What changed in this filing

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Item 1. Financial Statements

2023-06-29 compared with 2023-03-30 · 565 added, 85 removed, 559 unchanged (54% of the section changed)

4 unchanged sentences

Three Months Ended

Six Months Ended

$ 898,239  

$ 993,258  

$ 1,707,421  

$ 1,849,739  

Cost of sales

( 641,464 )  

( 739,737 )  

( 1,235,838 )  

( 1,383,326 )

256,775  

253,521  

471,583  

466,413  

Selling, general and administrative expenses

( 166,625 )  

( 166,007 )  

( 321,167 )  

Other income, net

Interest expense

( 33,131 )  

( 19,828 )  

( 66,200 )  

Interest income

Income before income taxes and income from equity method investments

58,556  

69,777  

89,024  

116,662  

( 19,291 )  

( 23,616 )  

( 29,024 )  

Income from equity method investments

Net income including non-controlling interest

40,422  

47,227  

62,338  

85,546  

Net income attributable to non-controlling interest

( 21 )  

( 24 )  

( 48 )  

Net income attributable to H.B.

$ 40,401  

$ 47,203  

$ 62,290  

$ 85,509  

Earnings per share attributable to H.B.

Fuller common stockholders:

$ 0.74  

$ 0.88  

$ 1.15  

$ 1.60  

$ 0.73  

$ 0.86  

$ 1.12  

$ 1.55  

Weighted-average common shares outstanding:

54,269  

53,497  

54,222  

53,425  

55,717  

55,078  

55,818  

55,237  

Dividends declared per common share

$ 0.205  

$ 0.190  

$ 0.395  

$ 0.358  

See accompanying Notes to Unaudited Consolidated Financial Statements.

3 unchanged sentences

Three Months Ended

Six Months Ended

Net income including non-controlling interest

Other comprehensive income

$ 40,422  

$ 47,227  

$ 62,338  

$ 85,546  

Other comprehensive income (loss)

Foreign currency translation

26,410  

( 84,110 )  

22,774  

Defined benefit pension plans adjustment, net of tax

Interest rate swaps, net of tax

( 9,488 )  

( 1,153 )  

Cross-currency swaps, net of tax

( 1,210 )  

Net investment hedges, net of tax

Other comprehensive income

Comprehensive income

( 5,384 )  

( 5,683 )  

Other comprehensive income (loss)

12,396  

( 79,170 )  

17,647  

Comprehensive income (loss)

52,818  

( 31,943 )  

79,985  

17,544  

Comprehensive income attributable to non-controlling interest

Comprehensive income attributable to H.B.

Comprehensive income (loss) attributable to H.B.

$ 52,812  

$ ( 31,955 )  

$ 79,942  

$ 17,528  

See accompanying Notes to Unaudited Consolidated Financial Statements.

6 unchanged sentences

$ 79,910  

Trade receivables (net of allowances of $ 11,121 and $ 10,939 , as of March 4, 2023 and December 3, 2022, respectively)

Trade receivables (net of allowances of $ 11,512 and $ 10,939 , as of June 3, 2023 and December 3, 2022, respectively)

586,609  

62 unchanged sentences

160,000,000 , shares outstanding –

53,818,698 and 53,676,576 as of March 4, 2023 and December 3, 2022, respectively

53,859,908 and 53,676,576 as of June 3, 2023 and December 3, 2022, respectively

$ 53,860  

26 unchanged sentences

Balance at December 3, 2022

$ 53,677  

$ 266,491  

$ 1,741,359  

$ ( 451,357 )  

$ 1,610,794  

Comprehensive income

21,889  

27,167  

( 10,305 )  

Stock option exercises

1 unchanged sentence

Repurchases of common stock

( 36 )  

( 2,412 )  

Balance at March 4, 2023

$ 53,819  

$ 272,820  

$ 1,752,943  

$ ( 446,116 )  

$ 1,634,127  

Comprehensive income

40,401  

12,411  

52,818  

( 11,129 )  

Stock option exercises

Share-based compensation plans other, net

Repurchases of common stock

( 102 )  

Balance at June 3, 2023

$ 53,860  

$ 280,120  

$ 1,782,215  

$ ( 433,705 )  

1,683,157  

Fuller Company Shareholders

8 unchanged sentences

Balance at February 26, 2022

Comprehensive income (loss)

Stock option exercises

Share-based compensation plans other, net

Repurchases of common stock

Balance at May 28, 2022

See accompanying Notes to Unaudited Consolidated Financial Statements. 

2 unchanged sentences

(In thousands)

Three Months Ended

March 4, 2023

February 26, 2022

Six Months Ended

Cash flows from operating activities:

2 unchanged sentences

$ 85,546  

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

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

39,163  

6 unchanged sentences

( 2,338 )  

 Debt issuance costs write-off

Loss on mark to market adjustment on contingent consideration liability

Debt issuance costs write-off

Gain on mark to market adjustment on contingent consideration liability

( 220 )  

Gain on sale or disposal of assets

( 42 )  

Share-based compensation

10,953  

13,625  

Pension and other post-retirement benefit plan activity

4 unchanged sentences

( 36,951 )  

( 33,800 )  

( 28,947 )  

Trade payables

( 20,301 )  

27,237  

Accrued compensation

7 unchanged sentences

( 13,497 )  

28,452  

Net cash provided by (used in) operating activities

108,397  

Cash flows from investing activities:

61 unchanged sentences

Recently issued accounting standards or pronouncements not disclosed above have been excluded as they are not relevant to the company.

Beardow Adams Holdings Ltd.

On May 1, 2023, we acquired Beardow Adams Holdings Ltd. (“Beardow Adams”) for a total purchase price of 79,570 British pound sterling, or approximately $ 99,426 , which was funded through borrowings on our credit facility. This includes a holdback amount of 8,000 British pound sterling that will be paid on the 18 -month anniversary of the closing date.

Beardow Adams, based in the  United Kingdom, develops and manufactures adhesives, sealants, coatings and primers, principally in the fields of packaging, labeling, bookbinding, hygiene, wood and product assembly. The acquisition of Beardow Adams is expected to accelerate profitable growth in many of our core end markets and generate business synergies through production optimization, an expanded distribution platform, and difference-making innovation.

The acquisition fair value measurement was preliminary as of June 3, 2023 and includes intangible asse ts of $ 40,485 , goodwill of $ 42,585  and other net asse ts of $ 16,356 .

Beardow Adams  is included in our Hygiene, Health and Consumable Adhesives operating segment. 

Aspen Research Corporation

4 unchanged sentences

The acquisition of Aspen is expected to expand our Engineering Adhesives footprint in North America and strengthen our capabilities in the insulating glass market, in addition to bringing additive continuous flow, process manufacturing capabilities that we plan to leverage.

The acquisition fair value measurement was preliminary as of March 4, 2023 and includes intangible asse ts of $ 7,902  and other net assets of $ 1,948 .

The acquisition fair value measurement was preliminary as of June 3, 2023 and includes intangible asse ts of $ 7,777  and other net assets of $ 2,073 .

A spen is included in our Engineering Adhesives operating segment. 

On December 15, 2022, we acquired Lemtapes Oy (“Lemtapes”) for a total purchase price of 7,997 Euro, or approximately $ 8,498 , which was funded through existing cash.

On December 15, 2022, we acquired Lemtapes Oy (“Lemtapes”) for a total purchase price of 8,048 Euro, or approximately $ 8,552  which was funded through existing cash.

This includes a holdback amount of 850 Euro that will be paid on the 18 -month anniversary of the closing date.

2 unchanged sentences

This acquisition will also accelerate our growth strategy of fast-growing, high margin businesses while adding technology capabilities and strong customer relationships.

The acquisition fair value measurement was preliminary as of March 4, 2023 and includes intangible ass ets of $ 6,834 and other net assets of $ 1,664 .

The acquisition fair value measurement was preliminary as of June 3, 2023 and includes intangible ass ets of $ 6,535 and other net assets of $ 2,017 .

Lemta pes is included in our Hygiene, Health and Consumable Adhesives operating segment.

3 unchanged sentences

GSSI, headquartered in Houston, Texas, is a manufacturer of premier elastomeric butyl rubber sealant tapes.

The acquisition of GSSI is expected to support our strategy to expand our Construction Adhesives business selectively via high margin applications and expand our reach to new regions. The acquisition fair value measurement was preliminary as of March 4, 2023 and includes intangible a ssets of $ 4,305 and other net assets of $ 3,178 .

The acquisition of GSSI is expected to support our strategy to expand our Construction Adhesives business selectively via high margin applications and expand our reach to new regions. The acquisition fair value measurement was preliminary as of June 3, 2023 and includes intangible a ssets of $ 4,523  and other net assets of $ 3,178 .

GSSI is included in our Construction Adhesives operating segment. 

4 unchanged sentences

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 unique technology, 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 March 

4, 2022 and includes intangible assets of $ 5,316 , goodwill of $ 3,786  

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

The acquisition fair value measurement was preliminary as of June 3,2023  and includes intangible assets of $ 5,183 , goodwill of $ 3,902  

and other net as sets of $ 10,085 .

18 unchanged sentences

Restructuring Actions

The Company has approved restructuring plans consisting of consolidation plans, organizational changes and other actions to optimize operations.

The following table summarizes the pre-tax distribution of charges under these restructuring plans by income statement classification:

During fiscal year 2023, the Company approved restructuring plans related to organizational changes and other actions to optimize operations and are currently expected to be completed during fiscal year 2025.

The following table summarizes the pre-tax distribution of restructuring charges by income statement classification:

Three Months Ended

March 4, 2023

February 26, 2022

Six Months Ended

Cost of sales

$ 2,784  

$ 5,085  

Selling, general and administrative

$ 5,402  

$ 8,328  

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

2 unchanged sentences

Balance at November 27, 2021

$ 1,095  

Expenses incurred

5 unchanged sentences

Foreign currency translation

Balance at March 4, 2023

Balance at June 3, 2023

$ 5,692  

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

1 unchanged sentence

Raw materials

$ 229,341  

$ 237,071  

Finished goods

269,934  

254,710  

Total inventories

$ 499,275  

$ 491,781  

Goodwill and Other Intangible Assets

The goodwill activity by reportable segment for the 

three months ended March 4, 2023 is presented below:

six months ended June 3, 2023 is presented below:

Hygiene, Health

1 unchanged sentence

Balance at December 3, 2022

$ 328,962  

$ 637,910  

$ 425,755  

$ 1,392,627  

$ 42,585  

42,585  

Foreign currency translation effect

Balance at March 4, 2023

$ 2,222  

$ 2,434  

$ 1,546  

Balance at June 3, 2023

$ 373,769  

$ 640,344  

$ 427,301  

$ 1,441,414  

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

March 4, 2023

Amortizable Intangible Assets

1 unchanged sentence

Original cost

$ 105,868  

$ 1,048,314  

$ 52,802  

$ 10,959  

$ 1,217,943  

Accumulated amortization

( 53,809 )  

( 415,783 )  

( 20,710 )  

( 6,544 )  

Net identifiable intangibles

$ 52,059  

$ 632,531  

$ 32,092  

$ 4,415  

$ 721,097  

December 3, 2022

2 unchanged sentences

Original cost

$ 118,727  

$ 1,004,008  

$ 50,324  

$ 11,053  

$ 1,184,112  

Accumulated amortization

( 66,433 )  

( 388,394 )  

( 21,401 )  

( 6,251 )  

Net identifiable intangibles

Amortization expense with respect to amortizable intangible assets was $ 18,683  and $ 17,792  for the three months ended March 4, 2023 and February 26, 2022 , respectively.

$ 52,294  

$ 615,614  

$ 28,923  

$ 4,802  

$ 701,633  

Amortization expense with respect to amortizable intangible assets was $ 19,130 and $ 18,620  for the three months ended June 3, 2023 and May 28, 2022 , respectively, and $ 37,813  and $ 36,412 for the six months ended 

June 3, 2023 and May 28, 2022 , 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

$ 68,435  

$ 69,181  

$ 67,465  

$ 61,828  

$ 59,086  

$ 395,102  

Non-amortizable intangible assets as of 

March 4, 2023 and December 3, 2022 were $ 462  and $ 459 , respectively, and relate to trademarks and trade names.

The change in non-amortizable assets as of March 4, 2023 compared to December 3, 2022 was due to changes in foreign currency exchange rates.

June 3, 2023 and December 3, 2022 were $ 467  and $ 459 , respectively, and relate to trademarks and trade names.

The change in non-amortizable assets as of June 3, 2023 compared to December 3, 2022 was due to changes in foreign currency exchange rates.

Long-Term Debt

7 unchanged sentences

Interest on Term Loan A is payable at the Secured Overnight Financing Rate ("SOFR") plus an adjustment of 

0.10 percent and an interest rate spread of 1.75 percent ( 6.47  percent at March 4, 2023).

0.10 percent and an interest rate spread of 1.75 percent ( 6.99  percent at June 3, 2023).

The interest rate spread is based on a secured leverage grid.

Term Loan A matures on February 15, 2028.

Interest on Term Loan B is payable at SOFR plus an interest rate spread of 2.50 percent with a SOFR floor of 0.50 percent ( 7.12  percent at March 4, 2023).

Interest on Term Loan B is payable at SOFR plus an interest rate spread of 2.50 percent with a SOFR floor of 0.50 percent ( 7.64 percent at June 3, 2023).

Term Loan B matures on February 15, 2030. 

1 unchanged sentence

See Note 11 for further discussion of this interest rate swap.

On March 16, 2023, we entered into interest rate swap agreements to convert $ 300,000 of our 1 -month SOFR rate debt to a fixed rate of 3.7210 percent and to convert $ 100,000 of our 1 -month SOFR rate debt to a fixed rate of 3.8990 percent.

See Note 11 for further discussion of these interest rate swaps.

Revolving Credit Facility

Interest on the Revolving Credit Facility is payable at SOFR plus an adjustment of 0.10 percent and an interest rate spread of 1.75 percent ( 6.47  percent at March 4, 2023).

Interest on the Revolving Credit Facility is payable at SOFR plus an adjustment of 0.10 percent and an interest rate spread of 1.75 percent ( 6.99 percent at June 3, 2023).

A facility fee of 25 basis points of the unused commitment under the Revolving Credit Facility is payable quarterly.

The interest rate spread and the facility fee are based on a secured leverage grid.

At March 4, 2023, there was no balance outstanding on the Revolving Credit Facility.

At June 3, 2023, there was no balance outstanding on the Revolving Credit Facility.

The Revolving Credit Facility matures on February 15, 2028.

The Revolving Credit Facility can be drawn upon for general corporate purposes up to a maximum of $ 700,000 , less issued letters of credit.

At March 4, 2023, letters of credit reduced the available amount under the Revolving Credit Facil ity by $ 9,864 .

At June 3, 2023, letters of credit reduced the available amount under the Revolving Credit Facil ity by $ 9,968 .

Covenants and Other

3 unchanged sentences

Restrictive covenants include, but are not limited to, limitations on secured and unsecured borrowings, interest coverage, intercompany transfers and investments, third party investments, dispositions of assets, leases, liens, dividends and distributions, and contains a maximum total debt to trailing twelve months EBITDA requirement. Certain covenants become less restrictive after meeting leverage or other financial ratios.

In addition, we cannot be a member of any consolidated group as defined for income tax purposes other than with our subsidiaries. 

The terms of the Second Amended and Restated Credit Agreement do not require the financial covenants to be measured until the fiscal quarter ending June 3, 2023.

We are subject to mandatory prepayments in the first quarter of each fiscal year equal to 50 % of Excess Cash Flow, as defined in the Second Amended and Restated Credit Agreement, of the prior fiscal year less any voluntary prepayments made during that fiscal year.

In addition, we cannot be a member of any consolidated group as defined for income tax purposes other than with our subsidiaries.

We are subject to mandatory prepayments in the first quarter of each fiscal year equal to 50 percent of Excess Cash Flow, as defined in the Second Amended and Restated Credit Agreement, of the prior fiscal year less any voluntary prepayments made during that fiscal year.

The Excess Cash Flow Percentage shall be reduced to 25 percent when our Secured Leverage Ratio is below 4.25:1.00 and to 0 percent when our Secured Leverage Ratio is below 3.75:1.00.

The principal balance of the Term Loan B loans will be repayable in equal quarterly installments in an aggregate annual amount equal to 1 percent of the original principal amount thereof, with the balance due at maturity on February 15, 2030. 

The principal balance of the Term Loan A loans will be repayable in quarterly installments as follows:

(i) with respect to the first eight fiscal quarters ended after the effective date of the Second Amended and Restated Credit Agreement, 1.25 percent of the aggregate principal amount of the original principal of the Term Loan A loans, (ii) with respect to the eight fiscal quarters ended after the end of the period set forth in the preceding clause (i), 1.875 percent of the aggregate principal amount of the original principal amount of the Term Loan A loans, and (iii) thereafter, 2.5 percent of the original principal amount of the Term Loan A loans, with the balance due at maturity on February 15, 2028.

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

Three Months Ended March 4, 2023 and February 26, 2022

Three Months Ended June 3, 2023 and May 28, 2022

Pension Benefits

3 unchanged sentences

Expected return on assets

( 7,205 )  

( 7,117 )  

( 1,730 )  

( 1,644 )  

( 2,465 )  

Amortization:

1 unchanged sentence

Actuarial loss (gain)

Settlement charge

Net periodic (benefit) cost

$ ( 3,095 )  

$ ( 3,737 )  

$ 3,748  

$ ( 2,164 )  

Six Months Ended June 3, 2023 and May 28, 2022

Pension Benefits

Postretirement

Net periodic (benefit) cost:

$ 1,420  

Interest cost

Expected return on assets

( 14,412 )  

( 14,235 )  

( 3,492 )  

( 3,391 )  

( 4,929 )  

Amortization:

Prior service (benefit) cost

Actuarial loss (gain)

Settlement charge

Net periodic (benefit) cost

$ ( 6,190 )  

$ ( 7,475 )  

$ 1,207  

$ 4,175  

$ ( 4,327 )  

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.

In the second quarter of 2022, we recognized a non-cash settlement charge of $ 3,329 related to the termination of our Canadian defined benefit pension plan. 

The settlement charge is included in other income, net in the Consolidated Statement of Income.

Accumulated Other Comprehensive Income (Loss)

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

Three Months Ended March 4, 2023

Three Months Ended February 26, 2022

Three Months Ended June 3, 2023

Three Months Ended May 28, 2022

Fuller Stockholders

2 unchanged sentences

Fuller and non-controlling interest

$ 40,401  

$ 47,203  

Foreign currency translation¹

$ 26,425  

26,425  

( 15 )  

$ ( 84,098 )  

( 84,098 )  

Defined benefit pension plans adjustment²

( 293 )  

( 1,069 )  

Interest rate swaps³

( 12,584 )  

( 9,488 )  

( 1,088 )  

Cross-currency swaps³

( 1,228 )  

( 1,210 )  

Net investment hedges³

Other comprehensive income

( 7,141 )  

( 5,384 )  

Other comprehensive income (loss)

$ 7,851  

$ 4,560  

$ 12,411  

$ ( 15 )  

$ ( 77,019 )  

$ ( 2,139 )  

$ ( 79,158 )  

Comprehensive income (loss)

$ 52,812  

$ ( 31,955 )  

Six Months Ended June 3, 2023

Six Months Ended May 28, 2022

Fuller Stockholders

Net income attributable to H.B.

Fuller and non-controlling interest

$ 62,290  

$ 85,509  

Foreign currency translation adjustment¹

$ 22,779  

22,779  

$ ( 77,558 )  

( 77,558 )  

Defined benefit pension plans adjustment²

( 583 )  

( 1,413 )  

Interest rate swap³

( 1,529 )  

( 1,153 )  

12,690  

( 3,112 )  

Cross-currency swaps³

( 3,343 )  

( 3,293 )  

Net investment hedges³

( 7,538 )  

( 5,683 )  

Other comprehensive income (loss)

$ 16,004  

$ 1,648  

$ 17,652  

$ ( 63,506 )  

$ ( 4,475 )  

( 67,981 )  

Comprehensive income

$ 79,942  

$ 17,528  

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:

March 4, 2023

Foreign currency translation adjustment

$ ( 241,270 )  

$ ( 241,233 )  

Interest rate swap, net of taxes of $ 376

( 1,153 )  

Net investment hedges, net of taxes of $ 15,152

( 46,426 )  

Defined benefit pension plans adjustment, net of taxes of $ 67,161

( 126,552 )  

Reclassification of AOCI tax effects

( 18,341 )  

Accumulated other comprehensive loss

$ ( 433,742 )  

$ ( 433,705 )  

December 3, 2022

Foreign currency translation adjustment

$ ( 264,054 )  

$ ( 264,012 )  

Net investment hedges, net of taxes of $ 13,297

( 40,743 )  

Defined benefit pension plans adjustment, net of taxes of $ 67,744

( 128,261 )  

Reclassification of AOCI tax effects

( 18,341 )  

Accumulated other comprehensive loss

$ ( 451,399 )  

$ ( 451,357 )  

Income tax expense for the 

three months ended March 4, 2023  includes $ 846  of discrete tax expense, relating to various foreign tax matters offset by an excess tax benefit related to U.S.

three and six months ended June 3, 2023  includes $ 2,042  and $ 2,888 of discrete tax expense, respectively, relating to various foreign tax matters offset by an excess tax benefit related to U.S.

stock compensation.

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

29.2 percent for the three months ended March 4, 2023 .

Income tax expense for the 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 .

March 4, 2023 , we had a liability of $ 17,973  recorded for gross unrecognized tax benefits (excluding interest) compared to $ 17,582  as of December 3, 2022 .

As of March 4, 2023 and December 3, 2022 , we had accrued $ 6,086 and $ 5,680 of gross interest relating to unrecognized tax benefits, respectively.

29.5 percent and 

29.4 percent for the three and six months ended June 3, 2023 , respectively.

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.

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 .

June 3, 2023 , we had a liability of $ 16,434  recorded for gross unrecognized tax benefits (excluding interest) compared to $ 17,582  as of December 3, 2022 .

As of June 3, 2023 and December 3, 2022 , we had accrued $ 5,933 and $ 5,680 of gross interest relating to unrecognized tax benefits, respectively.

Earnings Per Share

1 unchanged sentence

Three Months Ended

Six Months Ended

(Shares in thousands)

Weighted-average common shares - basic

54,269  

53,497  

54,222  

53,425  

Equivalent shares from share-based compensations plans

Weighted-average common and common equivalent shares diluted

55,717  

55,078  

55,818  

55,237  

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

5 unchanged sentences

Share-based compensation awards of 

1,172,987 and 700,250  shares for the three months ended March 4, 2023 and February 26, 2022 , respectively, were excluded from diluted earnings per share calculations because they were antidilutive.

1,026,155 and 658,511  shares for the three months ended June 3, 2023 and May 28, 2022 , respectively, and 

1,156,557  and 

744,479  shares for the six  months ended June 3, 2023 and May 28, 2022 , respectively, were excluded from diluted earnings per share calculations because they were antidilutive.

Financial Instruments

13 unchanged sentences

On January 12, 2023, we entered into an interest rate swap agreement to convert $ 400,000 of our variable rate 1 -month LIBOR rate debt to a fixed rate of 3.6895 percent. On February 28, 2023, after refinancing our debt, we amended the interest rate swap agreement to our 1 -month SOFR rate debt to a fixed rate of 3.7260 in accordance with the practical expedients included in ASC 848, Reference Rate Reform .

The combined fair value of the interest rate swaps was an asset of $ 6,688  at March 4, 2023 and was included in other assets i n the Consolidated Balance Sheets.

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

The combined fair value of the interest rate swap was an asset of $ 322 at June 3, 2023 and was included in other assets i n the Consolidated Balance Sheets.

The swap was designated for hedge accounting treatment as a cash flow hedge.

We are applying the hypothetical derivative method to assess hedge effectiveness for this interest rate swap.

Changes in the fair value of a hypothetically perfect swap with terms that match the critical terms of our variable rate debt are compared with the change in the fair value of the swap.

On March 16, 2023, we entered into an interest rate swap agreement to convert $ 300,000 of our 1 -month SOFR rate debt to a fixed rate of 3.7210 percent.

The combined fair value of the interest rate swap wa s a liability of $ 1,354  a t June 3, 2023 and was included in other liabilities  in the Consolidated Balance Sheets.

The swap was designated for hedge accounting treatment as a cash flow hedge.

We are applying the hypothetical derivative method to assess hedge effectiveness for this interest rate swap.

Changes in the fair value of a hypothetically perfect swap with terms that match the critical terms of our variable rate debt are compared with the change in the fair value of the swaps.

On March 16, 2023, we entered into an interest rate swap agreement to convert $ 100,000 of our 1 -month SOFR rate debt to a fixed rate of 3.8990 percent.

The combined fair value of the interest rate swap was a 

liability of $ 709  

at June 3, 2023 and was included i n other liabilities in the Consolidated Balance Sheets.

The swap was designated for hedge accounting treatment as a cash flow hedge.

We are applying the hypothetical derivative method to assess hedge effectiveness for these interest rate swaps.

2 unchanged sentences

Three Months Ended

March 4, 2023

February 26, 2022

Six Months Ended

Cross-currency swap contracts

$ ( 1,228 )  

Interest rate swap contracts

( 12,584 )  

( 1,529 )  

12,690  

Fair Value Hedges

2 unchanged sentences

These interest rate swap agreements mature on October 15, 2028.

The combined fair value of the interest rate swaps was a liabili ty of $ 49,529  a t 

March 4, 2023 , 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 liabili ty of $ 42,831 a t 

June 3, 2023 , 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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On October 20, 2022, we entered into fixed-to-fixed cross-currency interest rate swap agreements for a total notional amount of €300,000 with tranches maturing in August 2025, August 2026 and February 2027.

As of March 4, 2023, the combined fair value of the swaps was a liability of $ 54,442 a nd was included in other liabilities in the Consolidated Balance Sheets.

As of June 3, 2023 , the combined fair value of the swaps w as a liability of $ 61,584 a nd was included in other liabilities in the Consolidated Balance Sheets.

The cross-currency interest rate swaps hedge a portion of the Company’s investment in Euro denominated foreign subsidiaries.

4 unchanged sentences

The amount in accumulated other comprehensive income (loss) related to net investment hedge cross-currency swaps was a loss of $ 46,426  

as of March 4, 2023.

as of June 3, 2023 .

The amounts of pretax loss recognized in comprehensive income related to the net investment he dge was $ 7,538  

for the three months ended March 4, 2023.

As of March 4, 2023, we did not reclassify any gains or losses into earnings from net investment hedges and we do not expect to reclassify any such gain or loss into earnings within the next twelve months.

for the six months ended June 3, 2023 .

As of June 3, 2023 , we did not reclassify any gains or losses into earnings from net investment hedges and we do not expect to reclassify any such gain or loss into earnings within the next twelve months.

No amounts related to net investment hedges have been excluded from the assessment of hedge effectiveness.

4 unchanged sentences

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. 

As of March 4, 2023 , we had forward foreign currency contracts maturing between March 6, 2023  and November 21, 2023.

As of June 3, 2023 , we had forward foreign currency contracts maturing between June 5, 2023 

and May 13, 2024 .

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 (losses) recognized in other income, net related to derivative instruments not designated as hedging instruments for the 

three months ended March 4, 2023 and February 26, 2022 were  $ 7,154 a nd $ 4,237 , respectively.

six months ended June 3, 2023 and May 28, 2022 were  $ 1,276 a nd $ 5,089 , 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 March 4, 2023 , there were no significant concentrations of credit risk.

As of June 3, 2023 , there were no significant concentrations of credit risk.

Fair Value Measurements

9 unchanged sentences

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 March 4, 2023 and December 3, 2022 , 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 June 3, 2023 and December 3, 2022 , and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value.

Fair Value Measurements Using:

Marketable securities

$ 2,447  

Foreign exchange contract assets

1 unchanged sentence

Foreign exchange contract liabilities

 Interest rate swaps, fair value hedge liabilities

$ 1,956  

Interest rate swaps, cash flow hedge liabilities

Interest rate swaps, fair value hedge liabilities

42,831  

Net investment hedge liabilities

61,584  

Contingent consideration liabilities

1 unchanged sentence

Marketable securities

$ 4,013  

Foreign exchange contract assets

10,282  

Foreign exchange contract liabilities

$ 4,570  

Interest rate swaps, fair value hedge liabilities

42,542  

Net investment hedge liabilities

54,046  

Contingent consideration liabilities

The valuation of our contingent consideration liability related to the acquisitions of ZKLT and TissueSeal with a fair value of $ 1,483 and $ 500 , respectively as of 

March 4, 2023 . Adjustments to the fair value of contingent consideration are recorded to selling, general and administrative expenses in the Statement of Income. See Note 2 for further discussion regarding our acquisitions.

The valuation of our contingent consideration liability related to the acquisitions of ZKLT and TissueSeal was $ 1,095 and $ 500 , respectively, as of 

June 3, 2023 . Adjustments to the fair value of contingent consideration are recorded to selling, general and administrative expenses in the Statement of Income. See Note 2 for further discussion regarding our acquisitions.

The following table provides details of the contingent consideration liabilities: 

Balance at December 3, 2022

$ 1,977  

Mark to market adjustment

Foreign currency translation adjustment

Balance at March 4, 2023

Balance at June 3, 2023

$ 1,595  

Balances Measured at Fair Value on a Nonrecurring Basis

7 unchanged sentences

Balances Disclosed at Fair Value

Long-term debt had an estimated fair value of $ 1,714,383  and $ 1,713,257 as of March 4, 2023 and December 3, 2022 , respectively.

Long-term debt had an estimated fair value of $ 1,662,706  and $ 1,713,257 as of June 3, 2023 and December 3, 2022 , 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.

7 unchanged sentences

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 $ 5,541 and $ 5,754  as of March 4, 2023 and December 3, 2022 , respectively, for probable and reasonably estimable environmental remediation costs. Of the amount reserved, $ 2,640 and $ 2,789  as of March 4, 2023 and December 3, 2022 , 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 $ 5,530 and $ 5,754  as of June 3, 2023 and December 3, 2022 , respectively, for probable and reasonably estimable environmental remediation costs. Of the amount reserved, $ 2,640 and $ 2,789  as of June 3, 2023 and December 3, 2022 , 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.

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.

12 unchanged sentences

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

Three Months Ended

Six Months Ended

3 Years Ended

March 4, 2023

February 26, 2022

December 3, 2022

1 unchanged sentence

Settlement amounts

$ 3,495  

Insurance payments received or expected to be received

$ 1,944  

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.

16 unchanged sentences

Three Months Ended

March 4, 2023

February 26, 2022

Income (Loss)

1 unchanged sentence

Hygiene, Health and Consumable Adhesives

$ 404,486  

$ 51,592  

$ 437,889  

$ 43,267  

Engineering Adhesives

364,080  

44,400  

405,346  

42,917  

Construction Adhesives

129,673  

150,023  

11,285  

Total segment

$ 898,239  

$ 101,961  

$ 993,258  

$ 97,469  

Corporate Unallocated 1

( 11,811 )  

$ 898,239  

$ 90,150  

$ 993,258  

$ 87,514  

Six Months Ended

Income (Loss)

Hygiene, Health and Consumable Adhesives

$ 788,014  

$ 96,738  

$ 827,427  

$ 75,480  

Engineering Adhesives

697,147  

76,875  

759,323  

75,489  

Construction Adhesives

222,260  

( 3,664 )  

262,989  

15,641  

Total segment

$ 1,707,421  

$ 169,949  

$ 1,849,739  

$ 166,610  

Corporate Unallocated

( 19,533 )  

$ 1,707,421  

$ 150,416  

$ 1,849,739  

$ 144,515  

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

Six Months Ended

Operating income

$ 90,150  

$ 87,514  

$ 150,416  

$ 144,515  

Other income, net

Interest expense

( 33,131 )  

( 19,828 )  

( 66,200 )  

Interest income

Income before income taxes and income from equity method investments

$ 58,556  

$ 69,777  

$ 89,024  

$ 116,662  

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 March 4, 2023

Three Months Ended June 3, 2023

Hygiene, Health

and Consumable

Three Months Ended February 26, 2022

$ 237,325  

$ 149,239  

$ 101,642  

$ 488,206  

114,723  

119,199  

19,917  

253,839  

52,438  

95,642  

156,194  

$ 404,486  

$ 364,080  

$ 129,673  

$ 898,239  

Three Months Ended May 28, 2022

Hygiene, Health

and Consumable

Subsequent Event

On March 27, 2023, the Company approved a restructuring plan (the “Plan”) related to organizational changes and other actions to optimize operations.

In implementing the Plan, we currently expect to incur costs of approximately $ 15,000 to $ 20,000  ($ 12,400 to $ 16,400 after-tax), which includes (i) cash expenditures of approximately $ 13,800 to $ 15,000 ($ 11,100  to $ 12,100  after tax) for severance and related employee costs globally and (ii) other restructuring costs related to streamlining of processes and the payment of anticipated income taxes in certain jurisdictions related to the Plan.

The Plan will be implemented beginning in the second quarter of fiscal year 2023 and is currently expected to be completed during fiscal year 2025.

The restructuring costs will be spread across the next several fiscal quarters as the measures are implemented with the majority of the charges recognized and cash payments occurring in fiscal 2023 and 2024.

$ 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  

Six Months Ended June 3, 2023

Hygiene, Health

and Consumable

$ 460,944  

$ 282,709  

$ 172,606  

$ 916,259  

221,794  

232,559  

34,495  

488,848  

105,276  

181,879  

15,159  

302,314  

$ 788,014  

$ 697,147  

$ 222,260  

$ 1,707,421  

Six Months Ended May 28, 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  

Subsequent Events

On June 12, 2023, we completed the acquisition of XChem International LLC ("XChem") for a base purchase price of approx imately $ 12,347 .

X Chem, headquartered in Ras Al-Khaimah United Arab Emirates, is a manufacturer of adhesives, coatings and sealants for flooring, waterproofing, HVAC, and other construction-related applications.

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

On June 23, 

2023, we completed the acquisition of Adhezion Biomedical LLC (“Adhezion”) for a base purchase price of approximately $ 80,038 as well as contingent consideration up to $ 15,000 following the completion of certain performance goals and conditions.

Adhezion, headquartered in Wyomissing, Pennsylvania, is a manufacturer of cyanoacrylate-based medical adhesives and infection prevention products.

The acquisition will be included in our Hygiene, Health and Consumable Adhesives operating segment.

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