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FULLER H B CO - Quarter Report: 2021 May (Form 10-Q)

ful20200829_10q.htm
 
 

Table of Contents

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended May 29, 2021

 

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                              to                                 .

 

Commission file number: 001-09225

 

H.B. FULLER COMPANY

(Exact name of registrant as specified in its charter)

 

Minnesota41-0268370
(State or other jurisdiction of(I.R.S. Employer
incorporation or organization)Identification No.)

                                                                             

1200 Willow Lake Boulevard, St. Paul, Minnesota55110-5101
(Address of principal executive offices)(Zip Code)

                                                                                                                           

Registrant’s telephone number, including area code: (651) 236-5900

 

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

 

Securities registered pursuant to section 12(b) of the Act:

 

 Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, par value $1.00 per share

     FUL

New York Stock Exchange

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

                    

Large accelerated filer ☒Accelerated filer ☐
Non-accelerated filer ☐Smaller reporting company ☐

 

Emerging growth company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12(b) of the Exchange Act. Yes ☐ No ☒

 

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PROCEEDING FIVE YEARS:

 

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☐ No ☐

 

APPLICABLE ONLY TO CORPORATE ISSUERS

 

The number of shares outstanding of the Registrant’s Common Stock, par value $1.00 per share, was 52,534,579 as of June 21, 2021.

 

 

 

H.B. Fuller Company

Quarterly Report on Form 10-Q

Table of Contents

 

   

Page

PART 1. FINANCIAL INFORMATION

 
     

ITEM 1.

FINANCIAL STATEMENTS (Unaudited)

3

     
 

Consolidated Statements of Income for the three and six months ended May 29, 2021 and May 30, 2020

3

     
 

Consolidated Statements of Comprehensive Income for the three and six months ended May 29, 2021 and May 30, 2020

4

     
 

Consolidated Balance Sheets as of May 29, 2021 and November 28, 2020

5

     
 

Consolidated Statements of Total Equity for the three and six months ended May 29, 2021 and May 30, 2020

6

     
 

Consolidated Statements of Cash Flows for the three and six months ended May 29, 2021 and May 30, 2020

7

     
 

Notes to Consolidated Financial Statements

8

     

ITEM 2.

MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

21

     

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

32

     

ITEM 4.

CONTROLS AND PROCEDURES

32

     

PART II. OTHER INFORMATION

32

     

ITEM 1.

LEGAL PROCEEDINGS

32

     

ITEM 1A.

RISK FACTORS

33

     

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

34

     

ITEM 6.

EXHIBITS

35

     

SIGNATURES

36

 

 

PART I. FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

 

H.B. FULLER COMPANY AND SUBSIDIARIES

Consolidated Statements of Income

(In thousands, except per share amounts)

(Unaudited)

 

  

Three Months Ended

  

Six Months Ended

 
  

May 29,

  

May 30,

  

May 29,

  

May 30,

 
  

2021

  

2020

  

2021

  

2020

 

Net revenue

 $827,873  $674,602  $1,553,777  $1,321,166 

Cost of sales

  (610,323)  (489,701)  (1,143,863)  (966,003)

Gross profit

  217,550   184,901   409,914   355,163 

Selling, general and administrative expenses

  (148,409)  (127,998)  (292,423)  (269,507)

Other income, net

  11,879   3,049   19,748   8,018 

Interest expense

  (19,942)  (21,644)  (40,303)  (44,401)

Interest income

  2,530   2,898   5,189   5,816 

Income before income taxes and income from equity method investments

  63,608   41,206   102,125   55,089 

Income taxes

  (16,660)  (11,471)  (27,267)  (17,082)

Income from equity method investments

  2,176   1,893   4,072   3,527 

Net income including non-controlling interest

  49,124   31,628   78,930   41,534 

Net income attributable to non-controlling interest

  (22)  (15)  (37)  (26)

Net income attributable to H.B. Fuller

 $49,102  $31,613  $78,893  $41,508 
                 

Earnings per share attributable to H.B. Fuller common stockholders:

                

Basic

 $0.93  $0.61  $1.50  $0.80 

Diluted

 $0.90  $0.61  $1.47  $0.79 
                 

Weighted-average common shares outstanding:

                

Basic

  52,839   51,420   52,666   51,874 

Diluted

  54,294   52,029   53,817   52,305 
                 

Dividends declared per common share

 $0.168  $0.163  $0.330  $0.323 

 

See accompanying Notes to Unaudited Consolidated Financial Statements.

 

 

 

H.B. FULLER COMPANY AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

(In thousands)

(Unaudited)

 

   

Three Months Ended

   

Six Months Ended

 
   

May 29,

   

May 30,

   

May 29,

   

May 30,

 
   

2021

   

2020

   

2021

   

2020

 

Net income including non-controlling interest

  $ 49,124     $ 31,628     $ 78,930     $ 41,534  

Other comprehensive income (loss)

                               

Foreign currency translation

    55,524       (29,922 )     78,661       (32,703 )

Defined benefit pension plans adjustment, net of tax

    1,371       2,070       2,746       4,156  

Interest rate swaps, net of tax

    3,564       (9,883 )     7,744       (18,882 )

Cross-currency swaps, net of tax

    (1,241 )     5,878       (2,287 )     10,522  

Other comprehensive income (loss)

    59,218       (31,857 )     86,864       (36,907 )

Comprehensive income (loss)

    108,342       (229 )     165,794       4,627  

Less: Comprehensive income attributable to non-controlling interest

    34       19       39       29  

Comprehensive income (loss) attributable to H.B. Fuller

  $ 108,308     $ (248 )   $ 165,755     $ 4,598  

 

See accompanying Notes to Unaudited Consolidated Financial Statements.

 

 

 

H.B. FULLER COMPANY AND SUBSIDIARIES

Consolidated Balance Sheets

(In thousands, except share and per share amounts)

(Unaudited)

 

  

May 29,

  

November 28,

 
  

2021

  

2020

 

Assets

        

Current assets:

        

Cash and cash equivalents

 $69,597  $100,534 

Trade receivables (net of allowances of $11,486 and $12,905, as of May 29, 2021 and November 28, 2020, respectively)

  583,270   514,916 

Inventories

  427,835   323,213 

Other current assets

  86,242   81,113 

Total current assets

  1,166,944   1,019,776 
         

Property, plant and equipment

  1,476,601   1,428,183 

Accumulated depreciation

  (795,025)  (757,439)

Property, plant and equipment, net

  681,576   670,744 
         

Goodwill

  1,330,535   1,312,003 

Other intangibles, net

  732,760   755,968 

Other assets

  355,112   278,213 

Total assets

 $4,266,927  $4,036,704 
         

Liabilities, non-controlling interest and total equity

        

Current liabilities:

        

Notes payable

 $26,857  $16,925 

Trade payables

  433,515   316,460 

Accrued compensation

  75,902   83,598 

Income taxes payable

  28,074   29,173 

Other accrued expenses

  87,324   83,976 

Total current liabilities

  651,672   530,132 
         

Long-term debt

  1,685,553   1,756,985 

Accrued pension liabilities

  89,145   88,806 

Other liabilities

  277,345   278,919 

Total liabilities

  2,703,715   2,654,842 
         

Commitments and contingencies (Note 12)

          
         

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 – 52,499,414 and 51,906,663, as of May 29, 2021 and November 28, 2020, respectively

  52,499   51,907 

Additional paid-in capital

  190,243   157,867 

Retained earnings

  1,535,887   1,474,406 

Accumulated other comprehensive loss

  (215,997)  (302,859)

Total H.B. Fuller stockholders' equity

  1,562,632   1,381,321 

Non-controlling interest

  580   541 

Total equity

  1,563,212   1,381,862 

Total liabilities, non-controlling interest and total equity

 $4,266,927  $4,036,704 

 

 See accompanying Notes to Unaudited Consolidated Financial Statements.

 

 

 

H.B. FULLER COMPANY AND SUBSIDIARIES

Consolidated Statements of Total Equity

(In thousands)

(Unaudited)

 

   

H.B. Fuller Company Shareholders

                 
                           

Accumulated

                 
           

Additional

           

Other

                 
   

Common

   

Paid-in

   

Retained

   

Comprehensive

   

Non-Controlling

         
   

Stock

   

Capital

   

Earnings

   

Income (Loss)

   

Interest

   

Total

 
                                                 

Balance at November 28, 2020

  $ 51,907     $ 157,867     $ 1,474,406     $ (302,859 )   $ 541     $ 1,381,862  

Comprehensive income

    -       -       29,791       27,656       5       57,452  

Dividends

    -       -       (8,542 )     -       -       (8,542 )

Stock option exercises

    147       6,251       -       -       -       6,398  

Share-based compensation plans and other, net

    150       7,423       -       -       -       7,573  

Repurchases of common stock

    (49 )     (2,531 )     -       -       -       (2,580 )

Balance at February 27, 2021

  $ 52,155     $ 169,010     $ 1,495,655     $ (275,203 )   $ 546     $ 1,442,163  

Comprehensive income

    -       -       49,102       59,206       34     $ 108,342  

Dividends

    -       -       (8,870 )     -       -       (8,870 )

Stock option exercises

    318       13,887       -       -       -       14,205  

Share-based compensation plans other, net

    27       7,393       -       -       -       7,420  

Repurchases of common stock

    (1 )     (47 )     -       -       -       (48 )

Balance at May 29, 2021

  $ 52,499     $ 190,243     $ 1,535,887     $ (215,997 )   $ 580       1,563,212  

 

   

H.B. Fuller Company Shareholders

                 
                           

Accumulated

                 
           

Additional

           

Other

                 
   

Common

   

Paid-in

   

Retained

   

Comprehensive

   

Non-Controlling

         
   

Stock

   

Capital

   

Earnings

   

Income (Loss)

   

Interest

   

Total

 
                                                 

Balance at November 30, 2019

    51,241       130,295       1,384,411       (343,600 )     442       1,222,789  

Comprehensive income (loss)

    -       -       9,895       (5,049 )     10       4,856  

Dividends

    -       -       (8,313 )     -       -       (8,313 )

Stock option exercises

    26       881       -       -       -       907  

Share-based compensation plans and other, net

    206       4,821       -       -       -       5,027  

Repurchases of common stock

    (66 )     (3,146 )     -       -       -       (3,212 )

Balance at February 29, 2020

  $ 51,407     $ 132,851     $ 1,385,993     $ (348,649 )   $ 452     $ 1,222,054  

Comprehensive income

    -       -       31,613       (31,861 )     19       (229 )

Dividends

    -       -       (8,448 )     -       -       (8,448 )

Stock option exercises

    24       626       -       -       -       650  

Share-based compensation plans other, net

    121       4,730       -       -       -       4,851  

Repurchases of common stock

    (1 )     (32 )     -       -       -       (33 )

Balance at May 30, 2020

  $ 51,551     $ 138,175     $ 1,409,158     $ (380,510 )   $ 471     $ 1,218,845  

 

See accompanying Notes to Unaudited Consolidated Financial Statements. 

 

 

 

H.B. FULLER COMPANY AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

   

Six Months Ended

 
   

May 29, 2021

   

May 30, 2020

 

Cash flows from operating activities:

               

Net income including non-controlling interest

  $ 78,930     $ 41,534  

Adjustments to reconcile net income including non-controlling interest to net cash provided by operating activities:

               

Depreciation

    35,976       33,198  

Amortization

    35,649       35,458  

Deferred income taxes

    (1,167 )     (10,412 )

Income from equity method investments, net of dividends received

    (4,072 )     (3,527 )

Share-based compensation

    12,486       9,236  

Pension and other post-retirement benefit plan activity

    (15,927 )     (2,993 )

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

               

Trade receivables, net

    (43,191 )     33,867  

Inventories

    (100,358 )     (59,232 )

Other assets

    (21,709 )     (13,070 )

Trade payables

    115,488       42,182  

Accrued compensation

    (8,760 )     (21,587 )

Other accrued expenses

    1,925       8,981  

Income taxes payable

    (1,513 )     (2,728 )

Other liabilities

    (28,980 )     24,705  

Other

    25,055       (7,199 )

Net cash provided by operating activities

    79,832       108,413  
                 

Cash flows from investing activities:

               

Purchased property, plant and equipment

    (50,726 )     (54,533 )

Purchased businesses, net of cash acquired

    (5,445 )     (9,500 )

Purchase of assets

    -       (3,998 )

Proceeds from sale of property, plant and equipment

    1,237       1,416  

Cash payments related to government grant

    (1,526 )     (2,331 )

Net cash used in investing activities

    (56,460 )     (68,946 )
                 

Cash flows from financing activities:

               

Repayment of long-term debt

    (68,000 )     (67,000 )

Net proceeds of notes payable

    9,335       6,994  

Dividends paid

    (17,244 )     (16,577 )

Proceeds from stock options exercised

    20,621       1,557  

Repurchases of common stock

    (2,628 )     (3,246 )

Net cash used in financing activities

    (57,916 )     (78,272 )
                 

Effect of exchange rate changes on cash and cash equivalents

    3,607       (3,040 )

Net change in cash and cash equivalents

    (30,937 )     (41,845 )

Cash and cash equivalents at beginning of period

    100,534       112,191  

Cash and cash equivalents at end of period

  $ 69,597     $ 70,346  

 

See accompanying Notes to Unaudited Consolidated Financial Statements.

 

 

H.B. FULLER COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Amounts in thousands, except per share amounts)

(Unaudited)

 

 

Note 1: Basis of Presentation

 

Overview

 

The accompanying unaudited interim Consolidated Financial Statements of H.B. Fuller Company and Subsidiaries have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information necessary for a fair presentation of results of operations, comprehensive income, financial position and cash flows in conformity with U.S. generally accepted accounting principles. In our opinion, the unaudited interim Consolidated Financial Statements reflect all adjustments of a normal recurring nature considered necessary for the fair presentation of the results for the periods presented. Operating results for interim periods are not necessarily indicative of results that may be expected for the fiscal year as a whole.

 

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures at the date of the financial statements and during the reporting period. Actual results could differ from these estimates. These unaudited interim Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in our Annual Report on Form 10-K for the year ended  November 28, 2020 as filed with the Securities and Exchange Commission.

 

Change in Accounting Principle - Credit Losses

 

In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Statements. This ASU requires a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset. The FASB also issued ASU No. 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, in November 2018, ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments, in April 2019 and ASU No. 2019-11, Codification Improvements to Topic 326, Financial Instruments, in November 2019. ASU No. 2018-19 clarifies that receivables arising from operating leases are within the scope of Topic 842, Leases. ASU No. 2019-04 and ASU No. 2019-11 clarify various scoping and other issues arising from ASU No. 2016-13. The amendments in these ASUs affect the guidance in ASU No. 2016-13 and are effective in the same timeframe as ASU No. 2016-13. We adopted these ASUs and related standards during the first quarter ended February 27, 2021. Based on the conducted analyses on the change in accounting principle, the ASU did not have a material impact on the Consolidated Statements of Income or the Consolidated Balance Sheets. Therefore, a modified retrospective adjustment was not required. The trade receivables and allowances significant accounting policy has been changed in accordance with these ASUs as follows.

 

Trade Receivables and Allowances

 

Trade receivables are recorded at the invoiced amount and do not bear interest. Allowances are maintained for doubtful accounts, credits related to pricing or quantities shipped and early payment discounts. The allowance for doubtful accounts includes an estimate of future uncollectible receivables based on the aging of the receivable balance and our collection experience. The allowance also includes specific customer accounts when it is probable that the full amount of the receivable will not be collected. Current expectations of future credit losses using market and industry data are considered in the specific customer accounts.

 

New Accounting Pronouncements

 

Recently issued accounting standards or pronouncements have been excluded as they are not relevant to us.

 

8

 
 

Note 2: Acquisitions

 

STR Holdings, Inc.

 

On January 13, 2021, we acquired certain assets of STR Holding, Inc. ("STR") for a base purchase price of $5,445 which was funded through existing cash. The agreement requires us to pay an additional $800 on the first anniversary of the acquisition and contingent consideration of up to $1,700 based on certain agreement provisions. STR, headquartered in Enfield, Connecticut, is a manufacturer of encapsulant products used in the solar industry. The acquisition fair value measurement, which includes goodwill of $849, intangible assets of $5,900 and other net assets of $1,196, was preliminary as of May 29, 2021. The fair value of the contingent consideration as of the date of acquisition was $1,700. See Note 11 for further discussion of the fair value of the contingent consideration. Goodwill is deductible for tax purposes. STR and the related goodwill are reported in our Engineering Adhesives ("EA") operating segment. The STR acquisition does not represent a material business combination, and therefore pro forma financial information is not provided. 

 

D.H.M. Adhesives, Inc.

 

On February 3, 2020, we acquired certain assets of D.H.M. Adhesives, Inc. (“D.H.M.”) for approximately $9,500 which was funded through existing cash. In addition, the agreement requires us to pay contingent consideration of up to approximately $8,100 based upon a formula related to revenue during the fiscal years ended November 27, 2021 and December 3, 2022. D.H.M., headquartered in Calhoun, Georgia, is a provider of hotmelt adhesives. The acquisition fair value measurement was final as of May 30, 2020 and includes goodwill of $1,063 and customer relationship intangible of $11,900. The fair value of the contingent consideration as of the date of acquisition was $5,000 resulting in a final purchase price of $14,500. See Note 11 for further discussion of the fair value of the contingent consideration liability. Goodwill is deductible for tax purposes. D.H.M. and the related goodwill are reported in our Hygiene, Health and Consumable Adhesives operating segment. The D.H.M acquisition does not represent a material business combination, and therefore pro forma financial information is not provided.

 

 

Note 3: Restructuring Actions

 

The Company has approved restructuring plans consisting of consolidation plans, organizational changes and other actions related to the reorganization of our business into three segments, the integration of the operations of Royal Adhesives with the operations of the Company, and other actions to optimize operations. The following table summarizes the pre-tax charges under these restructuring plans by income statement classification:

 

   

Three Months Ended

   

Six Months Ended

 
   

May 29, 2021

   

May 30, 2020

   

May 29, 2021

   

May 30, 2020

 

Cost of sales

  $ 23     $ 7     $ 293     $ 67  

Selling, general and administrative

    (201 )     383       1,346       367  
    $ (178 )   $ 390     $ 1,639     $ 434  

 

The restructuring charges are all recorded in Corporate Unallocated for segment reporting.

 

A summary of the restructuring liability is presented below:

 

   

Employee-Related

   

Other

   

Total

 

Balance at November 30, 2019

  $ 9,830     $ 924     $ 10,754  

Expenses incurred

    2,898       1,681       4,579  

Cash payments

    (7,051 )     (2,357 )     (9,408 )

Foreign currency translation

    157       -       157  

Balance at November 28, 2020

    5,834       248       6,082  

Expenses incurred

    45       1,594       1,639  

       Non-cash charges

    -       (135 )     (135 )

Cash payments

    (3,106 )     (1,707 )     (4,813 )

Foreign currency translation

    (17 )     -       (17 )

Balance at May 29, 2021

  $ 2,756     $ -     $ 2,756  

 

9

 

Restructuring liabilities have been classified as a component of other accrued expenses in the Consolidated Balance Sheets.

 

 

Note 4: Inventories

 

The composition of inventories is as follows:

 

   

May 29,

   

November 28,

 
   

2021

   

2020

 

Raw materials

  $ 207,720     $ 151,026  

Finished goods

    220,115       172,187  

Total inventories

  $ 427,835     $ 323,213  

 

 

Note 5: Goodwill and Other Intangible Assets

 

The goodwill activity for the six months ended May 29, 2021 is presented below:

 

  

Hygiene, Health

             
  

and Consumable

  

Engineering

  

Construction

     
  

Adhesives

  

Adhesives

  

Adhesives

  

Total

 

Balance at November 28, 2020

 $332,909  $667,863  $311,231  $1,312,003 

Acquisition

  -   849   -   849 

Currency impact

  4,503   12,384   796   17,683 

Balance at May 29, 2021

 $337,412  $681,096  $312,027  $1,330,535 

 

Balances of amortizable identifiable intangible assets, excluding goodwill and other non-amortizable intangible assets, are as follows:

 

  

May 29, 2021

 
  

Purchased

                 
  

Technology

  

Customer

             

Amortizable Intangible Assets

 

and Patents

  

Relationships

  

Trade Names

  

Other

  

Total

 

Original cost

 $118,086  $946,526  $64,380  $11,422  $1,140,414 

Accumulated amortization

  (58,867)  (311,899)  (32,167)  (5,252)  (408,185)

Net identifiable intangibles

 $59,219  $634,627  $32,213  $6,170  $732,229 

 

  

November 28, 2020

 
  

Purchased

                 
  

Technology

  

Customer

             

Amortizable Intangible Assets

 

and Patents

  

Relationships

  

Trade Names

  

Other

  

Total

 

Original cost

 $113,775  $933,943  $63,266  $11,410  $1,122,394 

Accumulated amortization

  (53,216)  (279,586)  (29,368)  (4,775)  (366,945)

Net identifiable intangibles

 $60,559  $654,357  $33,898  $6,635  $755,449 

 

Amortization expense with respect to amortizable intangible assets was $17,753 and $17,468 for the three months ended May 29, 2021 and May 30, 2020, respectively, and $35,649 and $35,458 for the six months ended May 29, 2021 and May 30, 2020, respectively.

 

10

 

Estimated aggregate amortization expense based on the current carrying value of amortizable intangible assets for the next five fiscal years is as follows:

 

  

Remainder

                     

Fiscal Year

 

2021

  

2022

  

2023

  

2024

  

2025

  

Thereafter

 

Amortization expense

 $35,581  $70,049  $67,118  $61,985  $59,316  $438,180 

 

Non-amortizable intangible assets as of  May 29, 2021 and November 28, 2020 are $531 and $519, respectively, and are related to trademarks and trade names. The change in non-amortizable assets as of May 29, 2021 compared to November 28, 2020 was due to changes in foreign currency exchange rates.

 

 

Note 6: Components of Net Periodic Benefit related to Pension and Other Postretirement Benefit Plans

 

  

Three Months Ended May 29, 2021 and May 30, 2020

 
                  

Other

 
  

Pension Benefits

  

Postretirement

 
  

U.S. Plans

  

Non-U.S. Plans

  

Benefits

 

Net periodic cost (benefit):

 

2021

  

2020

  

2021

  

2020

  

2021

  

2020

 

Service cost

 $-  $-  $821  $721  $5  $18 

Interest cost

  2,325   2,935   739   781   206   284 

Expected return on assets

  (7,781)  (6,439)  (3,104)  (2,798)  (2,236)  (1,994)

Amortization:

                        

Prior service cost (benefit)

  (1)  (1)  17   16   -   - 

Actuarial loss

  799   1,799   1,016   940   18   16 

Net periodic benefit

 $(4,658) $(1,706) $(511) $(340) $(2,007) $(1,676)

 

  

Six Months Ended May 29, 2021 and May 30, 2020

 
                  

Other

 
  

Pension Benefits

  

Postretirement

 
  

U.S. Plans

  

Non-U.S. Plans

  

Benefits

 

Net periodic cost (benefit):

 

2021

  

2020

  

2021

  

2020

  

2021

  

2020

 

Service cost

 $-  $-  $1,654  $1,441  $11  $37 

Interest cost

  4,650   5,869   1,472   1,563   411   567 

Expected return on assets

  (15,561)  (12,879)  (6,181)  (5,596)  (4,472)  (3,988)

Amortization:

                        

Prior service cost (benefit)

  (2)  (2)  34   32   -   - 

Actuarial loss

  1,599   3,598   2,038   1,880   36   31 

Net periodic benefit

 $(9,314) $(3,414) $(983) $(680) $(4,014) $(3,353)

 

Service cost is included with employee compensation cost in cost of sales and selling, general and administrative expenses in the Consolidated Statements of Income. The components of our net periodic defined benefit pension and postretirement benefit costs other than service cost are presented in other income, net in the Consolidated Statements of Income.

 

 

Note 7: Accumulated Other Comprehensive Income (Loss)

 

The following table provides details of total comprehensive income (loss): 

 

   

Three Months Ended May 29, 2021

   

Three Months Ended May 30, 2020

 
                           

Non-

                           

Non-

 
                           

controlling

                           

controlling

 
   

H.B. Fuller Stockholders

   

Interest

   

H.B. Fuller Stockholders

   

Interest

 
   

Pre-tax

   

Tax

   

Net

   

Net

   

Pre-tax

   

Tax

   

Net

   

Net

 

Net income attributable to H.B. Fuller and non-controlling interest

                  $ 49,102     $ 22                     $ 31,613     $ 15  

    Foreign currency translation adjustment¹

  $ 55,512     $ -       55,512       12     $ (29,926 )   $ -       (29,926 )     4  

Defined benefit pension plans adjustment²

    1,851       (480 )     1,371       -       2,758       (688 )     2,070       -  

Interest rate swap³

    4,721       (1,157 )     3,564       -       (13,069 )     3,186       (9,883 )     -  

Cross currency swaps³

    (1,258 )     17       (1,241 )     -       5,994       (116 )     5,878       -  

Other comprehensive income (loss)

  $ 60,826     $ (1,620 )   $ 59,206     $ 12     $ (34,243 )   $ 2,382     $ (31,861 )   $ 4  

Comprehensive income (loss)

                  $ 108,308     $ 34                     $ (248 )   $ 19  

 

   

Six Months Ended May 29, 2021

   

Six Months Ended May 30, 2020

 
                           

Non-

                           

Non-

 
                           

controlling

                           

controlling

 
   

H.B. Fuller Stockholders

   

Interest

   

H.B. Fuller Stockholders

   

Interest

 
   

Pretax

   

Tax

   

Net

   

Net

   

Pretax

   

Tax

   

Net

   

Net

 

Net income attributable to H.B. Fuller and non-controlling interest

                  $ 78,893     $ 37                     $ 41,508     $ 26  

    Foreign currency translation adjustment¹

  $ 78,659     $ -       78,659       2     $ (32,706 )   $ -       (32,706 )     3  

Defined benefit pension plans adjustment²

    3,706       (960 )     2,746       -       5,537       (1,381 )     4,156       -  

Interest rate swap³

    10,258       (2,514 )     7,744       -       (24,970 )     6,088       (18,882 )     -  

Cross currency swaps³

    (2,320 )     33       (2,287 )     -       10,740       (218 )     10,522       -  

Other comprehensive income (loss)

  $ 90,303     $ (3,441 )   $ 86,862       2     $ (41,399 )   $ 4,489       (36,910 )     3  

Comprehensive income

                  $ 165,755     $ 39                     $ 4,598     $ 29  

 

¹ Income taxes are not provided for foreign currency translation relating to permanent investments in international subsidiaries.

 

² Loss reclassified from accumulated other comprehensive income ("AOCI") into earnings as part of net periodic cost related to pension and other postretirement benefit plans is reported in cost of sales and SG&A expense.

 

³ Income (loss) reclassified from AOCI into earnings is reported in other income, net.

 

11

 

The components of accumulated other comprehensive loss are as follows:

 

  

May 29, 2021

 
          

Non-

 
      

H.B. Fuller

  

controlling

 
  

Total

  

Stockholders

  

Interest

 

Foreign currency translation adjustment

 $(27,483) $(27,346) $(137)

Interest rate swap, net of taxes of $5,306

  (17,359)  (17,359)  - 

Cash flow hedges, net of taxes of $(88)

  5,682   5,682   - 

Defined benefit pension plans adjustment, net of taxes of $79,696

  (158,633)  (158,633)  - 

Reclassification of AOCI tax effects

  (18,341)  (18,341)  - 

Accumulated other comprehensive loss

 $(216,134) $(215,997) $(137)

 

  

November 28, 2020

 
          

Non-

 
      

H.B. Fuller

  

controlling

 
  

Total

  

Stockholders

  

Interest

 

Foreign currency translation adjustment

 $(106,140) $(106,005) $(135)

Interest rate swap, net of taxes of $8,639

  (25,103)  (25,103)  - 

Cash flow hedges, net of taxes of $(121)

  7,969   7,969   - 

Defined benefit pension plans adjustment, net of taxes of $80,656

  (161,379)  (161,379)  - 

Reclassification of AOCI tax effects

  (18,341)  (18,341)  - 

Accumulated other comprehensive loss

 $(302,994) $(302,859) $(135)

 

 

Note 8: Income Taxes

 

As of  May 29, 2021, we had a liability of $14,962 recorded for gross unrecognized tax benefits (excluding interest) compared to $14,569 as of November 28, 2020. As of May 29, 2021 and November 28, 2020, we had accrued $3,575 and $2,881 of gross interest relating to unrecognized tax benefits, respectively.

 

Income tax expense for the three and six months ended May 29, 2021 includes $600 and $558 of discrete tax benefit. Excluding the discrete tax benefit, the overall effective tax rate was 27.1 percent and 27.2 percent for the three and six months ended May 29, 2021, respectively.  

 

Income tax expense for the three and six months ended May 30, 2020 includes $45 of discrete tax benefit and $1,959 of discrete tax expense, respectively. Excluding the discrete tax benefit and expense, the overall effective tax rate was 28.0 percent and 27.5 percent for the three and six months ended May 30, 2020, respectively.

 

Note 9: Earnings Per Share

 

A reconciliation of the common share components for the basic and diluted earnings per share calculations is as follows:

 

   

Three Months Ended

   

Six Months Ended

 
   

May 29,

   

May 30,

   

May 29,

   

May 30,

 

(Shares in thousands)

 

2021

   

2020

   

2021

   

2020

 

Weighted-average common shares - basic

    52,839       51,420       52,666       51,874  

Equivalent shares from share-based compensations plans

    1,455       609       1,151       431  

Weighted-average common and common equivalent shares diluted

    54,294       52,029       53,817       52,305  

 

Basic earnings per share is calculated by dividing net income attributable to H.B. Fuller by the weighted-average number of common shares outstanding during the applicable period. Diluted earnings per share is based upon the weighted-average number of common and common equivalent shares outstanding during the applicable period. The difference between basic and diluted earnings per share is attributable to share-based compensation awards. We use the treasury stock method to calculate the effect of outstanding shares, which computes total employee proceeds as the sum of (a) the amount the employee must pay upon exercise of the award and (b) the amount of unearned share-based compensation costs attributed to future services. Share-based compensation awards for which total employee proceeds exceed the average market price over the applicable period have an antidilutive effect on earnings per share, and accordingly, are excluded from the calculation of diluted earnings per share.

 

12

 

Share-based compensation awards for 208,888 and 5,102,912 shares for the three months ended May 29, 2021 and May 30, 2020, respectively, and 2,107,062 and 4,461,452 for the six months ended May 29, 2021 and May 30, 2020, respectively, were excluded from diluted earnings per share calculations because they were antidilutive.

 

 

Note 10: Financial Instruments

 

Overview

 

As a result of being a global enterprise, our earnings, cash flows and financial position are exposed to foreign currency risk from foreign currency denominated receivables and payables.

 

We use foreign currency forward contracts, cross-currency swaps and interest rate swaps to manage risks associated with foreign currency exchange rates and interest rates. We do not hold derivative financial instruments of a speculative nature or for trading purposes. We record derivatives as assets and liabilities on the balance sheet at fair value. Changes in fair value are recognized immediately in earnings unless the derivative qualifies and is designated as a hedge. Cash flows from derivatives are classified in the Consolidated Statement of Cash Flows in the same category as the cash flows from the items subject to designated hedge or undesignated (economic) hedge relationships. We evaluate hedge effectiveness at inception and on an ongoing basis. If a derivative is no longer expected to be effective, hedge accounting is discontinued. Hedge ineffectiveness, if any, is recorded in earnings.

 

We are exposed to credit risk in the event of nonperformance of counterparties for foreign currency forward exchange contracts and interest rate swap agreements. We select investment-grade multinational banks and financial institutions as counterparties for derivative transactions and monitor the credit quality of each of these banks on a periodic basis as warranted. We do not anticipate nonperformance by any of these counterparties, and valuation allowances, if any, are de minimis.

 

Cash Flow Hedges

 

As of May 29, 2021, we had six cross-currency swap agreements effective October 20, 2017 to convert a notional amount of $401,200 of foreign currency denominated intercompany loans into U.S. dollars, which mature in 2021 and 2022.  As of May 29, 2021, the combined fair value of the swaps was a liability of $7,464 and was included in other liabilities in the Consolidated Balance Sheets. The swaps were designated as cash flow hedges for accounting treatment. The lesser amount between the cumulative change in the fair value of the actual swaps and the cumulative change in the fair value of hypothetical swaps is recorded in accumulated other comprehensive income (loss) in the Consolidated Balance Sheets and in other net cash provided by operating activities in the Consolidated Statement of Cash Flows. The differences between the cumulative change in the fair value of the actual swaps and the cumulative change in the fair value of hypothetical swaps are recorded as other income, net in the Consolidated Statements of Income. In a perfectly effective hedge relationship, the two fair value calculations would exactly offset each other. Any difference in the calculation represents hedge ineffectiveness. The amount in accumulated other comprehensive income (loss) related to cross-currency swaps was a gain of $5,682 as of May 29, 2021. The estimated net amount of the existing gain that is reported in accumulated other comprehensive income (loss) as of May 29, 2021 that is expected to be reclassified into earnings within the next twelve months is $3,823. As of May 29, 2021, we do not believe any gains or losses will be reclassified into earnings as a result of the discontinuance of these cash flow hedges because the original forecasted transaction will not occur.

 

13

 

The following table summarizes the cross-currency swaps outstanding as of May 29, 2021:

 

 

Fiscal Year of

       

Notional

         
 

Expiration

 

Interest Rate

   

Value

   

Fair Value

 

Pay EUR

2021

  2.75%     $ 133,340     $ (3,669 )

Receive USD

  4.9330%                  
                         

Pay EUR

2022

  3.00%     $ 267,860     $ (3,795 )

Receive USD

  5.1803%                  
                         

Total

        $ 401,200     $ (7,464 )

 

On February 27, 2018, we entered into an interest rate swap agreement to convert $200,000 of our $2,150,000 Term Loan B to a fixed interest rate of 4.589 percent. During the second quarter of 2021, we settled a portion of this interest rate swap as the debt underlying this swap was less than the swap value due to debt paydown. We settled the ineffective portion of the interest rate swap by making a cash payment of $378 and recorded that payment to interest expense in our Consolidated Statements of Income for the three months ended May 29, 2021. On October 20, 2017, we entered into interest rate swap agreements to convert $1,050,000, which was amortized down to $925,000 on October 20, 2020, of our $2,150,000 Term Loan B to a fixed interest rate of 4.0275 percent. The combined fair value of the interest rate swaps was a liability of $22,997 at May 29, 2021 and was included in other liabilities in the Consolidated Balance Sheets. The swaps were designated for hedge accounting treatment as cash flow hedges. We are applying the hypothetical derivative method to assess hedge effectiveness for these interest rate swaps. Changes in the fair value of a hypothetically perfect swap with terms that match the critical terms of our $1,125,000 variable rate Term Loan B are compared with the change in the fair value of the swaps.

 

On April 23, 2018, we amended our Term Loan B Credit Agreement to reduce the interest rate from LIBOR plus 2.25 percent to LIBOR plus 2.00 percent. Fixed interest rates related to swap agreements disclosed have been updated to reflect the amendment.

 

The amounts of pretax gains (losses) recognized in Comprehensive Income related to derivative instruments designated as cash flow hedges are as follows:

 

   

Three Months Ended

   

Six Months Ended

 
   

May 29, 2021

   

May 30, 2020

   

May 29, 2021

   

May 30, 2020

 

Cross-currency swap contracts

  $ (1,258 )   $ 5,994     $ (2,320 )   $ 10,740  

Interest rate swap contracts

    4,721       (13,069 )     10,258       (24,970 )

 

Fair Value Hedges

 

On February 12, 2021, we entered into interest rate swap agreements to convert our $300,000 Public Notes that were issued on October 20, 2020 to a variable interest rate of 1-month LIBOR plus 3.28 percent. The combined fair value of the interest rate swaps was a liability of $4,242 at  May 29, 2021, and was included in other liabilities in the Consolidated Balance Sheets. The swaps were designated for hedge accounting treatment as fair value hedges. We apply the short cut method and assume hedge effectiveness. Changes in the fair value of a hypothetically perfect swap with terms that match the critical terms of our $300,000 fixed rate Public Notes are compared with the change in the fair value of the swaps.

 

14

 

Derivatives Not Designated As Hedging Instruments

 

We use foreign currency forward contracts to offset our exposure to the change in value of certain foreign currency denominated assets and liabilities held at foreign subsidiaries that are remeasured at the end of each period. Although the contracts are effective economic hedges, they are not designated as accounting hedges. Foreign currency forward contracts are recorded as assets and liabilities on the balance sheet at fair value. Changes in the value of these derivatives are recognized immediately in earnings, thereby offsetting the current earnings effect of the related foreign currency denominated assets and liabilities. See Note 11 for fair value amounts of these derivative instruments.

 

As of May 29, 2021, we had forward foreign currency contracts maturing between June 1, 2021 and February 16, 2022. The mark-to-market effect associated with these contracts was largely offset by the underlying transaction gains and losses resulting from the foreign currency exposures for which these contracts relate. 

 

The amounts of pretax gains (losses) recognized in other income, net related to derivative instruments not designated as hedging instruments for the six months ended May 29, 2021 and May 30, 2020 were $404 and $(3,003), respectively.

 

Concentrations of credit risk with respect to trade accounts receivable are limited due to the large number of entities in the customer base and their dispersion across many different industries and countries. As of May 29, 2021, there were no significant concentrations of credit risk.

 

 

Note 11: Fair Value Measurements

 

Overview

 

Estimates of fair value for financial assets and liabilities are based on the framework established in the accounting guidance for fair value measurements. The framework defines fair value, provides guidance for measuring fair value and requires certain disclosures. The framework discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow) and the cost approach (cost to replace the service capacity of an asset or replacement cost). The framework utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:

 

 

Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

 

Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

 

Level 3: Unobservable inputs that reflect management’s assumptions, and include situations where there is little, if any, market activity for the asset or liability.

 

Balances Measured at Fair Value on a Recurring Basis

 

The following table presents information about our financial assets and liabilities that are measured at fair value on a recurring basis as of May 29, 2021 and November 28, 2020, and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value.

 

  

May 29,

  

Fair Value Measurements Using:

 

Description

 

2021

  

Level 1

  

Level 2

  

Level 3

 

Assets:

                

Marketable securities

 $2,770  $-  $2,770  $- 

Foreign exchange contract assets

  3,293   -   3,293   - 
                 

Liabilities:

                

Foreign exchange contract liabilities

 $2,889  $-  $2,889  $- 

Cross-currency cash flow hedge liabilities

  7,464   -   7,464   - 

Interest rate swaps, cash flow hedge liabilities

  22,997   -   22,997   - 

Interest rate swaps, fair value hedge liabilities

  4,242   -   4,242   - 

Contingent consideration liabilities

  8,700   -   -   8,700 

 

15

 
  

November 28,

  

Fair Value Measurements Using:

 

Description

 

2020

  

Level 1

  

Level 2

  

Level 3

 

Assets:

                

Marketable securities

 $22,560  $22,560  $-  $- 

Foreign exchange contract assets

  2,320   -   2,320   - 

Cross-currency cash flow hedge assets

  2,823   -   2,823   - 
                 

Liabilities:

                

Foreign exchange contract liabilities

 $5,251  $-  $5,251  $- 

Cross-currency cash flow hedge liabilities

  280   -   280    

Interest rate swaps, cash flow hedge liabilities

  33,256   -   33,256   - 

Contingent consideration liability

  5,800   -   -   5,800 

 

We use the income approach in calculating the fair value of our contingent consideration liability related to the D.H.M. acquisition using a real option model with Level 3 inputs. The expected cash flows are affected by various significant judgments and assumptions, including revenue growth rates, volatility and discount rate, which are sensitive to change. Estimates of fair value are inherently uncertain and represent only management’s reasonable expectation regarding future developments. These estimates and the judgments and assumptions upon which the estimates are based will, in all likelihood, differ in some respects from actual future results.

 

The valuation of our contingent consideration liabilities related to the acquisitions of D.H.M. and STR resulted in a fair value of $7,000 and $1,700, respectively, as of May 29, 2021. See Note 2 for further discussion regarding our acquisitions.

 

   

Amounts

 

Balance at November 28, 2020

  $ 5,800  

Acquisition

    1,700  

Mark to market adjustment

    1,200  

Balance at May 29, 2021

  $ 8,700  

 

Long-term debt had an estimated fair value of $1,715,934 and $1,811,562 as of May 29, 2021 and November 28, 2020, respectively. The fair value of long-term debt is based on quoted market prices for the same or similar issues or on the current rates offered for debt of similar maturities. The estimated fair value of these long-term obligations is not necessarily indicative of the amount that would be realized in a current market exchange.

 

 

Note 12: Commitments and Contingencies

 

Environmental Matters 

 

From time to time, we become aware of compliance matters relating to, or receive notices from, federal, state or local entities regarding possible or alleged violations of environmental, health or safety laws and regulations. We review the circumstances of each individual site, considering the number of parties involved, the level of potential liability or our contribution relative to the other parties, the nature and magnitude of the hazardous substances involved, the method and extent of remediation, the estimated legal and consulting expense with respect to each site and the time period over which any costs would likely be incurred. Also, from time to time, we are identified as a potentially responsible party (“PRP”) under the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”) and/or similar state laws that impose liability for costs relating to the clean up of contamination resulting from past spills, disposal or other release of hazardous substances. We are also subject to similar laws in some of the countries where current and former facilities are located. Our environmental, health and safety department monitors compliance with applicable laws on a global basis. To the extent we can reasonably estimate the amount of our probable liabilities for environmental matters, we establish an undiscounted financial provision. We recorded liabilities of $7,965 and $8,099 as of May 29, 2021 and November 28, 2020, respectively, for probable and reasonably estimable environmental remediation costs. Of the amount reserved, $3,585 and $3,703 as of May 29, 2021 and November 28, 2020, respectively, is attributable to a facility we own in Simpsonville, South Carolina as a result of our Royal Adhesives acquisition that is a designated site under CERCLA.

 

16

 

Currently, we are involved in various environmental investigations, clean up activities and administrative proceedings and lawsuits. In particular, we are currently deemed a PRP in conjunction with numerous other parties, in a number of government enforcement actions associated with landfills and/or hazardous waste sites. As a PRP, we may be required to pay a share of the costs of investigation and clean up of these sites. In addition, we are engaged in environmental remediation and monitoring efforts at a number of current and former operating facilities. While uncertainties exist with respect to the amounts and timing of the ultimate environmental liabilities, based on currently available information, we have concluded that these matters, individually or in the aggregate, will not have a material adverse effect on our results of operations, financial condition or cash flow.

 

Other Legal Proceedings 

 

From time to time and in the ordinary course of business, we are a party to, or a target of, lawsuits, claims, investigations and proceedings, including product liability, personal injury, contract, patent and intellectual property, environmental, health and safety, tax and employment matters. While we are unable to predict the outcome of these matters, we have concluded, based upon currently available information, that the ultimate resolution of any pending matter, individually or in the aggregate, including the asbestos litigation described in the following paragraphs, will not have a material adverse effect on our results of operations, financial condition or cash flow.

 

We have been named as a defendant in lawsuits in which plaintiffs have alleged injury due to products containing asbestos manufactured more than 30 years ago. The plaintiffs generally bring these lawsuits against multiple defendants and seek damages (both actual and punitive) in very large amounts. In many cases, plaintiffs are unable to demonstrate that they have suffered any compensable injuries or that the injuries suffered were the result of exposure to products manufactured by us. We are typically dismissed as a defendant in such cases without payment. If the plaintiff presents evidence indicating that compensable injury occurred as a result of exposure to our products, the case is generally settled for an amount that reflects the seriousness of the injury, the length, intensity and character of exposure to products containing asbestos, the number and solvency of other defendants in the case, and the jurisdiction in which the case has been brought.

 

A significant portion of the defense costs and settlements in asbestos-related litigation is paid by third parties, including indemnification pursuant to the provisions of a 1976 agreement under which we acquired a business from a third party. Currently, this third party is defending and paying settlement amounts, under a reservation of rights, in most of the asbestos cases tendered to the third party.

 

In addition to the indemnification arrangements with third parties, we have insurance policies that generally provide coverage for asbestos liabilities, including defense costs. Historically, insurers have paid a significant portion of our defense costs and settlements in asbestos-related litigation. However, certain of our insurers are insolvent. We have entered into cost-sharing agreements with our insurers that provide for the allocation of defense costs and settlements and judgments in asbestos-related lawsuits. These agreements require, among other things, that we fund a share of defense costs, settlements and judgments allocable to years in which the responsible insurer is insolvent.

 

A summary of the number of and settlement amounts for asbestos-related lawsuits and claims is as follows:

 

   

Six Months Ended

   

3 Years Ended

 
   

May 29, 2021

   

May 30, 2020

   

November 28, 2020

 

Lawsuits and claims settled

    2       2       19  

Settlement amounts

  $ 85     $ 30     $ 944  

Insurance payments received or expected to be received

  $ 55     $ 21     $ 660  

 

We do not believe that it would be meaningful to disclose the aggregate number of asbestos-related lawsuits filed against us because relatively few of these lawsuits are known to involve exposure to asbestos-containing products that we manufactured. Rather, we believe it is more meaningful to disclose the number of lawsuits that are settled and result in a payment to the plaintiff. To the extent we can reasonably estimate the amount of our probable liabilities for pending asbestos-related claims, we establish a financial provision and a corresponding receivable for insurance recoveries. 

 

17

 

Based on currently available information, we have concluded that the resolution of any pending matter, including asbestos-related litigation, individually or in the aggregate, will not have a material adverse effect on our results of operations, financial condition or cash flow.

 

 

Note 13: Segments

 

We are required to report segment information in the same way that we internally organize our business for assessing performance and making decisions regarding allocation of resources. Revenue and operating income of each of our segments are regularly reviewed by our chief operating decision maker to make decisions about resources to be allocated to the segments and assess their performance. Segment operating income is identified as gross profit less SG&A expenses. Corporate expenses, other than those included in Corporate Unallocated, are allocated to each operating segment. Consistent with our internal management reporting, Corporate Unallocated amounts include business acquisition and integration costs, organizational restructuring charges and project costs associated with our implementation of SAP ONE. Corporate assets are not allocated to the operating segments. Inter-segment revenues are recorded at cost plus a markup for administrative costs.

 

We have three reportable segments: Hygiene, Health and Consumable Adhesives, Engineering Adhesives and Construction Adhesives. The business components within each operating segment are managed to maximize the results of the overall operating segment rather than the results of any individual business component of the operating segment. Results of individual components of each operating segment are subject to numerous allocations of segment-wide costs that may or may not have been focused on that particular component for a particular reporting period. The costs for these allocated resources are not tracked on a "where-used" basis as financial performance is assessed at the total operating segment level.

 

The table below provides certain information regarding net revenue and operating income (loss) for each of our operating segments. 

 

  

Three Months Ended

 
  

May 29, 2021

  

May 30, 2020

 
  

Net

  

Operating

  

Net

  

Operating

 
  

Revenue

  

Income (Loss)

  

Revenue

  

Income (Loss)

 

Hygiene, Health and Consumable Adhesives

 $364,814  $38,929  $344,673  $35,009 

Engineering Adhesives

  345,373   32,075   236,063   20,149 

Construction Adhesives

  117,686   6,338   93,866   6,527 

Total segment

 $827,873  $77,342  $674,602  $61,685 

Corporate Unallocated

  -   (8,201)  -   (4,782)

Total

 $827,873  $69,141  $674,602  $56,903 

 

  

Six Months Ended

 
  

May 29, 2021

  

May 30, 2020

 
  

Net

  

Operating

  

Net

  

Operating

 
  

Revenue

  

Income (Loss)

  

Revenue

  

Income (Loss)

 

Hygiene, Health and Consumable Adhesives

 $700,482  $68,840  $657,185  $57,673 

Engineering Adhesives

  658,037   62,493   484,958   35,514 

Construction Adhesives

  195,258   1,635   179,023   5,152 

Total segment

 $1,553,777  $132,968  $1,321,166  $98,339 

Corporate Unallocated

  -   (15,477)  -   (12,683)

Total

 $1,553,777  $117,491  $1,321,166  $85,656 

 

Consistent with our internal management reporting, Corporate Unallocated amounts in the tables above include charges that are not allocated to the Company’s reportable segments. 

 

The table below provides a reconciliation of operating income to income before income taxes and income from equity method investments:

 

  

Three Months Ended

  

Six Months Ended

 
  

May 29,

  

May 30,

  

May 29,

  

May 30,

 
  

2021

  

2020

  

2021

  

2020

 

Operating income

 $69,141  $56,903  $117,491  $85,656 

Other income, net

  11,879   3,049   19,748   8,018 

Interest expense

  (19,942)  (21,644)  (40,303)  (44,401)

Interest income

  2,530   2,898   5,189   5,816 

Income before income taxes and income from equity method investments

 $63,608  $41,206  $102,125  $55,089 

 

 

18

 

We view the following disaggregation of net revenue by geographic region as useful to understanding the composition of revenue recognized during the respective reporting periods:

 

  

Three Months Ended May 29, 2021

 
                 
  

Hygiene, Health

             
  

and Consumable

  

Engineering

  

Construction

     
  

Adhesives

  

Adhesives

  

Adhesives

  

Total

 
                 

Americas

 $201,458  $126,450  $103,996  $431,904 

EIMEA

  108,310   121,585   6,506   236,401 

Asia Pacific

  55,046   97,338   7,184   159,568 

Total

 $364,814  $345,373  $117,686  $827,873 

 

 

19

 
  

Three Months Ended May 30, 2020

 
                 
  

Hygiene, Health

             
  

and Consumable

  

Engineering

  

Construction

     
  

Adhesives

  

Adhesives

  

Adhesives

  

Total

 
                 

Americas

 $190,581  $90,012  $84,047  $364,640 

EIMEA

  98,222   71,643   4,506   174,371 

Asia Pacific

  55,870   74,408   5,313   135,591 

Total

 $344,673  $236,063  $93,866  $674,602 

 

  

Six Months Ended May 29, 2021

 
  

Hygiene, Health

             
  

and Consumable

  

Engineering

  

Construction

     
  

Adhesives

  

Adhesives

  

Adhesives

  

Total

 
                 

Americas

 $383,479  $239,577  $171,028  $794,084 

EIMEA

  204,283   223,344   11,233   438,860 

Asia Pacific

  112,720   195,116   12,997   320,833 

Total

 $700,482  $658,037  $195,258  $1,553,777 

 

  

Six Months Ended May 30, 2020

 
  

Hygiene, Health

             
  

and Consumable

  

Engineering

  

Construction

     
  

Adhesives

  

Adhesives

  

Adhesives

  

Total

 
                 

Americas

 $363,855  $195,385  $158,306  $717,546 

EIMEA

  190,606   155,318   10,631   356,555 

Asia Pacific

  102,724   134,255   10,086   247,065 

Total

 $657,185  $484,958  $179,023  $1,321,166 

 

20

 
 

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

 

Overview

 

The Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with the MD&A included in our Annual Report on Form 10-K for the year ended November 28, 2020 for important background information related to our business. 

 

Net revenue in the second quarter of 2021 increased 22.7 percent from the second quarter of 2020. Net revenue increased 17.4 percent due to sales volume and 1.4 percent due to price. Currency effects of 3.9 percent compared to the second quarter of 2020 were primarily driven by a stronger Euro, Chinese renminbi, Australian and Canadian dollars and Mexican peso, partially offset by the weaker Brazilian real, Turkish lira and Argentinian peso compared to the U.S. dollar. Gross profit margin decreased 110 basis points primarily due to higher raw material costs partially offset by higher sales volume. 

 

Net revenue in the first six months of 2021 increased 17.5 percent from the first six months of 2020. Net revenue increased 14.0 percent due to sales volume and 0.7 percent due to price. Currency effects of 2.8 percent compared to the first six months of 2020 were primarily driven by a stronger Euro, Chinese renminbi, Australian and Canadian dollars and Mexican peso, partially offset by the weaker Brazilian real, Turkish lira and Argentinian peso compared to the U.S. dollar. Gross profit margin decreased 50 basis points primarily due to higher raw material costs partially offset by higher sales volume. 

 

Net income attributable to H.B. Fuller in the second quarter of 2021 was $49.1 million compared to $31.6 million in the second quarter of 2020. On a diluted earnings per share basis, the second quarter of 2021 was $0.90 per share compared to $0.61 per share for the second quarter of 2020.

 

Net income attributable to H.B. Fuller in the first six months of 2021 was $78.9 million compared to $41.5 million in the first six months of 2020. On a diluted earnings per share basis, the first six months of 2021 was $1.47 per share compared to $0.79 per share for the second quarter of 2020.

 

Market Conditions 

 

On March 11, 2020, the World Health Organization declared the outbreak of the novel coronavirus (“COVID-19”) a pandemic. COVID-19 continues to affect major economic and financial markets due to government restrictions, including travel restrictions, quarantines, shelter in place orders and shutdowns. However, we believe improvements in global COVID-19 trends provide a positive outlook. The Company has been deemed an essential business and all of our global manufacturing operations have remained open. We continue to monitor the situation to help ensure the well-being of our employees, customers and suppliers to minimize disruptions and provide for the safe and reliable supply of products to our customers. 

 

See "Risk Factors" in Item 1A in our Annual Report on Form 10-K for the year ended November 28, 2020 as filed with the Securities and Exchange Commission for further information of the possible impact of the COVID-19 pandemic on our business.

 

Restructuring Plan

 

2020 Restructuring Plan

 

During the fourth quarter of 2019, we approved a restructuring plan related to organizational changes and other actions to optimize operations in connection with the realignment of the Company into three global business units (“2020 Restructuring Plan”). In implementing the 2020 Restructuring Plan, we expect to incur costs of approximately $20.0 million ($15.8 million after-tax), which includes cash expenditures for severance and related employee costs globally, costs related to streamlining of processes and other restructuring-related costs. We have incurred costs of $16.3 million under this plan as of May 29, 2021. The 2020 Restructuring Plan was implemented in the fourth quarter of 2019 and is currently expected to be completed in 2022.

 

 

Results of Operations

 

Net revenue:

 

   

Three Months Ended

   

Six Months Ended

 
   

May 29,

   

May 30,

   

2021 vs

   

May 29,

   

May 30,

   

2021 vs

 

($ in millions)

 

2021

   

2020

   

2020

   

2021

   

2020

   

2020

 

Net revenue

  $ 827.9     $ 674.6       22.7 %   $ 1,553.8     $ 1,321.2       17.5 %

 

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 2021 compared to the same periods in 2020:

 

   

Three Months Ended

   

Six Months Ended

 
   

May 29, 2021 vs. May 30, 2020

   

May 29, 2021 vs. May 30, 2020

 

Organic growth

    18.8 %     14.7 %

M&A

    0.0 %     0.0 %

Currency

    3.9 %     2.8 %

Total

    22.7 %     17.5 %

 

Organic growth was 18.8 percent in the second quarter of 2021 compared to the second quarter of 2020 driven by a 39.7 percent increase in Engineering Adhesives, a 23.2 percent increase in Construction Adhesives and a 3.3 percent increase in Hygiene, Health and Consumable Adhesives. The increase is predominately driven by an increase in sales volume. The 3.9 percent currency impact was primarily driven by a stronger Euro, Chinese renminbi, Australian and Canadian dollars and Mexican peso partially offset by the weaker Brazilian real, Turkish lira, and Argentinian peso compared to the U.S. dollar.

 

Organic growth was 14.7 percent in the first six months of 2021 compared to the first six months of 2020 driven by a 30.2 percent increase in Engineering Adhesives, a 7.4 percent increase in Construction Adhesives and a 5.4 percent increase in Hygiene, Health and Consumable Construction Adhesives. The increase is predominately driven by an increase in sales volume. The 2.8 percent currency impact was primarily driven by a stronger Euro, Chinese renminbi, Australian and Canadian dollars and Mexican peso partially offset by the weaker Brazilian real, Turkish lira, and Argentinian peso compared to the U.S. dollar.

 

Cost of sales:

 

   

Three Months Ended

   

Six Months Ended

 
   

May 29,

   

May 30,

   

2021 vs

   

May 29,

   

May 30,

   

2021 vs

 

($ in millions)

 

2021

   

2020

   

2020

   

2021

   

2020

   

2020

 

Raw materials

  $ 454.9     $ 357.8       27.1 %   $ 839.9     $ 703.0       19.5 %

Other manufacturing costs

    155.4     $ 131.9       17.8 %     304.0       263.0       15.6 %

Cost of sales

  $ 610.3     $ 489.7       24.6 %   $ 1,143.9     $ 966.0       18.4 %

Percent of net revenue

    73.7 %     72.6 %             73.6 %     73.1 %        

 

 

Cost of sales in the second quarter of 2021 compared to the second quarter of 2020 increased 110 basis points as a percentage of net revenue. Raw material cost as a percentage of net revenue increased 190 basis points in the second quarter of 2021 compared to the second quarter of 2020 due to higher raw material costs. Other manufacturing costs as a percentage of revenue decreased 80 basis points in the second quarter of 2021 compared to the second quarter of 2020 due to higher sales volume.

 

Cost of sales in the first six months of 2021 compared to the first six months of 2020 increased 50 basis points as a percentage of net revenue. Raw material cost as a percentage of net revenue increased 90 basis points in the second quarter of 2021 compared to the second quarter of 2020 due to higher raw material costs. Other manufacturing costs as a percentage of revenue decreased 40 basis points in the second quarter of 2021 compared to the second quarter of 2020.

 

Gross profit:

 

   

Three Months Ended

   

Six Months Ended

 
   

May 29,

   

May 30,

   

2021 vs

   

May 29,

   

May 30,

   

2021 vs

 

($ in millions)

 

2021

   

2020

   

2020

   

2021

   

2020

   

2020

 

Gross profit

  $ 217.6     $ 184.9       17.7 %   $ 409.9     $ 355.2       15.4 %

Percent of net revenue

    26.3 %     27.4 %             26.4 %     26.9 %        

 

Gross profit in the second quarter of 2021 increased 17.7 percent and gross profit margin decreased 110 basis points compared to the second quarter of 2020. The decrease in gross profit margin was primarily due to higher raw material costs partially offset by higher sales volume.

 

Gross profit in the first six months of 2021 increased 15.4 percent and gross profit margin decreased 50 basis points compared to the first six months of 2020. The decrease in gross profit margin was primarily due to higher raw material costs partially offset by higher sales volume.

 

Selling, general and administrative (SG&A) expenses:

 

   

Three Months Ended

   

Six Months Ended

 
   

May 29,

   

May 30,

   

2021 vs

   

May 29,

   

May 30,

   

2021 vs

 

($ in millions)

 

2021

   

2020

   

2020

   

2021

   

2020

   

2020

 

SG&A

  $ 148.4     $ 128.0       15.9 %   $ 292.4     $ 269.5       8.5 %

Percent of net revenue

    17.9 %     19.0 %             18.8 %     20.4 %        

 

SG&A expenses for the second quarter of 2021 increased $20.4 million, or 15.9 percent, compared to the second quarter of 2020. The increase is primarily due to higher compensation costs compared to the prior year.

 

SG&A expenses for the first six months of 2021 increased $22.9 million, or 8.5 percent, compared to the first six months of 2020. The increase is primarily due to higher compensation costs compared to the prior year.

 

Other income, net:

 

   

Three Months Ended

   

Six Months Ended

 
   

May 29,

   

May 30,

   

2021 vs

   

May 29,

   

May 30,

   

2021 vs

 

($ in millions)

 

2021

   

2020

   

2020

   

2021

   

2020

   

2020

 

Other income, net

  $ 11.9     $ 3.0       296.7 %   $ 19.7     $ 8.0       146.3 %

 

Other income, net in the second quarter of 2021 included $8.0 million of net defined benefit pension benefits and $5.2 million of other income, offset by $1.3 million of currency transaction losses. Other income in the second quarter of 2021 includes gains related to a legal entity merger and a transactional tax legal settlement in Brazil.  Other income, net in the second quarter of 2020 included $4.4 million of net defined benefit pension benefits, $0.2 million of other income, offset by $1.6 million of currency transaction losses.

 

Other income, net in the first six months of 2021 included $15.9 million of net defined benefit pension benefits and $6.9 million of other income, offset by $3.1 million of currency transaction losses. Other income, net in the first six months quarter of 2020 included $8.9 million of net defined benefit pension benefits, $0.5 million of other income, offset by $1.4 million of currency transaction losses.

 

 

Interest expense:

 

   

Three Months Ended

   

Six Months Ended

 
   

May 29,

   

May 30,

   

2021 vs

   

May 29,

   

May 30,

   

2021 vs

 

($ in millions)

 

2021

   

2020

   

2020

   

2021

   

2020

   

2020

 

Interest expense

  $ 19.9     $ 21.6       (7.9 )%   $ 40.3     $ 44.4       (9.2 )%

 

Interest expense in the second quarter of 2021 was $19.9 million compared to $21.6 million in the second quarter of 2020. Interest expense in the second quarter of 2021 compared to the second quarter of 2020 was lower due to lower U.S. debt balances and lower interest rates.

 

Interest expense in the first six months of 2021 was $40.3 million compared to $44.4 million in the first six months of 2020. Interest expense in the first six months of 2021 compared to the first six months of 2020 was lower due to lower U.S. debt balances and lower interest rates.

 

Interest income:

   

Three Months Ended

   

Six Months Ended

 
   

May 29,

   

May 30,

   

2021 vs

   

May 29,

   

May 30,

   

2021 vs

 

($ in millions)

 

2021

   

2020

   

2020

   

2021

   

2020

   

2020

 

Interest income

  $ 2.5     $ 2.9       (13.8 )%   $ 5.2     $ 5.8       (10.3 )%

 

Interest income in the second quarter of 2021 was $2.5 million. Interest income in the second quarter of 2020 was $2.9 million.

 

Interest income in the first six months of 2021 was $5.2 million. Interest income in the first six months of 2020 was $5.8 million.

 

Income taxes:

 

   

Three Months Ended

   

Six Months Ended

 
   

May 29,

   

May 30,

   

2021 vs

   

May 29,

   

May 30,

   

2021 vs

 

($ in millions)

 

2021

   

2020

   

2020

   

2021

   

2020

   

2020

 

Income taxes

  $ 16.7     $ 11.5       45.2 %   $ 27.3     $ 17.1       59.6 %

Effective tax rate

    26.2 %     27.9 %             26.7 %     31.0 %        

 

Income tax expense of $16.7 million in the second quarter of 2021 includes $0.6 million of discrete tax benefit. Excluding the discrete tax benefit, the overall effective tax rate was 27.1 percent. Income tax expense of $11.5 million in the second quarter of 2020 includes less than $0.1 million of discrete tax benefit. Excluding the discrete tax benefit, the overall effective tax rate was 28.0 percent. The discrete tax benefits relate to various U.S. and foreign tax matters.

 

Income tax expense of $27.3 million in the first six months of 2021 includes $0.6 million of discrete tax benefit. Excluding the discrete tax benefit, the overall effective tax rate was 27.2 percent. Income tax expense of $17.1 million in the first six months of 2020 includes $2.0 million of discrete tax expense. Excluding the discrete tax expense, the overall effective tax rate was 27.5 percent. The discrete tax benefit and expense relate to various U.S. and foreign tax matters.

 

 

Income from equity method investments:

 

   

Three Months Ended

   

Six Months Ended

 
   

May 29,

   

May 30,

   

2021 vs

   

May 29,

   

May 30,

   

2021 vs

 

($ in millions)

 

2021

   

2020

   

2020

   

2021

   

2020

   

2020

 

Income from equity method investments

  $ 2.2     $ 1.9       15.8 %   $ 4.1     $ 3.5       17.1 %

 

The income from equity method investments relates to our 50 percent ownership of the Sekisui-Fuller joint venture in Japan. The higher income for the second quarter and first six months of 2021 compared to the same period of 2020 relates to higher net income in our joint venture.

 

Net income attributable to H.B. Fuller:

 

   

Three Months Ended

   

Six Months Ended

 
   

May 29,

   

May 30,

   

2021 vs

   

May 29,

   

May 30,

   

2021 vs

 

($ in millions)

 

2021

   

2020

   

2020

   

2021

   

2020

   

2020

 

Net income attributable to H.B. Fuller

  $ 49.1     $ 31.6       55.4 %   $ 78.9     $ 41.5       90.1 %

Percent of net revenue

    5.9 %     4.7 %             5.1 %     3.1 %        

 

The net income attributable to H.B. Fuller for the second quarter of 2021 was $49.1 million compared to $31.6 million for the second quarter of 2020. The diluted earnings per share for the second quarter of 2021 was $0.90 per share as compared to $0.61 per share for the second quarter of 2020.

 

The net income attributable to H.B. Fuller for the first six months of 2021 was $78.9 million compared to $41.5 million for the first six months of 2020. The diluted earnings per share for the first six months of 2021 was $1.47 per share as compared to $0.79 per share for the first six months of 2020.

 

 

Operating Segment Results

 

We have three reportable segments: Hygiene, Health and Consumable Adhesives, Engineering Adhesives and Construction Adhesives. Operating results of each of these segments are regularly reviewed by our chief operating decision maker to make decisions about resources to be allocated to the segments and assess their performance. 

 

The tables below provide certain information regarding the net revenue and operating income of each of our operating segments. 

 

Corporate Unallocated amounts include business acquisition and integration costs, organizational restructuring charges and project costs associated with our implementation of Project ONE.

 

Net Revenue by Segment:

 

   

Three Months Ended

   

Six Months Ended

 
   

May 29, 2021

   

May 30, 2020

   

May 29, 2021

   

May 30, 2020

 
   

Net

   

% of

   

Net

   

% of

   

Net

   

% of

   

Net

   

% of

 

($ in millions)

 

Revenue

   

Total

   

Revenue

   

Total

   

Revenue

   

Total

   

Revenue

   

Total

 

Hygiene, Health and Consumable Adhesives

  $ 364.8       44 %   $ 344.7       51 %   $ 700.5       45 %   $ 657.2       50 %

Engineering Adhesives

    345.4       42 %     236.0       35 %     658.0       42 %     485.0       37 %

Construction Adhesives

    117.7       14 %     93.9       14 %     195.3       13 %     179.0       13 %

Segment total

  $ 827.9       100 %   $ 674.6       100 %   $ 1,553.8       100 %   $ 1,321.2       100 %

Corporate Unallocated

    -       -       -       -       -       -       -       -  

Total

  $ 827.9       100 %   $ 674.6       100 %   $ 1,553.8       100 %   $ 1,321.2       100 %

 

 

Segment Operating Income (Loss):

 

   

Three Months Ended

   

Six Months Ended

 
   

May 29, 2021

   

May 30, 2020

   

May 29, 2021

   

May 30, 2020

 
   

Segment

           

Segment

           

Segment

           

Segment

         
   

Operating

           

Operating

           

Operating

           

Operating

         
   

Income

   

% of

   

Income

   

% of

   

Income

   

% of

   

Income

   

% of

 

($ in millions)

 

(Loss)

   

Total

   

(Loss)

   

Total

   

(Loss)

   

Total

   

(Loss)

   

Total

 

Hygiene, Health and Consumable Adhesives

  $ 38.9       56 %   $ 35.0       62 %   $ 68.9       59 %   $ 57.7       67 %

Engineering Adhesives

    32.1       47 %     20.2       35 %     62.5       53 %     35.5       42 %

Construction Adhesives

    6.3       9 %     6.5       11 %     1.6       1 %     5.2       6 %

Segment total

  $ 77.3       112 %   $ 61.7       108 %   $ 133.0       113 %   $ 98.4       115 %

Corporate Unallocated

    (8.2 )     (12 )%     (4.8 )     (8 )%     (15.5 )     (13 )%     (12.7 )     (15 )%

Total

  $ 69.1       100 %   $ 56.9       100 %   $ 117.5       100 %   $ 85.8       100 %

 

Hygiene, Health and Consumable Adhesives

 

   

Three Months Ended

   

Six Months Ended

 
   

May 29,

   

May 30,

   

2021 vs

   

May 29,

   

May 30,

   

2021 vs

 

($ in millions)

 

2021

   

2020

   

2020

   

2021

   

2020

   

2020

 

Net revenue

  $ 364.8     $ 344.7       5.8 %   $ 700.5     $ 657.2       6.6 %

Segment operating income

  $ 38.9     $ 35.0       11.1 %   $ 68.9     $ 57.7       19.4 %

Segment operating margin

    10.7 %     10.2 %             9.8 %     8.8 %        

 

The following table provides details of the Hygiene, Health and Consumable Adhesives net revenue variances:

 

   

Three Months Ended

   

Six Months Ended

 
   

May 29, 2021 vs. May 30, 2020

   

May 29, 2021 vs. May 30, 2020

 

Organic growth

    3.3 %     5.4 %

Currency

    2.5 %     1.2 %

Total

    5.8 %     6.6 %

 

Net revenue increased 5.8 percent in the second quarter of 2021 compared to the second quarter of 2020. The increase in organic growth was attributable primarily to an increase in sales volume and an increase in product pricing. The positive currency effect was due to the stronger Euro, Chinese renminbi, Mexican peso and Australian dollar partially offset by a weaker Brazilian real, Turkish lira and Argentinian peso compared to the U.S. dollar. As a percentage of net revenue, raw material costs increased 30 basis points. Other manufacturing costs as a percentage of net revenue decreased 80 basis points due to higher net revenue. SG&A expenses as a percentage of net revenue was flat quarter over quarter.  Segment operating income increased 11.1 percent and segment operating margin as a percentage of net revenue increased 50 basis points compared to the second quarter of 2020.

 

Net revenue increased 6.6 percent in the first six months of 2021 compared to the first six months of 2020. The increase in organic growth was attributable primarily to an increase in sales volume and a slight increase in product pricing. The positive currency effect was due to the stronger Euro, Chinese renminbi, and Australian and Canadian dollars partially offset by a weaker Brazilian real, Turkish lira and Argentinian peso compared to the U.S. dollar. As a percentage of net revenue, raw material costs decreased 40 basis points. Other manufacturing costs as a percentage of net revenue decreased 30 basis points. SG&A expenses as a percentage of net revenue decreased 30 basis points. Segment operating income increased 19.4 percent and segment operating margin as a percentage of net revenue increased 100 basis points compared to the first six months of 2020.

 

 

Engineering Adhesives

 

   

Three Months Ended

   

Six Months Ended

 
   

May 29,

   

May 30,

   

2021 vs

   

May 29,

   

May 30,

   

2021 vs

 

($ in millions)

 

2021

   

2020

   

2020

   

2021

   

2020

   

2020

 

Net revenue

  $ 345.4     $ 236.0       46.3 %   $ 658.0     $ 485.0       35.7 %

Segment operating income

  $ 32.1     $ 20.2       58.9 %   $ 62.5     $ 35.5       76.1 %

Segment operating margin

    9.3 %     8.6 %             9.5 %     7.3 %        

 

The following tables provide details of the Engineering Adhesives net revenue variances:

 

   

Three Months Ended

   

Six Months Ended

 
   

May 29, 2021 vs. May 30, 2020

   

May 29, 2021 vs. May 30, 2020

 

Organic growth

    39.7 %     30.2 %

Currency

    6.6 %     5.5 %

Total

    46.3 %     35.7 %

 

Net revenue increased 46.3 percent in the second quarter of 2021 compared to the second quarter of 2020. The increase in organic growth was attributable to an increase in sales volume and in product pricing. The currency effect was due to a stronger Euro and Chinese renminbi compared to the U.S. dollar. Raw material costs as a percentage of net revenue increased 360 basis points due to higher raw material costs. Other manufacturing costs as a percentage of net revenue decreased 30 basis points. SG&A expenses as a percentage of net revenue decreased 400 basis points primarily due to higher net revenue. Segment operating income increased 58.9 percent and segment operating margin increased 70 basis points compared to the second quarter of 2020.

 

Net revenue increased 35.7 percent in the first six months of 2021 compared to the first six months of 2020. The increase in organic growth was primarily attributable to an increase in sales volume. The currency effect was due to a stronger Euro and Chinese renminbi compared to the U.S. dollar. Raw material costs as a percentage of net revenue increased 200 basis points due to higher raw material costs. Other manufacturing costs as a percentage of net revenue decreased 40 basis points. SG&A expenses as a percentage of net revenue decreased 380 basis points primarily due to higher net revenue. Segment operating income increased 76.1 percent and segment operating margin increased 220 basis points compared to the first six months of 2020.

 

Construction Adhesives

 

   

Three Months Ended

   

Six Months Ended

 
   

May 29,

   

May 30,

   

2021 vs

   

May 29,

   

May 30,

   

2021 vs

 

($ in millions)

 

2021

   

2020

   

2020

   

2021

   

2020

   

2020

 

Net revenue

  $ 117.7     $ 93.9       25.4 %   $ 195.3     $ 179.0       9.1 %

Segment operating income

  $ 6.3     $ 6.5       (3.1 )%   $ 1.6     $ 5.2       (69.2 )%

Segment operating margin

    5.4 %     6.9 %             0.8 %     2.9 %        

 

The following tables provide details of the Construction Adhesives net revenue variances:

 

   

Three Months Ended

   

Six Months Ended

 
   

May 29, 2021 vs. May 30, 2020

   

May 29, 2021 vs. May 30, 2020

 

Organic growth

    23.2 %     7.4 %

Currency

    2.2 %     1.7 %

Total

    25.4 %     9.1 %

 

 

Net revenue increased 25.4 percent in the second quarter of 2021 compared to the second quarter of 2020. The increase in organic growth was attributable to an increase in sales volume, partially offset by slight unfavorable product pricing. The currency effect was due to a stronger Australian dollar, Euro and Canadian dollar compared to the U.S. dollar. Raw material costs as a percentage of net revenue increased 600 basis points due to higher raw material costs. Other manufacturing costs as a percentage of net revenue decreased 240 basis points due to higher sales volume. SG&A expenses as a percentage of net revenue decreased 210 basis points due to higher sales volume. Segment operating income decreased 3.1 percent and segment operating margin decreased 150 basis points compared to the second quarter of 2020.

 

Net revenue increased 9.1 percent in the first six months of 2021 compared to the first six months of 2020. The increase in organic growth was attributable to an increase in sales volume, partially offset by slightly unfavorable product pricing. The currency effect was due to a stronger Australian dollar, Euro and Canadian dollar compared to the U.S. dollar. Raw material costs as a percentage of net revenue increased 330 basis points due to higher raw material costs. Other manufacturing costs as a percentage of net revenue decreased 40 basis points. SG&A expenses as a percentage of net revenue decreased 80 basis points due to higher sales volume. Segment operating income decreased 69.2 percent and segment operating margin decreased 210 basis points compared to the first six months of 2020.

 

Corporate Unallocated

 

   

Three Months Ended

   

Six Months Ended

 
   

May 29,

   

May 30,

   

2021 vs

   

May 29,

   

May 30,

   

2021 vs

 

($ in millions)

 

2021

   

2020

   

2020

   

2021

   

2020

   

2020

 

Net revenue

  $ -     $ -       0.0 %   $ -     $ -       0.0 %

Segment operating loss

  $ (8.2 )   $ (4.8 )     70.8 %   $ (15.5 )   $ (12.7 )     22.0 %

Segment operating margin

 

NMP

   

NMP

           

NMP

   

NMP

         

 

NMP = Non-meaningful percentage

 

Segment operating loss in the second quarter and first six months of 2021 increased 70.8 percent and 22.0 percent compared to the second quarter and first six months of 2020 reflecting increased organizational realignment costs.

 

 

Financial Condition, Liquidity and Capital Resources

 

Total cash and cash equivalents as of May 29, 2021 were $69.6 million compared to $100.5 million as of November 28, 2020 and $70.3 million as of May 30, 2020. The majority of the $69.6 million in cash and cash equivalents as of May 29, 2021 was held outside the United States. Total long and short-term debt was $1,712.4 million as of May 29, 2021, $1,773.9 million as of November 28, 2020 and $1,928.0 million as of May 30, 2020. The total debt to total capital ratio as measured by Total Debt divided by (Total Debt plus Total Stockholders’ Equity) was 52.2 percent as of May 29, 2021 as compared to 56.1 percent as of November 28, 2020 and 61.3 percent as of May 30, 2020.

 

We believe that cash flows from operating activities will be adequate to meet our ongoing liquidity and capital expenditure needs. In addition, we believe we have the ability to obtain both short-term and long-term debt to meet our financing needs for the foreseeable future. Cash available in the United States has historically been sufficient and we expect it will continue to be sufficient to fund U.S. operations, U.S. capital spending and U.S. pension and other postretirement benefit contributions in addition to funding U.S. acquisitions, dividend payments, debt service and share repurchases as needed. For those international earnings considered to be reinvested indefinitely, we currently have no intention to, and plans do not indicate a need to, repatriate these funds for U.S. operations.

 

 

Our credit agreements include restrictive covenants that, if not met, could lead to a renegotiation of our credit lines and a significant increase in our cost of financing. At May 29, 2021, we were in compliance with all covenants of our contractual obligations as shown in the following table:

 

Covenant

Debt Instrument

Measurement

 

Result as of May 29, 2021

 

Secured Indebtedness / TTM EBITDA

Term Loan B Credit Agreement

Not greater than 5.9

    2.5  

Secured Indebtedness / TTM EBITDA

Revolving Credit Agreement

Not greater than 5.9

    2.4  

TTM EBITDA / Consolidated Interest Expense

Revolving Credit Agreement

Not less than 2.0

    5.5  

 

 

TTM = Trailing 12 months

 

 

EBITDA for Term Loan B covenant purposes is defined as consolidated net income, plus interest expense, expense for taxes paid or accrued, depreciation and amortization, certain non-cash impairment losses, extraordinary non-cash losses incurred other than in the ordinary course of business, nonrecurring extraordinary non-cash restructuring charges and the non-cash impact of purchase accounting, expenses related to the Royal Adhesives acquisition not to exceed $40.0 million, expenses relating to the integration of Royal Adhesives during the fiscal years ending in 2017, 2018 and 2019 not exceeding $30 million in aggregate, restructuring expenses that began prior to the Royal Adhesives acquisition incurred in fiscal years ending in 2017 and 2018 not exceeding $28 million in aggregate, and non-capitalized charges relating to the SAP implementation during fiscal years ending in 2017 through 2021 not exceeding $13 million in any single fiscal year, minus extraordinary non-cash gains. For the Total Indebtedness / TTM EBITDA ratio, TTM EBITDA is adjusted for the pro forma results from Material Acquisitions and Material Divestitures as if the acquisition or divestiture occurred at the beginning of the calculation period. The full definition is set forth in the Term Loan B Credit Agreement and can be found in the Company’s Form 8-K filing dated October 20, 2017.

 

 

EBITDA for Revolving Credit Facility covenant purposes is defined as consolidated net income, plus interest expense, expense for taxes paid or accrued, depreciation and amortization, non-cash impairment losses related to long-lived assets, intangible assets or goodwill, nonrecurring or unusual non-cash losses  incurred other than in the ordinary course of business, nonrecurring or unusual non-cash restructuring charges and the non-cash impact of purchase accounting, fees, premiums, expenses and other transaction costs incurred or paid by the borrower or any of its Subsidiaries on the effective date in connection with the  transactions, this agreement and the other loan documents, the 2020 supplemental indenture and the transactions contemplated hereby and thereby, one-time, non-capitalized charges and expenses relating to the Company’s SAP implementation during fiscal years ending in 2017 through 2024, in an amount not  exceeding $15.0 million in any single fiscal year of the Company, charges and expenses relating to the ASP Royal Acquisition, including but not limited to advisory and financing costs, during the Company’s fiscal years ending in 2020 and 2021, in an aggregate amount (as to such years combined) not exceeding $40.0 million, charges and expenses related to the reorganization of the Company and its subsidiaries from five business units to three business units to reduce costs during the Company’s fiscal years ending in 2020 and 2021 in an aggregate amount (as to such years combined) not exceeding $24.0 million, and charges and expenses related to the Company’s manufacturing and operations project to improve delivery, implement cost savings and reduce inventory during the Company’s fiscal years ending in 2020, 2021 and 2022 in an aggregate amount (as to such years combined) not exceeding $15.5 million.

 

 

Consolidated Interest Expense for the Revolving Credit Facility is defined as the interest expense (including without limitation the portion of capital lease obligations that constitutes imputed interest in accordance with GAAP) of the Company and its subsidiaries calculated on a consolidated basis for such period with respect to all outstanding indebtedness of the Company and its subsidiaries allocable to such period in accordance with GAAP.

 

We believe we have the ability to meet all of our contractual obligations and commitments in fiscal 2021.

 

Selected Metrics of Liquidity

 

Key metrics we monitor are net working capital as a percent of annualized net revenue, trade receivable days sales outstanding (“DSO”), inventory days on hand, free cash flow after dividends and debt capitalization ratio.

 

   

May 29,

   

May 30,

 
   

2021

   

2020

 

Net working capital as a percentage of annualized net revenue1

    16.7 %     19.2 %

Accounts receivable DSO (in days)2

    61       60  

Inventory days on hand (in days)3

    67       76  

Free cash flow after dividends4

  $ 11.8     $ 37.3  

Total debt to total capital ratio5

    52.2 %     61.3 %

 

1 Current quarter net working capital (trade receivables, net of allowance for doubtful accounts plus inventory minus trade payables) divided by annualized net revenue (current quarter multiplied by four).

 

2 Trade receivables net of the allowance for doubtful accounts at the balance sheet date multiplied by 91 (13 weeks) and divided by the net revenue for the quarter.

 

3 Total inventory multiplied by 91 and divided by cost of sales (excluding delivery costs) for the quarter.

 

4 Year-to-date net cash provided by operating activities, less purchased property, plant and equipment and dividends paid. See reconciliation of net cash provided by operating activities to free cash flow after dividends below.

 

5 Total debt divided by (total debt plus total stockholders’ equity).

 

 

Free cash flow after dividends, a non-GAAP financial measure, is defined as net cash provided by operations less purchased property, plant and equipment and dividends paid. Free cash flow after dividends is an integral financial measure used by the Company to assess its ability to generate cash in excess of its operating needs, therefore, the Company believes this financial measure provides useful information to investors. The following table reflects the manner in which free cash flow after dividends is determined and provides a reconciliation of free cash flow after dividends to net cash provided by operating activities, the most directly comparable financial measure calculated and reported in accordance with U.S. GAAP.

 

Reconciliation of "Net cash provided by operating activities" to Free cash flow after dividends

 

   

Six Months Ended

 

($ in millions)

 

May 29, 2021

   

May 30, 2020

 

Net cash provided by operating activities

  $ 79.8     $ 108.4  

Less: Purchased property, plant and equipment

    50.7       54.5  

Less: Dividends paid

    17.2       16.6  

Free cash flow after dividends

  $ 11.8     $ 37.3  

 

Summary of Cash Flows

 

Cash Flows from Operating Activities: 

 

   

Six Months Ended

 
   

May 29,

   

May 30,

 

($ in millions)

 

2021

   

2020

 

Net cash provided by operating activities

  $ 79.8     $ 108.4  

 

Net income including non-controlling interest was $78.9 million in the first six months of 2021 compared to $41.5 million in the first six months of 2020. Depreciation and amortization expense totaled $71.6 million in the first six months of 2021 compared to $68.7 million in the first six months of 2020. Deferred income taxes was a use of cash of $1.2 million in 2021 compared to $10.4 million in the first six months of 2020. Accrued compensation was a use of cash of $8.8 million in 2021 compared to $21.6 million last year.  Other assets was a use of cash of $21.7 million in the first six months of 2021 compared to $13.1 million in the first six months of 2020. Other liabilities was a use of cash of $29.0 million in the first six months of 2021 compared to a source of cash of $24.7 million in the first six months of 2020.

 

Changes in net working capital (trade receivables, inventory and trade payables) accounted for a use of cash of $28.1 million compared to a source of cash of $16.9 million last year. The table below provides the cash flow impact due to changes in the components of net working capital:

 

   

Six Months Ended

 
   

May 29,

   

May 30,

 

($ in millions)

 

2021

   

2020

 

Trade receivables, net

  $ (43.2 )   $ 33.9  

Inventory

    (100.4 )     (59.2 )

Trade payables

    115.5       42.2  

Total cash flow impact

  $ (28.1 )   $ 16.9  

 

 

 

Trade Receivables, net – Trade receivables, net was a use of cash of $43.2 million compared to a source of $33.9 million in the first six months of 2021 and 2020, respectively. The use of cash in 2021 compared to 2020 was due to higher revenue in the first six months of 2021 compared to 2020 and more cash collected on trade receivables in the prior year compared to the current year. The DSO were 61 and 60 days at May 29, 2021 and  May 30, 2020, respectively. 

 

 

Inventory – Inventory was a use of cash of $100.4 million and $59.2 million in the first six months of 2021 and 2020, respectively. The higher use of cash in 2021 is due to increasing inventory costs in 2021 compared to 2020. Inventory days on hand were 67 days as of May 29, 2021 and 76 days as of May 30, 2020.

 

 

Trade Payables – Trade payables was a source of cash of $115.5 million compared to $42.2 million in the first six months of 2021 and 2020, respectively. The higher source of cash in 2021 compared to 2020 reflects lower payments on trade payables in the current year.

 

Cash Flows from Investing Activities:

 

   

Six Months Ended

 
   

May 29,

   

May 30,

 

($ in millions)

 

2021

   

2020

 

Net cash used in investing activities

  $ (56.5 )   $ (68.9 )

 

Purchases of property, plant and equipment were $50.7 million during the first six months of 2021. This is compared to $54.5 million for the same period of 2020.  This difference also reflects the timing of capital projects and expenditures related to growth initiatives.  

 

Cash Flows from Financing Activities:

 

   

Six Months Ended

 
   

May 29,

   

May 30,

 

($ in millions)

 

2021

   

2020

 

Net cash used in financing activities

  $ (57.9 )   $ (78.3 )

 

Repayments of long-term debt were $68.0 million in the first six months of 2021 and $67.0 million in the first six months of 2020.  Net proceeds of notes payable were $9.3 million in the first six months of 2021 compared to $7.0 million in the same period of 2020. Cash dividends paid were $17.2 million in the first six months of 2021 compared to $16.6 million in the same period of 2020. Repurchases of common stock were $2.6 million in the first six months of 2021 compared to $3.2 million in the same period of 2020.

 

Forward-Looking Statements and Risk Factors

 

The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements may be identified by the use of words like "plan," "expect," "aim," "believe," "project," "anticipate," "intend," "estimate," "will," "should," "could" (including the negative or variations thereof) and other expressions that indicate future events and trends. These plans and expectations are based upon certain underlying assumptions, including those mentioned with the specific statements. Such assumptions are in turn based upon internal estimates and analyses of current market conditions and trends, our plans and strategies, economic conditions and other factors. These plans and expectations and the assumptions underlying them are necessarily subject to risks and uncertainties inherent in projecting future conditions and results. Actual results could differ materially from expectations expressed in the forward-looking statements if one or more of the underlying assumptions and expectations proves to be inaccurate or is unrealized. In addition to the factors described in this report, Item 1A. Risk Factors identifies some of the important factors that could cause our actual results to differ materially from those in any such forward-looking statements. In order to comply with the terms of the safe harbor, we have identified these important factors which could affect our financial performance and could cause our actual results for future periods to differ materially from the anticipated results or other expectations expressed in the forward-looking statements. These factors should be considered, together with any similar risk factors or other cautionary language that may be made elsewhere in this Quarterly Report on Form 10-Q.

 

The list of important factors in Item 1A. Risk Factors does not necessarily present the risk factors in order of importance. This disclosure, including that under Forward-Looking Statements and Risk Factors, and other forward-looking statements and related disclosures made by us in this report and elsewhere from time to time, represents our best judgment as of the date the information is given. We do not undertake responsibility for updating any of such information, whether as a result of new information, future events, or otherwise, except as required by law. Investors are advised, however, to consult any further public company disclosures (such as in filings with the SEC or in our press releases) on related subjects.

 

 

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

 

We are exposed to various market risks, including changes in interest rates, foreign currency rates and prices of raw materials. Market risk is the potential loss arising from adverse changes in market rates and prices, such as interest rates and foreign currency exchange rates.  See Part II, Item 7A in our Annual Report on Form 10-K for the year ended November 28, 2020 for further discussion of these market risks. There have been no material changes in the reported market risk of the Company since November 28, 2020. 

 

Item 4. Controls and Procedures

 

Controls and Procedures

 

We conducted an evaluation, under the supervision and with the participation of our president and chief executive officer and executive vice president, chief financial officer, of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (Exchange Act)) as of May 29, 2021. Based on this evaluation, our president and chief executive officer and executive vice president, chief financial officer concluded that, as of May 29, 2021, our disclosure controls and procedures were effective.

 

For purposes of Rule 13a-15(e), the term disclosure controls and procedures means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act (15 U.S.C. 78a et seq.) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its president and chief executive officer and executive vice president, chief financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

 

Changes in Internal Control over Financial Reporting

 

There were no changes in our internal control over financial reporting during our most recently completed fiscal quarter that have materially affected or are reasonably likely to materially affect our internal control over financial reporting, as defined in Rule 13a-15(f) under the Exchange Act.

 

PART II. OTHER INFORMATION

 

Item 1. Legal Proceedings

 

Environmental Matters 

 

From time to time, we become aware of compliance matters relating to, or receive notices from, federal, state or local entities regarding possible or alleged violations of environmental, health or safety laws and regulations. Also, from time to time, we are identified as a potentially responsible party (“PRP”) under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) and/or similar state laws that impose liability for costs relating to the clean up of contamination resulting from past spills, disposal or other release of hazardous substances. We are also subject to similar laws in some of the countries where current and former facilities are located. Our environmental, health and safety department monitors compliance with applicable laws on a global basis.

 

Currently, we are involved in various environmental investigations, clean up activities and administrative proceedings and lawsuits. In particular, we are currently deemed a PRP in conjunction with numerous other parties, in a number of government enforcement actions associated with landfills and/or hazardous waste sites. As a PRP, we may be required to pay a share of the costs of investigation and clean up of these sites.

 

 

We are also engaged in environmental remediation and monitoring efforts at a number of current and former operating facilities. To the extent we can reasonably estimate the amount of our probable liabilities for environmental matters, we establish a financial provision. It is reasonably possible that we may have additional liabilities related to these known environmental matters. However, the full extent of our future liability for environmental matters is difficult to predict because of uncertainty as to the cost of investigation and clean up of the sites, our responsibility for such hazardous substances and the number of and financial condition of other potentially responsible parties.

 

While uncertainties exist with respect to the amounts and timing of the ultimate environmental liabilities, based on currently available information, we have concluded that these matters, individually or in the aggregate, will not have a material adverse effect on our results of operations, financial condition or cash flow. However, adverse developments and/or periodic settlements could negatively impact the results of operations or cash flows in one or more future periods.

 

Other Legal Proceedings 

 

From time to time and in the ordinary course of business, we are a party to, or a target of, lawsuits, claims, investigations and proceedings, including product liability, personal injury, contract, patent and intellectual property, environmental, health and safety, tax and employment matters. While we are unable to predict the outcome of these matters, we have concluded, based upon currently available information, that the ultimate resolution of any pending matter, individually or in the aggregate, including asbestos-related litigation, will not have a material adverse effect on our results of operations, financial condition or cash flow. However, adverse developments and/or periodic settlements could negatively impact the results of operations or cash flows in one or more future periods.

 

For additional information regarding environmental matters and other legal proceedings, see Note 12 to our Consolidated Financial Statements.

 

Item 1A. Risk Factors

 

This Form 10-Q contains forward-looking statements concerning our future programs, products, expenses, revenue, liquidity and cash needs as well as our plans and strategies. These forward-looking statements are based on current expectations and we assume no obligation to update this information. Numerous factors could cause actual results to differ significantly from the results described in these forward-looking statements, including the risk factors identified under Part I, Item 1A. Risk Factors contained in our Annual Report on Form 10-K for the fiscal year ended November 28, 2020. There have been no material changes in the risk factors disclosed by us under Part I, Item 1A. Risk Factors contained in the Annual Report on Form 10-K for the fiscal year ended November 28, 2020.

 

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

Issuer Purchases of Equity Securities

 

Information on our purchases of equity securities during the second quarter ended May 29, 2021 is as follows:

 

                   

(d)

 
                   

Maximum

 
                   

Approximate Dollar

 
   

(a)

           

Value of Shares that

 
   

Total

   

(b)

   

may yet be

 
   

Number of

   

Average

   

Purchased Under the

 
   

Shares

   

Price Paid

   

Plan or Program

 

Period

 

Purchased1

   

per Share

   

(millions)

 
                         

February 28, 2021 - April 3, 2021

    307     $ 63.25     $ 187,170  
                         

April 4, 2021 - May 1, 2021

    230     $ 66.82     $ 187,170  
                         

May 2, 2021 - May 29, 2021

    192     $ 69.09     $ 187,170  

 

1 The total number of shares purchased are shares withheld to satisfy the employees’ withholding taxes upon vesting of restricted stock.

 

Repurchases of common stock are made to support our stock-based employee compensation plans and for other corporate purposes. Upon vesting of restricted stock awarded to employees, shares are withheld to cover the employees’ minimum withholding taxes.

 

On April 6, 2017, the Board of Directors authorized a new share repurchase program of up to $200.0 million of our outstanding common shares. Under the program, we are authorized to repurchase shares for cash on the open market, from time to time, in privately negotiated transactions or block transactions, or through an accelerated repurchase agreement. The timing of such repurchases is dependent on price, market conditions and applicable regulatory requirements. Upon repurchase of the shares, we reduce our common stock for the par value of the shares with the excess being applied against additional paid-in capital. This authorization replaces the September 30, 2010 authorization to repurchase shares.

 

 

Item 6. Exhibits

 

 

31.1

Form of 302 Certification –James J. Owens

 

31.2

Form of 302 Certification –John J. Corkrean

 

32.1

Form of 906 Certification –James J. Owens

 

32.2

Form of 906 Certification –John J. Corkrean

 

101

The following materials from the H.B. Fuller Company Quarterly Report on Form 10-Q for the quarter ended May 29, 2021 formatted in Inline Extensible Business Reporting Language (Inline XBRL): (i) the Consolidated Statements of Income, (ii) the Consolidated Statements of Comprehensive Income, (iii) the Consolidated Balance Sheets, (iv) the Consolidated Statements of Total Equity, (v) the Consolidated Statements of Cash Flows and (vi) the Notes to Consolidated Financial Statements.

 

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

 

 

SIGNATURES

 

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

  H.B. Fuller Company  
     
       

Dated: June 29, 2021

 

/s/ John J. Corkrean

 
   

John J. Corkrean

 
   

Executive Vice President,

 
   

Chief Financial Officer

 

 

 

Exhibit Index

 

Exhibits

 

  31.1

Form of 302 Certification – James J. Owens

 

31.2

Form of 302 Certification – John J. Corkrean

 

32.1

Form of 906 Certification –James J. Owens

 

32.2

Form of 906 Certification –John J. Corkrean

 

101

The following materials from the H.B. Fuller Company Quarterly Report on Form 10-Q for the quarter ended May 29, 2021 formatted in Inline Extensible Business Reporting Language (Inline XBRL): (i) the Consolidated Statements of Income, (ii) the Consolidated Statements of Comprehensive Income, (iii) the Consolidated Balance Sheets, (iv) the Consolidated Statements of Total Equity, (v) the Consolidated Statements of Cash Flows and (vi) the Notes to Consolidated Financial Statements.

 

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

 

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