What changed in this filing

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Item 1. Financial Statements

2022-09-22 compared with 2022-06-23 · 122 added, 544 removed, 588 unchanged (53% of the section changed)

4 unchanged sentences

Three Months Ended

Six Months Ended

$ 993,258  

$ 827,873  

$ 1,849,739  

$ 1,553,777  

Nine Months Ended

Cost of sales

( 739,737 )  

( 610,323 )  

( 1,383,326 )  

( 1,143,863 )

253,521  

217,550  

466,413  

409,914  

Selling, general and administrative expenses

( 166,007 )  

( 148,409 )  

( 321,898 )  

Other income, net

11,879  

19,748  

Interest expense

( 19,828 )  

( 19,942 )  

( 38,025 )  

Interest income

Income before income taxes and income from equity method investments

69,777  

63,608  

116,662  

102,125  

( 23,616 )  

( 16,660 )  

( 33,765 )  

Income from equity method investments

Net income including non-controlling interest

47,227  

49,124  

85,546  

78,930  

Net income attributable to non-controlling interest

( 24 )  

( 22 )  

( 37 )  

Net income attributable to H.B.

$ 47,203  

$ 49,102  

$ 85,509  

$ 78,893  

Earnings per share attributable to H.B.

Fuller common stockholders:

$ 0.88  

$ 0.93  

$ 1.60  

$ 1.50  

$ 0.86  

$ 0.90  

$ 1.55  

$ 1.47  

Weighted-average common shares outstanding:

53,497  

52,839  

53,425  

52,666  

55,078  

54,294  

55,237  

53,817  

Dividends declared per common share

$ 0.190  

$ 0.168  

$ 0.358  

$ 0.330  

See accompanying Notes to Unaudited Consolidated Financial Statements.

3 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

Net income including non-controlling interest

$ 47,227  

$ 49,124  

$ 85,546  

$ 78,930  

Other comprehensive (loss) income

Foreign currency translation

( 84,110 )  

55,524  

( 77,579 )  

78,661  

Defined benefit pension plans adjustment, net of tax

1 unchanged sentence

Cross-currency swaps, net of tax

( 1,210 )  

( 1,241 )  

( 3,293 )  

Other comprehensive (loss) income

( 79,170 )  

59,218  

( 68,002 )  

86,864  

Comprehensive (loss) income

( 31,943 )  

108,342  

17,544  

165,794  

Comprehensive income attributable to non-controlling interest

Comprehensive income (loss) attributable to non-controlling interest

Comprehensive (loss) income attributable to H.B.

$ ( 31,955 )  

$ 108,308  

$ 17,528  

$ 165,755  

See accompanying Notes to Unaudited Consolidated Financial Statements.

6 unchanged sentences

$ 61,786  

Trade receivables (net of allowances of $ 12,701 and $ 9,935 , as of May 28, 2022 and November 27, 2021, respectively)

Trade receivables (net of allowances of $ 12,662 and $ 9,935 , as of August 27, 2022 and November 27, 2021, respectively)

649,727  

62 unchanged sentences

160,000,000 , shares outstanding –

53,153,056 and 52,777,753 as of May 28, 2022 and November 27, 2021, respectively

53,298,831 and 52,777,753 as of August 27, 2022 and November 27, 2021, respectively

53,299  

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

$ 53,042  

$ 221,338  

$ 1,629,943  

$ ( 259,070 )  

$ 1,645,848  

Comprehensive income (loss)

47,203  

( 79,158 )  

( 10,177 )  

Stock option exercises

1 unchanged sentence

Repurchases of common stock

( 31 )  

Balance at May 28, 2022

$ 53,153  

$ 232,253  

$ 1,666,969  

$ ( 338,228 )  

1,614,754  

Comprehensive income (loss)

Stock option exercises

Share-based compensation plans other, net

Repurchases of common stock

Balance at August 27, 2022

Fuller Company Shareholders

3 unchanged sentences

Balance at November 28, 2020

$ 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

$ 52,155  

$ 169,010  

$ 1,495,655  

$ ( 275,203 )  

$ 1,442,163  

Comprehensive income

49,102  

59,206  

108,342  

( 8,870 )  

Stock option exercises

13,887  

14,205  

Share-based compensation plans other, net

Repurchases of common stock

( 47 )  

Balance at May 29, 2021

$ 52,499  

$ 190,243  

$ 1,535,887  

$ ( 215,997 )  

$ 1,563,212  

Comprehensive income

Stock option exercises

Share-based compensation plans other, net

Repurchases of common stock

Balance at August 28, 2021

See accompanying Notes to Unaudited Consolidated Financial Statements. 

2 unchanged sentences

(In thousands)

Six Months Ended

Nine Months Ended

August 27, 2022

August 28, 2021

Cash flows from operating activities:

Net income including non-controlling interest

$ 85,546  

$ 78,930  

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

36,333  

35,976  

36,412  

35,649  

Deferred income taxes

( 4,961 )  

Income from equity method investments, net of dividends received

( 2,649 )  

 Loss on sale or disposal of assets

( 1,087 )  

Loss (gain) on sale or disposal of assets

Share-based compensation

13,625  

12,486  

Pension and other post-retirement benefit plan activity

( 9,720 )  

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

Trade receivables, net

( 35,491 )  

( 95,413 )  

( 21,908 )  

Trade payables

27,237  

115,488  

Accrued compensation

( 40,448 )  

Other accrued expenses

Income taxes payable

( 5,864 )  

Other liabilities

( 23,597 )  

28,452  

25,055  

Net cash (used in) provided by operating activities

( 9,131 )  

79,832  

Net cash provided by operating activities

Cash flows from investing activities:

Purchased property, plant and equipment

( 69,055 )  

Purchased businesses, net of cash acquired

( 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

( 293,172 )  

Cash flows from financing activities:

Proceeds from debt

335,000  

Repayment of long-term debt

 Payment of debt issuance costs

( 600 )  

Payment of debt issuance costs

Net proceeds of notes payable

Dividends paid

( 18,965 )  

 Contingent consideration payment

( 5,000 )  

Contingent consideration payment

Proceeds from stock options exercised

20,621  

Repurchases of common stock

( 3,609 )  

Net cash provided by (used in) financing activities

318,228  

Effect of exchange rate changes on cash and cash equivalents

( 9,562 )  

Net change in cash and cash equivalents

Cash and cash equivalents at beginning of period

61,786  

100,534  

Cash and cash equivalents at end of period

$ 68,149  

$ 69,597  

See accompanying Notes to Unaudited Consolidated Financial Statements.

22 unchanged sentences

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.

On August 16, 2022, we acquired ZKLT Polymer Co., Ltd.

("ZKLT") for a base purchase price of 102,812 Chinese renminbi, or approximately $ 15,183 , which was funded through existing cash.

We are also required to pay 

27,000 Chinese renminbi, or approximately $ 3,987 , with half to be paid on each of the 12 month and 18 month anniversaries of the closing date, as well as contingent consideration up to 30,000 Chinese renminbi, or approximately $ 4,430 , following the completion of certain performance goals and conditions. ZKLT, headquartered in Chongquin City, China, is a manufacturer of liquid adhesives primarily for the automotive market.

The acquisition of ZKLT is expected to add market knowledge, strong customer relationships and a strategic manufacturing location to further strengthen our presence in Southwest China.

The acquisition fair value measurement was preliminary as of August 27, 2022 and includes intangible assets of $ 3,042 , goodwill of $ 8,175 and other net assets of $ 7,953 .

Goodwill is not deductible for tax purposes.

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

ZKLT will be included in our E ngineering Adhesives operating segment. The ZKLT acquisition does not represent a material business combination, and therefore pro forma financial information is not provided. 

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 151,214 British pound sterling, or approximately $ 203,573 , which was funded through borrowings on our credit facility.

The agreement requires us to pay an additional 1,500 British pound sterling, or approximately $ 2,019 , following the completion of certain environmental studies.

As of August 27, 2022, the environmental studies were complete and the $ 2,019 was paid. 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 May 28, 2022.

The acquisition fair value measurement was preliminary as of August 27, 2022.

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

1 unchanged sentence

February 26, 2022

$ 12,165  

August 27, 2022

Current assets

18,873  

Property, plant and equipment

104,885  

13,359  

118,244  

Other intangibles

Customer relationships

82,256  

( 14,809 )  

67,447  

Trademarks/trade names

( 3,096 )  

Current liabilities

( 8,293 )  

( 41 )  

Other liabilities

( 23,883 )  

$ 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.

The expected useful lives of the acquired intangible assets are 15 years for technology, 10  years for customer relationships and five  years for trademarks/trade names.

Based on the fair value measurement of the assets acquired and liabilities assumed, we allocated $ 118,295 to goodwill for the expected synergies from combining Apollo with our existing business.

2 unchanged sentences

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 .

On January 11, 2022, we acquired Fourny NV ("Fourny") for a base purchase price of 12,867 Euro, or approximately $ 14,627 , which was funded through existing cash. The agreement requires us to pay an additional 3,100 Euro, 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 May 28, 2022 and includes intangible assets of $ 10,117 , goodwill of $ 6,593 , cash of $ 75 and other net assets of $ 1,366 .

The acquisition fair value measurement was preliminary as of August 27, 2022 and includes intangible assets of $ 10,117 , goodwill of $ 6,617 , cash of $ 75 and other net assets of $ 1,342 .

Goodwill is not ded uctible for tax purposes.

3 unchanged sentences

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 May 28, 2022 and includes intangible assets of $ 11,160 , goodwill of $ 13,765  and other net assets of $ 217 .

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 August 27, 2022 and includes intangible assets of $ 11,160 , goodwill of $ 13,765  and other net assets of $ 217 .

Goodwill is de ductible for tax purposes.

26 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

August 27, 2022

August 28, 2021

August 27, 2022

August 28, 2021

Cost of sales

$ ( 152 )  

Selling, general and administrative

( 201 )  

( 75 )  

$ ( 178 )  

$ ( 227 )  

$ 1,639  

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

( 227 )  

Cash payments

( 530 )  

Foreign currency translation

( 40 )  

Balance at May 28, 2022

Balance at August 27, 2022

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

2 unchanged sentences

Raw materials

$ 274,704  

$ 226,723  

Finished goods

268,422  

221,681  

Total inventories

$ 543,126  

$ 448,404  

Goodwill and Other Intangible Assets

The goodwill activity by reportable segment for the 

six months ended May 28, 2022 is presented below:

nine months ended August 27, 2022 is presented below:

Hygiene, Health

12 unchanged sentences

118,295  

ZKLT acquisition

Foreign currency translation effect

1 unchanged sentence

( 36,536 )  

Balance at May 28, 2022

( 16,097 )  

Balance at August 27, 2022

$ 322,135  

1 unchanged sentence

$ 420,169  

$ 1,375,964  

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

August 27, 2022

Amortizable Intangible Assets

1 unchanged sentence

Original cost

$ 120,094  

$ 1,008,089  

$ 49,929  

$ 11,048  

$ 1,189,160  

Accumulated amortization

( 64,174 )  

( 362,491 )  

( 19,614 )  

( 5,798 )  

Net identifiable intangibles

$ 55,920  

$ 645,598  

$ 30,315  

$ 5,250  

$ 737,083  

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

$ 53,616  

$ 597,501  

$ 29,757  

$ 5,708  

$ 686,582  

Amortization expense with respect to amortizable intangible assets was $ 18,620  and $ 17,753  for the three months ended May 28, 2022 and May 29, 2021 , respectively, and $ 36,412  and $ 35,649  for the six  months ended May 28, 2022 and May 29, 2021 , respectively.

Amortization expense with respect to amortizable intangible assets was $ 18,676  and $ 17,815  for the three months ended August 27, 2022 and August 28, 2021 , respectively, and $ 55,088  and $ 53,464  for the 

nine months ended August 27, 2022 and August 28, 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

$ 50,012  

$ 69,293  

$ 65,104  

$ 62,851  

$ 56,546  

$ 433,277  

Non-amortizable intangible assets as of 

May 28, 2022 and November 27, 2021 are $ 468  and $ 493 , respectively, and are related to trademarks and trade names.

The change in non-amortizable assets as of May 28, 2022 compared to November 27, 2021 was due to changes in foreign currency exchange rates.

August 27, 2022 and November 27, 2021 are $ 434  and $ 493 , respectively, and are related to trademarks and trade names.

The change in non-amortizable assets as of August 27, 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 May 28, 2022 and May 29, 2021

Three Months Ended August 27, 2022 and August 28, 2021

Pension Benefits

3 unchanged sentences

Expected return on assets

( 7,117 )  

( 7,781 )  

( 1,644 )  

( 3,104 )  

( 2,719 )  

Amortization:

Prior service cost (benefit)

Actuarial loss

( 845 )  

Actuarial loss (gain)

Settlement charge

Net periodic benefit

$ ( 3,737 )  

$ ( 4,658 )  

$ 3,748  

$ ( 511 )  

$ ( 3,380 )  

Six Months Ended May 28, 2022 and May 29, 2021

Nine Months Ended August 27, 2022 and August 28, 2021

Pension Benefits

1 unchanged sentence

Net periodic cost (benefit):

$ 1,420  

$ 1,654  

Interest cost

Expected return on assets

( 14,235 )  

( 15,561 )  

( 3,391 )  

( 6,181 )  

( 5,437 )  

Amortization:

Prior service cost (benefit)

Actuarial loss

( 1,690 )  

Actuarial loss (gain)

Settlement charge

Net periodic benefit

$ ( 7,475 )  

$ ( 9,314 )  

$ 4,175  

$ ( 983 )  

$ ( 6,760 )  

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

4 unchanged sentences

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

Three Months Ended May 28, 2022

Three Months Ended May 29, 2021

Three Months Ended August 27, 2022

Three Months Ended August 28, 2021

Fuller Stockholders

2 unchanged sentences

Fuller and non-controlling interest

$ 47,203  

$ 49,102  

Foreign currency translation adjustment¹

$ ( 84,098 )  

( 84,098 )  

( 12 )  

$ 55,512  

55,512  

Defined benefit pension plans adjustment²

( 1,069 )  

( 480 )  

Interest rate swap³

( 1,088 )  

( 1,157 )  

Cross currency swaps³

( 1,228 )  

( 1,210 )  

( 1,258 )  

( 1,241 )  

Other comprehensive income (loss)

$ ( 77,019 )  

$ ( 2,139 )  

$ ( 79,158 )  

$ ( 12 )  

$ 60,826  

$ ( 1,620 )  

$ 59,206  

Other comprehensive loss

Comprehensive income (loss)

$ ( 31,955 )  

$ 108,308  

Six Months Ended May 28, 2022

Six Months Ended May 29, 2021

Nine Months Ended August 27, 2022

Nine Months Ended August 28, 2021

Fuller Stockholders

2 unchanged sentences

Fuller and non-controlling interest

$ 85,509  

$ 78,893  

Foreign currency translation adjustment¹

$ ( 77,558 )  

( 77,558 )  

( 21 )  

$ 78,659  

78,659  

Defined benefit pension plans adjustment²

( 1,413 )  

( 960 )  

Interest rate swap³

12,690  

( 3,112 )  

10,258  

( 2,514 )  

Cross currency swaps³

( 3,343 )  

( 3,293 )  

( 2,320 )  

( 2,287 )  

Other comprehensive income (loss)

$ ( 63,506 )  

$ ( 4,475 )  

$ ( 67,981 )  

( 21 )  

$ 90,303  

$ ( 3,441 )  

86,862  

Comprehensive income

$ 17,528  

$ 165,755  

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 27, 2022

Foreign currency translation adjustment

2 unchanged sentences

Interest rate swap, net of taxes of ($ 325 )

Cash flow hedges, net of taxes of $ 3

( 181 )  

Cash flow hedges, net of taxes of ($3)

Defined benefit pension plans adjustment, net of taxes of $ 62,418

25 unchanged sentences

Income tax expense for the 

three and six months ended May 28, 2022  includes $ 4,149  and $ 1,248  of discrete tax expense, respectively, relating to the revaluation of cross-currency swap agreements due to depreciation of the Euro versus the U.S.

three and nine months ended August 27, 2022  includes $ 6,449  and $ 7,696  of discrete tax expense, respectively, primarily relating to the revaluation of cross-currency swap agreements due to depreciation of the Euro versus the U.S.

Dollar, as well as various foreign tax matters offset by the tax effect of legal entity mergers.

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

27.9 percent for both the three and six months ended May 28, 2022 . 

Income tax expense for the three and six months ended May 29, 2021 includes $ 600  and $ 558 of discrete tax benefit, respectively. 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.

May 28, 2022 , we had a liability of $ 15,414  recorded for gross unrecognized tax benefits (excluding interest) compared to $ 13,281  as of November 27, 2021 .

As of May 28, 2022 and November 27, 2021 , we had accrued $ 3,215 and $ 2,448 of gross interest relating to unrecognized tax benefits, respectively.

29.9 percent and 

28.7 percent for the three and nine months ended August 27, 2022  respectively.

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, as well as 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.

August 27, 2022 , we had a liability of $ 14,541  recorded for gross unrecognized tax benefits (excluding interest) compared to $ 13,281  as of November 27, 2021 .

As of August 27, 2022 and November 27, 2021 , we had accrued $ 4,555 and $ 2,448 of gross interest relating to unrecognized tax benefits, respectively.

Earnings Per Share

1 unchanged sentence

Three Months Ended

Six Months Ended

Nine Months Ended

(Shares in thousands)

Weighted-average common shares - basic

53,497  

52,839  

53,425  

52,666  

Equivalent shares from share-based compensations plans

Weighted-average common and common equivalent shares diluted

55,078  

54,294  

55,237  

53,817  

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

5 unchanged sentences

Share-based compensation awards of 

658,511 and 208,888  shares for the three months ended May 28, 2022 and May 29, 2021 , respectively, and 

744,479  and 2,107,062  shares for the six  months ended May 28, 2022 and May 29, 2021 , respectively, were excluded from diluted earnings per share calculations because they were antidilutive.

573,914 and 93,876  shares for the three months ended August 27, 2022 and August 28, 2021 , respectively, and 

691,856  and 1,655,852  shares for the 

nine months ended August 27, 2022 and August 28, 2021 , respectively, were excluded from diluted earnings per share calculations because they were antidilutive.

Financial Instruments

12 unchanged sentences

Cash Flow Hedges

As of May 28, 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.

As of August 27, 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 May 28, 2022 , the combined fair value of the swaps was an asse t of $ 24,932  

 As of August 27, 2022 , the combined fair value of the swaps was an asse t of $ 42,329  

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.

1 unchanged sentence

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 $ 190  as of May 28, 2022 . The estimated net amount of the existing gain that is reported in accumulated other comprehensive income (loss) as of May 28, 2022 that is expected to be reclassified into earnings within the next twelve mont hs is $ 190 .

 As of May 28, 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 May 28, 2022 :

The amount in accumulated other comprehensive income (loss) related to cross-currency swaps was a loss of $ 181  as of August 27, 2022 . The estimated net amount of the existing loss that is reported in accumulated other comprehensive income (loss) as of August 27, 2022 that is expected to be reclassified into earnings within the next twelve mont hs is $ 181 .

 As of August 27, 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 August 27, 2022 :

Fiscal Year of

Interest Rate

3.00 %  

$ 267,860  

$ 24,932  

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.

3 unchanged sentences

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 liabi lity of $ 460  

at May 28, 2022 and was included in other liabilities in the Consolidated Balance Sheets.

These interest rate swap agreements mature on October 20, 2022.

The combined fair value of the interest rate swaps was an asset  of $ 802  

at August 27, 2022 and was included in other liabilities in the Consolidated Balance Sheets.

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

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Three Months Ended

Six Months Ended

Nine Months Ended

August 27, 2022

August 28, 2021

August 27, 2022

August 28, 2021

Cross-currency swap contracts

$ ( 1,228 )  

$ ( 1,258 )  

$ ( 3,343 )  

Interest rate swap contracts

12,690  

10,258  

Fair Value Hedges

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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 $ 33,901  at 

May 28, 2022 , and was included in other liabilities in the Consolidated Balance Sheets. The swaps were designated for hedge accounting treatment as fair value hedges.

These interest rate swap agreements mature on October 15, 2028.The combined fair value of the interest rate swaps was a liability of $ 38,069  

August 27, 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.

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

As of May 28, 2022 , we had forward foreign currency contracts maturing between May 31, 2022 and December 13, 2022.

As of August 27, 2022 , we had forward foreign currency contracts maturing between August 29, 2022 and December 13, 2022.

The ma rk-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 recognized in other income, net related to derivative instruments not designated as hedging instruments for the 

six months ended May 28, 2022 and May 29, 2021 were  $ 5,089 a nd $ 404 , respectively.

nine months ended August 27, 2022 and August 28, 2021 were  $ 2,378 a nd $ 1,428 , 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 28, 2022 , there were no significant concentrations of credit risk.

As of August 27, 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 May 28, 2022 and November 27, 2021 , 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 August 27, 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

$ 3,247  

Foreign exchange contract assets

Cross-currency cash flow hedge assets

24,932  

Foreign exchange contract liabilities

$ 4,053  

Interest rate swaps, cash flow hedge liabilities

Foreign exchange contract liabilities

Interest rate swaps, fair value hedge liabilities

33,901  

Contingent consideration liability

Contingent consideration liabilities

Fair Value Measurements Using:

Marketable securities

$ 2,079  

Foreign exchange contract assets

Cross-currency cash flow hedge assets

14,496  

Foreign exchange contract liabilities

$ 6,082  

Interest rate swaps, cash flow hedge liabilities

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 

May 28, 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 valuation of our contingent consideration liability related to the acquisition of ZKLT with a fair value of $ 4,430 and TissueSeal with a fair value of $ 500  as of 

August 27, 2022 . As of November 27, 2021, the agreement provisions for the D.H.M contingent consideration were met, and as a result, $ 8,122  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 May 28, 2022

Balance at August 27, 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 or cost approach.

The fair value of the intangible assets was calculated using either the income or cost approach.

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

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Balances Disclosed at Fair Value

Long-term debt had an estimated fair value of $ 1,819,598  and $ 1,618,291 as of May 28, 2022 and November 27, 2021 , respectively.

Long-term debt had an estimated fair value of $ 1,508,239  and $ 1,618,291 as of August 27, 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 $ 6,378 and $ 6,603  as of May 28, 2022 and November 27, 2021 , respectively, for probable and reasonably estimable environmental remediation costs. Of the amount reserved, $ 3,078 and $ 3,333  as of May 28, 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.

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 $ 6,127 and $ 6,603  as of August 27, 2022 and November 27, 2021 , respectively, for probable and reasonably estimable environmental remediation costs. Of the amount reserved, $ 2,962 and $ 3,333  as of August 27, 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:

Six Months Ended

Nine Months Ended

3 Years Ended

August 27, 2022

August 28, 2021

November 27, 2021

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Three Months Ended

August 27, 2022

August 28, 2021

Income (Loss)

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Hygiene, Health and Consumable Adhesives

$ 437,889  

$ 43,267  

$ 364,814  

$ 38,929  

Engineering Adhesives

405,346  

42,917  

345,373  

32,075  

Construction Adhesives

150,023  

11,285  

117,686  

Total segment

$ 993,258  

$ 97,469  

$ 827,873  

$ 77,342  

Corporate Unallocated 1

( 9,955 )  

$ 993,258  

$ 87,514  

$ 827,873  

$ 69,141  

Six Months Ended

Nine Months Ended

August 27, 2022

August 28, 2021

Income (Loss)

1 unchanged sentence

Hygiene, Health and Consumable Adhesives

$ 827,427  

$ 75,480  

$ 700,482  

$ 68,840  

Engineering Adhesives

759,323  

75,489  

658,037  

62,493  

Construction Adhesives

262,989  

15,641  

195,258  

Total segment

$ 1,849,739  

$ 166,610  

$ 1,553,777  

$ 132,968  

Corporate Unallocated

( 22,095 )  

$ 1,849,739  

$ 144,515  

$ 1,553,777  

$ 117,491  

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. 

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Three Months Ended

Six Months Ended

Nine Months Ended

Operating income

$ 87,514  

$ 69,141  

$ 144,515  

$ 117,491  

Other income, net

11,879  

19,748  

Interest expense

( 19,828 )  

( 19,942 )  

( 38,025 )  

Interest income

Income before income taxes and income from equity method investments

$ 69,777  

$ 63,608  

$ 116,662  

$ 102,125  

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 28, 2022

Three Months Ended August 27, 2022

Hygiene, Health

and Consumable

$ 255,243  

$ 166,559  

$ 119,420  

$ 541,222  

123,145  

133,932  

23,713  

280,790  

59,501  

104,855  

171,246  

$ 437,889  

$ 405,346  

$ 150,023  

$ 993,258  

Three Months Ended May 29, 2021

Three Months Ended August 28, 2021

Hygiene, Health

and Consumable

$ 201,458  

$ 126,450  

$ 103,996  

$ 431,904  

108,310  

121,585  

236,401  

55,046  

97,338  

159,568  

$ 364,814  

$ 345,373  

$ 117,686  

$ 827,873  

Six Months Ended May 28, 2022

Nine Months Ended August 27, 2022

Hygiene, Health

and Consumable

$ 475,938  

$ 299,886  

$ 214,998  

$ 990,822  

237,797  

249,752  

34,930  

522,479  

113,692  

209,685  

13,061  

336,438  

$ 827,427  

$ 759,323  

$ 262,989  

$ 1,849,739  

Six Months Ended May 29, 2021

Nine Months Ended August 28, 2021

Hygiene, Health

and Consumable

$ 383,479  

$ 239,577  

$ 171,028  

$ 794,084  

204,283  

223,344  

11,233  

438,860  

112,720  

195,116  

12,997  

320,833  

$ 700,482  

$ 658,037  

$ 195,258  

$ 1,553,777  

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