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Item 2. Management’s Discussion and Analysis

2025-06-26 compared with 2025-03-27 · 168 added, 96 removed, 202 unchanged (57% of the section changed)

1 unchanged sentence

The Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with the MD&A included in our Annual Report on Form 10-K for the year ended November 30, 2024, for important background information related to our business.

Net revenue in the first quarter of 2025 decreased 2.7 percent from the first quarter of 2024.

Net revenue increased 1.7 percent due to sales volume and 0.2 percent due to pricing but was offset by a 1.2 percent decrease due to acquisitions/divestitures and a 3.4 percent decrease due to negative currency effect compared to the first quarter of 2024.

The negative currency effect was primarily driven by a weaker Euro, Egyptian pound, Brazilian real, and Mexican peso compared to the U.S.

Gross profit margin decreased 70 basis points primarily due to lower revenue, and higher raw material and manufacturing costs.

Net revenue in the second quarter of 2025 decreased 2.1 percent from the second quarter of 2024.

The decrease was due to a 1.3 percent decrease in acquisitions/divestitures, a 1.2 percent decrease due to negative currency effects compared to the second quarter of 2024 and a 0.3 percent decrease due to sales volume, partially offset by a 0.7 percent increase due to pricing.

The negative currency effect was primarily driven by a weaker Brazilian real, Mexican peso, Egyptian pound, and Turkish Lira c ompared to the U.S.

Gross profit margin increased 110 basis points due to the impact of acquisitions/divestitures.

Net revenue in the first six months of 2025 decreased 2.4 percent from the first six months of 2024 .

The decrease was due to a 2.2 percent decrease due to negative currency effects compared to the first six months of 2024 and a 1.2 percent decrease in acquisitions/divestitures, partially offset by a 0.5 percent increase due to sales volume and a 0.5 increase due to pricing.

The negative currency effect was primarily driven by a weaker Egyptian pound, Brazilian real, Euro, Mexican peso, Turkish lira, and Chinese renminbi compared to the U.S.

Gross profit margin increased 20 basis points due to the impact of acquisitions/divestitures.

Net income attributable to H.B.

Fuller in the first quarter of 2025 was $13.2 million compared to $31.0 million in the first quarter of 2024.

Diluted earnings per share for the first quarter of 2025 was $0.24 per share compared to $0.55 per share for the first quarter of 2024.

Fuller in the second quarter of 2025 was $41.8 million compared to $51.3 million in the second quarter of 2024 .

Diluted earnings per share for the second quarter of 2025 was $0.76 per share compared to $0.91 per share for the second quarter of 2024 .

Net income attributable to H.B.

Fuller in the first six months of 2025 was $55.1 million compared to $82.3 million in the first six months of 2024 .

Diluted earnings per share for the first six months of 2025 was $0.99 per share compared to $1.45 per share for the first six months of 2024 .

Restructuring Plans

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In implementing the Plans, the Company currently expects to incur costs of approximately $70.0 million to $75.0 million ($47.8 million to $51.2 million after-tax), which include (i) cash expenditures of approximately $41.0 million to $42.0 million ($28.0 million to $28.7 million after tax) for severance and related employee costs globally and (ii) other restructuring costs related to the streamlining of processes and the payment of anticipated income taxes in certain jurisdictions related to the Plans.

We have incurred costs of $61.7 million under the Plans as of March 1, 2025.

We have incurred costs of $66.3 million under the Plans as of May 31, 2025.

The Plans were implemented in the second quarter of fiscal year 2023 and are currently expected to be completed during fiscal year 2026.

The restructuring costs will be spread across the next several fiscal quarters as the measures are implemented.

The remaining restructuring costs will be spread across the next several fiscal quarters as the measures are implemented.

Results of Operations

Three Months Ended

Six Months Ended

($ in millions)

We review variances in net revenue in terms of changes related to sales volume and product pricing (referred to as organic revenue growth), business acquisitions and divestitures (“M&A”) and changes in foreign currency exchange rates.

The following table shows the net revenue variance analysis for the first quarter of 2025 compared to the first quarter of 2024:

The following table shows the net revenue variance analysis for the second quarter and first six months of 2025 compared to the second quarter and first six months of 2024:

Three Months Ended

March 1, 2025 vs.

March 2, 2024

Six Months Ended

May 31, 2025 vs.

Organic growth

Organic revenue increased 1.9 percent in the first quarter of 2025 compared to the first quarter of 2024 and consisted of a 4.2 percent increase in Hygiene, Health and Consumable Adhesives and a 2.2 percent increase in Building Adhesive Solutions, partially offset by a 1.9 percent decrease in Engineering Adhesives.

The increase was driven by a 1.7 percent increase in sales volume and a 0.2 percent increase in product pricing.

The 1.2 percent decrease from M&A was due to the sale of our North American Flooring business ("NA Flooring"), discussed further in Operating Segment Results below, net of our acquisitions that occurred in the last twelve months.

The negative 3.4 percent foreign currency impact was primarily driven by a weaker Euro, Egyptian pound, Brazilian real and Mexican peso compared to the U.S.

Organic revenue increased 0.4 percent in the second quarter of 2025 compared to the second quarter of 2024 driven by a 0.7 percent increase in product pricing, partially offset by a 0.3 percent decrease in sales volume.

The 1.3 percent decrease from M&A was due to the sale of our North American Flooring business ( “ NA Flooring ” ), discussed further in Operating Segment Results below, net of acquisitions that occurred in the last twelve months.

The negative 1.2 percent foreign currency impact was primarily driven by a weaker Brazilian real, Mexican peso, Egyptian pound, and Turkish lira compared to the U.S.

Organic revenue increased 1.0 percent in the first six months of 2025 compared to the first six months of 2024 driven by a 0.5 percent increase in sales volume and a 0.5 percent increase in product pricing.

The 1.2 percent decrease from M&A was due to the sale of NA Flooring, net of acquisitions that occurred in the last twelve months.

The negative 2.2 percent foreign currency impact was primarily driven by a weaker Egyptian pound, Brazilian real, Euro, and Mexican peso, Turkish lira, and Chinese renminbi compared to the U.S.

Cost of sales:

Three Months Ended

Six Months Ended

($ in millions)

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Percent of net revenue

Cost of sales as a percentage of net revenue in the first quarter of 2025 compared to the first quarter of 2024 increased 70 basis points.

Raw material cost as a percentage of net revenue increased 50 basis points in 2025 compared to 2024 and other manufacturing cost as a percentage of net revenue increased 20 basis points in 2025 compared to 2024.

Cost of sales as a percentage of net revenue in the second quarter of 2025 compared to the second quarter of 2024 decreased 120 basis points.

Raw material cost as a percentage of net revenue decreased 70 basis points in 2025 compared to 2024 due to the impact of acquisitions/divestitures and other manufacturing costs as a percentage of net revenue decreased 50 basis points in 2025 compared to 2024 .

Cost of sales as a percentage of net revenue in the first six months of 2025 compared to the first six months of 2024 decreased 20 basis points.

Raw material cost as a percentage of net revenue decre ased 10 basis points in 2025 compared to 2024 and other manufacturing costs as a percentage of net revenue decreased 10 basis points in 2025 compared to 2024 .

Gross profit:

Three Months Ended

Six Months Ended

($ in millions)

Percent of net revenue

Gross profit in the first quarter of 2025 decreased 5.1 percent and gross profit margin decreased 70 basis points compared to the first quarter of 2024.

The decrease in gross profit margin was due to higher raw material and other manufacturing costs .

Gross profit in the second quarter of 2025 increased 1.5 percent and gross profit margin increased 110 basis points compared to the second quarter of 2024 .

The increase in gross profit margin was due to the impact of acquisitions/divestitures.

Gross profit in the first six months of 2025 decreased 1.5 percent and gross profit margin increased 20 basis points compared to the first six months of 2024 .

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

Three Months Ended

Six Months Ended

($ in millions)

Percent of net revenue

SG&A expenses for the first quarter of 2025 compared to the first quarter of 2024 increased 160 basis points as a percentage of net reve nue.

The increase was due to the impact of acquisitions, net of the sale of NA Flooring, and higher compensation costs.

SG&A expenses for the second quarter of 2025 compared to the second quarter of 2024 increased 90 basis points as a percentage of net reve nue.

The increase was due to the impact of acquisitions/divestitures.

SG&A expenses for the first six months of 2025 compared to the first six months of 2024 increased 130 basis points as a percentage of net reve nue.

The increase was due to the impact of acquisitions/divestitures and higher compensation costs.

Other income, net:

Three Months Ended

Six Months Ended

($ in millions)

Other income, net

Other income, net in the first quarter of 2025 included $5.7 million of net defined benefit pension benefits and $0.6 million of currency transaction gains, partially offset by a $1.5 million loss on the sale of our North American Flooring business ("NA Flooring") and $1.6 million of other expense.

Other income, net in the first quarter of 2024 included $4.0 million of net defined benefit pension benefits, partially offset by $2.1 million of currency transaction losses and a $0.4 million loss from the write-off a cost method investment.

Other income, net in the second quarter of 2025 included $5.7 million of net defined benefit pension benefits and $1.4 million of currency transaction gains.

Other income, net in the second quarter of 2024 included $4.0 million of net defined benefit pension benefits, partially offset by $0.3 million of currency transaction losses and $0.1 million of other expense.

Other income, net in the first six months of 2025 included $11.4 million of net defined benefit pension benefits and $2.0 million of currency transaction gains, partially offset by a $1.5 million loss on the sale of our NA Flooring business and $1.6 million of other expense.

Other income, net in the first six months of 2024 included $7.9 million of net defined benefit pension benefits, partially offset by $2.3 million of currency transaction losses, a $0.4 million loss from the write-off of a cost method investment and $0.1 million of other expense.

Interest expense:

Three Months Ended

Six Months Ended

($ in millions)

Interest expense

Interest expense in the first quarter of 2025 was $32.0 million compared to $31.9 million in the first quarter of 2024 .

Interest expense in the second quarter of 2025 was $34.9 million compared to $32.3 million in the second quarter of 2024 due to higher debt levels.

Interest expense in the first six months of 2025 was $66.9 million compared to $64.2 million in the first six months of 2024 due to higher debt levels.

Interest income:

Three Months Ended

Six Months Ended

($ in millions)

Interest income

Interest income in the first quarter of 2025 and 2024 was $1.1 million and $1.3 million, respectively, consisting primarily of interest on cross-currency swap activity and other miscellaneous interest income.

Interest income in the second quarter of 2025 and 2024 was $0.9 million and $1.2 million, respectively, consisting primarily of interest on cross-currency swap activity and other miscellaneous interest income.

Interest income in the first six months of 2025 and 2024 was $2.0 million and $2.5 million, respectively, consisting primarily of interest on cross-currency swap activity and other miscellaneous interest income.

Income taxes:

Three Months Ended

Six Months Ended

($ in millions)

Effective tax rate

Income tax expense of $5.9 million in the first quarter of 2025 includes $0.9 million of discrete tax expense.

Income tax expense of $32.7 million in the second quarter of 2025 includes $14.0 million of discrete tax expense.

Excluding the discrete tax expense, the overall effective tax rate was 25.7 percent.

The discrete tax expense relates to various U.S.

The discrete tax expense relates to the impact of withholding tax recorded on earnings that are no longer permanently reinvested as well as other various U.S.

and foreign tax matters.

Income tax expense of $7.8 million in the first quarter of 2024 includes $2.5 million of discrete tax benefit.

Excluding the discrete tax benefit, the overall effective tax rate was 27.4 percent.

The discrete tax benefit related to various foreign tax matters, as well an excess tax benefit related to U.S.

Income tax expense of $22.4 million in the second quarter of 2024 includes $1.3 million of discrete tax expense.

Excluding the discrete tax expense, the overall effective tax rate was 28.9 percent.

The discrete tax expense related to various foreign tax matters, offset by an excess tax benefit related to U.S.

stock compensation.

Income tax expense of $38.7 million in the first six months of 2025 includes $15.0 million of discrete tax expense.

Excluding the discrete tax expense, the overall effective tax rate was 25.8 percent.

The discrete tax expense relates to the impact of withholding tax recorded on earnings that are no longer permanently reinvested as well as other various U.S.

and foreign tax matters.

Income tax expense of $30.2 million in the first six months of 2024 includes $1.2 million of discrete tax benefit.

Excluding the discrete tax benefit, the overall effective tax rate was 28.4 percent.

The discrete tax benefit related to an excess tax benefit related to U.S.

stock compensation offset by various foreign tax matters.

Income from equity method investments:

Three Months Ended

Six Months Ended

($ in millions)

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The income from equity method investments relates to our 50 percent ownership of the Sekisui-Fuller joint venture in Japan.

The lower income for the first quarter of 2025 compared to the first quarter of 2024 is due to lower net income in our joint venture during the quarter compared to the prior year and the impact of the weakening of the Japanese yen compared to the U.S.

The higher income for the second quarter of 2025 compared to the second quarter of 2024 is due to higher net income in our joint venture during the quarter compared to the prior year and the impact of the strengthening of the Japanese yen compared to the U.S.

The income from equity method investments relates to our 50 percent ownership of the Sekisui-Fuller joint venture in Japan.

The higher income for the first six months of 2025 compared to the first six months of 2024 is due to higher net income in our joint venture compared to the prior year and the impact of the strengthening of the Japanese yen compared to the U.S.

Net income attributable to H.B.

Three Months Ended

Six Months Ended

($ in millions)

2 unchanged sentences

The net income attributable to H.B.

Fuller for the first quarter of 2025 was $13.2 million compared to $31.0 million for the first quarter of 2024.

The diluted earnings per share for the first quarter of 2025 was $0.24 per share as compared to $0.55 per share for the first quarter of 2024.

Fuller in the second quarter of 2025 was $41.8 million compared to $51.3 million in the second quarter of 2024 .

The diluted earnings per share in the second quarter of 2025 was $0.76 per share as compared to $0.91 per share in the second quarter of 2024 .

The net income attributable to H.B.

Fuller in the first six months of 2025 was $55.1 million compared to $82.3 million in the first six months of 2024 .

The diluted earnings per share in the first six months of 2025 was $0.99 per share as compared to $1.45 per share in the first six months of 2024 .

Operating Segment Results

As of November 30, 2024, our three operating segments consisted of Hygiene, Health and Consumable Adhesives, Engineering Adhesives and Construction Adhesives.

As of the beginning of fiscal 2025, we reorganized our operating segments by selling our NA Flooring, previously part of the Construction Adhesives operating segment, and combining our Insulated Glass, Woodworking and Composite businesses, previously part of the Engineering Adhesives operating segment, with Construction Adhesives Roofing and Building Envelope and Infrastructure businesses to form the newly named Building Adhesive Solutions operating segment.

As of the beginning of fiscal 2025, we reorganized our operating segments by selling our NA Flooring business, previously part of the Construction Adhesives operating segment, and combining our Insulated Glass, Woodworking and Composite businesses, previously part of the Engineering Adhesives operating segment, with Construction Adhesives Roofing and Building Envelope and Infrastructure businesses to form the newly named Building Adhesive Solutions operating segment.

All financial results related to NA Flooring have been moved to our Corporate Unallocated segment.

5 unchanged sentences

Three Months Ended

March 1, 2025

March 2, 2024

Six Months Ended

($ in millions)

6 unchanged sentences

Three Months Ended

March 1, 2025

March 2, 2024

Six Months Ended

($ in millions)

6 unchanged sentences

Three Months Ended

Six Months Ended

($ in millions)

3 unchanged sentences

Three Months Ended

March 1, 2025 vs.

March 2, 2024

Six Months Ended

May 31, 2025 vs.

Organic growth

Net revenue was flat in the first quarter of 2025 compared to the first quarter of 2024.

Organic growth increased due to an increase in both sales volume and in product pricing.

The negative currency effect was due to a weaker Egyptian pound, Brazilian real, Euro and Mexican peso compared to the U.S.

As a percentage of net revenue, raw material costs increased 330 basis points due to higher raw material costs.

Net revenue increased 1.1 percent in the second quarter of 2025 compared to the second quarter of 2024 .

Organic growth increased due to an increase in both product pricing and sales volume.

The 1.4 percent increase in net revenue from M&A was due to the acquisitions of GEM and Medifill in the first quarter of 2025.

The negative currency effect was due to a weaker Brazilian real, Mexican peso, and Egyptian pound compared to the U.S.

As a percentage of net revenue, raw material costs increased 100 basis points due to higher raw material costs, partially offset by the impact of acquisitions.

Other manufacturing costs as a percentage of net revenue was flat compared to the prior year.

SG&A expenses as a percentage of net revenue increased 80 basis points due to higher compensation costs.

Segment operating income decreased 12.9 percent and segment operating margin as a percentage of net revenue decreased 180 basis points compared to the second quarter of 2024 .

Net revenue increased 0.6 percent in the first six months of 2025 compared to the first six months of 2024 .

Organic growth increased due to an increase in product pricing and sales volume.

The 1.2 percent increase in net revenue from M&A was due to the acquisitions of GEM and Medifill in the first quarter of 2025.

The negative currency effect was due to a weaker Egyptian pound, Brazilian real, Mexican peso, and Euro compared to the U.S.

As a percentage of net revenue, raw material costs increased 210 basis points due to higher raw material costs, partially offset by the impact of acquisitions.

Other manufacturing costs as a percentage of net revenue increased 30 basis points due to higher compensation and delivery costs.

SG&A expenses as a percentage of net revenue increased 80 basis points due to higher compensation costs.

Segment operating income decreased 36.9 percent and segment operating margin as a percentage of net revenue decreased 480 basis points compared to the first quarter of 2024 .

Segment operating income decreased 24.5 percent and segment operating margin as a percentage of net revenue decreased 320 basis points compared to the first six months of 2024 .

Engineering Adhesives

Three Months Ended

Six Months Ended

($ in millions)

3 unchanged sentences

Three Months Ended

March 1, 2025 vs.

March 2, 2024

Six Months Ended

May 31, 2025 vs.

Organic growth

Net revenue increased 4.7 percent in the first quarter of 2025 compared to the first quarter of 2024 .

Organic growth decreased due to a decrease in both sales volume and in product pricing.

The 8.7 percent increase in net revenue from M&A was due to the acquisition of ND Industries in the second quarter of 2024.

The negative currency effect was due to a weaker Euro and Chinese renminbi co mpared to the U.S.

Net revenue increased 7.3 percent in the second quarter of 2025 compared to the second quarter of 2024 .

Organic growth decreased due to a decrease in sales volume.

The 8.4 percent increase in net revenue from M&A was due to the acquisition of ND Industries.

The negative currency effect was due to a weaker Mexican peso and Chinese renminbi co mpared to the U.S.

A s a percentage of net revenue, raw material costs decreased 330 basis points primarily due to the impact of acquisitions.

Other manufacturing costs as a percentage of net revenue increased 70 basis points due to the impact of lower sales volume offset by the impact of acquisitions.

SG&A expenses as a percentage of net revenue increased 70 basis points primarily due to higher compensation.

Segment operating income increased 20.3 percent and segment operating margin increased 190 basis points compared to the second quarter of 2024 .

Net revenue increased 6.1 percent in the first six months of 2025 compared to the first six months of 2024 .

Organic growth decreased due to a decrease in sales volume.

The 8.5 percent increase in net revenue from M&A was due to the acquisition of ND Industries.

The negative currency effect was due to a weaker Chinese renminbi and Euro co mpared to the U.S.

A s a percentage of net revenue, raw material costs decreased 350 basis points due to lower raw material costs and the impact of acquisitions.

Other manufacturing costs as a percentage of net revenue increased 110 basis points due to the impact of lower product pricing and sales volume as well as the impact of acquisitions.

Other manufacturing costs as a percentage of net revenue increased 90 basis points due to the impact of lower sales volume offset by acquisitions.

SG&A expenses as a percentage of net revenue increased 140 basis points primarily due to higher compensation.

Segment operating income increased 8.5 percent and segment operating margin increased 40 basis points compared to the first quarter of 2024 .

Segment operating income increased 15.7 percent and segment operating margin increased 120 basis points compared to the first six months of 2024 .

Building Adhesive Solutions

Three Months Ended

Six Months Ended

($ in millions)

3 unchanged sentences

Three Months Ended

March 1, 2025 vs.

March 2, 2024

Six Months Ended

May 31, 2025 vs.

Organic growth

Net revenue increased 2.2 percent in the first quarter of 2025 compared to the first quarter of 2024.

Organic growth increased due to an increase in sales volume, partially offset by a decrease in product pricing.

Net revenue increased 0.8 percent in the second quarter of 2025 compared to the second quarter of 2024 .

Organic growth decreased due to a decrease in sales volume, partially offset by an increase in product pricing.

The 2.2 percent increase in net revenue from M&A was due to the acquisition of HS Butyl in the third quarter of 2024.

The negative currency effect was due to a weaker Turkish lira and Australian dollar, partially offset by a stronger British Pound sterling co mpared to the U.S.

As a percentage of net revenue, raw material costs decreased 60 basis points due to lower raw materials costs.

O ther manufacturing costs as a percentage of net revenue were flat.

SG&A expenses as a percentage of net revenue increased 60 basis points due to higher compensation.

S egment operating income increased 0.5 percent and segment operating margin was flat.

Net revenue increased 1.4 percent in the first six months of 2025 compared to the first six months of 2024 .

Organic growth increased due to an increase in sales volume.

T he 2.3 percent increase in net revenue from M&A was due to the acquisition of HS Butyl in the third quarter of 2024.

The negative currency effect was due to a weaker Euro co mpared to the U.S.

As a percentage of net revenue, raw material costs decreased 20 basis points.

O ther manufacturing costs as a percentage of net revenue was flat compared to the first quarter of 2024.

As a percentage of net revenue, raw material costs decreased 50 basis points due to lower raw material costs.

O ther manufacturing costs as a percentage of net revenue was flat.

SG&A expenses as a percentage of net revenue increased 70 basis points due to higher compensation.

S egment operating income decreased 8.3 percent and segment operating margin decreased 40 basis points compared to the first quarter of 2024 .

S egment operating income decreased 1.4 percent and segment operating margin decreased 20 basis points compared to the first six months of 2024 .

Corporate Unallocated

Three Months Ended

Six Months Ended

($ in millions)

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As a result of the change in operating segments and the sale of our NA Flooring business, we have retrospectively moved the results of our Flooring business to Corporate Unallocated for prior periods.

Segment operating loss in the first quarter of 2025 decreased 34.1 percent compared to the first quarter of 2024 due to due to the inclusion of the NA Flooring business results in 2024.

Segment operating loss in the second quarter of 2025 increased 21.6 percent compared to the second quarter of 2024 due to the inclusion of the NA Flooring business results in 2024.

Segment operating loss in the first six months of 2025 increased 29.7 percent compared to the first six months of 2024 due to the inclusion of the NA Flooring business results in 2024.

Financial Condition, Liquidity and Capital Resources

Total cash and cash equivalents as of March 1, 2025 were $105.7 million compared to $169.4 million as of November 30, 2024 and $165.2 million as of March 2, 2024.

The majority of the $105.7 million in cash and cash equivalents as of March 1, 2025 was held outside the United States.

Total long and short-term debt was $2,180.0 million as of March 1, 2025, $2,010.6 million as of November 30, 2024 and $1,830.8 million as of March 2, 2024.

The total debt to total capital ratio as measured by total debt divided by total debt plus total stockholders’ equity was 55.1 percent as of March 1, 2025 as compared to 50.8 percent as of November 30, 2024 and 50.9 percent as of March 2, 2024.

Total cash and cash equivalents as of May 31, 2025 were $96.8 million compared to $169.4 million as of November 30, 2024 and $114.8 million as of June 1, 2024.

The majority of the $96.8 million in cash and cash equivalents as of May 31, 2025 was held outside the United States.

Total long and short-term debt was $2,112.4 million as of May 31, 2025, $2,010.6 million as of November 30, 2024 and $2,024.9 million as of June 1, 2024.

The total debt to total capital ratio as measured by total debt divided by total debt plus total stockholders’ equity was 53.0 percent as of May 31, 2025 as compared to 50.8 percent as of November 30, 2024 and 53.0 percent as of June 1, 2024.

We believe that cash flows from operating activities will be adequate to meet our short-term and long-term liquidity and capital expenditure needs.

7 unchanged sentences

Our credit agreements include restrictive covenants that, if not met, could lead to a renegotiation of our credit lines and a significant increase in our cost of financing.

As of March 1, 2025, we were in compliance with all covenants of our contractual obligations as shown in the following table:

As of May 31, 2025, we were in compliance with all covenants of our contractual obligations as shown in the following table:

Debt Instrument

Result as of March 1, 2025

Result as of May 31, 2025

Secured Total Indebtedness / TTM 1 EBITDA

31 unchanged sentences

Reconciliation of "Net cash provided by operating activities" to free cash flow

Three Months Ended

Six Months Ended

($ in millions)

March 1, 2025

March 2, 2024

Net cash provided by operating activities

3 unchanged sentences

Cash Flows from Operating Activities:

Three Months Ended

Six Months Ended

($ in millions)

Net cash provided by operating activities

Net income including non-controlling interest was $13.3 million in the first three months of 2025 compared to $31.0 million in the first three months of 2024.

Depreciation and amortization expense totaled $42.6 million in the first three months of 2025 compared to $43.5 million in the first three months of 2024.

Deferred income taxes was a source of cash of $5.8 million in the first three months of 2025 compared to a use of cash of $5.7 million in the first three months of 2024.

Net income including non-controlling interest was $55.1 million in the first six months of 2025 compared to $82.3 million in the first six months of 2024.

Depreciation and amortization expense totaled $87.3 million in the first six months of 2025 compared to $84.7 million in the first six months of 2024.

Deferred income taxes was a use of cash of $14.1 million in the first six months of 2025 compared to $24.1 million in the first six months of 2024.

Accrued compensation was a use of cash of $23.5 million in 2025 compared to $16.4 million in 2024.

Other assets was a use of cash of $0.3 million in the first three months of 2025 compared to $9.1 million in the first three months of 2024.

Other liabilities was a use of cash of $0.3 million in the first three months of 2025 compared to $0.4 million in the first three months of 2024.

Other assets was a use of cash of $4.1 million in the first six months of 2025 compared to $22.3 million in the first six months of 2024.

Other liabilities was a source of cash of $24.8 million in the first six months of 2025 compared to a use of cash of $1.8 million in the first six months of 2024.

Changes in net working capital (trade receivables, inventory and trade payables) accounted for a use of cash of $57.5 million compared to a source of cash of $4.9 million last year.

The table below provides the cash flow impact due to changes in the components of net working capital and an assessment of each of the components:

Three Months Ended

Six Months Ended

($ in millions)

2 unchanged sentences

Total cash flow impact

Trade receivables, net – Trade receivables, net was a source of cash of $13.9 million and $56.9 million in the first three months of 2025 and 2024, respectively.

The lower source of cash in 2025 compared to 2024 was due to less cash collected on trade receivables in the current year compared to the prior year.

The DSO were 61 days at March 1, 2025 and 59 days at March 2, 2024.

Inventory – Inventory was a use of cash of $27.1 million and $50.2 million in the first three months of 2025 and 2024, respectively.

Trade receivables, net – Trade receivables, net was a use of cash of $28.9 million and a source of cash of $22.6 million in the first six months of 2025 and 2024, respectively.

The use of cash in 2025 compared to source of cash in 2024 was due to less cash collected on trade receivables in the current year compared to the prior year.

The DSO were 59 days at May 31, 2025 and 57 days at June 1, 2024.

Inventory – Inventory was a use of cash of $40.2 million and $56.5 million in the first six months of 2025 and 2024, respectively.

The lower use of cash in 2025 compared to 2024 was due to lower inventory purchases in 2025 compared to 2024.

Inventory days on hand were 79 days as of March 1, 2025 and 82 days as of March 2, 2024.

Trade payables – Trade payables was a use of cash of $14.3 million and a source of cash of $27.6 million in the first three months of 2025 and 2024, respectively.

The use of cash in 2025 compared to source of cash in 2024 reflects higher payments on trade payables in the current year compared to the prior year.

Days payable outstanding were 73 days as of March 1, 2025 and March 2, 2024.

Inventory days on hand were 77 days as of May 31, 2025 and 74 days as of June 1, 2024.

Trade payables – Trade payables was a source of cash of $11.6 million and $38.8 million in the first six months of 2025 and 2024, respectively.

The lower source of cash in 2025 compared to 2024 reflects higher payments on trade payables in the current year compared to the prior year.

Days payable outstanding were 72 days as of May 31, 2025 and 68 days as of June 1, 2024.

Cash Flows from Investing Activities:

Three Months Ended

Six Months Ended

($ in millions)

Net cash used in investing activities

Purchases of property, plant and equipment were $33.0 million during the first three months of 2025 compared to $43.3 million for the same period of 2024 .

Purchases of property, plant and equipment were $64.5 million during the first six months of 2025 compared to $90.2 million for the same period of 2024 .

This difference reflects the timing of capital projects and expenditures related to growth initiatives.

During the first three months of 2025, we paid $162.0 million of cash for business acquisitions.

Additionally, we received $75.8 million in cash related to the sale of NA Flooring.

During the first six months of 2025, we paid $162.0 million of cash for business acquisitions.

Additionally, we received $75.8 million in cash related to the sale of our NA Flooring business.

During the first six months of 2024, we paid $254.3 million of cash for business acquisitions.

Cash Flows from Financing Activities:

Three Months Ended

Six Months Ended

($ in millions)

Net cash (used in) provided by financing activities

In the first three months of 2025 , borrowings on our revolving credit facility were $526.3 million and repayments on our revolving credit facility and our long-term debt totaled $359.5 million.

Net cash provided by financing activities

In the first six months of 2025 , borrowings on our revolving credit facility were $784.9 million and repayments on our revolving credit facility and our long-term debt totaled $687.8 million.

These borrowings are for general working capital purposes and permitted acquisitions.

Borrowings on our revolving credit facility were $195.0 and repayments on our revolving credit facility and our long-term debt totaled $203.3 million in the first three months of 2024 .

Net payments of notes payable were a use of cash of $0.2 million in the first three months of 2025 compared to $0.3 million in the same period of 2024 .

Cash dividends paid were $12.2 million in the first three months of 2025 compared to $11.2 million in the same period of 2024 .

Repurchases of common stock were $44.4 million in the first three months of 2025 compared to $6.2 million in the same period of 2024 .

Borrowings on our revolving credit facility were $1,497.0 and repayments on our revolving credit facility and our long-term debt totaled $1,305.5 million in the first six months of 2024 .

Net payments of notes payable were a use of cash of $0.6 million in the first six months of 2025 compared to $0.4 million in the same period of 2024 .

Cash dividends paid were $24.9 million in the first six months of 2025 compared to $23.3 million in the same period of 2024 .

Repurchases of common stock were $60.7 million in the first six months of 2025 compared to $21.8 million in the same period of 2024 .

Forward-Looking Statements and Risk Factors

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What changed 10-Q

Item 2. Management’s Discussion and Analysis