Item 2. Management’s Discussion and Analysis
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Overview
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 29, 2025, for important background information related to our business.
Net revenue in the first quarter of 2026 decreased 2.3 percent from the first quarter of 2025. The decrease was due to a 7.2 percent decrease due to sales volume, partially offset by a 3.6 percent increase due to positive currency effects, a 0.7 percent increase due to acquisitions and a 0.6 percent increase due to pricing compared to the first quarter of 2025. The positive currency effect was primarily driven by a stronger Euro, Chinese renminbi, British pound, Brazilian real, Mexican peso and Australian dollar partially offset by a weaker T urkish lira compared to the U.S. dollar. Gross profit margin increased 180 basis points primarily due to higher product pricing, lower raw material costs, the impact of acquisitions and restructuring actions.
Net income attributable to H.B. Fuller in the first quarter of 2026 was $21.0 million compared to $13.2 million in the first quarter of 2025 . Diluted earnings per share for the first quarter of 2026 was $0.38 per share compared to $0.24 per share for the first quarter of 2025 .
Adjusted EBITDA in the first three months of 2026 increased 3.8 percent from the first three months of 2025 , primarily driven by higher net income and depreciation and amortization expense.
Restructuring Plans
During fiscal year 2023, the Company approved restructuring plans (the “Plans”) related to organizational changes and other actions to optimize operations and integrate acquired businesses. In implementing the Plans, the Company currently expects to incur costs of approximately $85.0 million to $90.0 million ($58.0 million to $61.4 million after tax), which include (i) cash expenditures of approximately $51.0 million to $52.0 million ($34.8 million to $35.5 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 $83.2 million under the Plans as of February 28, 2026 . Remaining cash payments will continue into fiscal year 2026.
During the first quarter of 2026, the Company approved other restructuring actions related to global footprint optimization. In implementing the other restructuring actions, the Company currently expects to incur costs of approximately $10.2 million to $12.2 million ($7.5 million to $9.0 million after tax), which include (i) cash expenditures of approximately $5.8 million to $6.8 million ($4.3 million to $5.0 million after tax) for severance and related employee costs globally and (ii) other restructuring costs related to optimizing the Company’s footprint and the payment of anticipated income taxes in certain jurisdictions related to the other restructuring actions. We have incurred costs of $4.8 million under the other restructuring actions as of February 28, 2026. The other restructuring actions began to be implemented in the first quarter of 2026 and are currently expected to be completed during fiscal year 2028. Restructuring costs are expected to be incurred over the next several fiscal quarters as the measures are implemented with the majority of the charges recognized and cash payments occurring in fiscal 2026 and 2027.
Results of Operations
Net revenue:
Three Months Ended
February 28,
March 1,
2026 vs
($ in millions)
2026
2025
2025
Net revenue
$
770.8
$
788.7
(2.3
)%
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/divestitures (“M&A”) and changes in foreign currency exchange rates. The following table shows the net revenue variance analysis for the first quarter of 2026 compared to the first quarter of 2025:
Three Months Ended
February 28, 2026 vs. March 1, 2025
Organic revenue growth
(6.6
)%
M&A
0.7
%
Currency
3.6
%
Net revenue growth
(2.3
)%
Organic revenue decreased 6.6 percent in the first quarter of 2026 compared to the first quarter of 2025 and consisted of a 10.1 percent decrease in Hygiene, Health and Consumable Adhesives, a 5.1 percent decrease in Building Adhesive Solutions and a 2.0 percent decrease in Engineering Adhesives. The overall decrease was driven by a 7.2 percent decrease in sales volume, partially offset by a 0.6 percent increase in product pricing . The 0.7 percent increase from M&A was due to the acquisition of GEM, Medifill, ND Industries Taiwan and ND Industries Turkey, discussed further in Operating Segment Results below. The positive 3.6 percent foreign currency impact was primarily driven by a stronger Euro, Chinese renminbi, British pound, Brazilian real, Mexican peso and Australian dollar, partially offset by a weaker Turkish lira compared to the U.S. dollar.
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Cost of sales:
Three Months Ended
February 28,
March 1,
2026 vs
($ in millions)
2026
2025
2025
Cost of sales
$
534.8
$
561.6
(4.8
)%
Percent of net revenue
69.4
%
71.2
%
Cost of sales as a percentage of net revenue in the first quarter of 2026 compared to the first quarter of 2025 decreased 180 basis points. Raw material cost as a percentage of net revenue decreased 250 basis points in 2026 compared to 2025 primarily due to higher product pricing, lower raw material costs and the impact of acquisitions. Other manufacturing costs as a percentage of net revenue increased 70 basis points in 2026 compared to 2025 due to higher manufacturing and distribution costs and the impact of acquisitions.
Gross profit:
Three Months Ended
February 28,
March 1,
2026 vs
($ in millions)
2026
2025
2025
Gross profit
$
236.0
$
227.1
3.9
%
Percent of net revenue
30.6
%
28.8
%
Gross profit in the first quarter of 2026 increased 3.9 percent and gross profit margin increased 180 basis points compared to the first quarter of 2025 . The increase in gross profit margin was due to higher product pricing, lower raw material costs and the impact of acquisitions.
Selling, general and administrative (SG&A) expenses:
Three Months Ended
February 28,
March 1,
2026 vs
($ in millions)
2026
2025
2025
SG&A
$
184.5
$
180.6
2.2
%
Percent of net revenue
23.9
%
22.9
%
SG&A expenses for the first quarter of 2026 compared to the first quarter of 2025 increased 100 basis points as a percentage of net revenue. The increase was due to lower revenue and the impact of acquisitions.
Other income, net:
Three Months Ended
February 28,
March 1,
2026 vs
($ in millions)
2026
2025
2025
Other income, net
$
6.7
$
3.2
109.4
%
Other income, net in the first quarter of 2026 included $6.3 million of net defined benefit pension benefits, $0.3 million of currency transaction gains and $0.1 million of other income . 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 $1.6 million of other expense.
Interest expense:
Three Months Ended
February 28,
March 1,
2026 vs
($ in millions)
2026
2025
2025
Interest expense
$
32.9
$
32.0
2.8
%
Interest expense in the first quarter of 2026 was $32.9 million compared to $32.0 million in the first quarter of 2025 due to higher debt levels partially offset by lower interest rates.
Interest income:
Three Months Ended
February 28,
March 1,
2026 vs
($ in millions)
2026
2025
2025
Interest income
$
2.1
$
1.1
90.9
%
Interest income in the first quarter of 2026 and 2025 was $2.1 million and $1.1 million, respectively, consisting primarily of interest on cross-currency swap activity and other miscellaneous interest income.
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Income taxes:
Three Months Ended
February 28,
March 1,
2026 vs
($ in millions)
2026
2025
2025
Income taxes
$
7.4
$
5.9
25.4
%
Effective tax rate
26.9
%
31.8
%
Income tax expense of $7.4 million in the first quarter of 2026 includes $0.1 million of discrete tax expense. Excluding the discrete tax expense, the overall effective tax rate was 26.6 percent. The discrete tax expense relates to various U.S. and foreign tax matters. Income tax expense of $5.9 million in the first quarter of 2025 includes $0.9 million of discrete tax expense. Excluding the discrete tax expense, the overall effective tax rate was 26.5 percent. The discrete tax expense related to various U.S. and foreign tax matters.
Income from equity method investments:
Three Months Ended
February 28,
March 1,
2026 vs
($ in millions)
2026
2025
2025
Income from equity method investments
$
0.9
$
0.5
80.0
%
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 quarter of 2026 compared to the first quarter of 2025 is due to higher net income in our joint venture during the quarter compared to the prior year.
Net income attributable to H.B. Fuller:
Three Months Ended
February 28,
March 1,
2026 vs
($ in millions)
2026
2025
2025
Net income attributable to H.B. Fuller
$
21.0
$
13.2
59.1
%
Percent of net revenue
2.7
%
1.7
%
The net income attributable to H.B. Fuller in the first quarter of 2026 was $21.0 million compared to $13.2 million in the first quarter of 2025 . The diluted earnings per share in the first quarter of 2026 was $0.38 per share as compared to $0.24 per share in the first quarter of 2025 .
Adjusted EBITDA:
Three Months Ended
February 28,
March 1,
2026 vs
($ in millions)
2026
2025
2025
Adjusted EBITDA
$
118.7
$
114.4
3.8
%
Percent of net revenue
15.4
%
14.5
%
Adjusted EBITDA for H.B. Fuller in the first quarter of 2026 was $118.7 million compared to $114.4 million in the first quarter of 2025 . Adjusted EBITDA as a percentage of net revenue increased 90 basis points in the first quarter of 2026 compared to first quarter of 2025 due to higher net income and depreciation and amortization expense. For a reconciliation of Adjusted EBITDA to net income attributable to H.B. Fuller as reflected in the unaudited consolidated statement of income see "Non-GAAP Measures" below.
Operating Segment Results
Our three reportable operating segments consist of Hygiene, Health and Consumable Adhesives, Engineering Adhesives and Building Adhesive Solutions. We are required to report segment information in the same way that we internally organize our business for assessing performance and making decisions regarding allocation of resources. Revenue and Adjusted EBITDA of each of our segments are regularly reviewed by our chief executive officer, who acts as our chief operating decision maker, to make decisions about resources to be allocated to the segments and assess their performance. Adjusted EBITDA is defined as net income before interest, income taxes, depreciation and amortization and foreign currency gain/loss, adjusted for other items within a relevant period which are not reflective of the segment’s operating performance in the period. Corporate expenses, other than those included in Corporate Unallocated, are allocated to each operating segment.
The tables below provide certain information regarding the net revenue, Adjusted EBITDA and Adjusted EBITDA margin of each of our operating segments. Adjusted EBITDA margin is defined as Adjusted EBITDA divided by net revenue for each operating segment. Corporate Unallocated amounts include business acquisition and integration costs, organizational restructuring charges and project costs associated with implementing a global Enterprise Resource Planning (“ERP”) system that we refer to as Project ONE.
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Table of Contents
Net Revenue by Segment:
Three Months Ended
February 28, 2026
March 1, 2025
Net
% of
Net
% of
($ in millions)
Revenue
Total
Revenue
Total
Hygiene, Health and Consumable Adhesives
$
346.5
45
%
$
368.2
47
%
Engineering Adhesives
242.4
31
%
236.8
30
%
Building Adhesive Solutions
181.9
24
%
183.7
23
%
Segment total
$
770.8
100
%
$
788.7
100
%
Corporate Unallocated
-
0
%
-
0
%
Total
$
770.8
100
%
$
788.7
100
%
Segment Adjusted EBITDA
Three Months Ended
February 28, 2026
March 1, 2025
Adjusted
% of
Adjusted
% of
($ in millions)
EBITDA
Total
EBITDA
Total
Hygiene, Health and Consumable Adhesives
$
48.0
40
%
$
46.9
41
%
Engineering Adhesives
48.2
41
%
44.2
39
%
Building Adhesive Solutions
21.6
18
%
21.8
19
%
Segment total
$
117.8
99
%
$
112.9
99
%
Corporate Unallocated
0.9
1
%
1.5
1
%
Total
$
118.7
100
%
$
114.4
100
%
Hygiene, Health and Consumable Adhesives
Three Months Ended
February 28,
March 1,
2026 vs
($ in millions)
2026
2025
2025
Net revenue
$
346.5
$
368.2
(5.9
)%
Segment adjusted EBITDA
$
48.0
$
46.9
2.3
%
Segment adjusted EBITDA margin
13.9
%
12.7
%
The following table provides details of the Hygiene, Health and Consumable Adhesives net revenue variances:
Three Months Ended
February 28, 2026 vs. March 1, 2025
Organic revenue growth
(10.1
)%
M&A
0.8
%
Currency
3.4
%
Total
(5.9
)%
Net revenue decreased 5.9 percent in the first quarter of 2026 compared to the first quarter of 2025 . Organic revenue growth decreased due to decrease in sales volume and product pricing. The 0.8 percent increase in net revenue from M&A was due to the acquisitions of GEM and Medifill in the first quarter of 2025. The positive currency effect was due to a stronger Euro, Brazilian real, Mexican peso and Chinese renminbi, partially offset by a weaker Turkish lira compared to the U.S. dollar. Segment adjusted EBITDA increased 2.3 percent in the first quarter of 2026 compared to the first quarter of 2025 . Segment adjusted EBITDA margin increased 120 basis points primarily due to lower revenue, lower raw materials cost and the impact of acquisitions.
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Engineering Adhesives
Three Months Ended
February 28,
March 1,
2026 vs
($ in millions)
2026
2025
2025
Net revenue
$
242.4
$
236.8
2.4
%
Segment adjusted EBITDA
$
48.2
$
44.2
9.0
%
Segment adjusted EBITDA margin
19.9
%
18.7
%
The following tables provide details of the Engineering Adhesives net revenue variances:
Three Months Ended
February 28, 2026 vs. March 1, 2025
Organic revenue growth
(2.0
)%
M&A
1.1
%
Currency
3.3
%
Total
2.4
%
Net revenue increased 2.4 percent in the first quarter of 2026 compared to the first quarter of 2025 . Organic revenue growth decreased due to a decrease in sales volume, partially offset by an increase in product pricing. The 1.1 percent increase in net revenue from M&A was due to the acquisition of ND Industries Taiwan and ND Industries Turkey. The positive currency effect was due to a stronger Euro and Chinese renminbi compared to the U.S. dollar. Segment adjusted EBITDA increased 9.0 percent in the first quarter of 2026 compared to the first quarter of 2025. S egment adjusted EBITDA margin increased 120 basis points primarily due to higher product pricing, lower raw materials cost and the impact of acquisitions, partially offset by higher manufacturing and distribution costs.
Building Adhesive Solutions
Three Months Ended
February 28,
March 1,
2026 vs
($ in millions)
2026
2025
2025
Net revenue
$
181.9
$
183.7
(1.0
)%
Segment adjusted EBITDA
$
21.6
$
21.8
(0.9
)%
Segment adjusted EBITDA margin
11.9
%
11.9
%
The following tables provide details of the Building Adhesive Solutions net revenue variances:
Three Months Ended
February 28, 2026 vs. March 1, 2025
Organic revenue growth
(5.1
)%
M&A
0.0
%
Currency
4.1
%
Total
(1.0
)%
Net revenue decreased 1.0 percent in the first quarter of 2026 compared to the first quarter of 2025 . Organic growth decreased due to a decrease in sales volume partially offset by an increase in product pricing . The positive currency effe ct was due to a str onger Euro and British pound compared to the U.S. dollar. Segment adjusted EBITDA increased 0.9 percent in the first quarter of 2026 compared to the first quarter of 2025. Segment adjusted EBITDA margin was flat.
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Corporate Unallocated
Three Months Ended
February 28,
March 1,
2026 vs
($ in millions)
2026
2025
2025
Net revenue
$
-
$
-
0.0
%
Adjusted EBITDA
$
0.9
$
1.5
(40.0
)%
NMP = Non-meaningful percentage
Corporate Unallocated amounts include business acquisition and integration costs, organizational restructuring charges and project costs associated with implementing a global Enterprise Resource Planning (“ERP”) system that we refer to as Project ONE.
Financial Condition, Liquidity and Capital Resources
Total cash and cash equivalents as of February 28, 2026 were $107.9 million compared to $107.2 million as of November 29, 2025 and $105.7 million as of March 1, 2025. The majority of the $107.9 million in cash and cash equivalents as of February 28, 2026 was held outside the United States. Total long and short-term debt was $2,076.1 million as of February 28, 2026, $2,016.9 million as of November 29, 2025 and $2,180.0 million as of March 1, 2025. The total debt to total capital ratio as measured by total debt divided by total debt plus total stockholders’ equity was 50.1 percent as of February 28, 2026 as compared to 50.2 percent as of November 29, 2025 and 55.1 percent as of March 1, 2025.
We believe that cash flows from operating activities will be adequate to meet our short-term and long-term liquidity and capital expenditure needs. In addition, we believe we have the ability to obtain both short-term and long-term debt to meet our financing needs for the foreseeable future. Cash available in the United States has historically been sufficient and we expect it will continue to be sufficient to fund U.S. operations, U.S. capital spending and U.S. pension and other postretirement benefit contributions in addition to funding U.S. acquisitions, dividend payments, debt service and share repurchases as needed. For those international earnings considered to be reinvested indefinitely, we currently have no intention to, and plans do not indicate a need to, repatriate these funds for U.S. operations.
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 February 28, 2026, we were in compliance with all covenants of our credit agreement contractual obligations as shown in the following table:
Covenant
Debt Instrument
Measurement
Result as of February 28, 2026
Secured Total Indebtedness / TTM 1 EBITDA
Revolving Facility and Term Loan A Facility
Not greater than 4.50
2.3
TTM 1 EBITDA / Consolidated Interest Expense
Revolving Facility and Term Loan A Facility
Not less than 2.0
5.0
1 TTM = Trailing 12 months
EBITDA for covenant purposes is defined as consolidated net income, plus (i) interest expense, (ii) expense for taxes paid or accrued, (iii) depreciation and amortization, (iv) certain non-cash impairment losses, (v) extraordinary non-cash losses incurred other than in the ordinary course of business, (vi) nonrecurring extraordinary non-cash restructuring charges and the non-cash impact of purchase accounting, (vii) any non-cash charge for the excess of rent expense over actual cash rent paid due to the use of straight-line rent, non-cash charge pursuant to any management equity plan, stock option plan or any other management or employee benefit, (viii) any non-cash finance charges in respect of any pension liabilities or other provisions and income (loss) attributable to deferred compensation plans, (ix) any non-recurring or unusual cash restructuring charges and operating improvements, (x) cost savings initiative and cost synergies related to acquisitions within 12 months, (xi) non-capitalized charges relating to the Company’s SAP implementation, (xii) fees, costs, expenses and charges incurred in connection with the financing, (xiii) fees, costs, expenses, make-whole or penalty payments and other similar items arising out of acquisitions, investments and dispositions, the incurrence, issuance, repayment or refinancing of indebtedness and any issuance of equity interests; minus, non-recurring or unusual non-cash gains incurred not in the ordinary course of business. Provided that the aggregate amounts that may be added back for any period pursuant to clauses (ix), (x) and (xi) shall not exceed 15% of EBITDA for such period (calculated prior to giving effect to all addbacks and adjustments). For Secured Total Indebtedness / TTM EBITDA ratio, TTM EBITDA is adjusted for the pro forma results from Material Acquisitions and Material Divestitures, both as defined in the Second Amended and Restated Credit Agreement, as if the acquisition or divestiture occurred at the beginning of the calculation period. The full definition is set forth in the Second Amended and Restated Credit Agreement filed as an exhibit to the Company's 8-K filing dated February 21, 2023.
Consolidated Interest Expense for covenant purposes is defined as the interest expense (including without limitation to the portion of capital lease obligations that constitutes imputed interest in accordance with GAAP) of the Company and its subsidiaries calculated on a consolidated basis for such period with respect to all outstanding indebtedness allocable to such period in accordance with GAAP, including net costs (or benefits) under Interest Rate Swap Agreements and commissions, discounts and other fees and charges with respect to letters of credit and the interest component of all Attributable Receivables Indebtedness.
We believe we have the ability to meet all of our contractual obligations and commitments for the next twelve months.
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Selected Metrics of Liquidity
Key metrics we monitor are net working capital as a percent of annualized net revenue, trade receivable days sales outstanding (“DSO”), inventory days on hand, trade accounts payable outstanding ("DPO") free cash flow and debt capitalization ratio.
February 28,
March 1,
2026
2025
Net working capital as a percentage of annualized net revenue 1
19.0
%
17.2
%
Accounts receivable DSO (in days) 2
63
61
Inventory days on hand (in days) 3
90
79
Trade accounts payable DPO (in days) 4
77
73
Free cash flow 5
$
(61.7
)
$
(85.9
)
Total debt to total capital ratio 6
50.1
%
55.1
%
1 Net working capital (trade receivables, net of allowance for doubtful accounts plus inventory minus trade payables) divided by annualized net revenue (current quarter multiplied by four).
2 Trade receivables net of the allowance for doubtful accounts multiplied by 91 (13 weeks) and divided by the net revenue for the quarter.
3 Total inventory multiplied by 91 (13 weeks) and divided by cost of sales (excluding delivery costs) for the quarter.
4 Trade accounts payable multiplied by 91 (13 weeks) and divided by net revenue for the quarter.
5 Year-to-date net cash provided by operating activities, less purchased property, plant and equipment. See "Non GAAP Measures" for reconciliation of net cash provided by operating activities to free cash flow.
6 Total debt divided by (total debt plus total stockholders’ equity).
Free cash flow, a non-GAAP financial measure, is defined as net cash provided by operating activities less purchased property, plant and equipment. Free cash flow is an integral financial measure used by the Company to assess its ability to generate cash in excess of its operating needs, therefore, the Company believes this financial measure provides useful information to investors. For a reconciliation of net cash provided by operating activities to free cash flow see “Non-GAAP Measures” below.
Summary of Cash Flows
Cash Flows from Operating Activities:
Three Months Ended
February 28,
March 1,
($ in millions)
2026
2025
Net cash provided by operating activities
$
(4.0
)
$
(52.9
)
Net income including non-controlling interest was $21.0 million in the first three months of 2026 compared to $13.3 million in the first three months of 2025. Depreciation and amortization expense totaled $46.4 million in the first three months of 2026 compared to $42.6 million in the first three months of 2025. Deferred income taxes were a use of cash of $2.4 million in the first three months of 2026 compared to a source of cash of $5.8 million in the first three months of 2025. Accrued compensation was a use of cash of $46.4 million in the first three months of 2026 compared to $37.9 million in the first three months of 2025. Other assets were a use of cash of $3.2 million in the first three months of 2026 compared to $0.3 million in the first three months of 2025. Other liabilities were a use of cash of $9.9 million in the first three months of 2026 compared to $0.3 million in the first three months of 2025.
Changes in net working capital (trade receivables, inventory and trade payables) accounted for a source of cash of $13.7 million in the first three months of 2026 compared to a use of cash of $27.5 million in the first three months of 2025. The table below provides the cash flow impact due to changes in the components of net working capital and an assessment of each of the components:
Three Months Ended
February 28,
March 1,
($ in millions)
2026
2025
Trade receivables, net
$
39.6
$
13.9
Inventory
(28.9
)
(27.1
)
Trade payables
3.0
(14.3
)
Total cash flow impact
$
13.7
$
(27.5
)
●
Trade receivables, net – Trade receivables, net was a source of cash of $39.6 million and $13.9 million in the first three months of 2026 and 2025, respectively. The higher source of cash in 2026 compared to 2025 was due to more cash collected on trade receivables in the current year compared to the prior year. The DSO were 63 days at February 28, 2026 and 61 days at March 1, 2025.
●
Inventory – Inventory was a use of cash of $28.9 million and $27.1 million in the first three months of 2026 and 2025, respectively. The slightly higher use of cash in 2026 compared to 2025 was due to higher inventory purchases in 2026 compared to 2025. Inventory days on hand were 90 days as of February 28, 2026 and 79 days as of March 1, 2025.
●
Trade payables – Trade payables was a source of cash of $3.0 million and a use of cash of $14.3 million in the first three months of 2026 and 2025, respectively. The source of cash in 2026 compared to use of cash in 2025 reflects lower payments on trade payables in the current year compared to the prior year. Days payable outstanding were 77 days as of February 28, 2026 and 73 days as of March 1, 2025.
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Cash Flows from Investing Activities:
Three Months Ended
February 28,
March 1,
($ in millions)
2026
2025
Net cash used in investing activities
$
(57.4
)
$
(121.4
)
Purchases of property, plant and equipment were $57.7 million during the first three months of 2026 compared to $33.0 million for the same period of 2025 . This difference reflects the timing of capital projects and expenditures related to growth initiatives.
We did not pay any cash for business acquisitions during the first three months of 2026 . During the first three months of 2025 we paid $162.0 million in cash for business acquisitions and we received $75.7 million in cash related to the sale of our NA Flooring business.
Cash Flows from Financing Activities:
Three Months Ended
February 28,
March 1,
($ in millions)
2026
2025
Net cash provided by financing activities
$
48.7
$
111.4
In the first three months of 2026 , borrowings on our revolving credit facility were $288.1 million and repayments on our revolving credit facility and our long-term debt totaled $231.4 million. These borrowings are for general working capital purposes and permitted acquisitions. 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 in the first three months of 2025 . There were no net payments of notes payable in the first three months of 2026 compared to $0.2 million in the same period of 2025 . Cash dividends paid were $12.8 million in the first three months of 2026 compared to $12.2 million in the same period of 2025 . Repurchases of common stock were $2.9 million in the first three months of 2026 compared to $44.4 million in the same period of 2025 .
Non-GAAP Measures
We use both GAAP and non-GAAP financial measures for operational and financial decision making, and to assess Company and segment business performance. Our non-GAAP measures include Adjusted EBITDA and Free Cash Flow. Our calculation of these non-GAAP measures may not be comparable to similarly titled measures of other companies due to potential differences between companies in the method of calculation. As a result, the use of these non-GAAP measures has limitations and should not be considered superior to, in isolation from, or as a substitute for, related U.S. GAAP measures.
These non-GAAP measures allow management and investors to view operating trends, perform analytical comparisons and benchmark performance between periods and among geographic regions to understand operating performance without regard to items we do not consider a component of our core operating performance. Furthermore, these non-GAAP measures allow investors the opportunity to measure and monitor our performance against our externally communicated targets and evaluate the investment decisions being made by management to improve Adjusted EBITDA. Management uses these measures in its financial, investment and operational decision-making processes, for internal reporting and as part of its forecasting and budgeting processes. Further, our Board of Directors uses certain of these and other measures as key metrics to determine management performance under our performance-based compensation plans. For these reasons, we believe these non-GAAP measures are useful for our investors.
Adjusted EBITDA is presented net of noncontrolling interests and is used by management and can be used by investors to review our consolidated operating results because it excludes depreciation, amortization, interest income, interest expense and income taxes as well as certain additional adjustments that are not considered part of our core operations. Examples of adjustments to EBITDA include, but are not limited to, costs for acquisition projects, organizational realignment, Project One, business divestitures, discrete taxes, and the income tax effect on these adjustments. For Adjusted EBITDA, once we have made an adjustment in the current period for an item, we will also adjust the related non-GAAP measure in future periods in which there is an impact from the item. The following table reflects the manner in which Adjusted EBITDA is determined and provides a reconciliation of Adjusted EBITDA to Net income attributable to H.B. Fuller, the most directly comparable financial measure calculated and reported in accordance with U.S. GAAP.
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Reconciliation of Net income attributable to H.B. Fuller to Adjusted EBITDA
Three Months Ended
February 28,
March 1,
2026
2025
Net income attributable to H.B. Fuller
$
21,045
$
13,248
Adjustments:
Acquisition project costs
931
9,828
Organizational realignment
10,022
8,774
Project One
3,053
3,064
Other
(95
)
-
Discrete tax items
98
992
Income tax effect on adjustments
(3,539
)
(5,909
)
Adjusted net income attributable to H.B. Fuller
31,515
29,997
Add:
Interest expense 1
32,373
32,030
Interest income
(2,069
)
(1,100
)
Adjusted Income taxes
10,862
10,862
Depreciation and Amortization expense 2
46,023
42,567
Adjusted EBITDA
118,704
114,356
1 Interest expense added back for EBITDA is adjusted for amounts already included in adjusted net income attributable to H.B. Fuller.
2 Depreciation and amortization expense added back for EBITDA is adjusted for amounts already included in adjusted net income attributable to H.B. Fuller.
Free cash flow, a non-GAAP financial measure, is defined as net cash provided by operating activities less purchased property, plant and equipment. Free cash flow is an integral financial measure used by the Company to assess its ability to generate cash in excess of its operating needs, therefore, the Company believes this financial measure provides useful information to investors. The following table reflects the manner in which free cash flow is determined and provides a reconciliation of free cash flow to net cash provided by operating activities, the most directly comparable financial measure calculated and reported in accordance with U.S. GAAP.
Reconciliation of Net cash provided by operating activities to Free cash flow
Three Months Ended
($ in millions)
February 28, 2026
March 1, 2025
Net cash provided by operating activities
$
(4.0
)
$
(52.9
)
Less: Purchased property, plant and equipment
57.7
33.0
Free cash flow
$
(61.7
)
$
(85.9
)
Forward-Looking Statements and Risk Factors
The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements may be identified by the use of words like "plan," "expect," "aim," "believe," "project," "anticipate," "intend," "estimate," "will," "should," "could" (including the negative or variations thereof) and other expressions that indicate future events and trends. These plans and expectations are based upon certain underlying assumptions, including those mentioned with the specific statements. Such assumptions are in turn based upon internal estimates and analyses of current market conditions and trends, our plans and strategies, economic conditions and other factors. These plans and expectations and the assumptions underlying them are necessarily subject to risks and uncertainties inherent in projecting future conditions and results. Actual results could differ materially from expectations expressed in the forward-looking statements if one or more of the underlying assumptions and expectations proves to be inaccurate or is unrealized. In addition to the factors described in this report, Item 1A. Risk Factors identifies some of the important factors that could cause our actual results to differ materially from those in any such forward-looking statements. In order to comply with the terms of the safe harbor, we have identified these important factors which could affect our financial performance and could cause our actual results for future periods to differ materially from the anticipated results or other expectations expressed in the forward-looking statements. These factors should be considered, together with any similar risk factors or other cautionary language that may be made elsewhere in this Quarterly Report on Form 10-Q.
The list of important factors in Item 1A. Risk Factors does not necessarily present the risk factors in order of importance. This disclosure, including that under Forward-Looking Statements and Risk Factors, and other forward-looking statements and related disclosures made by us in this report and elsewhere from time to time, represents our best judgment as of the date the information is given. We do not undertake responsibility for updating any of such information, whether as a result of new information, future events, or otherwise, except as required by law. Investors are advised, however, to consult any further public company disclosures (such as in filings with the SEC or in our press releases) on related subjects.
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