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Item 2. Management’s Discussion and Analysis

2025-09-25 compared with 2025-06-26 · 183 added, 160 removed, 210 unchanged (62% 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 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 revenue in the third quarter of 2025 decreased 2.8 percent from the third quarter of 2024.

The decrease was due to a 2.9 percent decrease in acquisitions/divestitures, and a 1.9 percent decrease due to sales volume, partially offset by a 1.0 percent increase due to positive currency effects compared to the third quarter of 2024 and a 1.0 percent increase due to pricing.

The positive currency effect was primarily driven by a stronger Euro, British pound, and Egyptian pound, partially offset by a weaker T urkish lira c ompared to the U.S.

Gross profit margin increased 200 basis points primarily due to the higher product pricing, lower distribution costs, and the impact of acquisitions/divestitures.

Net revenue in the first nine months of 2025 decreased 2.5 percent from the first nine months of 2024 .

The decrease was due to a 1.8 percent decrease in acquisitions/divestitures, a 1.1 percent decrease due to negative currency effects compared to the first nine months of 2024 and a 0.2 percent decrease due to sales volume, partially offset by a 0.6 increase due to pricing.

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

Gross profit margin increased 90 basis points due to higher pricing and the impact of acquisitions/divestitures.

Net income attributable to H.B.

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 .

Fuller in the third quarter of 2025 was $67.2 million compared to $55.4 million in the third quarter of 2024 .

Diluted earnings per share for the third quarter of 2025 was $1.22 per share compared to $0.98 per share for the third 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 .

Fuller in the first nine months of 2025 was $122.2 million compared to $137.6 million in the first nine months of 2024 .

Diluted earnings per share for the first nine months of 2025 was $2.21 per share compared to $2.43 per share for the first nine 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 $66.3 million under the Plans as of May 31, 2025.

We have incurred costs of $69.7 million under the Plans as of August 30, 2025.

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

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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 second quarter and first six months of 2025 compared to the second quarter and first six months of 2024:

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

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August 31, 2024

Organic growth

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.

Organic revenue decreased 0.9 percent in the third quarter of 2025 compared to the third quarter of 2024 driven by a 1.9 percent decrease in sales volume, partially offset by a 1.0 percent increase in product pricing .

The 2.9 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.

The positive 1.0 percent foreign currency impact was primarily driven by a stronger Euro, British pound, and Egyptian pound, partially offset by a weaker T urkish lira c ompared to the U.S.

Organic revenue increased 0.4 percent in the first nine months of 2025 compared to the first nine months of 2024 driven by a 0.6 percent increase in product pricing, partially offset by a 0.2 percent decrease in sales volume.

T he 1.8 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 1.1 percent foreign currency impact was primarily driven by a weaker Brazilian real, Egyptian pound, Mexican peso and Turkish lira, partially offset by a stronger Euro compared to the U.S.

Cost of sales:

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Percent of net revenue

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 .

Cost of sales as a percentage of net revenue in the third quarter of 2025 compared to the third quarter of 2024 decreased 200 basis points.

Raw material cost as a percentage of net revenue decreased 130 basis points in 2025 compared to 2024 primarily due to higher product pricing and the impact of acquisitions/divestitures.

Other manufacturing costs as a percentage of net revenue decreased 70 basis points in 2025 compared to 2024 due to lower manufacturing and distribution costs, and the impact of acquisitions/divestitures.

Cost of sales as a percentage of net revenue in the first nine months of 2025 compared to the first nine months of 2024 decreased 90 basis points.

Raw material cost as a percentage of net revenue decre ased 50 basis points in 2025 compared to 2024 .

Other manufacturing costs as a percentage of net revenue decreased 40 basis points in 2025 compared to 2024 .

Gross profit:

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Percent of net revenue

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 .

Gross profit in the third quarter of 2025 increased 3.4 percent and gross profit margin increased 200 basis points compared to the third quarter of 2024 .

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

Gross profit in the first nine months of 2025 increased 0.2 percent and gross profit margin increased 90 basis points compared to the first nine months of 2024 .

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

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

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Percent of net revenue

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.

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

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

SG&A expenses for the first nine months of 2025 compared to the first nine months of 2024 increased 110 basis points as a percentage of net reve nue.

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

Other income, net:

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Other income, net

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.

Other income, net in the third quarter of 2025 included $5.7 million of net defined benefit pension benefits and $0.1 million of other income, partially offset by a $0.5 million of currency transaction losses.

Other income, net in the third quarter of 2024 included $4.0 million of net defined benefit pension benefits, and $0.3 million of currency transaction gains, partially offset by a $2.0 million loss on equity investment and $0.2 million of other expense.

Other income, net in the first nine months of 2025 included $17.1 million of net defined benefit pension benefits and $1.5 million of currency transaction gains, partially offset by a $1.5 million loss on the sale of our NA Flooring business and $1.4 million of other expense.

Other income, net in the first nine months of 2024 included $11.9 million of net defined benefit pension benefits, partially offset by $2.0 million of currency transaction losses, a $2.0 million loss on equity investment and $0.6 million of other expense.

Interest expense:

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Interest expense

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 expense in the third quarter of 2025 was $33.6 million compared to $35.3 million in the third quarter of 2024 due to lower interest rates partially offset by higher debt levels.

Interest expense in the first nine months of 2025 was $100.5 million compared to $99.5 million in the first nine months of 2024 due to higher debt levels.

Interest income:

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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.

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

Interest income in the first nine months of 2025 and 2024 was $3.1 million and $3.6 million, respectively, consisting primarily of interest on cross-currency swap activity and other miscellaneous interest income.

Income taxes:

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Effective tax rate

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

Income tax expense of $16.5 million in the third quarter of 2025 includes $3.7 million of discrete tax benefit.

Excluding the discrete tax benefit, the overall effective tax rate was 24.4 percent.

The discrete tax benefit relates to various U.S.

and foreign tax matters.

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.

Income tax expense of $18.3 million in the third quarter of 2024 includes $2.9 million of discrete tax benefit.

Excluding the discrete tax benefit, the overall effective tax rate was 29.3 percent.

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

stock compensation, as well as other various U.S.

and foreign tax matters.

Income tax expense of $55.2 million in the first nine months of 2025 includes $11.2 million of discrete tax expense.

Excluding the discrete tax expense, the overall effective tax rate was 25.2 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.

The discrete tax expense relates to the impact of withholding tax recorded on earnings that are no longer permanently reinvested, offset by v arious 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.

Income tax expense of $48.5 million in the first nine months of 2024 includes $4.1 million of discrete tax benefit.

Excluding the discrete tax benefit, the overall effective tax rate was 28.7 percent.

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

stock compensation offset by various foreign tax matters.

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

stock compensation, as well as other various U.S.

and foreign tax matters.

Income from equity method investments:

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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 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 lower income for the third quarter of 2025 compared to the third quarter of 2024 is due to lower net income in our joint venture during the quarter compared to the prior year partially offset by 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.

The lower income for the first nine months of 2025 compared to the first nine months of 2024 is due to lower net income in our joint venture compared to the prior year partially offset by the strengthening of the Japanese yen compared to the U.S.

Net income attributable to H.B.

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The net income attributable to H.B.

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 .

Fuller in the third quarter of 2025 was $67.2 million compared to $55.4 million in the third quarter of 2024 .

The diluted earnings per share in the third quarter of 2025 was $1.22 per share as compared to $0.98 per share in the third 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 .

Fuller in the first nine months of 2025 was $122.2 million compared to $137.6 million in the first nine months of 2024 .

The diluted earnings per share in the first nine months of 2025 was $2.21 per share as compared to $2.43 per share in the first nine months of 2024 .

Operating Segment Results

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August 31, 2024

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August 31, 2024

Organic growth

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.

Net revenue decreased 1.0 percent in the third quarter of 2025 compared to the third quarter of 2024 .

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

The 1.5 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 positive currency effect was due to a stronger Euro and Egyptian pound, partially offset by a weaker Turkish lira compared to the U.S.

As a percentage of net revenue, raw material costs decreased 90 basis points due to higher product pricing and the impact of acquisitions.

Other manufacturing costs as a percentage of net revenue decreased 60 basis points compared to the prior year due to higher product pricing and the impact of acquisitions.

SG&A expenses as a percentage of net revenue increased 200 basis points due to higher compensation costs and the impact of acquisitions.

Segment operating income decreased 4.3 percent and segment operating margin as a percentage of net revenue decreased 50 basis points compared to the third quarter of 2024 .

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

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

The 1.3 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 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 .

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

As a percentage of net revenue, raw material costs increased 110 basis points due to higher raw material costs partially offset by higher product pricing and the impact of acquisitions.

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

SG&A expenses as a percentage of net revenue increased 120 basis points due to higher compensation costs and the impact of acquisitions.

Segment operating income decreased 17.9 percent and segment operating margin as a percentage of net revenue decreased 230 basis points compared to the first nine months of 2024 .

Engineering Adhesives

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August 31, 2024

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August 31, 2024

Organic growth

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

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

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

The 1.3 percent increase in net revenue from M&A was due to the acquisition of ND Industries Taiwan.

The positive currency effect was due to a stronger Euro and British pound com pared to the U.S.

A s a percentage of net revenue, raw material costs decreased 140 basis points primarily due to higher product pricing and the impact of acquisitions offset by higher raw material costs.

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

SG&A expenses as a percentage of net revenue increased 30 basis points.

Segment operating income increased 16.7 percent and segment operating margin increased 180 basis points compared to the third quarter of 2024 .

Net revenue increased 5.6 percent in the first nine months of 2025 compared to the first nine months of 2024 .

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

The 6.0 percent increase in net revenue from M&A was due to the acquisition of ND Industries and ND Industries Taiwan.

The negative currency effect was d ue to a weaker Chinese renminbi and Mexican peso, partially offset by a stronger Euro and British pound compared to the U.S.

As a percentage of net revenue, raw material costs decreased 280 basis points due to higher product pricing and the impact of acquisitions.

Other manufacturing costs as a percentage of net revenue increased 30 basis points.

SG&A expenses as a percentage of net revenue increased 110 basis points primarily due to higher compensation and the impact of acquisitions.

Segment operating income increased 16.2 percent and segment operating margin increased 140 basis points compared to the first nine months of 2024 .

Building Adhesive Solutions

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August 31, 2024

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Organic growth

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

Net revenue increased 2.3 percent in the third quarter of 2025 compared to the third quarter of 2024 .

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

The 1.7 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.

The positive currency effe ct was due to a stronger Euro and British pound co mpared to the U.S.

As a percentage of net revenue, raw material costs decreased 40 basis points.

O ther manufacturing costs as a percentage of net revenue increased 30 basis points.

SG&A expenses as a percentage of net revenue increased 40 basis points.

S egment operating income decreased 0.4 percent and segment operating margin decreased 30 basis points compared to the third quarter of 2024 .

Net revenue increased 1.7 percent in the first nine months of 2025 compared to the first nine months of 2024 .

Organic growth was flat due to a decrease in sales volume offset by an increase in product pricing.

T he 2.0 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 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 1.4 percent and segment operating margin decreased 20 basis points compared to the first six months of 2024 .

The negative currency effect was due to a weaker Turkish lira and Australia dollar, partially offset by the Euro and British pound, compared to the U.S.

As a percenta ge of net revenue, raw material costs decreased 40 basis points.

O ther manufacturing costs as a percentage of net revenue increased 10 basis points.

SG&A expenses as a percentage of net revenue increased 50 basis points.

S egment operating income decreased 1.1 percent and segment operating margin decreased 20 basis points compared to the first nine months of 2024 .

Corporate Unallocated

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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 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.

Segment operating loss in the third quarter of 2025 decreased 12.5 percent compared to the third quarter of 2024 due to the inclusion of the NA Flooring business results in 2024.

Segment operating loss in the first nine months of 2025 increased 16.1 percent compared to the first nine months of 2024 due to higher acquisition project in costs and the inclusion of the NA Flooring business results in 2024.

Financial Condition, Liquidity and Capital Resources

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.

Total cash and cash equivalents as of August 30, 2025 were $122.5 million compared to $169.4 million as of November 30, 2024 and $131.4 million as of August 31, 2024.

The majority of the $122.5 million in cash and cash equivalents as of August 30, 2025 was held outside the United States.

Total long and short-term debt was $2,080.5 million as of August 30, 2025, $2,010.6 million as of November 30, 2024 and $2,021.1 million as of August 31, 2024.

The total debt to total capital ratio as measured by total debt divided by total debt plus total stockholders’ equity was 51.5 percent as of August 30, 2025 as compared to 50.8 percent as of November 30, 2024 and 52.3 percent as of August 31, 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 May 31, 2025, we were in compliance with all covenants of our contractual obligations as shown in the following table:

As of August 30, 2025, we were in compliance with all covenants of our contractual obligations as shown in the following table:

Debt Instrument

Result as of May 31, 2025

Result as of August 30, 2025

Secured Total Indebtedness / TTM 1 EBITDA

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

Six Months Ended

Nine Months Ended

($ in millions)

August 30, 2025

August 31, 2024

Net cash provided by operating activities

3 unchanged sentences

Cash Flows from Operating Activities:

Six Months Ended

Nine Months Ended

($ in millions)

Net cash provided by operating activities

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.

Net income including non-controlling interest was $122.3 million in the first nine months of 2025 compared to $137.6 million in the first nine months of 2024.

Depreciation and amortization expense totaled $132.8 million in the first nine months of 2025 compared to $128.7 million in the first nine months of 2024.

Deferred income taxes was a use of cash of $39.2 million in the first nine months of 2025 compared to $46.0 million in the first nine months of 2024.

Accrued compensation was a use of cash of $19.2 million in 2025 compared to $11.6 million in 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.

Other assets was a use of cash of $7.5 million in the first nine months of 2025 compared to $39.0 million in the first nine months of 2024.

Other liabilities was a source of cash of $28.6 million in the first nine months of 2025 compared to $0.9 million in the first nine months of 2024.

Changes in net working capital (trade receivables, inventory and trade payables) accounted for a use of cash of $71.2 million compared to a source of cash of $13.9 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:

Six Months Ended

Nine Months Ended

($ in millions)

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Total cash flow impact

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.

Trade receivables, net – Trade receivables, net was a use of cash of $3.3 million and a source of cash of $26.4 million in the first nine 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 DSO were 57 days at August 30, 2025 and 57 days at August 31, 2024.

Inventory – Inventory was a use of cash of $42.1 million and $62.2 million in the first nine 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 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.

Inventory days on hand were 78 days as of August 30, 2025 and 75 days as of August 31, 2024.

Trade payables – Trade payables was a use of cash of $25.8 million and a source of cash of $49.7 million in the first nine 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 69 days as of August 30, 2025 and 70 days as of August 31, 2024.

Cash Flows from Investing Activities:

Six Months Ended

Nine Months Ended

($ in millions)

Net cash used in investing activities

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 .

Purchases of property, plant and equipment were $94.6 million during the first nine months of 2025 compared to $112.8 million for the same period of 2024 .

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

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

During the first nine months of 2025, we paid $162.1 million of cash for business acquisitions.

Additionally, we received $75.7 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.

During the first nine months of 2024, we paid $274.1 million of cash for business acquisitions.

Cash Flows from Financing Activities:

Six Months Ended

Nine Months Ended

($ in millions)

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.

In the first nine months of 2025 , borrowings on our revolving credit facility were $1,114.3 million and repayments on our revolving credit facility and our long-term debt totaled $1,053.6 million.

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

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 .

Borrowings on our revolving credit facility were $1,732.9 and repayments on our revolving credit facility and our long-term debt totaled $1,556.1 million in the first nine months of 2024 .

Net payments of notes payable were a use of cash of $0.6 million in the first nine months of 2025 compared to $1.0 million in the same period of 2024 .

Cash dividends paid were $37.6 million in the first nine months of 2025 compared to $35.4 million in the same period of 2024 .

Repurchases of common stock were $60.7 million in the first nine months of 2025 compared to $39.4 million in the same period of 2024 .

Forward-Looking Statements and Risk Factors

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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 2. Management’s Discussion and Analysis