What changed in this filing

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Item 1. Financial Statements

2022-03-24 compared with 2021-09-23 · 389 added, 230 removed, 500 unchanged (55% of the section changed)

4 unchanged sentences

Three Months Ended

Nine Months Ended

$ 856,482  

$ 725,904  

$ 2,380,607  

$ 2,012,629  

Cost of sales

2 unchanged sentences

192,364  

( 1,469,622 )

193,950  

187,844  

603,863  

543,007  

Selling, general and administrative expenses

( 155,894 )  

( 129,113 )  

( 426,921 )  

Other income, net

25,899  

11,740  

Interest expense

( 18,196 )  

( 20,196 )  

( 59,699 )  

Interest income

3 unchanged sentences

( 10,148 )  

100,291  

( 19,095 )  

( 5,112 )  

( 46,362 )  

Income from equity method investments

2 unchanged sentences

29,806  

110,560  

83,165  

Net income attributable to non-controlling interest

( 14 )  

( 24 )  

( 51 )  

Net income attributable to H.B.

1 unchanged sentence

$ 29,791  

$ 110,509  

$ 83,115  

Earnings per share attributable to H.B.

4 unchanged sentences

$ 0.56  

$ 0.58  

$ 0.79  

$ 2.04  

$ 1.59  

Weighted-average common shares outstanding:

3 unchanged sentences

53,339  

54,646  

52,591  

54,093  

52,400  

Dividends declared per common share

1 unchanged sentence

$ 0.163  

$ 0.498  

$ 0.485  

See accompanying Notes to Unaudited Consolidated Financial Statements.

3 unchanged sentences

Three Months Ended

Nine Months Ended

Net income including non-controlling interest

1 unchanged sentence

$ 29,806  

$ 110,560  

$ 83,165  

Other comprehensive (loss) income

Other comprehensive income

Foreign currency translation

23,137  

46,711  

46,655  

14,008  

Defined benefit pension plans adjustment, net of tax

Interest rate swaps, net of tax

11,574  

Cross-currency swaps, net of tax

( 2,083 )  

( 2,314 )  

( 3,576 )  

Other comprehensive (loss) income

( 28,090 )  

50,600  

Other comprehensive income

11,167  

3 unchanged sentences

57,452  

96,858  

Comprehensive (loss) income attributable to non-controlling interest

( 13 )  

Comprehensive income attributable to non-controlling interest

Comprehensive income attributable to H.B.

1 unchanged sentence

$ 57,447  

$ 169,308  

$ 96,783  

See accompanying Notes to Unaudited Consolidated Financial Statements.

6 unchanged sentences

$ 61,786  

Trade receivables (net of allowances of $ 9,139 and $ 12,905 , as of August 28, 2021 and November 28, 2020, respectively)

Trade receivables (net of allowances of $10,736 and $9,935 , as of February 26, 2022 and November 27, 2021, respectively)

616,274  

62 unchanged sentences

160,000,000 , shares outstanding –

52,549,798 and 51,906,663 , as of August 28, 2021 and November 28, 2020, respectively

53,041,801 and 52,777,753 as of February 26, 2022 and November 27, 2021, respectively

53,042  

26 unchanged sentences

Balance at November 27, 2021

$ 52,778  

$ 213,637  

$ 1,600,601  

$ ( 270,247 )  

$ 1,597,360  

Comprehensive income

38,306  

11,177  

49,487  

( 8,964 )  

Stock option exercises

1 unchanged sentence

Repurchases of common stock

( 49 )  

( 3,528 )  

Balance at February 26, 2022

Comprehensive income

Stock option exercises

Share-based compensation plans other, net

Repurchases of common stock

Balance at May 29, 2021

Comprehensive income

Stock option exercises

Share-based compensation plans other, net

Repurchases of common stock

Balance at August 28, 2021

$ 53,042  

$ 221,338  

$ 1,629,943  

$ ( 259,070 )  

$ 1,645,848  

Fuller Company Shareholders

3 unchanged sentences

Balance at November 28, 2020

Comprehensive income (loss)

$ 51,907  

$ 157,867  

$ 1,474,406  

$ ( 302,859 )  

$ 1,381,862  

Comprehensive income

29,791  

27,656  

57,452  

( 8,542 )  

Stock option exercises

1 unchanged sentence

Repurchases of common stock

( 49 )  

( 2,531 )  

Balance at February 27, 2021

Comprehensive income

Stock option exercises

Share-based compensation plans other, net

Repurchases of common stock

Balance at May 30, 2020

Comprehensive income

Stock option exercises

Share-based compensation plans other, net

Repurchases of common stock

Balance at August 29, 2020

$ 52,155  

$ 169,010  

$ 1,495,655  

$ ( 275,203 )  

$ 1,442,163  

See accompanying Notes to Unaudited Consolidated Financial Statements. 

2 unchanged sentences

(In thousands)

Nine Months Ended

August 28, 2021

August 29, 2020

Three Months Ended

February 26, 2022

February 27, 2021

Cash flows from operating activities:

Net income including non-controlling interest

$ 38,320  

$ 29,806  

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

18,163  

17,833  

17,792  

17,896  

Deferred income taxes

( 6,020 )  

Income from equity method investments, net of dividends received

( 1,583 )  

Loss on sale or disposal of assets

( 13 )  

Share-based compensation

Pension and other post-retirement benefit plan activity

( 5,361 )  

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

Trade receivables, net

13,283  

( 87,419 )  

( 3,195 )  

Trade payables

46,464  

67,373  

Accrued compensation

( 44,066 )  

Other accrued expenses

( 6,839 )  

Income taxes payable

Other liabilities

Net cash provided by operating activities

( 8,810 )  

( 178 )  

Net cash (used in) provided by operating activities

( 17,673 )  

35,849  

Cash flows from investing activities:

Purchased property, plant and equipment

( 48,883 )  

Purchased businesses, net of cash acquired

Purchase of assets

( 229,314 )  

Proceeds from sale of property, plant and equipment

 Cash received from government grant

Cash payments related to government grant

Net cash used in investing activities

( 274,247 )  

Cash flows from financing activities:

Proceeds from debt

307,500  

Repayment of long-term debt

Net proceeds of notes payable

Payment of debt issuance costs

( 400 )  

Net payments of notes payable

( 7,604 )  

Dividends paid

 Contingent consideration payment

( 8,881 )  

Contingent consideration payment

( 5,000 )  

Proceeds from stock options exercised

Repurchases of common stock

Net cash used in financing activities

( 3,577 )  

Net cash provided by (used in) financing activities

287,792  

Effect of exchange rate changes on cash and cash equivalents

1 unchanged sentence

Cash and cash equivalents at beginning of period

61,786  

100,534  

Cash and cash equivalents at end of period

$ 63,511  

$ 81,192  

See accompanying Notes to Unaudited Consolidated Financial Statements.

15 unchanged sentences

November 27, 2021 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 

2019 - 11, Codification Improvements to Topic 326, Financial Instruments, in November 2019.

2018 - 19 clarifies that receivables arising from operating leases are within the scope of Topic 842, Leases.

2019 - 04 and ASU No.

2019 - 11 clarify various scoping and other issues arising from ASU No.

The amendments in these ASUs affect the guidance in ASU No.

2016 - 13 and are effective in the same timeframe as ASU No.

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.

In November 2021, the FASB issued ASU No.

2021 - 10, Government Assistance (Topic 832 ):

Disclosures by Business Entities about Government Assistance .

This ASU requires business entities to make annual disclosures about transactions with a government they account for by analogizing to a grant or contribution accounting model under ASC 958 - 605.

Our effective date for adoption of this ASU is our fiscal year beginning December 4, 2022 with early adoption permitted.

We have evaluated the effect that this guidance will have on our Consolidated Financial Statements and determined it will not have a material impact.

On January 26, 2022, we acquired Apollo Chemicals Limited, Apollo Roofing Solutions Limited and Apollo Construction Solutions Limited (collectively, "Apollo") for a base purchase price of GBP 151,214 , or approximately $ 203,573 , which was funded through borrowings on our credit facility.

The agreement requires us to pay an additional GBP 1,500 , or approximately $ 2,019 , following the completion of certain environmental studies. Apollo, headquartered in Tamworth, UK, is a manufacturer of liquid adhesives, coatings and primers for the roofing, industrial and construction markets.

Apollo is expected to enhance our position in key high-value, high-margin markets in the UK and throughout Europe.

The acquisition fair value measurement was preliminary as of February 26, 2022.

The acquisition will be included in our Construction Adhesives operating segment. 

The following table summarizes the preliminary fair value measurement of the assets acquired and liabilities assumed as of the date of acquisition:

$ 12,165  

Current assets

18,873  

Property, plant and equipment

104,885  

Other intangibles

Customer relationships

82,256  

Trademarks/trade names

Current liabilities

Other liabilities

$ 205,592  

The expected useful lives of the acquired intangible assets are 12 years for customer relationships and technology and 10 years for trademarks/trade names.

Based on the fair value measurement of the assets acquired and liabilities assumed, we allocated $ 104,885 to goodwill for the expected synergies from combining Apollo with our existing business.

Such goodwill is not deductible for tax purposes.

The goodwill was assigned to our Construction Adhesives operating segment.

The Apollo acquisition does not represent a material business combination, and therefore pro forma financial information is not provided.

On January 11, 2022, we acquired Fourny NV ("Fourny") for a base purchase price of EUR 12,867 , or approximately $ 14,627 , which was funded through existing cash. The agreement requires us to pay an additional EUR 3,100 , or approximately $ 3,524 , 18 months following the date of acquisition. Fourny, headquartered in Willebroek, Belgium, is a manufacturer of construction and automotive adhesives .

Fourny is expected to enhance our position in key high-value, high-margin markets in Europe.

The acquisition fair value measurement was preliminary as of February 26, 2022 and includes intangible assets of $ 10,799 , goodwill of $ 6,497 , cash of $ 75 and other net assets of $ 780 .

Goodwill is not ded uctible for tax purposes.

Fourny is recorded in our Construction Adhesives operating segment. The Fourny acquisition does not represent a material business combination, and therefore pro forma financial information is not provided.

Tissue Seal, LLC

November 30, 2021, we acquired certain assets of Tissue Seal, LLC ("TissueSeal") for a base purchase price of $ 22,167 , which was funded through existing cash.

The agreement requires us to pay an additional $ 2,475  on the first anniversary of the acquisition and contingent consideration of up to $ 500 on November 30, 2024 based on certain agreement provisions. TissueSeal, headquartered in Ann Arbor, Michigan, is a distributor of topical tissue adhesives and sutures.

With this acquisition, we add TissueSeal's regulatory clearances, customer and distribution relationships, regulatory approvals and trademarks into our portfolio of products. T he acquisition fair value measurement was preliminary as of February 26, 2022 and includes intangible assets of $ 11,161 , goodwill of $ 13,764  and other net assets of $ 217 .

Goodwill is de ductible for tax purposes.

See Note 11 for further discussion of the fair value of the contingent consideration liability.

TissueSeal is recorded in our Hygiene, Health and Consumable Adhesives operating segment. The TissueSeal acquisition does not represent a material business combination, and therefore pro forma financial information is not provided.

STR Holdings, Inc.

1 unchanged sentence

("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.

The agreement required 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 intangible assets of $ 6,700  and other net assets of $ 1,245 , was preliminary as of August 28, 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.

We recorded no goodwill in our accounting for this acquisition. STR is reported in our Engineering Adhesives ("EA") operating segment.

The acquisition fair value measurement, which includes intangible assets of $ 6,700  and other net assets of $ 1,245 , was final as of November 27, 2021.

The agreement provisions for the contingent consideration were met, and as a result, $ 1,700 was paid as of November 27, 2021.

No goodwill was recorded for this acquisition. STR is reported in our Engineering Adhesives operating segment.

The STR acquisition does not represent a material business combination, and therefore pro forma financial information is not provided. 

Adhesives, Inc .

On February 3, 2020, we acquired certain assets of D.H.M.

5 unchanged sentences

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.

As of November 27, 2021, the agreement provisions for the contingent consideration were met, and as a result, $ 8,100 was paid during the period ended February 26, 2022.

Goodwill is deductible for tax purposes.

2 unchanged sentences

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

Nine Months Ended

August 28, 2021

August 29, 2020

August 28, 2021

August 29, 2020

February 26, 2022

February 27, 2021

Cost of sales

$ ( 152 )  

Selling, general and administrative

( 89 )  

$ ( 241 )  

$ 1,817  

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

2 unchanged sentences

Balance at November 28, 2020

$ 5,834  

$ 6,082  

Expenses incurred

( 807 )  

 Non-cash charges

( 135 )  

Cash payments

( 3,917 )  

( 1,707 )  

Foreign currency translation

( 15 )  

Balance at November 27, 2021

Expenses incurred

 Non-cash charges

( 241 )  

Cash payments

( 288 )  

Foreign currency translation

Balance at August 28, 2021

( 18 )  

Balance at February 26, 2022

Non-cash charges include accelerated depreciation resulting from the cessation of use of certain long-lived assets.

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

1 unchanged sentence

Raw materials

$ 276,638  

$ 226,723  

Finished goods

271,230  

221,681  

Total inventories

$ 547,868  

$ 448,404  

Goodwill and Other Intangible Assets

The goodwill activity for the 

nine months ended August 28, 2021 is presented below:

The goodwill activity by reportable segment for the 

three months ended February 26, 2022 is presented below:

Hygiene, Health

1 unchanged sentence

Balance at November 27, 2021

Currency impact

Balance at August 28, 2021

$ 325,470  

$ 662,021  

$ 311,354  

$ 1,298,845  

TissueSeal acquisition

13,764  

Fourny acquisition

Apollo acquisition

104,885  

Foreign currency translation effect

( 462 )  

Balance at February 26, 2022

$ 339,885  

$ 663,777  

$ 422,274  

$ 1,425,936  

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

August 28, 2021

February 26, 2022

Amortizable Intangible Assets

1 unchanged sentence

Original cost

$ 100,423  

$ 1,035,413  

$ 58,223  

$ 11,149  

$ 1,205,208  

Accumulated amortization

( 45,714 )  

( 350,052 )  

( 18,951 )  

( 5,593 )  

Net identifiable intangibles

$ 54,709  

$ 685,361  

$ 39,272  

$ 5,556  

$ 784,898  

November 27, 2021

2 unchanged sentences

Original cost

$ 115,980  

$ 932,644  

$ 63,543  

$ 11,343  

$ 1,123,510  

Accumulated amortization

( 62,364 )  

( 335,143 )  

( 33,786 )  

( 5,635 )  

Net identifiable intangibles

Amortization expense with respect to amortizable intangible assets was $ 17,815  and $ 17,485  for the three months ended August 28, 2021 and August 29, 2020 , respectively, and $ 53,464  and $ 52,943  for the nine months ended August 28, 2021 and August 29, 2020 , respectively.

$ 53,616  

$ 597,501  

$ 29,757  

$ 5,708  

$ 686,582  

Amortization expense with respect to amortizable intangible assets was $ 17,792  and $ 17,896  for the three months ended February 26, 2022 and February 27, 2021 , respectively.

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

Amortization expense

$ 57,478  

$ 73,948  

$ 69,010  

$ 66,434  

$ 59,601  

$ 458,427  

Non-amortizable intangible assets as of 

August 28, 2021 and November 28, 2020 are $514  and $ 519 , respectively, and are related to trademarks and trade names.

The change in non-amortizable assets as of August 28, 2021 compared to November 28, 2020 was due to changes in foreign currency exchange rates.

February 26, 2022 and November 27, 2021 are $ 491  and $ 493 , respectively, and are related to trademarks and trade names.

The change in non-amortizable assets as of February 26, 2022 compared to November 27, 2021 was due to changes in foreign currency exchange rates.

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

Three Months Ended August 28, 2021 and August 29, 2020

Pension Benefits

Postretirement

Net periodic cost (benefit):

Interest cost

Expected return on assets

Amortization:

Prior service cost (benefit)

Actuarial loss

Net periodic benefit

Nine Months Ended August 28, 2021 and August 29, 2020

Three Months Ended February 26, 2022 and February 27, 2021

Pension Benefits

3 unchanged sentences

Expected return on assets

( 7,117 )  

( 7,781 )  

( 1,747 )  

( 3,077 )  

( 2,719 )  

Amortization:

1 unchanged sentence

Actuarial loss

( 845 )  

Net periodic benefit

$ ( 3,737 )  

$ ( 4,658 )  

$ ( 472 )  

$ ( 3,380 )  

Service cost is included with employee compensation cost in cost of sales and selling, general and administrative expenses in the Consolidated Statements of Income.

2 unchanged sentences

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

Three Months Ended August 28, 2021

Three Months Ended August 29, 2020

Three Months Ended February 26, 2022

Three Months Ended February 27, 2021

Fuller Stockholders

2 unchanged sentences

Fuller and non-controlling interest

$ 38,306  

$ 29,791  

Foreign currency translation adjustment¹

$ 6,540  

( 10 )  

$ 23,147  

23,147  

Defined benefit pension plans adjustment²

( 344 )  

( 480 )  

Interest rate swap³

( 2,024 )  

( 1,357 )  

Cross currency swaps³

( 2,115 )  

( 2,083 )  

( 1,062 )  

( 1,046 )  

Other comprehensive income (loss)

$ 13,513  

$ ( 2,336 )  

$ 11,177  

$ ( 10 )  

$ 29,477  

$ ( 1,821 )  

$ 27,656  

Comprehensive income (loss)

Nine Months Ended August 28, 2021

Nine Months Ended August 29, 2020

Fuller Stockholders

Net income attributable to H.B.

Fuller and non-controlling interest

Foreign currency translation adjustment¹

Defined benefit pension plans adjustment²

Interest rate swap³

Cross currency swaps³

Other comprehensive income (loss)

Comprehensive income

$ 49,483  

$ 57,447  

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

2 unchanged sentences

The components of accumulated other comprehensive loss are as follows:

August 28, 2021

February 26, 2022

Foreign currency translation adjustment

32 unchanged sentences

Income tax expense for the 

three and nine months ended August 28, 2021  includes $ 5,626 and $ 5,068  of discrete tax expense, respectively, relating to the revaluation of cross-currency swap agreements due to depreciation of the Euro versus the U.S.

dollar and various foreign tax matters.

Excluding the discrete tax expense, the overall effective tax rate was 

27.6 percent and 

27.4 percent for the three and nine months ended August 28, 2021 , respectively.  

Income tax expense for the three and nine months ended August 29, 2020 includes $ 7,183  and $ 5,223  of discrete tax benefit, respectively, relating to the revaluation of cross-currency swap agreements due to appreciation of the Euro versus the U.S.

Dollar and various foreign tax matters. Excluding the discrete tax benefit, the overall effective tax rate was 27.1  percent and 

27.3 percent for the three and nine months ended August 29, 2020 , respectively.

August 28, 2021 , we had a liability of $ 14,463  recorded for gross unrecognized tax benefits (excluding interest) compared to $ 14,569 as of November 28, 2020 .

As of August 28, 2021 and November 28, 2020 , we had accrued $ 2,283 and $ 2,881 of gross interest relating to unrecognized tax benefits, respectively.

three months ended February 26, 2022  includes $ 2,901 of discrete tax benefit, relating to legal entity mergers offset by various foreign tax matters.

Excluding the discrete tax benefit, the overall effective tax rate was 

27.8 percent for the three months ended February 26, 2022 .  

Income tax expense for the three months ended February 27, 2021 includes $ 42  of discrete tax expense, relating to the revaluation of cross-currency swap agreements due to appreciation of the Euro versus the U.S.

Dollar and various foreign tax matters. Excluding the discrete tax expense, the overall effective tax rate was 

27.4  percent for the three months ended February 27, 2021 .

February 26, 2022 , we had a liability of $ 14,703  recorded for gross unrecognized tax benefits (excluding interest) compared to $ 13,281  as of November 27, 2021 .

As of February 26, 2022 and November 27, 2021 , we had accrued $ 3,131 and $ 2,881 of gross interest relating to unrecognized tax benefits, respectively.

Earnings Per Share

1 unchanged sentence

Three Months Ended

Nine Months Ended

(Shares in thousands)

Weighted-average common shares - basic

53,353  

52,492  

Equivalent shares from share-based compensations plans

Weighted-average common and common equivalent shares diluted

55,395  

53,339  

Basic earnings per share is calculated by dividing net income attributable to H.B.

4 unchanged sentences

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.

Share-based compensation awards for 

93,876 and 3,672,150  shares for the three months ended August 28, 2021 and August 29, 2020 , respectively, and 1,655,852  and 4,034,001  for the nine  months ended August 28, 2021 and August 29, 2020 , respectively, were excluded from diluted earnings per share calculations because they were antidilutive.

Share-based compensation awards of 

700,250 and 2,789,184  shares for the three months ended February 26, 2022 and February 27, 2021 , respectively, were excluded from diluted earnings per share calculations because they were antidilutive.

Financial Instruments

12 unchanged sentences

Cash Flow Hedges

As of August 28, 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 August 28, 2021 , the combined fair value of the swaps was an asset of $ 4,716 and was included in other assets 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.

As of February 26, 2022 , we had cash flow hedges of four  cross-currency swap agreements effective October 20, 2017 to convert a notional amount of $ 267,860 of foreign currency denominated intercompany loans into U.S.

dollars, which mature in 2022.

 As of February 26, 2022 , the combined fair value of the swaps was an asse t of $ 13,503  

and was included in other current assets 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 differ ences 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 $ 4,393 as of August 28, 2021 . The estimated net amount of the existing gain that is reported in accumulated other comprehensive income (loss) as of August 28, 2021 that is expected to be reclassified into earnings within the next twelve months is $( 3,176 ). As of August 28, 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.

The following table summarizes the cross-currency swaps outstanding as of August 28, 2021 :

The amount in accumulated other comprehensive income (loss) related to cross-currency swaps was a gain of $ 1,400  as of February 26, 2022 . The estimated net amount of the existing gain that is reported in accumulated other comprehensive income (loss) as of February 26, 2022 that is expected to be reclassified into earnings within the next twelve month s is $ 1,400 .

 As of February 26, 2022 , 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.

The following table summarizes the cross-currency swaps outstanding as of February 26, 2022 :

Fiscal Year of

Interest Rate

3.00 %  

$ 267,860  

$ 13,503  

5.1803 %  

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 $ 800,000 on October 20, 2021, 

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 $ 17,924 at August 28, 2021 and was included in other liabilities in the Consolidated Balance Sheets.

The combined fair value of the interest rate swaps was a liabi lity of $ 4,900  

at February 26, 2022 and was included in other liabilities in the Consolidated Balance Sheets.

The swaps were designated for hedge accounting treatment as cash flow hedges.

5 unchanged sentences

Three Months Ended

Nine Months Ended

August 28, 2021

August 29, 2020

August 28, 2021

August 29, 2020

February 26, 2022

February 27, 2021

Cross-currency swap contracts

$ ( 2,115 )  

Interest rate swap contracts

2 unchanged sentences

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 $ 3,478 at 

August 28, 2021 , and was included in other liabilities in the Consolidated Balance Sheets. The swaps were designated for hedge accounting treatment as fair value hedges.

The combined fair value of the interest rate swaps was a liability of $ 21,844  at 

February 26, 2022 , 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.

6 unchanged sentences

See Note 11  for fair value amounts of these derivative instruments.

As of August 28, 2021 , we had forward foreign currency contracts maturing between August 30, 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. 

As of February 26, 2022 , we had forward foreign currency contracts maturing between February 28, 2022 and December 13, 2022.

Th e 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 

nine months ended August 28, 2021 and August 29, 2020 were $ 1,428 and $ ( 4,859 ), respectively.

three months ended February 26, 2022 and February 27, 2021 were $ 4,237  a nd $ ( 5,205 ), 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 August 28, 2021 , there were no significant concentrations of credit risk.

As of February 26, 2022 , there were no significant concentrations of credit risk.

Fair Value Measurements

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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 August 28, 2021 and November 28, 2020 , and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value.

The following table presents information about our financial assets and liabilities that are measured at fair value on a recurring basis as of February 26, 2022 and November 27, 2021 , and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value.

Fair Value Measurements Using:

Marketable securities

$ 2,923  

Foreign exchange contract assets

Cross-currency cash flow hedge assets

13,503  

Foreign exchange contract liabilities

1 unchanged sentence

Interest rate swaps, fair value hedge liabilities

Contingent consideration liabilities

21,844  

Contingent consideration liability

Fair Value Measurements Using:

Marketable securities

$ 2,079  

Foreign exchange contract assets

Cross-currency cash flow hedge assets

14,496  

Foreign exchange contract liabilities

Cross-currency cash flow hedge liabilities

$ 6,082  

Interest rate swaps, cash flow hedge liabilities

Contingent consideration liabilities

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 August 28, 2021 .

See Note 2 for further discussion regarding our acquisitions.

12,366  

Interest rate swaps, fair value hedge liabilities

10,539  

Contingent consideration liability

Adjustments to the fair value of contingent consideration are recorded to selling, general and administrative expenses in the Statement of Income. 

The valuation of our contingent consideration liability related to the acquisition of TissueSeal resulted in a fair value of $ 500 as of 

February 26, 2022 . As of November 27, 2021, the agreement provisions for the D.H.M contingent consideration were met, and as a result, $ 8,100 was paid during the period ended February 26, 2022.

See Note 2 for further discussion regarding our acquisitions. 

The following table provides details of the contingent consideration liabilities: 

Balance at November 27, 2021

$ 8,100  

Payment of contingent consideration

Mark to market adjustment

Balance at August 28, 2021

Long-term debt had an estimated fair value of 

$1,675,314.0  and $ 1,811,562 as of August 28, 2021 and November 28, 2020 , respectively.

Balance at February 26, 2022

Balances Measured at Fair Value on a Nonrecurring Basis

We measure certain assets and liabilities at fair value on a nonrecurring basis.

These assets include intangible assets acquired in an acquisition. 

The identified intangible assets of customer relationships, technology and tradenames acquired in connection with our acquisitions were measured using unobservable (Level 

3 ) inputs.  The fair value of the intangible assets was calculated using either the income approach.

Significant inputs include estimated revenue growth rates, gross margins, operating expenses, attrition rate, royalty rate and discount rate.  

See Note 

2  for further discussion regarding our acquisitions.

Balances Disclosed at Fair Value

Long-term debt had an estimated fair value of $ 1,905,402  and $ 1,618,291 as of February 26, 2022 and November 27, 2021 , 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.

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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 $ 7,462 and $ 8,099  as of August 28, 2021 and November 28, 2020 , respectively, for probable and reasonably estimable environmental remediation costs. Of the amount reserved, $ 3,404 and $ 3,703  as of August 28, 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.

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 $ 6,522 and $ 6,603  as of February 26, 2022 and November 27, 2021 , respectively, for probable and reasonably estimable environmental remediation costs. Of the amount reserved, $ 3,172 and $ 3,333  as of February 26, 2022 and November 27, 2021 , 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.

Currently, we are involved in various environmental investigations, clean up activities and administrative proceedings and lawsuits.

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

Nine Months Ended

Three Months Ended

3 Years Ended

August 28, 2021

August 29, 2020

February 26, 2022

February 27, 2021

November 27, 2021

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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.

8 unchanged sentences

Three Months Ended

August 28, 2021

August 29, 2020

Income (Loss)

Hygiene, Health and Consumable Adhesives

Engineering Adhesives

Construction Adhesives

Total segment

Corporate Unallocated

Nine Months Ended

August 28, 2021

August 29, 2020

February 26, 2022

February 27, 2021

Income (Loss)

1 unchanged sentence

Hygiene, Health and Consumable Adhesives

$ 389,538  

$ 32,213  

$ 335,669  

$ 29,912  

Engineering Adhesives

353,977  

32,572  

312,663  

30,417  

Construction Adhesives

112,967  

77,572  

Total segment

$ 856,482  

$ 69,141  

$ 725,904  

$ 55,626  

Corporate Unallocated 1

( 12,142 )  

$ 856,482  

$ 56,999  

$ 725,904  

$ 48,350  

1 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. 

1 unchanged sentence

Three Months Ended

Nine Months Ended

Operating income

$ 56,999  

$ 48,350  

Other income, net

Interest expense

( 18,196 )  

Interest income

Income before income taxes and income from equity method investments

$ 46,885  

$ 38,517  

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 August 28, 2021

Hygiene, Health

and Consumable

Three Months Ended August 29, 2020

Hygiene, Health

and Consumable

Nine Months Ended August 28, 2021

Three Months Ended February 26, 2022

Hygiene, Health

and Consumable

Nine Months Ended August 29, 2020

$ 220,694  

$ 133,328  

$ 95,578  

$ 449,600  

114,653  

115,820  

11,217  

241,690  

54,191  

104,829  

165,192  

$ 389,538  

$ 353,977  

$ 112,967  

$ 856,482  

Three Months Ended February 27, 2021

Hygiene, Health

and Consumable

$ 182,022  

$ 113,126  

$ 67,032  

$ 362,180  

95,973  

101,759  

202,459  

57,674  

97,778  

161,265  

$ 335,669  

$ 312,663  

$ 77,572  

$ 725,904  

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements