PR Newswire | Sep 23, 2020 04:05PM EDT

09/23 15:05 CDT

H.B. Fuller Reports Third Quarter Fiscal Year 2020 ResultsDiluted EPS of $0.79; adjusted diluted EPS of $0.76Adjusted EBITDA of $106 million exceeded guidance rangeDebt paydown of $59M ahead of target ST. PAUL, Minn., Sept. 23, 2020

ST. PAUL, Minn., Sept. 23, 2020 /PRNewswire/ -- H.B. Fuller Company (NYSE: FUL) today reported financial results for its third quarter ended August 29, 2020.

Items of Note for Third Quarter 2020

* Strong operational performance with net income of $42 million and adjusted EBITDA of $106 million, which exceeded the company's guidance, driven by solid organic sales results, benefits from restructuring efficiencies and lower raw material costs. * Total organic revenues declined by 2.5% compared with last year, ahead of the company's expectations. * Continued share gains led to organic revenue growth in Hygiene, Health and Consumable Adhesives (HHC) and higher sequential revenues in Engineering Adhesives and Construction Adhesives. * Year-to-date cash flow from operations increased by 20% versus the same period in 2019, driven by working capital reductions. * Debt paydown of $59 million exceeded the company's $40 to $50 million targeted debt paydown for the quarter. The company remains on track to achieve $200 million debt repayment target for 2020. * Delivered restructuring savings of $7 million in the quarter, with expected savings of approximately $30 million for fiscal year 2020, related to our realignment to three global business units (GBUs). * The company expects to deliver additional savings of $20 to $30 million by the end of 2022 related to the company's operations and supply chain project initiated this year.

Summary of Third Quarter 2020 ResultsNet revenue of $691 million decreased 4.7% compared with the third quarter of 2019. Organic revenue was down 2.5% versus the same period last year, excluding impacts from foreign currency exchange rates and the sale of the surfactants, thickeners and dispersants business which, combined, negatively impacted revenues by 2.2%. Hygiene, Health and Consumable Adhesives organic revenue increased 1% year over year reflecting continued demand for adhesives for essential goods and packaging. Construction Adhesives and Engineering Adhesives organic revenues were lower than last year but increased versus the second quarter. Engineering Adhesives significantly improved revenue performance included double-digit year-over-year growth in Electronics, Recreational Vehicles and Technical Textiles.

Gross profit margin was 27.2%. Adjusted gross profit margin of 27.3% was down 150 basis points versus last year. The decline was due to lower revenues and unfavorable business mix related to impacts from COVID-19, partially offset by favorable raw material costs. Selling, General and Administrative (SG&A) expense was $129 million. Adjusted SG&A expense of $123 million declined 6.4% compared with the same period last year, driven by cost savings realized from the company's business realignment to three global business units and lower discretionary expenses in the quarter.

As a result of these factors, net income attributable to H.B. Fuller in the quarter was $42 million, or $0.79 per diluted share. Adjusted net income attributable to H.B. Fuller was $40 million, or $0.76 of adjusted EPS, down from $44 million, or $0.86 of adjusted EPS in the prior year. Adjusted EBITDA was $106 million in the quarter, compared with $116 million in the same period last year, and adjusted EBITDA margin was 15.3% versus 16% in the prior year.

"In the third quarter, we delivered higher than expected organic revenue performance by building on our market share gains in HHC, improving performance in Construction Adhesives and winning new business in Engineering Adhesives," said Jim Owens, H.B. Fuller president and chief executive officer. "We continued to realize operational cost efficiencies from our GBU realignment, reduce SG&A spending and bring down raw material costs, which drove EBITDA results that were also better than forecasted. Strong cash flow enabled us to exceed our debt paydown target in the quarter, keeping us on track for $200 million of total debt paydown for the year. During the quarter, we also began implementing the operational improvement projects we announced on our second quarter call that will drive $20 to $30 million of incremental cost savings in 2021 and 2022.

Owens continued, "H.B. Fuller has performed well during the pandemic due to the competitive advantages we've created through our new GBU and global customer focused business structure, our cultural emphasis on collaboration and speed and our investments in digital tools. We will build on our successes from the first nine months of the year and leverage those wins in the fourth quarter and into 2021. Our margins and cash flow remain resilient, and we are well-positioned to accelerate our performance as end markets continue to show signs of improvement. We remain focused on our vision to be the best adhesive company in the world by creating value for our customers and shareholders today, and as the world evolves following the pandemic."

Key Balance Sheet and Cash Flow ItemsAt the end of the third quarter of 2020, the company had cash on hand of $75 million and total debt equal to $1,869 million. This compares to cash and debt levels equal to $70 million and $1,928 million, respectively, at the end of the second quarter of 2020. For the nine-month year-to-date period, cash flow from operations increased to $193 million from $160 million for the same period of 2019, driven by improved working capital management. Capital expenditures were $17 million versus $15 million in the third quarter of fiscal 2019, reflecting timing of capital projects and expenditures related to growth initiatives. The company estimates capital investment for the fiscal year totaling $80 to $85 million.

H.B. Fuller has more than adequate liquidity to meet any foreseeable needs, including a $400 million revolving credit facility with a feature that allows for an increase of the facility by $300 million dollars if needed. The company also has ample room under its debt covenants using significantly conservative outlook scenarios.

Q4 2020 GuidanceThe extent of COVID-19's impact on global economic factors remains uncertain. The company is providing the following guidance based on current economic projections, order patterns and assumptions for global commercial activity:

* Estimated revenue in the fourth quarter is anticipated to increase by 4% to 7% sequentially from the third quarter and be approximately flat to down 3% year over year. * Adjusted EBITDA is anticipated to be approximately $110 million to $115 million, in line with the fourth quarter of 2019. * Debt reduction of $200 million for the full year, consistent with our original 2020 plans.

Conference CallThe Company will host an investor conference call to discuss its third quarter results and fourth quarter planning assumptions on Thursday, Sept. 24, 2020, at 10:30 a.m. EDT. The conference call audio and accompanying presentation slides will be available to interested parties via a simultaneous webcast, and may be accessed from the company's website at https://investors.hbfuller.com/calendar. Participants should access the webcast prior to the start of the call to register for the event and install and test any necessary software. Accompanying presentation slides will be available at the link above 30 minutes prior to the call, and the webcast and presentation will be archived on the company's website. A telephone replay of the conference call will be available approximately 1 hour after the conclusion of the call, through Oct. 1, 2020. To access the telephone replay dial 1-877-344-7529 in the US, 855-669-9658 in Canada, and 1-412-317-0088 outside the US and Canada, and enter access code 10147504.

Regulation GThe information presented in this earnings release regarding segment operating income, adjusted gross profit, adjusted gross profit margin, adjusted selling, general and administrative expense, adjusted income before income taxes and income from equity investments, adjusted income taxes, adjusted effective tax rate, adjusted net income, adjusted diluted earnings per share and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) 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 to the results of other companies. 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 "Regulation G Reconciliation" tables in this press release with the exception of our forward-looking non-GAAP measures contained above in our fiscal 2020 Planning Assumptions, which the company cannot reconcile to forward-looking GAAP results without unreasonable effort.

About H.B. FullerSince 1887, H.B. Fuller has been a leading global adhesives provider focusing on perfecting adhesives, sealants and other specialty chemical products to improve products and lives. With fiscal 2019 net revenue of $2.9 billion, H.B. Fuller's commitment to innovation brings together people, products and processes that answer and solve some of the world's biggest challenges. Our reliable, responsive service creates lasting, rewarding connections with customers in electronics, disposable hygiene, medical, transportation, aerospace, clean energy, packaging, construction, woodworking, general industries and other consumer businesses. And, our promise to our people connects them with opportunities to innovate and thrive. For more information, visit us at https://www.hbfuller.com/.

Safe Harbor for Forward-Looking StatementsCertain statements in this press release 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 consequences of the COVID-19 outbreak and other pandemics; 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, cost savings and operating efficiencies from the Royal transaction, the global business unit realignment or the operations and supply chain project 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 more costly than expected; 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. Many of the foregoing risks and uncertainties are, and will be, exacerbated by COVID-19 and any worsening of the global business and economic environment as a result.

Further information about the various risks and uncertainties can be found in the company's SEC 10-K filing for the fiscal year ended November 30, 2019. 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, managements' best estimate 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

August 29, 2020 Net Revenue August 31, 2019 Net Revenue

Net revenue $ 691,463 100.0% $ 725,376 100.0%

Cost of sales (503,619) (72.8%) (518,055) (71.4%)

Gross profit 187,844 27.2% 207,321 28.6%

Selling, generaland (129,113) (18.7%) (140,615) (19.4%)administrativeexpenses

Other income, 3,722 0.5% 22,762 3.1%net

Interest expense (20,196) (2.9%) (25,607) (3.5%)

Interest income 2,945 0.4% 3,115 0.4%

Income beforeincome taxes andincome from 45,202 6.5% 66,976 9.2%equity methodinvestments

Income taxes (5,112) (0.7%) (19,321) (2.7%)

Income fromequity method 1,541 0.2% 2,075 0.3%investments

Net incomeincluding 41,631 6.0% 49,730 6.9%non-controllinginterest

Net (loss)incomeattributable to (24) (0.0%) (12) (0.0%)non-controllinginterest

Net incomeattributable to $ 41,607 6.0% $ 49,718 6.9%H.B. Fuller

Basic income percommon share $ 0.80 $ 0.98attributable toH.B. Fuller

Diluted incomeper common share $ 0.79 $ 0.97attributable toH.B. Fuller

Weighted-averagecommon sharesoutstanding:

Basic 52,130 50,939

Diluted 52,591 51,502

Dividendsdeclared per $ 0.163 $ 0.160common share

Selected Balance Sheet Information (subject to change prior to filing of theCompany's Quarterly Report on Form 10-Q)

August 29, 2020 November 30, 2019 August 31, 2019

Cash & cash equivalents $ 74,922 $ 112,191 $ 119,776

Trade accounts receivable, net 476,099 493,181 485,688

Inventories 354,221 337,267 373,609

Trade payables 272,232 298,869 272,554

Total assets 3,981,725 3,985,734 4,032,683

Total debt 1,868,926 1,979,116 2,097,122

H.B. FULLER COMPANY AND SUBSIDIARIES

CONSOLIDATED FINANCIAL INFORMATION

In thousands, except per share amounts (unaudited)

Nine Months Ended Percent of Nine Months Ended Percent of

August 29, 2020 Net Revenue August 31, 2019 Net Revenue

Net revenue $ 2,012,629 100.0% $ 2,157,894 100.0%

Cost of sales (1,469,622) (73.0%) (1,552,189) (71.9%)

Gross profit 543,007 27.0% 605,705 28.1%

Selling, generaland (398,620) (19.8%) (432,407) (20.0%)administrativeexpenses

Other income, 11,740 0.6% 29,113 1.3%net

Interest expense (64,597) (3.2%) (79,354) (3.7%)

Interest income 8,761 0.4% 9,191 0.4%

Income beforeincome taxes andincome from 100,291 5.0% 132,248 6.1%equity methodinvestments

Income taxes (22,194) (1.1%) (38,902) (1.8%)

Income fromequity method 5,068 0.3% 5,273 0.2%investments

Net incomeincluding 83,165 4.1% 98,619 4.6%non-controllinginterest

Net (loss)incomeattributable to (50) (0.0%) (16) (0.0%)non-controllinginterest

Net incomeattributable to $ 83,115 4.1% $ 98,603 4.6%H.B. Fuller

Basic income percommon share $ 1.60 $ 1.94attributable toH.B. Fuller^1

Diluted incomeper common share $ 1.59 $ 1.90attributable toH.B. Fuller^1

Weighted-averagecommon sharesoutstanding:

Basic 51,959 50,864

Diluted 52,400 51,836

Dividendsdeclared per $ 0.485 $ 0.475common share

^1 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)

Three Months Ended Nine Months Ended

August 29, August 31, August 29, August 31, 2020 2019 2020 2019

Net income attributable to $ 41,607 $ 49,718 $ 83,115 $ 98,603H.B. Fuller

Adjustments:

Acquisition project costs (55) 1,535 (1,162) 2,158

Organizational realignment 2,511 (684) 6,199 1,110

Royal restructuring and 1,358 (9,132) 5,502 (1,150)integration

Tax reform - - (26) 55

Project ONE 1,216 1,130 3,100 3,179

Other ^2 (6,687) 1,660 (3,842) 3,427

Adjusted net income 39,950 44,227 92,886 107,382attributable to H.B. Fuller ^3

Add:

Interest expense 20,220 25,607 64,650 79,354

Interest income (2,945) (3,115) (8,761) (9,191)

Income taxes 14,050 14,798 32,335 37,219

Depreciation and amortization 34,432 34,606 102,992 105,403expense^4

Adjusted EBITDA ^3 105,707 116,123 284,102 320,167

Diluted Shares 52,591 51,502 52,400 51,836

Adjusted diluted income percommon share attributable to $ 0.76 $ 0.86 $ 1.77 $ 2.07

H.B. Fuller ^3

Revenue $ 691,463 $ 725,376 $ 2,012,629 $ 2,157,894

Adjusted EBITDA margin ^3 15.3% 16.0% 14.1% 14.8%

_______________

^2 Includes adjustment of ($7,182) of discrete tax benefit in the quarter endedAugust 29, 2020 related to various foreign tax matters and a tax benefitrelating to the revaluation of cross-currency swap agreements due toappreciation of the Euro versus US dollar.

^3 Adjusted net income attributable to H.B. Fuller, adjusted diluted income percommon share attributable to H.B. Fuller, adjusted EBITDA and adjusted EBITDAmargin are non-GAAP financial measures. Adjusted net income attributable toH.B. Fuller is defined as net income before the specific adjustments shownabove. Adjusted diluted income per common share is defined as adjusted netincome attributable to H.B. Fuller divided by the number of diluted commonshares. Adjusted EBITDA is defined as net income before interest, income taxes,depreciation, amortization and the specific adjustments shown above. AdjustedEBITDA margin is defined as adjusted EBITDA divided by net revenue. The tableabove provides a reconciliation of adjusted net income attributable to H.B.Fuller, adjusted diluted income per common share attributable to H.B. Fuller,adjusted EBITDA and adjusted EBITDA margin to net income attributable to H.B.Fuller, the most directly comparable financial measure determined and reportedin accordance with U.S. GAAP.

^4 Depreciation and amortization expense added back for EBITDA is adjusted foramounts already included in Adjusted net income attributable to H.B. Fullertotaling ($413) and ($174) for the three months ended August 29, 2020 andAugust 30, 2019, respectively and ($509) and ($1,135) for the nine months endedAugust 29, 2020 and August 30, 2019, respectively.

H.B. FULLER COMPANY AND SUBSIDIARIES

SEGMENT FINANCIAL INFORMATION

In thousands (unaudited)

Three Months Ended Nine Months Ended

August 29, 2020 August 31, 2019 August 29, 2020 August 31, 2019

Net Revenue:

Hygiene,Health and $ 320,187 $ 328,420 $ 977,373 $ 986,166ConsumableAdhesives

Engineering 276,083 286,716 761,040 855,010Adhesives

Construction 95,193 108,406 274,216 302,987Adhesives

Corporate - 1,834 - 13,731Unallocated

Total H.B. $ 691,463 $ 725,376 $ 2,012,629 $ 2,157,894Fuller

SegmentOperatingIncome:

Hygiene,Health and $ 31,883 $ 32,638 $ 89,556 $ 85,576ConsumableAdhesives

Engineering 29,873 36,847 65,386 98,146Adhesives

Construction 4,284 7,650 9,436 14,246Adhesives

Corporate (7,309) (10,429) (19,991) (24,670)Unallocated

Total H.B. $ 58,731 $ 66,706 $ 144,387 $ 173,298Fuller

AdjustedEBITDA ^3

Hygiene,Health and $ 43,697 $ 45,146 $ 127,914 $ 123,700ConsumableAdhesives

Engineering 46,831 52,152 112,918 144,521Adhesives

Construction 14,394 17,486 39,893 44,185Adhesives

Corporate 785 1,339 3,377 7,761Unallocated

Total H.B. $ 105,707 $ 116,123 $ 284,102 $ 320,167Fuller

AdjustedEBITDAMargin ^3

Hygiene,Health and 13.6% 13.7% 13.1% 12.5%ConsumableAdhesives

Engineering 17.0% 18.2% 14.8% 16.9%Adhesives

Construction 15.1% 16.1% 14.5% 14.6%Adhesives

Corporate NMP NMP NMP NMPUnallocated

Total H.B. 15.3% 16.0% 14.1% 14.8%Fuller

NMP = non-meaningful percentage

^3 Adjusted net income attributable to H.B. Fuller, adjusted diluted income percommon share attributable to H.B. Fuller, adjusted EBITDA and adjusted EBITDAmargin are non-GAAP financial measures. Adjusted net income attributable toH.B. Fuller is defined as net income before the specific adjustments shownabove. Adjusted diluted income per common share is defined as adjusted netincome attributable to H.B. Fuller divided by the number of diluted commonshares. Adjusted EBITDA is defined as net income before interest, income taxes,depreciation, amortization and the specific adjustments shown above. AdjustedEBITDA margin is defined as adjusted EBITDA divided by net revenue. The tableabove provides a reconciliation of adjusted net income attributable to H.B.Fuller, adjusted diluted income per common share attributable to H.B. Fuller,adjusted EBITDA and adjusted EBITDA margin to net income attributable to H.B.Fuller, the most directly comparable financial measure determined and reportedin accordance with U.S. GAAP.

H.B. FULLER COMPANY AND SUBSIDIARIES

REGULATION G RECONCILIATION

In thousands, except per share amounts (unaudited)

Three Months Ended Nine Months Ended

August 29, 2020 August 31, 2019 August 29, 2020 August 31, 2019

Income beforeincome taxesand incomefrom $ 45,202 $ 66,976 $ 100,291 $ 132,248

equity methodinvestments

Adjustments:

Acquisitionrelated (73) 1,871 (1,584) 2,641activity

Organizational 3,308 (1,345) 8,286 885realignment

Royalrestructuring 1,790 (12,131) 7,379 (1,591)andintegration

Tax reform - - (35) 75

Project ONE 1,602 1,378 4,141 3,982

Other 654 213 1,725 1,105

Adjustedincome beforeincome taxesand income $ 52,483 $ 56,962 $ 120,203 $ 139,345from equitymethodinvestments ^5

^5 Adjusted income before income taxes and income from equity investments is anon-GAAP financial measure. Adjusted income before income taxes and income fromequity investments is defined as income before income taxes and income fromequity investments before the specific adjustments shown above. The table aboveprovides a reconciliation of adjusted income before income taxes and incomefrom equity investments to income before income taxes and income from equityinvestments, the most directly comparable financial measure determined andreported in accordance with U.S. GAAP.

H.B. FULLER COMPANY AND SUBSIDIARIES

REGULATION G RECONCILIATION

In thousands, except per share amounts (unaudited)

Three Months Ended Nine Months Ended

August 29, 2020 August 31, 2019 August 29, 2020 August 31, 2019

Income taxes $ (5,112) $ (19,321) $ (22,194) $ (38,902)

Adjustments:

Acquisitionrelated 18 (336) 423 (482)activity

Organizational (797) 660 (2,087) 225realignment

Royalrestructuring (431) 2,999 (1,877) 441andintegration

Tax reform - - 9 (20)

Project ONE (386) (247) (1,043) (803)

Other ^2 (7,342) 1,447 (5,566) 2,322

Adjustedincome taxes ^ $ (14,050) $ (14,798) $ (32,335) $ (37,219)6

Adjustedincome beforeincome taxesand income $ 52,483 $ 56,962 $ 120,203 $ 139,345from equitymethodinvestments

Adjustedeffective 26.8% 26.0% 26.9% 26.7%income taxrate ^6

^2 Includes adjustment of ($7,182) of discrete tax benefit in the quarter endedAugust 29, 2020 related to various foreign tax matters and a tax benefitrelating to the revaluation of cross-currency swap agreements due toappreciation of the Euro versus US dollar.

^6 Adjusted income taxes and adjusted effective income tax rate are non-GAAPfinancial measures. Adjusted income taxes is defined as income taxes before thespecific adjustments shown above. Adjusted effective income tax rate is definedas income taxes divided by adjusted income before income taxes and income fromequity method investments. The table above provides a reconciliation ofadjusted income taxes and adjusted effective income tax rate to income taxes,the most directly comparable financial measure determined and reported inaccordance with U.S. GAAP.

H.B. FULLER COMPANY AND SUBSIDIARIES

REGULATION G RECONCILIATION

In thousands (unaudited)

Three Months Ended Nine Months Ended

August 29, 2020 August 31, 2019 August 29, 2020 August 31, 2019

Net revenue 691,463 725,376 2,012,629 2,157,894

Gross profit $ 187,844 $ 207,321 $ 543,007 $ 605,705

Gross profit 27.2% 28.6% 27.0% 28.1%margin

Adjustments:

Organizational (204) (367) (53) (124)realignment

Royalrestructuring 1,132 1,741 2,730 4,250andintegration

Other 272 (5) 1,263 (9)

Adjusted gross $ 189,044 $ 208,690 $ 546,947 $ 609,822profit ^7

Adjusted grossprofit margin 27.3% 28.8% 27.2% 28.3%^7

^7 Adjusted gross profit and adjusted gross profit margin are non-GAAPfinancial measures. Adjusted gross profit and adjusted gross profit margin isdefined as gross profit and gross profit margin excluding the specificadjustments shown above. The table above provides a reconciliation ofadjusted gross profit and gross profit margin to gross profit and grossprofit margin, the most directly comparable financial measure determined andreported in accordance with U.S. GAAP.

H.B. FULLER COMPANY AND SUBSIDIARIES

REGULATION G RECONCILIATION

In thousands (unaudited)

Three Months Ended Nine Months Ended

August 29, 2020 August 31, 2019 August 29, 2020 August 31, 2019

Selling,general and $ (129,113) $ (140,615) $ (398,620) $ (432,407)administrativeexpenses

Adjustments:

Acquisition (73) 1,871 (1,584) 2,641project costs

Organizational 3,516 2,937 8,342 4,551realignment

Royalrestructuring 682 2,737 4,725 10,747andintegration

Tax reform - - (35) 75

Project ONE 1,602 1,378 4,142 3,982

Other 382 242 462 1,134

Adjustedselling,general and $ (123,004) $ (131,450) $ (382,568) $ (409,277)administrativeexpenses ^8

_______________

^8 Adjusted selling, general and administrative expenses is a non-GAAPfinancial measure. Adjusted selling, general and administrative expenses isdefined as selling, general and administrative expenses excluding thespecific adjustments shown above. The table above provides a reconciliationof adjusted selling, general and administrative expenses to selling, generaland administrative expenses, the most directly comparable financial measuredetermined and reported in accordance with U.S. GAAP.

H.B. FULLER COMPANY AND SUBSIDIARIES

REGULATION G RECONCILIATION

In thousands (unaudited)

Hygiene, Health and Engineering Construction Corporate H.B. FullerThree Months Consumable TotalEnded August Adhesives Adhesives Unallocated Consolidated29, 2020 Adhesives

Net incomeattributable to $ 33,688 $ 31,334 $ 5,468 $ 70,490 $ (28,883) $ 41,607H.B. Fuller

Adjustments:

Acquisition - - - - (55) (55)project costs

Organizational - - - - 2,511 2,511realignment

Royalrestructuring - - - - 1,358 1,358and integration

Project ONE - - - - 1,216 1,216

Other - - - - (6,687) (6,687)

Adjusted netincomeattributable to 33,688 31,334 5,468 70,490 (30,540) 39,950

H.B. Fuller ^3

Add:

Interest - - - - 20,220 20,220expense

Interest - - - - (2,945) (2,945)income

Income taxes - - - - 14,050 14,050

Depreciationand 10,009 15,497 8,926 34,432 - 34,432amortizationexpense

Adjusted EBITDA $ 43,697 $ 46,831 $ 14,394 $ 104,922 $ 785 $ 105,707^3

Revenue 320,187 276,083 95,193 691,463 - 691,463

Adjusted EBITDA 13.6% 17.0% 15.1% 15.2% NMP 15.3%Margin ^3

Hygiene, Health and Engineering Construction Corporate H.B. FullerNine Months Consumable TotalEnded August Adhesives Adhesives Unallocated Consolidated29, 2020 Adhesives

Net incomeattributable to $ 94,979 $ 69,767 $ 12,987 $ 177,733 $ (94,618) $ 83,115H.B. Fuller

Adjustments:

Acquisition - - - - (1,162) (1,162)project costs

Organizational - - - - 6,199 6,199realignment

Royalrestructuring - - - - 5,502 5,502and integration

Tax reform - - - - (26) (26)

Project ONE - - - - 3,100 3,100

Other - - - - (3,842) (3,842)

Adjusted netincomeattributable to 94,979 69,767 12,987 177,733 (84,847) 92,886

H.B. Fuller ^3

Add:

Interest - - - - 64,650 64,650expense

Interest - - - - (8,761) (8,761)income

Income taxes - - - - 32,335 32,335

Depreciationand 32,935 43,151 26,906 102,992 - 102,992amortizationexpense

Adjusted EBITDA $ 127,914 $ 112,918 $ 39,893 $ 280,725 $ 3,377 $ 284,102^3

Revenue 977,373 761,040 274,216 2,012,629 - 2,012,629

Adjusted EBITDA 13.1% 14.8% 14.5% 13.9% NMP 14.1%Margin ^3

Note: Adjusted EBITDA is a non-GAAP financial measure. The table above providesa reconciliation of adjusted EBITDA for each segment to net income attributableto H.B. Fuller for each segment, the most directly comparable financial measuredetermined and reported in accordance with U.S. GAAP.

NMP = Non-meaningful percentage

H.B. FULLER COMPANY AND SUBSIDIARIES

REGULATION G RECONCILIATION

In thousands (unaudited)

Hygiene, Health and Engineering Construction Corporate H.B. FullerThree Months Consumable TotalEnded August Adhesives Adhesives Unallocated Consolidated31, 2019 Adhesives

Net incomeattributable $ 33,934 $ 38,014 $ 8,662 $ 80,610 $ (30,892) $ 49,718to H.B. Fuller

Adjustments:

Acquisition - - - - 1,535 1,535project costs

Organizational - - - - (684) (684)realignment

Royal - - - - (9,132) (9,132)Restructuring

Project ONE - - - - 1,130 1,130

Other - - - - 1,660 1,660

Adjusted netincomeattributable 33,934 38,014 8,662 80,610 (36,383) 44,227to

H.B. Fuller ^3

Add:

Interest - - - - 25,607 25,607expense

Interest - - - - (3,115) (3,115)income

Income taxes - - - - 14,798 14,798

Depreciationand 11,212 14,138 8,824 34,174 432 34,606amortizationexpense

Adjusted $ 45,146 $ 52,152 $ 17,486 $ 114,784 $ 1,339 $ 116,123EBITDA ^3

Revenue 328,420 286,716 108,406 723,542 1,834 725,376

AdjustedEBITDA Margin^ 13.7% 18.2% 16.1% 15.9% NMP 16.0% 3

Hygiene, Health and Engineering Construction Corporate H.B. FullerNine Months Consumable TotalEnded August Adhesives Adhesives Unallocated Consolidated31, 2019 Adhesives

Net incomeattributable $ 89,567 $ 101,476 $ 17,228 $ 208,271 $ (109,668) $ 98,603to H.B. Fuller

Adjustments:

Acquisition - - - - - - - 2,158 2,158project costs

Organizational - - - - - - - 1,110 1,110realignment

Royal - - - - - - - (1,150) (1,150)Restructuring

Tax Reform - - - - - - - 55 55

Project ONE - - - - - - - 3,179 3,179

Other - - - - - - - 3,427 3,427

Adjusted netincomeattributable 89,567 101,476 17,228 208,271 (100,889) 107,382to

H.B. Fuller ^3

Add:

Interest - - - - 79,354 79,354expense

Interest - - - - (9,191) (9,191)income

Income taxes - - - - 37,219 37,219

Depreciationand 34,133 43,045 26,957 104,135 1,268 105,403amortizationexpense

Adjusted $ 123,700 $ 144,521 $ 44,185 $ 312,406 $ 7,761 $ 320,167EBITDA ^3

Revenue 986,166 855,010 302,987 2,144,163 13,731 2,157,894

AdjustedEBITDA Margin 12.5% 16.9% 14.6% 14.6% NMP 14.8%^3

Note: Adjusted EBITDA is a non-GAAP financial measure. The table aboveprovides a reconciliation of adjusted EBITDA for each segment to net incomeattributable to H.B. Fuller for each segment, the most directly comparablefinancial measure determined and reported in accordance with U.S. GAAP.

NMP = non-meaningful percentage

H.B. FULLER COMPANY AND SUBSIDIARIES

SEGMENT FINANCIAL INFORMATION

NET REVENUE GROWTH (DECLINE)

(unaudited)

Three Months Nine Months Ended Ended

August 29, 2020

Price (0.4%) (0.7%)

Volume (2.1%) (3.1%)

OrganicGrowth (2.5%) (3.8%)(Decline)

M&A (0.2%) (0.6%)

F/X (2.0%) (2.3%)

Total H.B.Fuller net (4.7%) (6.7%)revenue

Three Months Ended Nine Months Ended

August 29, 2020 August 29, 2020

Net Organic Net Organic Revenue F/X M&A Growth Revenue F/X M&A Growth (Decline) (Decline)

Hygiene,Health and (2.5%) (3.6%) 0.0% 1.1% (0.9%) (3.6%) 0.0% 2.7%ConsumableAdhesives

Engineering (3.7%) (0.8%) 0.0% (2.9%) (11.0%) (1.5%) 0.0% (9.5%)Adhesives

Construction (12.2%) 0.0% 0.0% (12.2%) (9.5%) (0.3%) 0.0% (9.2%)Adhesives

Unallocated NMP 0.0% NMP 0.0% NMP 0.0% NMP 0.0%Corporate

Total H.B. (4.7%) (2.0%) (0.2%) (2.5%) (6.7%) (2.3%) (0.6%) (3.8%)Fuller

NMP =non-meaningful percentage

H.B. FULLER COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

(Unaudited)



August 29, November 30,

2020 2019

Assets

Current assets:

Cash and cash equivalents $ 74,922 $112,191

Trade receivables (net of allowances of $13,637 and $10,682, as of August 29, 2020 476,099 493,181 and November 30, 2019, respectively)

Inventories 354,221 337,267

Other current assets 84,187 90,723

Total current assets 989,429 1,033,362



Property, plant and equipment 1,392,017 1,304,231

Accumulated depreciation (737,299) (674,418)

Property, plant and equipment, net654,718 629,813



Goodwill 1,306,398 1,281,808

Other intangibles, net 771,942 799,399

Other assets 259,238 241,352

Total assets $ 3,981,725 $3,985,734



Liabilities, non-controlling interest and total equity

Current liabilities:

Notes payable $ 21,082$15,732

Current maturities of long-term - 65,000 debt

Trade payables 272,232 298,869

Accrued compensation 68,031 78,582

Income taxes payable 18,352 23,229

Other accrued expenses 75,739 60,745

Total current liabilities 455,436 542,157



Long-term debt, excluding current1,847,844 1,898,384 maturities

Accrued pension liabilities 84,336 80,214

Other liabilities 280,201 242,190

Total liabilities $ 2,667,817 $ 2,762,945



Equity:

H.B. Fuller stockholders' equity:

Preferred stock (no shares outstanding) shares authorized - - - 10,045,900

Common stock, par value $1.00 per share, shares authorized - 160,000,000, shares outstanding -51,726 51,241 51,725,732 and 51,241,190, as of August 29, 2020 and November 30, 2019, respectively

Additional paid-in capital 149,305 130,295

Retained earnings 1,442,292 1,384,411

Accumulated other comprehensive (329,932) (343,600) loss

Total H.B. Fuller 1,313,391 1,222,347 stockholders' equity

Non-controlling interest 517 442

Total equity 1,313,908 1,222,789

Total liabilities, non-controlling$ 3,981,725 $3,985,734 interest and total equity

H.B. FULLER COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

In thousands (Unaudited)

Nine Months Ended

August 29, 2020 August 31, 2019

Cash flows from operating activities:

Net income including non-controlling $ 83,165 $ 98,619 interest

Adjustments to reconcile net income includingnon-controlling interest to net cash providedby operating activities:

Depreciation 50,558 50,269

Amortization 52,943 56,269

Deferred income taxes (10,952) (36,831)

Income from equity method investments, net 2,660 1,743 of dividends received

Loss (gain) on sale of assets 118 (19,964)

Share-based compensation 14,087 20,170

Change in assets and liabilities, net of effects of acquisitions:

Trade receivables, net 17,307 (15,674)

Inventories (17,195) (17,704)

Other assets 31,372 (31,853)

Trade payables (9,449) 2,246

Accrued compensation (12,345) (10,173)

Other accrued expenses 8,776 7,936

Income taxes payable 330 23,587

Accrued / prepaid pensions (5,954) (7,548)

Other liabilities 20,481 10,636

Other (32,872) 28,520

Net cash provided by operating activities 193,030 160,248

Cash flows from investing activities:

Purchased property, plant and equipment (71,939) (47,023)

Purchased businesses, net of cash acquired (9,500) (8,042)

Purchase of assets (5,623) -

Purchased business remaining equity - (9,870)

Proceeds from sale of property, plant and 1,407 5,314 equipment

Proceeds from sale of business - 70,293

Cash received from government grant - 9,045

Cash payments related to government grant (5,326) (1,120)

Net cash (used in) provided by investing (90,981) 18,597activities

Cash flows from financing activities:

Repayment of long-term debt (128,000) (173,500)

Net proceeds of notes payable 8,422 2,667

Dividends paid (24,970) (24,181)

Contingent consideration payment (767) (3,610)

Proceeds from stock options exercised 6,567 2,495

Repurchases of common stock (3,342) (2,922)

Net cash used in financing activities (142,090) (199,051)

Effect of exchange rate changes on cash and 2,772 (10,811) cash equivalents

Net change in cash and cash equivalents (37,269) (31,017)

Cash and cash equivalents at beginning of 112,191 150,793 period

Cash and cash equivalents at end of period $ 74,922 $ 119,776

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SOURCE H.B. Fuller Company