total debt to total capital ratio as measured by total debt divided by total debt plus total stockholders’ equity was 53.0 percent as of June 1, 2024 as compared to 51.1 percent as of December 2, 2023 and 52.8 percent as of June 3, 2023.

Previous wording

Reconciliation of "Net cash provided by operating activities" to free (negative) cash flow

Current wording

Reconciliation of "Net cash provided by operating activities" to free cash flow

Previous wording

Net income including non-controlling interest was $31.0 million in the first three months of 2024 compared to $21.9 million in the first three months of 2023. Depreciation and amortization expense totaled $43.5 million in the first three months of 2024 compared to $37.9 million in the first three months of 2023. Deferred income taxes was a use of cash of $5.7 million in the first three months of 2024 and 2023. Accrued compensation was a use of cash of $31.9 million in 2024 compared to $57.0 million in 2023. Other assets was a use of cash of $9.1 million in the first three months of 2024 compared to $28.9 million in the first three months of 2023. Other liabilities was a use of cash of $0.4 million in the first three months of 2024 compared to a use of cash of $3.1 million in the first three months of 2023.

Current wording

Net income including non-controlling interest was $82.3 million in the first six months of 2024 compared to $62.3 million in the first six months of 2023. Depreciation and amortization expense totaled $84.7 million in the first six months of 2024 compared to $77.0 million in the first six months of 2023. Deferred income taxes was a use of cash of $24.1 million in the first six months of 2024 compared to $16.8 million in the first six months of 2023. Accrued compensation was a use of cash of $16.4 million in 2024 compared to $42.2 million in 2023. Other assets was a use of cash of $22.3 million in the first six months of 2024 compared to $37.0 million in the first six months of 2023. Other liabilities was a use of cash of $1.8 million in the first six months of 2024 compared to a source of cash of $18.8 million in the first six months of 2023.

Previous wording

Changes in net working capital (trade receivables, inventory and trade payables) accounted for a source of cash of $34.3 million compared to a source of cash of $30.6 million last year. The table below provides the cash flow impact due to changes in the components of net working capital and an assessment of each of the components:

Current wording

Changes in net working capital (trade receivables, inventory and trade payables) accounted for a source of cash of $4.9 million compared to a source of cash of $54.9 million last year. The table below provides the cash flow impact due to changes in the components of net working capital and an assessment of each of the components:

Previous wording

Purchases of property, plant and equipment were $43.3 million during the first three months of 2024 compared to $47.6 million for the same period of 2023. This difference reflects the timing of capital projects and expenditures related to growth initiatives.

Current wording

Purchases of property, plant and equipment were $90.2 million during the firstsix months of 2024 compared to $82.6 million for the same period of 2023. This difference reflects the timing of capital projects and expenditures related to growth initiatives.

Previous wording

During the first three months of 2023, we paid $16.7 million of cash, net of cash acquired for purchased businesses.

Current wording

During the first six months of 2024, we paid $254.3 million of cash, net of cash acquired for purchased businesses. During the first six months of 2023, we paid $103.7 million, net of cash acquired for purchased businesses.

Previous wording

In the first three months of 2024, borrowings on our revolving credit facility were $195.0 million and repayments on our revolving credit facility and our long-term debt totaled $203.3 million. These borrowings are for general working capital purposes. Borrowings on our long-term debt were $1,300.0 and payments on our revolving credit facility were $1,176.7 million in the first three months of 2023. Payment of debt issue costs were $10.2 million in the first three months of 2023. Net payments of notes payable were $0.3 million in the first three months of 2024 and $0.9 million in the same period of 2023. Cash dividends paid were $11.2 million in the first three months of 2024 compared to $10.2 million in the same period of 2023. Repurchases of common stock were $6.2 million in the first three months of 2024 compared to $2.4 million in the same period of 2023.

Current wording

In the firstsix months of 2024, borrowings on our revolving credit facility were $1,497.0 million and repayments on our revolving credit facility and our long-term debt totaled $1,305.5 million. These borrowings are for general working capital purposes and permitted acquisitions. Borrowings on our long-term debt were $1,300.0 and payments on our revolving credit facility were $1,176.7 million in the firstsix months of 2023. Payment of debt issue costs were $3.5 million in the first six months of 2024 and $10.2 million in the firstsix months of 2023. Net payments of notes payable were a use of cash of $0.4 million in the firstsix months of 2024 compared to $0.2 million in the same period of 2023. Cash dividends paid were $23.3 million in the firstsix months of 2024 compared to $21.3 million in the same period of 2023. Repurchases of common stock were $21.8 million in the firstsix months of 2024 compared to $2.6 million in the same period of 2023.