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What changed in FULLER H B CO's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of FULLER H B CO's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+264 added−269 removedSource: 10-K (2025-01-23) vs 10-K (2023-01-24)

Top changes in FULLER H B CO's 2024 10-K

264 paragraphs added · 269 removed · 204 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeNoncompliance with GDPR and other data protection laws could result in damage to our reputation and payment of monetary penalties. Seasonality Our operating segments have historically had lower net revenue in winter months, which is primarily our first fiscal quarter, mainly due to international holidays and the seasonal decline in construction and consumer spending activities.
Biggest changeSeasonality Our operating segments have historically had lower net revenue in winter months, which is primarily our first fiscal quarter, mainly due to international holidays and the seasonal decline in construction and consumer spending activities. 7 Table of Contents Information About Our Executive Officers The following table shows the name, age and business experience for the past five years of the executive officers as o f January 23, 2025.
Principal competitive factors in the sale of adhesives and other specialty chemicals are product performance, supply assurance, technical service, quality, price and customer service. 3 Table of Contents Customers We have cultivated strong, integrated relationships with a diverse set of customers worldwide. Our customers are among the technology and market leaders in consumer goods, construction and industrial markets.
Principal competitive factors in the sale of adhesives and other specialty chemicals are product performance, supply assurance, technical service, quality, price and customer service. 4 Table of Contents Customers We have cultivated strong, integrated relationships with a diverse set of customers worldwide. Our customers are among the technology and market leaders in consumer goods, construction and industrial markets.
Competitive Pay and Benefits Our primary compensation strategy is “Pay for Performance”, which supports a culture of accountability and performance. Our compensation guiding principles are to structure compensation that is simple, aligned and balanced. We believe that these principles are strongly aligned with the strategic priorities of our business and our objective to deliver value for our shareholders.
Competitive Pay and Benefits Our primary compensation strategy is “Pay for Performance,” which supports a culture of accountability and performance. Our compensation guiding principles are to structure compensation that is simple, aligned and balanced. We believe that these principles are strongly aligned with the strategic priorities of our business and our objective to deliver value for our shareholders.
It is one of the tools we use to recruit and retain, and it is seen as the preferred benefit by most employees. Employees in the United States earning below $ 52,000 each year have 100% of their individual medical premiums covered by the Company in the form of a medical premium reimbursement.
It is one of the tools we use to recruit and retain, and it is seen as the preferred benefit by most employees. Employees in the United States earning below $56,000 each year have 100% of their individual medical premiums covered by the Company in the form of a medical premium reimbursement.
U.S. trademark registrations are for a term of ten years and are renewable every ten years as long as the trademarks are used in the regular course of trade. Research and Development Our investment in research and development creates new and innovative adhesive technology platforms, enhances product performance, ensures a competitive cost structure and leverages available raw materials.
U.S. trademark registrations are for a term of ten years and are renewable every ten years as long as the trademarks are used in the regular course of trade. 6 Table of Contents Research and Development Our investment in research and development creates new and innovative adhesive technology platforms, enhances product performance, ensures a competitive cost structure and leverages available raw materials.
Sales operations span 34 countries in North America, Europe, Latin America, the Asia Pacific region, India, the Middle East and Africa. Industrial adhesives represent our core product offering, which help improve the performance of our customers’ products or improve their manufacturing processes.
Sales operations span 35 countries in North America, Europe, Latin America, Asia Pacific, India, the Middle East and Africa. Industrial adhesives represent our core product offering, which help improve the performance of our customers’ products or improve their manufacturing processes.
We foster open innovation, seek supplier-driven new technology and use relationships with academic and other institutions to enhance our capabilities. 5 Table of Contents As climate change and other sustainability concerns become more prevalent, governmental and non-governmental organizations, customers and investors are increasingly focusing on these issues.
We foster open innovation, seek supplier-driven new technology and use relationships with academic and other institutions to enhance our capabilities. As climate change and other sustainability concerns become more prevalent, governmental and non-governmental organizations, customers and investors are increasingly focusing on these issues.
We operate and sell our products in countries that are rated as high-risk for corruption, which creates the risk of unauthorized conduct by our employees, customs brokers, distributors or other third party intermediaries that could be in violation of the FCPA or similar local regulations.
However, we operate and sell our products in countries that are rated as high-risk for corruption, creating the risk of unauthorized conduct by our employees, customs brokers, distributors or other third party intermediaries that could be in violation of the FCPA or similar local regulations.
Item 1. Business H.B. Fuller Company was founded in 1887 and incorporated as a Minnesota corporation in 1915. Our stock is traded on the New York Stock Exchange (“NYSE”) under the ticker symbol FUL. As used herein, “H.B. Fuller”, “we”, “us”, “our”, “management” or “company” includes H.B. Fuller and its subsidiaries unless otherwise indicated.
Item 1. Business H.B. Fuller Company was founded in 1887 and incorporated as a Minnesota corporation in 1915. Our stock is traded on the New York Stock Exchange (“NYSE”) under the ticker symbol FUL. As used herein, “H.B. Fuller,” “we," “us,” “our,” “management” or “company” includes H.B. Fuller and its subsidiaries unless otherwise indicated.
Our products are delivered directly to customers primarily from our manufacturing and distribution facilities, with additional deliveries made through distributors and retailers. Human Capital Resources and Management Employees and Labor Relations As of December 3, 2022, we have approximately 7,000 employees in 45 countries, including approximately 2,500 employees based in the U.S.
Our products are delivered directly to customers primarily from our manufacturing and distribution facilities, with additional deliveries made through distributors and retailers. Human Capital Resources and Management Employees and Labor Relations As of November 30, 2024, we have approximately 7,500 employees in 45 countries, including approximately 2,800 employees based in the U.S.
This also facilitates the creation of new high-performance solutions that enable customers to improve their products and processes to better achieve their sustainability programs. Regulatory Compliance We comply with applicable federal, state, local and foreign laws and regulations relating to environmental protection and workers' safety, including those required by the U.S.
This also facilitates the creation of new high-performance solutions that enable customers to improve their products and processes to better achieve their sustainability programs. Regulatory Compliance The Company is subject to various federal, state, local and foreign laws and regulations relating to environmental protection and workers' safety, including those required by the U.S.
Where we refer to 2022, 2021 and 2020 herein, the reference is to our fiscal years ended December 3, 2022, November 27, 2021, and November 28, 2020, respectively. We are a leading worldwide formulator, manufacturer and marketer of adhesives, sealants and other specialty chemical products.
Where we refer to 2024, 2023 and 2022 herein, the reference is to our fiscal years ended November 30, 2024, December 2, 2023, and December 3, 2022, respectively. We are a leading worldwide formulator, manufacturer and marketer of adhesives, sealants and other specialty chemical products.
Expenditures to comply with environmental regulations over the next two years are estimated to be approximately $15.4 million, including approximately $2.8 million of capital expenditures. See additional disclosure under Item 3. Legal Proceedings.
Expenditures to comply with environmental regulations over the next two years are estimated to be approximately $20.9 million, including approximately $0.3 million of capital expenditures. See additional disclosure under Item 3. Legal Proceedings.
The vast majority of the products sold within any region are produced within the region, and the respective regions do not import significant amounts of product from other regions. As of December 3, 2022, we had sales offices and manufacturing plants in 23 countries outside the United States and satellite sales offices in another 10 countries.
The vast majority of the products sold within any region are produced within the region, and the respective regions do not import significant amounts of product from other regions. As of November 30, 2024, we had sales offices and manufacturing plants in 25 countries outside the United States and satellite sales offices in another 9 countries.
Talent Development We recognize how important it is for our colleagues to develop and progress in their careers. We provide a variety of resources to help our colleagues grow in their current roles and build new skills, including online development resources focused on specific business imperatives with access to hundreds of online courses in our learning management system.
We provide a variety of resources to help our colleagues grow in their current roles and build new skills, including online development resources focused on specific business imperatives with access to hundreds of online courses in our learning management system.
We continue to monitor the development and implementation of such legislation and regulations. We also continue to regularly report our sustainability efforts and metrics under the Global Reporting Initiative (“GRI”) framework and report our goals and progress in our annual Sustainability Report. The Foreign Corrupt Practices Act (the “FCPA”) prohibits bribery of government officials to benefit business interests.
We also continue to regularly report our sustainability efforts and metrics under the Global Reporting Initiative (“GRI”) framework and report our goals and progress in our annual Sustainability Report. The Foreign Corrupt Practices Act (the “FCPA”) and other anti-bribery and anti-corruption laws and regulations prohibit bribery of government officials to benefit business interests.
Fuller®, Swift®, Advantra®, Clarity®, Earthic™, Sesame®, TEC®, Foster®, Rakoll®, Rapidex®, Full-Care®, Thermonex®, Silaprene®, Eternabond®, Cilbond®, Hydroarmor®, Ködispace®, Weld Mount® and TONSAN® are important in marketing products. Many of our trademarks and service marks are registered.
We own numerous trademarks and service marks in various countries. Trademarks, such as H.B. Fuller®, Swift®, Advantra®, Clarity®, Earthic™, Sesame®, Foster®, Rakoll®, Rapidex®, Full-Care®, Thermonex®, Silaprene®, Eternabond®, Cilbond®, HydroArmor®, Ködispace®, Weld Mount®, TONSAN®, SecurePortIV®, Sugriseal® and Vibra-Tite® are important in marketing products. Many of our trademarks and service marks are registered.
These assignments support the employees’ development while also supporting company initiatives that are required to be resourced with talented employees. Raw Materials We use several principal raw materials in our manufacturing processes, including tackifying resins, polymers, synthetic rubbers, vinyl acetate monomer and plasticizers. We generally avoid sole source supplier arrangements for raw materials.
Finally, we provide ambitious employees with short-term opportunities in unique assignments in addition to their current roles. These assignments support the employees’ development while also supporting company initiatives that are required to be resourced with talented employees. Raw Materials We use several principal raw materials in our manufacturing processes, including tackifying resins, polymers, synthetic rubbers, vinyl acetate monomer and plasticizers.
The majority of our raw materials are petroleum/natural gas based derivatives. Under normal conditions, raw materials are available on the open market. Prices and availability are subject to supply and demand market mechanisms.
We generally avoid sole source supplier arrangements for raw materials. The majority of our raw materials are petroleum/natural gas-based derivatives, therefore the cost of crude oil and natural gas can impact the cost of our raw materials. Under normal conditions, raw materials are available on the open market. Prices and availability are subject to supply and demand market mechanisms.
We file annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission (“SEC”) via EDGAR. Our SEC filings are available free of charge to the public on the SEC website at www.sec.gov and on our website as soon as reasonably practicable after they have been filed with or furnished to the SEC.
Our SEC filings are available free of charge to the public on the SEC website at www.sec.gov and on our website as soon as reasonably practicable after they have been filed with or furnished to the SEC.
For technology not available in the public domain, we rely on trade secrets and patents when appropriate to protect our competitive position. We also license some patented technology from other sources. Our business is not materially dependent upon licenses or similar rights or on any single patent or group of related patents.
Patents, Trademarks and Licenses Much of the technology we use in our products and manufacturing processes is available in the public domain. For technology not available in the public domain, we rely on trade secrets and patents when appropriate to protect our competitive position. We also license some patented technology from other sources.
Fuller Foundation and the thousands of employee volunteer hours each year. 4 Table of Contents I nclusion and Diversit y As a global company, we currently have employees present in 45 countries around the world. We place strong value on collaboration and we believe that working together leads to better outcomes for our customers.
Fuller Foundation and the thousands of employee volunteer hours each year. 5 Table of Contents I nclusion and Diversit y We place strong value on collaboration and we believe that working together leads to better outcomes for our customers. This extends to the way we treat each other as team members.
East 58 Executive Vice President, Hygiene, Health and Consumable Adhesives December 2022 - Present Senior Vice President, Hygiene, Health and Consumable Adhesives October 2021 - December 2022 Vice President, Engineering Adhesives Americas and Global Director Automotive April 2018 - October 2021 Global Business Director, General Industries and Business Director, Cyberbond LLC June 2016 - March 2018 6 Table of Contents Traci L.
East 60 Executive Vice President, Hygiene, Health and Consumable Adhesives December 2022 - Present Senior Vice President, Hygiene, Health and Consumable Adhesives October 2021 - December 2022 Vice President, Engineering Adhesives Americas and Global Director Automotive April 2018 - October 2021 8 Table of Contents Laura J.
Campe 49 Senior Vice President, International Growth December 2021 - Present Senior Vice President, Global Hygiene, Health and Consumable Adhesives August 2019 - November 2021 Senior Vice President, Americas Adhesives October 2016 - August 2019 John J. Corkrean 57 Executive Vice President and Chief Financial Officer May 2016 - Present James J.
Campe 51 Senior Vice President, International Growth December 2021 - Present Senior Vice President, Global Hygiene, Health and Consumable Adhesives August 2019 - November 2021 John J.
Environmental Protection Agency (the “EPA”) and the EU’s Registration, Evaluation, Authorization and Restriction of Chemicals (“REACH”) regulation. This includes regular review of and upgrades to environmental, health and safety policies, practices and procedures as well as improved production methods to minimize our facilities’ outgoing waste, based on evolving societal standards and increased environmental understanding.
We maintain programs intended to ensure compliance with these regulations, including regular review of and upgrades to environmental, health and safety policies, practices and procedures as well as improved production methods to minimize our facilities’ outgoing waste, based on evolving societal standards and increased environmental understanding.
Raw material costs are primarily determined by the balance of supply against the aggregate demand from the adhesives industry and other industries that use the same raw material streams. The cost of crude oil and natural gas, the primary feedstocks for our raw materials, can also impact the cost of our raw materials. See Item 1A.
Raw material costs, including costs for unique or specialty chemicals used in the manufacturing of our products, are primarily determined by the balance of supply against the aggregate demand from the adhesives industry and other industries that use the same raw material streams.
Mastin 54 President and Chief Executive Officer Executive Vice President and Chief Operating Officer Chief Executive Officer, PetroChoice Lubrication Solutions Chief Executive Officer, Distribution International December 2022 - Present March - December 2022 2018 - 2022 2013 - 2017 Zhiwei Cai 60 Executive Vice President, Engineering Adhesives August 2019 - Present Senior Vice President, Engineering Adhesives February 2016 - August 2019 Heather A.
Mastin 56 President and Chief Executive Officer Executive Vice President and Chief Operating Officer Chief Executive Officer, PetroChoice Lubrication Solutions (leading lubricant distributor, providing solutions across the industrial, commercial and passenger vehicle customer segments) December 2022 - Present March - December 2022 2018 - 2022 Zhiwei Cai 62 Executive Vice President, Engineering Adhesives August 2019 - Present Heather A.
Various legislation, regulations and international accords pertaining to climate change have been implemented or are being considered for implementation, particularly as they relate to the reduction of greenhouse gas emissions. These laws may directly impact the Company, however we have not determined the extent of potential disclosures or other reporting requirements.
These laws may directly impact the Company, however we have not determined the extent of potential disclosures or other reporting requirements. We continue to monitor the development and implementation of such legislation and regulations.
This extends to the way we treat each other as team members. We strive to create an environment where innovative ideas can flourish by demonstrating respect for each other and valuing the diverse opinions, background and viewpoints of employees.
We strive to create an environment where innovative ideas can flourish by demonstrating respect for each other and valuing the diverse opinions, background and viewpoints of employees. We believe that diversity in our teams leads to new ideas, helps us solve problems and allows us to better connect with our global customer base.
We enter into agreements with many employees to protect rights to technology and intellectual property. Confidentiality commitments also are routinely obtained from customers, suppliers and others to safeguard proprietary information. We own numerous trademarks and service marks in various countries. Trademarks, such as H.B.
Our business is not materially dependent upon licenses or similar rights or on any single patent or group of related patents. We enter into agreements with many employees to protect rights to technology and intellectual property. Confidentiality commitments also are routinely obtained from customers, suppliers and others to safeguard proprietary information.
We comply with the FCPA’s requirements to make and keep accurate books and records that accurately and fairly reflect our transactions and to devise and maintain an adequate system of internal accounting controls. We are also subject to and comply with increasingly complex privacy and data protection laws and regulations in the United States and other jurisdictions.
The FCPA also requires the Company to make and keep accurate books and records that accurately and fairly reflect our transactions and to devise and maintain an adequate system of internal accounting controls. The Company maintains an international compliance program, including policies and procedures, training, and internal controls, designed to ensure compliance with these laws and regulations.
We believe that diversity in our teams leads to new ideas, helps us solve problems and allows us to better connect with our global customer base. We are taking specific actions to foster inclusion and diversity into our culture. Learning resources have been implemented to support greater awareness and understanding of the behaviors expected from employees.
We are taking specific actions to foster inclusion and diversity into our culture. Learning resources have been implemented to support greater awareness and understanding of the behaviors expected from employees. We have introduced employee resource groups, a structured mentoring program and focused development programs with the goal of creating meaningful opportunities for employees.
Information About Our Executive Officers The following table shows the name, age and business experience for the past five years of the executive officers as of January 6, 2023. Unless otherwise noted, the positions described are positions with the company or its subsidiaries. Name Age Positions Period Served Celeste B.
The Board of Directors elects the executive officers annually. Un less otherwise noted, the positions described are positions with the Company or its subsidiaries. Name Age Positions Period Served Celeste B.
This includes the European Union’s General Data Protection Regulation (“GDPR”), which enforces rules relating to the protection of processing and movement of personal data. The interpretation and enforcement of such regulations are continuously evolving and there may be uncertainty with respect to how to comply with them.
The interpretation and enforcement of such regulations are continuously evolving and there may be uncertainty with respect to how to comply with them. Noncompliance with GDPR and other data protection laws could result in damage to our reputation and payment of monetary penalties.
We focus on getting employees into roles with greater responsibility and opportunities for advancement that are also aligned with their career path to facilitate development and maximize potential. Finally, we provide ambitious employees with short-term opportunities in unique assignments in addition to their current roles.
Individua l development planning is a part of our annual goal setting process and people managers are expected to have regular discussions with employees to measure progress and make needed adjustments. We focus on getting employees into roles with greater responsibility and opportunities for advancement that are also aligned with their career path to facilitate development and maximize potential.
We have introduced employee networking groups, an expanded and enhanced mentoring program and focused development programs with the goal of creating meaningful opportunities for employees. We have adjusted our recruiting practices to ensure we are getting the right level of exposure to diverse candidates.
We have adjusted our recruiting practices to ensure we are getting the right level of exposure to diverse candidates. Talent Development We recognize how important it is for our colleagues to develop and progress in their careers.
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We have implemented an innovative delivery method for leadership training to drive experiential learning and to increase access to leaders around the world. Individual development planning is a part of our annual goal setting process and people managers are expected to have regular discussions with employees to measure progress and make needed adjustments.
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We utilize an innovative method to deliver leadership training to drive experiential learning and to increase access to leaders around the world. We have built and launched two advanced leadership academies focused on business leadership and manufacturing leadership to ensure people in these roles have the right skills to be effective.
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Risk Factors for a discussion of the effects of the COVID-19 pandemic on raw material cost and availability. Patents, Trademarks and Licenses Much of the technology we use in our products and manufacturing processes is available in the public domain.
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Environmental Protection Agency (the “EPA”) and the European Union’s ("EU") Registration, Evaluation, Authorization and Restriction of Chemicals (“REACH”) regulation.
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Jensen 56 Executive Vice President and Chief Administrative Officer December 2022 - Present Vice President, Global Business Process Improvement December 2019 - December 2022 Senior Vice President, Global Construction Products July 2016 - December 2019 Timothy J.
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Various legislation, regulations and international accords pertaining to climate change have been implemented or are being considered for implementation, particularly as they relate to the reduction of greenhouse gas emissions, such as the EU's Corporate Sustainability Reporting Directive ("CSRD"), California’s Climate Corporate Data Accountability Act and Climate Related Financial Risk Act, the Securities and Exchange Commission's ("SEC") Enhancement and Standardization of Climate-Related Disclosures for Investors, and other new and proposed regulatory frameworks.
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Keenan 65 Senior Vice President, General Counsel and Corporate Secretary December 2022 - Present Vice President, General Counsel and Corporate Secretary December 2006 - December 2022 M.
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We are also subject to increasingly complex privacy and data protection laws and regulations in the United States and other jurisdictions. This includes the EU’s General Data Protection Regulation (“GDPR”), which enforces rules relating to the protection of processing and movement of personal data.
Removed
Shahbaz Malik 55 Senior Vice President, Construction Adhesives December 2019 - Present Vice President and Business Leader, North America Distribution, Masonite International Corporation (global residential doors business) 2018 - 2019 Senior Vice President, Sales, Marketing and Supply Chain, Continental Building Products, Inc. (North America manufacturer of wallboard and joint compound materials) 2014 - 2018 Nathanial D.
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Corkrean 59 Executive Vice President and Chief Financial Officer May 2016 - Present Xinyu Du 53 Senior Vice President, Global Research & Development January 2025 - Present Vice President, Engineering Adhesives Asia Pacific and Global Product Management July 2023 - December 2024 Vice President, Engineering Adhesives Asia Pacific and Global Automotive and Aerospace October 2021 - July 2023 Vice President, Engineering Adhesives Asia Pacific and Global Durable Assembly August 2019 - October 2021 James J.
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Weaver 47 Senior Vice President, Human Resources December 2022 - Present Vice President, Human Resources March 2020 - December 2022 Director, Human Resources 2017 - March 2020 The Board of Directors elects the executive officers annually. Available Information For more information about us, visit our website at: www.hbfuller.com.
Added
Lorenz 47 Senior Vice President, Human Resources & Communication January 2025 - Present Senior Vice President, Human Resources, Skywater Technology (semiconductor manufacturer) December 2023 - December 2024 Vice President, Human Resources, 3M Transportation and Electronics Business Group, a division of 3M Company January 2021 - December 2023 Vice President, Human Resources, Corporate Staff Services, 3M Company (diversified manufacturer) January 2020 - January 2021 João Magalhaes 1 45 Senior Vice President, Engineering Adhesives Beginning March 2025 Vice President, Engineering Adhesives, Global Mobility December 2023 - Present Vice President, Engineering Adhesives, Global Wood and Composites February 2021 - November 2023 Business Director EIMEA, Durable Assembly November 2018 - January 2021 M.
Added
Shahbaz Malik 57 Senior Vice President, Building Adhesives Solutions December 2024 - Present Senior Vice President, Construction Adhesives December 2019 - December 2024 Gregory O. Ogunsanya 50 Senior Vice President, General Counsel and Corporate Secretary October 2023 - Present Vice President, Assistant General Counsel, Securities and Governance, Stanley Black & Decker Inc.
Added
June 2022 - September 2023 Vice President Legal, Stanley Industrial, a division of Stanley Black & Decker, Inc. (the world’s largest tool company) October 2020 - June 2022 Vice President and Deputy General Counsel, Safety and Productivity Solutions, Honeywell International, Inc. November 2019 - October 2020 Nathaniel D.
Added
Weaver 49 Executive Vice President, Business Transformation December 2024 - Present Senior Vice President, Human Resources December 2022 - November 2024 Vice President, Human Resources March 2020 - December 2022 Director, Human Resources 2017 - March 2020 1 Mr.
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Magalhaes has been appointed to the role of Senior Vice President, Engineering Adhesives, effective March 1, 2025. 9 Table of Contents Available Information For more information about us, visit our website at: www.hbfuller.com. We file annual, quarterly and current reports, proxy statements and other information with the SEC via EDGAR.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

47 edited+23 added−16 removed43 unchanged
Biggest changeOur overall leverage and the terms of our financing arrangements could: ● limit our ability to obtain additional financing in the future for working capital, capital expenditures and acquisitions; ● make it more difficult to satisfy our obligations under the terms of our indebtedness; ● limit our ability to refinance our indebtedness on terms acceptable to us or at all; ● limit our flexibility to plan for and adjust to changing business and market conditions in the industries in which we operate and increase our vulnerability to general adverse economic and industry conditions; ● require us to dedicate a substantial portion of our cash flow to make interest and principal payments on our debt, thereby limiting the availability of our cash flow to fund future acquisitions, working capital, business activities and other general corporate requirements; ● limit our ability to obtain additional financing for working capital, to fund growth or for general corporate purposes, even when necessary to maintain adequate liquidity, particularly if any ratings assigned to our debt securities by rating organizations were revised downward; and ● subject us to higher levels of indebtedness than our competitors, which may cause a competitive disadvantage and may reduce our flexibility in responding to increased competition. 10 Table of Contents In addition, the restrictive covenants require us to maintain specified financial ratios and satisfy other financial condition tests.
Biggest changeOur overall leverage and the terms of our financing arrangements could: ● limit our ability to obtain additional financing in the future for working capital, capital expenditures and acquisitions, even when necessary to maintain adequate liquidity, particularly if any ratings assigned to our debt securities by rating organizations were revised downward; ● make it more difficult to satisfy our obligations under the terms of our indebtedness; ● limit our ability to refinance our indebtedness on terms acceptable to us or at all; ● limit our flexibility to plan for and adjust to changing business and market conditions in the industries in which we operate and increase our vulnerability to general adverse economic and industry conditions; ● require us to dedicate a substantial portion of our cash flow to make interest and principal payments on our debt, thereby limiting the availability of our cash flow to fund future acquisitions, working capital, business activities and other general corporate requirements; ● subject us to higher levels of indebtedness than our competitors, which may cause a competitive disadvantage and may reduce our flexibility in responding to increased competition; and ● expose us to interest rate risk since a portion of our debt obligations are at variable rates.
In addition to traditional computer “hackers , ” malicious code (such as viruses and worms), phishing attempts, employee theft or misuse, and denial of service attacks, sophisticated nation-state and nation-state supported actors engage in intrusions and attacks (including advanced persistent threat intrusions) and add to the risks to internal networks, cloud deployed enterprise and customer-facing environments and the information they store and process.
In addition to traditional computer “hackers,” malicious code (such as viruses and worms), phishing attempts, ransomware, employee theft or misuse, and denial of service attacks, sophisticated nation-state and nation-state supported actors engage in intrusions and attacks (including advanced persistent threat intrusions) and add to the risks to internal networks, cloud deployed enterprise and customer-facing environments and the information they store and process.
We are at risk of cyber-attacks or other security breaches that could compromise sensitive business information, undermine our ability to operate effectively and expose us to liability, which could cause our business and reputation to suffer. Increasingly, companies are subject to a wide variety of attacks on their networks on an ongoing basis.
We are at risk of cyber-attacks and other security breaches that could compromise sensitive business information, undermine our ability to operate effectively and expose us to liability, which could cause our business and reputation to suffer. Increasingly, companies are subject to a wide variety of attacks on their networks on an ongoing basis.
Such geo-political instability and uncertainty could have a negative impact on our ability to sell to, ship products to, collect payments from, and support customers in certain regions based on trade restrictions, embargoes and export control law restrictions, and logistics restrictions including closures of air space, and could increase the costs, risks and adverse impacts from these new challenges.
Such geopolitical instability and uncertainty could have a negative impact on our ability to sell to, ship products to, collect payments from, and support customers in certain regions based on trade restrictions, embargoes and export control law restrictions, and logistics restrictions including closures of air space, and could increase the costs, risks and adverse impacts from these new challenges.
Although we utilize risk management tools, including hedging, as appropriate, to mitigate market fluctuations in foreign currencies, any changes in strategy in regard to risk management tools can also affect revenue, expenses and results of operations and there can be no assurance that such measures will result in cost savings or that all market fluctuation exposure will be eliminated.
Although we utilize risk management tools, including hedging, as appropriate, to mitigate market fluctuations in foreig n currencies, any changes in strategy in regard to risk management tools can also affect revenue, expenses and results of operations and there can be no assurance that such measures will result in cost savings or that all market fluctuation exposure will be eliminated.
Legal Proceedings for a discussion of current environmental matters. 9 Table of Contents Climate change, or legal, regulatory or market measures to address climate change, may materially adversely affect our financial condition and business operations.
Legal Proceedings for a discussion of current environmental matters. 14 Table of Contents Climate change, or legal, regulatory or market measures to address climate change, may materially adversely affect our financial condition and business operations.
The Company’s effective tax rate could be volatile and materially change as a result of the adoption of new tax legislation and other factors. A change in tax laws is one of many factors that impact the Company’s effective tax rate. The U.S.
The Company ’ s effective tax rate could be volatile and materially change as a result of the adoption of new tax legislation and other factors. A change in tax laws is one of many factors that impact the Company’s effective tax rate. The U.S.
It is not possible to predict the broader or longer-term consequences of this conflict, which could include further sanctions, embargoes, regional instability, energy shortages, geopolitical shifts and adverse effects on macroeconomic conditions, security conditions, currency exchange rates and financial markets.
It is not possible to predict the broader or longer-term consequences of that conflict or the ongoing conflict in the Middle East, which could include further sanctions, embargoes, regional instability, energy shortages, geopolitical shifts and adverse effects on macroeconomic conditions, security conditions, currency exchange rates and financial markets.
Strategic and Operational Risks Our business and operations have been, and may in the future, be adversely affected by epidemics, pandemics, outbreaks of disease and other adverse public health developments, including COVID-19. Epidemics, pandemics, outbreaks of novel diseases and other adverse public health developments in countries and states where we operate may arise at any time.
Our business and operations have been, and may in the future, be adversely affected by epidemics, pandemics, outbreaks of disease and other adverse public health developments. Epidemics, pandemics, outbreaks of novel diseases and other adverse public health developments in countries and states where we operate may arise at any time.
Distressed financial markets may result in dramatic deflation of financial asset valuations and a general disruption in capital markets. Adverse equity market conditions and volatility in the credit markets could have a negative impact on the value of our pension trust assets, our future estimated pension liabilities and other postretirement benefit plans.
Distressed financial markets may result in dramatic deflation of financial asset valuations and high interest rates may disrupt the availability of capital . Adverse equity market conditions and volatility in the credit markets could have a negative impact on the value of our pension trust assets, our future estimated pension liabilities and other postretirement benefit plans.
Failure to develop new products and protect our intellectual property could negatively impact our future performance and growth. Ongoing innovation and product development are important factors in our competitiveness. Failure to create new products and generate new ideas could negatively impact our ability to grow and deliver strong financial results.
Failure to develop and/or acquire new products and protect our intellectual property could negatively impact our future performance and growth. Ongoing innovation and product development are important factors in our competitiveness, as is acquisition of new technologies. Failure to create and/or acquire new products and generate new ideas could negatively impact our ability to grow and deliver strong financial results.
In addition, we could be required to provide increased pension plan funding. As a result, our financial results could be negatively impacted. Reduced access to capital markets may affect our ability to invest in strategic growth initiatives such as acquisitions.
In addition, we could be required to provide increased pension plan funding. As a result, our financial results could be negatively impacted. In a rising interest rate environment, more costly debt and reduced access to capital markets may affect our ability to invest in strategic growth initiatives such as acquisitions.
In addition, trade protection measures, anti-bribery and anti-corruption regulations, restrictions on repatriation of earnings, differing intellectual property rights and changes in legal and regulatory requirements that restrict the sales of products or increase costs could adversely affect our results of operations.
In addition, tariffs and other trade protection measures, anti-bribery and anti-corruption regulations, restrictions on repatriation of earnings and cash, currency controls implemented by foreign governments, differing intellectual property rights and changes in legal and regulatory requirements that restrict the sales of products or increase costs could adversely affect our results of operations.
Based on 2022 financial results, a hypothetical one percent change in our cost of sales due to foreign currency rate changes would have resulted in a change in net income of approximately $10.5 million or $0.19 per diluted share.
Based on 2024 financial results, a hypothetical one percent change in our cost of sales due to foreign currency rate changes would have resulted in a change in net income of approximately $8.4 million or $0.15 per diluted share.
We are in the process of implementing a global Enterprise Resource Planning (“ERP”) system that we refer to as Project ONE, which will upgrade and standardize our information system.
We are in the process of implementing a global Enterprise Resource Planning (“ERP”) system, including the upgrade to SAP S/4HANA® at the beginning of fiscal 2025, that we refer to as Project ONE, which will upgrade and standardize our information system.
We may also be the subject of increased cyber-attacks. While Russia does not constitute a material portion of our business, a significant escalation or expansion of economic disruption or the conflict's current scope could have a material adverse effect on our results of operations.
We may also be the subject of increased cyber-attacks. While the countries involved in these conflicts do not constitute a material portion of our business, a significant escalation or expansion of economic disruption or the conflicts' current scope could have a material adverse effect on our results of operations.
If the prices of raw materials increase in a short period of time, we may be unable to pass these increases on to our customers in a timely manner and could experience reductions to our profit margins. The COVID-19 pandemic has had a significant impact on raw material prices, which could continue in the future.
If the prices of raw materials increase in a short period of time, we may be unable to pass these increases on to our customers in a timely manner and could experience reductions to our profit margins.
The extent to which COVID-19 or other pandemics will impact our business and our financial results in the future will depend on future developments, which are highly uncertain and cannot be predicted.
The extent to which major public health issues impact our business and our financial results in the future will depend on future developments, which are highly uncertain and cannot be predicted.
Such events could reduce demand for our products or make it difficult or impossible for us to receive raw materials from suppliers and deliver products to our customers. 11 Table of Contents Item 1B. Unresolved Staff Comments None.
Such events could reduce demand for our products or make it difficult or impossible for us to receive raw materials from suppliers and deliver products to our customers.
In the ordinary course of our business, we are also subject to continuous examinations of our income tax returns by tax authorities. Although we believe our tax estimates are reasonable, the final results of any tax examination or related litigation could be materially different from our related historical income tax provisions and accruals.
Although we believe our tax estimates are reasonable, the final results of any tax examination or related litigation could be materially different from our related historical income tax provisions and accruals.
Many of our direct competitors are part of large multinational companies and may have more resources than we do. Any increase in competition may result in lost market share or reduced prices, which could result in reduced profit margins. This may impair the ability to grow or even to maintain current levels of revenues and earnings.
Any increase in competition may result in lost market share or reduced prices, which could result in reduced profit margins. This may impair our ability to grow or even to maintain current levels of revenues and earnings.
Implementation of Project ONE began in our North America adhesives business in 2014 and, through 2022, we completed implementation of this system in various parts of our business including Latin America (except Brazil), Australia and various other businesses in North America and EIMEA. During 2023 and beyond, we will continue implementation in North America, EIMEA and Asia Pacific.
Implementation of Project ONE began in our North America adhesives business in 2014 and, through 2024, we completed implementation of this system in various parts of our business including Latin America (except Brazil), Australia and various other businesses in North America and Europe, India, Middle East and Africa (EIMEA).
International operations could be adversely affected by changes in economic, political, regulatory, and social conditions, especially in Brazil, Russia, China, the Middle East, including Turkey and Egypt, and other developing or emerging markets where we do business.
Appr oximately 55 percent, or $1.9 billion, of our net revenue was generated outside the United States in 2024. International operations could be adversely affected by changes in economic, political, regulatory, and social conditions, especially in Brazil, Russia, China, the Middle East, including Turkey and Egypt, and other developing or emerging markets where we do business.
In addition, the reduced credit availability could limit our customers’ ability to invest in their businesses, refinance maturing debt obligations, or meet their ongoing working capital needs. If these customers do not have sufficient access to the financial markets, demand for our products may decline.
In addition, the reduced credit availability could limit our customers’ ability to invest in their businesses, refinance maturing debt obligations, or meet their ongoing working capital needs.
If we fail to successfully integrate acquisitions into our existing business, our results of operations and our cash flows could be adversely affected.
The ability to grow through acquisitions and optimize our portfolio through divestitures depends upon our ability to identify, negotiate, and complete suitable acquisitions and divestitures. If we fail to successfully integrate acquisitions into our existing business, our results of operations and our cash flows could be adversely affected.
Our ability to meet those financial ratios and tests will depend on our ongoing financial and operating performance, which, in turn, will be subject to economic conditions and to financial, market and competitive factors, many of which are beyond our control. A breach of any of these covenants could result in a default under the instruments governing our indebtedness.
In addition, the restrictive covenants require us to maintain specified financial ratios and satisfy other financial condition tests. Our ability to meet those financial ratios and tests will depend on our ongoing financial and operating performance, which, in turn, will be subject to economic conditions and to financial, market and competitive factors, many of which are beyond our control.
Financial Risks We may be required to record impairment charges on our goodwill or long-lived assets.
The decision to repatriate foreign earnings could result in higher withholding taxes. Financial Risks We may be required to record impairment charges on our goodwill or long-lived assets.
The Organization for Economic Co-operation and Development ("OECD"), an international association of 38 countries including the United States, has proposed changes to numerous long-standing tax principles. These proposals, if finalized and adopted by the associated countries, will likely increase tax uncertainty and may adversely affect our provision for income taxes.
The Organization for Economic Co-operation and Development ("OECD"), an international association of 38 countries including the United States, finalized and adopted numerous changes to long-standing tax principles.
The substitution of key raw materials requires us to identify new supply sources, reformulate and re-test and may require seeking re-approval from our customers using those products. From time to time, the prices and availability of these raw materials may fluctuate, which could impair our ability to procure necessary materials, or increase the cost of manufacturing products.
From time to time, the prices and availability of these raw materials may fluctuate, which could impair our ability to procure necessary materials, or increase the cost of manufacturing products.
Failure or abandonment of any part of the ERP system could result in a write-off of part or all of the costs that have been capitalized on the project.
In addition, the failure to either deliver the application on time or anticipate the necessary readiness and training needs could lead to business disruption and loss of business. Failure or abandonment of any part of the ERP system could result in a write-off of part or all of the costs that have been capitalized on the project.
Risks associated with acquisitions could have an adverse effect on us and the inability to execute organizational restructuring may affect our results. As part of our growth strategy, from time to time, we have made acquisitions of complementary businesses or products. The ability to grow through acquisitions depends upon our ability to identify, negotiate, complete and integrate suitable acquisitions.
Risks associated with acquisitions and divestitures could have an adverse effect on us and the inability to execute organizational restructuring may affect our results. As part of our growth strategy, we have made, and will likely continue to make, acquisitions of complementary businesses or products and divestitures of businesses or products that do not align with our portfolio optimization strategy.
Our security measures may be breached as a result of third-party action, including intentional misconduct by computer hackers, employee error, malfeasance or otherwise.
As part of our business, we store our data, including intellectual property, and certain data about our employees, customers and vendors in our information technology systems. Our security measures may be breached as a result of third-party action, including intentional misconduct by computer hackers, employee error, malfeasance or otherwise.
Additi onal income tax expense or exposure to additional income tax liabilities could have a negative impact on our financial results. We are subject to income tax laws and regulations in the United States and various foreign jurisdictions. Significant judgment is required in evaluating and estimating our provision and accruals for these taxes.
We are subject to income tax laws and regulations in the United States and various foreign jurisdictions. Significant judgment is required in evaluating and estimating our provision and accruals for these taxes. Our income tax liabilities are dependent upon the location of earnings among these different jurisdictions.
Fluctuations in exchange rates between the U.S. dollar and other currencies could potentially result in increases or decreases in net revenue, cost of raw materials and earnings and may adversely affect the value of our assets outside the United States. In 2022, the change in foreign currencies negatively impacted our net revenue by approximately $191.7 million.
We could experience a negative impact on our operating results, profitability, customer relationships and future cash flows. Fluctuations and volatility in exchange rates between the U.S. dollar and other currencies could potentially result in increases or decreases in net revenue, cost of raw materials and earnings and may adversely affect the value of our assets outside the United States.
Our income tax liabilities are dependent upon the location of earnings among these different jurisdictions. Our income tax provision and income tax liabilities could be adversely affected by the jurisdictional mix of earnings, changes in valuation of deferred tax assets and liabilities and changes in tax laws and regulations.
Our income tax provision and income tax liabilities could be adversely affected by the jurisdictional mix of earnings, changes in valuation of deferred tax assets and liabilities and changes in tax laws and regulations. In the ordinary course of our business, we are also subject to continuous examinations of our income tax returns by tax authorities.
The military conflict between Russia and Ukraine, and the global response to it, could adversely impact our revenues, gross margins and financial results. The U.S. government and other nations have imposed significant restrictions on most companies’ ability to do business in Russia as a result of the military conflict between Russia and Ukraine.
The U.S. government and other nations have imposed significant restrictions on most companies’ ability to do business in Russia as a result of the military conflict between Russia and Ukraine. Increases in energy demand and supply disruptions caused by the Russia and Ukraine conflict have resulted in significantly higher energy prices, particularly in Europe.
If such laws or regulations are more stringent than current legal or regulatory requirements, we may experience increased compliance burdens and costs to meet the regulatory obligations and may adversely affect raw material sourcing, manufacturing operations and the distribution of our products. We have lawsuits and claims against us with uncertain outcomes.
We are experiencing increased compliance burdens and costs to meet the regulatory obligations and these regulatory obligations may adversely affect raw material sourcing, manufacturing operations and the distribution of our products.
In 2022, we spent approximately $2.2 billion for raw materials worldwide of which approximately $1.2 billion was purchased outside the United States.
In 2024, the change in foreign currencies negatively impacted our net revenue by approximately $34.9 million. In 2024, we spent approximately $1.8 billion for raw materials worldwide of which approximately $1.0 billion was purchased outside the United States.
Despite significant efforts to create security barriers to such threats, it is virtually impossible for us to entirely mitigate these risks.
Despite significant efforts to create security barriers to such threats, it is virtually impossible for us to entirely mitigate these risks. We, and our third-party software and service providers, have experienced and will continue to experience security threats and attacks from a variety of sources.
In 2022, raw material costs made up approximately 75 percent of our cost of sales. Based on 2022 financial results, a hypothetical one percent change in our raw material costs would have resulted in a change in net income of approximately $15.7 million or $0.28 per diluted share.
Based on 2024 financial results, a hypothetical one percent change in our raw material costs would have resulted in a change in net income of approximately $12.0 million or $0.21 per diluted share. Accordingly, changes in the cost of raw materials, due to scarcity, supplier disruptions, inflation and for other reasons, can significantly impact our earnings.
Our wide variety of products are sold in numerous markets, each of which is highly competitive. Our competitive position in markets is, in part, subject to external factors. For example, supply and demand for certain of our products is driven by end-use markets and worldwide capacities which, in turn, impact demand for and pricing of our products.
For example, supply and demand for certain of our products is driven by end-use markets and worldwide capacities which, in turn, impact demand for and pricing of our products. Many of our direct competitors are part of large multinational companies and may have more resources than we do.
Future acquisitions could result in additional debt and other liabilities, and increased interest expense, restructuring charges and amortization expense related to intangible assets. Our growth strategy depends in part on our ability to further penetrate markets outside the United States, where there is the potential for significant economic and political disruptions.
Future acquisitions could result in additional debt and other liabilities, and increased interest expense, restructuring charges and amortization expense related to intangible assets.
Under normal market conditions, these raw materials are generally available on the open market from a variety of producers. While alternate supplies of most key raw materials are available, supplier production outages may lead to strained supply-demand situations for certain raw materials.
While alternate supplies of most key raw materials are available, supplier production outages may lead to strained supply-demand situations for certain raw materials. The substitution of key raw materials requires us to identify new supply sources, reformulate and re-test and may require seeking re-approval from our customers using those products.
Concern over climate change could result in new legal or regulatory requirements designed to mitigate the effects of climate change on the environment.
Concern over climate change continues to result in new legal or regulatory requirements designed to mitigate the effects of climate change on the environment, such as the EU's CSRD, California’s Climate Corporate Data Accountability Act and Climate Related Financial Risk Act, the SEC's Enhancement and Standardization of Climate-Related Disclosures for Investors, and other new and proposed regulatory frameworks.
As a result, it is not possible to predict the overall future impact of COVID-19 on our business, liquidity, capital resources and financial results. 7 Table of Contents Increases in prices and declines in the availability of raw materials have adversely affected, and could continue to erode, our profit margins, and could negatively impact our operating results.
As a result, it is not possible to predict the overall future impact of major public health issues on our business, liquidity, capital resources and financial results. 12 Table of Contents Macroeconomic Risks Uncertainties in foreign economic, political, regulatory and social conditions and fluctuations in foreign currency may adversely affect our results.
Accordingly, changes in the cost of raw materials, due to scarcity, supplier disruptions, inflation and for other reasons, can significantly impact our earnings. Raw materials needed to manufacture products are obtained from a number of suppliers and many of the raw materials are petroleum and natural gas based derivatives.
Raw materials needed to manufacture products are obtained from a number of suppliers and m any of the raw materials are petroleum and natural gas based derivatives. Under normal market conditions, these raw materials are generally available on the open market from a variety of producers.
If a third party gained unauthorized access to our data, including any data regarding our employees, customers or vendors, the security breach could expose us to risks.
Our failure to comply with these regulatory regimes may result in significant liabilities or penalties. 10 Table of Contents Security breaches resulting in unauthorized access to our data, including any data regarding our employees, customers or vendors, expose us to risks.
Removed
Such developments may include ongoing spread of the virus, disease severity, outbreak duration, extent of any reoccurrence of the coronavirus or any evolutions or mutations of the virus, and availability, administration and effectiveness of vaccines and development of therapeutic treatments that can restore consumer and business economic confidence.
Added
Strategic and Operational Risks Increases in prices and declines in the availability of raw materials have adversely affected, and could continue to erode, our profit margins, and could negatively impact our operating results. In 2024, raw material costs made up appr oximately 75 percent of our cost of sales.
Removed
Further, the COVID-19 pandemic and responses to it have significantly limited or prevented the movement of goods and services worldwide, which has resulted in and could continue to result in disruptions in our supply chain and our difficulty in procuring or inability to procure raw materials necessary for the manufacturing of our products.
Added
We are subject to increasingly complex and evolving laws, regulations and customer-imposed controls, that govern privacy and cybersecurity. These laws and regulations have been adopted by multiple agencies at the federal and state level, as well as in foreign jurisdictions, and the regimes have not been harmonized.
Removed
The impact of the COVID-19 pandemic and responses to it has increased and could continue to increase the costs of making and distributing our products or result in delays in delivering, or an inability to deliver, them to our customers. We experience substantial competition in each of the operating segments and geographic areas in which we operate.
Added
We experience substantial competition in each of the operating segments and geographic areas in which we operate. Our wide variety of products are sold in numerous markets, each of which is highly competitive. Our competitive position in markets is, in part, subject to external factors.
Removed
Any delays or other failure to achieve our implementation goals may adversely impact our financial results. In addition, the failure to either deliver the application on time or anticipate the necessary readiness and training needs could lead to business disruption and loss of business.
Added
We may face difficulties marketing products produced using new technologies including, but not limited to, sustainable adhesives, which may adversely impact our sales and financial results. Failure of our products to work as predicted could lead to liability and damage to our reputation.
Removed
We, and our third-party software and service providers, may face security threats and attacks from a variety of sources. 8 Table of Contents As part of our business, we store our data, including intellectual property, and certain data about our employees, customers and vendors in our information technology systems.
Added
During 2025 and beyond, we will continue implementation in North America; Europe, India, the Middle East and Africa ("EIMEA"); Brazil and Asia Pacific. 11 Table of Contents Any delays or other failure to achieve our implementation goals may adversely impact our financial results.
Removed
The current U.S. presidential administration could enact changes in tax laws that could negatively impact the Company’s effective tax rate.
Added
Divestiture activity poses similar risks, including distraction of management from current operations, disruption of operations in adjacent or related businesses, greater than expected time and expenses, reductions to profit margins if we are unable to reduce fixed costs, loss of customer, supplier, or other business relationships, and employee retention challenges.
Removed
Prior to the U.S. presidential election, President Biden proposed an increase in the U.S. corporate income tax rate from 21% to 28%, doubling the rate of tax on certain earnings of foreign subsidiaries, the creation of a 10% penalty on certain imports and a 15% minimum tax on worldwide book income.
Added
The inability to successfully manage the risks associated with our divestiture activity may result in higher production costs, lost sales or otherwise negatively affect earnings and financial results. Our growth strategy depends in part on our ability to further penetrate markets outside the United States, where there is the potential for significant economic and political disruptions.
Removed
Additionally, the proposed changes include significant provisions related to the deductibility of interest. If any or all of these (or similar) proposals are ultimately enacted into law, in whole or in part, they could have a negative impact to the Company’s effective tax rate.
Added
In addition, anti-bribery and anti-corruption regulations, restrictions on repatriation of earnings and cash, currency controls implemented by the U.S. and foreign governments, differing intellectual property rights and changes in legal and regulatory requirements that restrict the sales of products or increase costs could adversely affect our results of operations.
Removed
The interest rates of our term loans are priced using a spread over LIBOR. LIBOR, the London Interbank Offered Rate, is the basic rate of interest used in lending between banks on the London interbank market and is widely used as a reference for setting the interest rate on loans globally.
Added
Import tariffs, taxes, customs duties and other trading regulations imposed by the U.S. government on foreign countries, or by foreign countries on the U.S., could significantly increase the prices we pay for raw materials that are critical to our ability to manufacture our products.
Removed
We typically use LIBOR as a reference rate or index in our term loans such that the interest due to our creditors pursuant to a term loan extended to us is calculated using LIBOR. Most of our term loan agreements contain a stated minimum value for LIBOR.
Added
In addition, we may be unable to find a domestic supplier to provide the necessary raw materials on an economical basis in the amounts we require. Tariffs may decrease the competitiveness of our products in foreign markets or foreclose our sales entirely into those markets.
Removed
On July 27, 2017, the United Kingdom’s Financial Conduct Authority, which regulates the entity that calculates LIBOR, announced that LIBOR was to be phased out by the end of 2021.
Added
If these customers do not have sufficient access to the financial markets, demand for our products may decline. 13 Table of Contents The military conflicts between Russia and Ukraine and in the Middle East, and the global response to these events, could adversely impact our revenues, gross margins and financial results.
Removed
Subsequently, on March 5, 2021, LIBOR’s administrator announced that publication of overnight, one-month, three-month, six-month and 12-month U.S. dollar LIBOR would cease immediately following publication of such interest rates on June 30, 2023, and that publication of all other currency and tenor variants would cease immediately following publication on December 31, 2021.
Added
Our business exposes us to potential product liability, warranty, and tort claims, as well as recalls and regulatory enforcement actions, which may negatively impact our operations, financial results, and reputation.
Removed
In December 2022, the FASB released an exposure draft that proposes deferring the sunset date of Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) Topic 848, Reference Rate Reform , which provides optional relief for contract modifications that are related to reference rate reform, from December 31, 2022 to December 31, 2024. The U.S.
Added
The development, manufacture and sale of adhesives, sealants, and other specialty chemical products by us, including products produced for the medical device, automotive, food and beverage, aerospace and defense, construction, and hygiene products end markets, involves a risk of exposure to product liability, warranty, and tort claims, product recalls, product seizures and related adverse publicity.
Removed
Federal Reserve has selected the Secured Overnight Funding Rate ("SOFR") as the preferred alternate rate to LIBOR. We are planning for this transition and will amend any agreements to accommodate the SOFR rate where required. While our term loan is calculated using LIBOR as its underlying rate, our revolver has transitioned to now using SOFR as its underlying rate.
Added
A product liability, warranty, or tort claim or judgment against us could also result in substantial and unexpected expenditures, affect customer confidence in our products, and divert management's attention from other responsibilities.
Removed
We continue to evaluate the potential impact of the transition to the SOFR rate, which remains subject to uncertainty. Macroeconomic Risks Uncertainties in foreign economic, political, regulatory and social conditions and fluctuations in foreign currency may adversely affect our results. Approximately 55 percent, or $2.1 billion, of our net revenue was generated outside the United States in 2022.
Added
Although we maintain product liability insurance, there can be no assurance that the level of coverage is adequate, that coverage will apply, or that we will be able to continue to maintain our existing insurance or obtain comparable insurance at a reasonable cost, if at all.
Removed
Increases in energy demand and supply disruptions caused by the Russia and Ukraine conflict have resulted in significantly higher energy prices, particularly in Europe.
Added
We also have contracting policies and controls in place to limit our exposure to third party claims, though we might not always be able to limit our exposure to those claims.
Added
In addition to tort claims, our industry is also facing new compliance obligations and potential enforcement activity related to recent federal and state initiatives to regulate additional per- and polyfluoroalkyl substances (“PFAS”) in an expanding set of products. Such initiatives include proposals and rules from the U.S.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe following is a list of our manufacturing plants as of December 3, 2022 (each of the listed properties are owned by us, unless otherwise specified): Segment Segment Hygiene, Health and Consumable Adhesives Engineering Adhesives Argentina Buenos Aires France Surbourg Australia Dandenong South Germany Wunstorf Australia Sydney 1 Germany Nienburg Brazil Sorocaba 2 Germany Langelsheim 1 Brazil Curitiba 1 Germany Pirmasens Brazil Guarulhos Italy Pianezze Chile Maipu, Santiago People's Republic of China Beijing Colombia Rionegro People's Republic of China Chongqing 1 Egypt 6th of October City People's Republic of China Nanjing - ShanXu Road France Blois ` People's Republic of China Nanjing - Xinjinhu Road 1 Germany Luneburg People's Republic of China Suzhou Greece Lamia People's Republic of China Yantai India Pune Portugal Mindelo Indonesia Mojokerto United Kingdom Preston 1 Kenya Nairobi 1 United States California - Irvine 1 Malaysia Selangor United States California - Wilmington 1 New Zealand Auckland 1 United States Connecticut - Enfield 1 People's Republic of China Guangzhou United States Georgia - Norcross 1 Philippines Manila United States Georgia - Ball Ground 1 United Kingdom Dukinfield United States Illinois - Frankfort - Corsair United States Georgia - Covington United States Illinois - Frankfort - West Drive United States Georgia - Tucker United States Indiana - South Bend United States Illinois - Seneca United States Massachusetts - Peabody 1 United States Kentucky - Paducah United States Michigan - Grand Rapids United States Ohio - Blue Ash United States Minnesota - Fridley United States Minnesota - Vadnais Heights United States New Hampshire - Raymond 1 United States New York - Syracuse 1 United States Ohio - Bellevue 1 United States South Carolina - Simpsonville United States Texas - Mesquite Construction Adhesives United States California - Roseville Belgium Antwerp United States Washington - Vancouver Canada Ontario 1 Vietnam Binh Duong 1 Mexico Coahuila 1 United Kingdom Staffordshire United States California - La Mirada United States Florida - Gainesville United States Georgia - Dalton United States Illinois - Aurora United States Michigan - Michigan Center United States New Jersey - Edison United States Ohio - Chagrin Falls United States Texas - Houston United States Texas - Mansfield 1 Leased Property 2 Idle Property 12 Table of Contents
Biggest changeThe following is a list of our manufacturing plants as of November 30, 2024 (each of the listed properties are owned by us, unless otherwise specified): Segment Segment Hygiene, Health and Consumable Adhesives Engineering Adhesives Argentina Buenos Aires 2 France Surbourg Australia Dandenong South Germany Wunstorf Australia Sydney 1 Germany Nienburg Brazil Sorocaba 2 Germany Langelsheim 1 Brazil Curitiba 1 Germany Pirmasens Brazil Guarulhos Italy Pianezze Chile Santiago People's Republic of China Beijing Colombia Rionegro People's Republic of China Chongqing 1 Egypt 6th of October City 2 - 3rd Industrial Zone People's Republic of China Nanjing Egypt 6th of October City - CPC Industrial Park People's Republic of China Suzhou Finland Valkeakoski 1 People's Republic of China Yantai France Blois Portugal Mindelo Germany Lueneburg United Kingdom Preston1 Germany Frankfurt 1,2 - Kilianstädter United States California - Irvine 1 Germany Frankfurt 1,2 - Vilbeler United States California - Wilmington 1 Greece Lamia United States California - Santa Fe Springs 1 India Pune United States Georgia - Ball Ground 1 Indonesia Mojokerto United States Georgia - Norcross 1 Kenya Nairobi 1 United States Illinois - Frankfort - Corsair Malaysia Selangor United States Illinois - Frankfort - West Drive New Zealand Auckland 1 United States Illinois - Northbrook People's Republic of China Guangzhou United States Illinois - Rockford Philippines Manila 2 United States Indiana - South Bend Sweden Landskrona United States Massachusetts - Peabody 1 United Kingdom Dukinfield United States Michigan - Clawson 1 United Kingdom Milton Keynes 1 United States Michigan - Grand Rapids United States California - Roseville United States Michigan - Troy United States Georgia - Covington United States Minnesota - Fridley United States Georgia - Tucker United States Minnesota - Maple Grove United States Illinois - Seneca United States Ohio - Bellevue 1 United States Kentucky - Paducah United States Ohio - Twinsburg 1 United States Minnesota - Vadnais Heights United States Texas - Arlington United States New York - Syracuse 1 United States North Carolina - Charlotte 2 United States North Carolina - Hudson Construction Adhesives United States Ohio - Blue Ash Belgium Willebroek United States South Carolina - Simpsonville Canada Ontario - Toronto 1,2 United States Texas - Mesquite Mexico Coahuila 1 United States Washington - Vancouver United Arab Emirates Ras Al-Khaimah 1 United Kingdom Kirkby in Ashfield United Kingdom Lymington United Kingdom Mansfield 1 United Kingdom Staffordshire United Kingdom Tibshelf 1,2 United States California - La Mirada United States Florida - Gainesville United States Georgia - Dalton United States Illinois - Aurora United States Michigan - Michigan Center United States New Jersey - Edison United States Ohio - Chagrin Falls United States Texas - Houston United States Texas - Mansfield 1 Leased Property 2 Idle Property 18 Table of Contents
Item 2. Propertie s Principal executive offices and central research facilities are located in the St. Paul, Minnesota area. These facilities are company-owned. Manufacturing operations are carried out at 33 plants located throughout the United States and at 38 plants located in 23 other countries. In addition, numerous sales and service offices are located throughout the world.
Item 2. Propertie s Principal executive offices and central research facilities are located in the St. Paul, Minnesota area. These facilities are company-owned. Manufacturing operations are carried out at 40 plants located throughout the United States and at 40 plants located in 25 other countries. In addition, numerous sales and service offices are located throughout the world.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeHowever, adverse developments and/or periodic settlements could negatively impact the results of operations or cash flows in one or more future periods. For additional information regarding environmental matters and other legal proceedings, see Note 14 to our Consolidated Financial Statements. Item 4. Mine Safety Disclosures Not applicable. Part II.
Biggest changeHowever, adverse developments and/or periodic settlements could negatively impact the results of operations or cash flows in one or more future periods. For additional information regarding environmental matters and other legal proceedings, see Note 14 to the Consolidated Financial Statements.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThis authorization replaces the April 6, 2017 authorization to repurchase shares. 13 Table of Contents Total Shareholder Return Graph The line graph below compares the cumulative total shareholder return on our common stock for the last five fiscal years with cumulative total return on the S&P Small Cap 600 Index and Dow Jones U.S. Specialty Chemicals Index.
Biggest changeTotal Shareholder Return Graph The line graph below compares the cumulative total shareholder return on our common stock for the last five fiscal years with cumulative total return on the S&P Small Cap 600 Index and Dow Jones U.S. Specialty Chemicals Index. This graph assumes a $100 investment in each of H.B.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock is traded on the New York Stock Exchange under the symbol FUL. As of January 18, 2023 , there were 1,348 common shareholders of record for our common stock.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock is traded on the New York Stock Exchange under the symbol FUL. As of January 17, 2025 , there were 1,307 common shareholders of record for our common stock.
Upon repurchase of the shares, we reduce our common stock for the par value of the shares with the excess being applied against additional paid in capital.
Upon repurchase of the shares, we reduce our common stock for the par value of the shares with the excess being applied against additional paid in capital. This authorization replaced the April 6, 2017 authorization to repurchase shares.
On April 7, 2022, the Board of Directors authorized a new share repurchase program of up to $300.0 million of our outstanding common shares for a period of up to five years.
Issuer Purchases of Equity Securities The Company did not repurchase any equity securities during the fourth quarter ended November 30, 2024. On April 7, 2022, the Board of Directors authorized a share repurchase program of up to $300.0 million of our outstanding common shares for a period of up to five years.
This graph assumes a $100 investment in each of H.B. Fuller, the S&P Small Cap 600 Index and the Dow Jones U.S. Specialty Chemicals Index at the close of trading on December 2, 2017, and also assumes the reinvestment of all dividends.
Fuller, the S&P Small Cap 600 Index and the Dow Jones U.S. Specialty Chemicals Index at the close of trading on November 30, 2019, and also assumes the reinvestment of all dividends. 20 Table of Contents
Removed
Issuer Purchases of Equity Securities Information on our purchases of equity securities during the fourth quarter of 2022 is as follows: Total Number of Approximate Dollar Shares Value of Shares that Total Purchased as may yet be Number of Average Part of a Publicly Purchased Under the Shares Price Paid Announced Plan Plan or Program Period Purchased 1 per Share or Program (thousands) August 28, 2022 - October 1, 2022 10 $ 59.78 - $ 300,000 October 2, 2022 - October 29, 2022 48 $ 60.10 - $ 300,000 October 30, 2022 - December 3, 2022 892 $ 69.08 - $ 300,000 1 The total number of shares purchased are shares withheld to satisfy the employees' withholding taxes upon vesting of restricted stock.
Removed
Repurchases of common stock are made to support our stock-based employee compensation plans and for other corporate purposes. Upon vesting of restricted stock awarded to employees, shares are withheld to cover the employees' minimum withholding taxes.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeAt December 3, 2022, we were in compliance with all covenants of our contractual obligations as shown in the following table: Covenant Debt Instrument Measurement Result as of December 3, 2022 Total Indebtedness / TTM EBITDA Term Loan B Credit Agreement Not greater than 5.25 2.3 Total Indebtedness / TTM EBITDA Revolving Credit Agreement Not greater than 5.25 2.3 TTM EBITDA / Consolidated Interest Expense Revolving Credit Agreement Not less than 2.0 5.4 ● TTM = trailing 12 months ● EBITDA for Term Loan B covenant purposes is defined as consolidated net income, plus interest expense, expense for taxes paid or accrued, depreciation and amortization, certain non-cash impairment losses, extraordinary non-cash losses incurred other than in the ordinary course of business, nonrecurring extraordinary non-cash restructuring charges and the non-cash impact of purchase accounting, expenses related to the Royal Adhesives acquisition not to exceed $40.0 million, expenses relating to the integration of Royal Adhesives during the fiscal years ending in 2017, 2018 and 2019 not exceeding $30 million in aggregate, restructuring expenses that began prior to the Royal Adhesives acquisition incurred in fiscal years ending in 2017 and 2018 not exceeding $28 million in aggregate, and non-capitalized charges relating to the SAP implementation during fiscal years ending in 2017 through 2021 not exceeding $13 million in any single fiscal year, minus extraordinary non-cash gains.
Biggest changeAt November 30, 2024, we were in compliance with all covenants of our contractual obligations for outstanding indebtedness as shown in the following table: Covenant Debt Instrument Measurement Result as of November 30, 2024 Secured Total Indebtedness / TTM 1 EBITDA Revolving Facility and Term Loan A Facility Not greater than 4.50 2 2.3 TTM 1 EBITDA / Consolidated Interest Expense Revolving Facility and Term Loan A Facility Not less than 2.0 4.9 1 TTM = trailing 12 months 2 The Maximum Secured Leverage Ratio prior to June 1, 2024, shall be 4.75 to 1.00 and will step down to 4.50 to 1.00 with respect to quarters ending after June 1, 2024 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.
We have not recorded U.S. deferred income taxes for certain of our non-U.S. subsidiaries undistributed earnings as such amounts are intended to be indefinitely reinvested outside of the U.S. Should we change our business strategies related to these non-U.S. subsidiaries, additional U.S. tax liabilities could be incurred. It is not practical to estimate the amount of these additional tax liabilities.
We have not recorded U.S. deferred income taxes for certain of our non-U.S. subsidiaries' undistributed earnings as such amounts are intended to be indefinitely reinvested outside of the U.S. Should we change our business strategies related to these non-U.S. subsidiaries, additional U.S. tax liabilities could be incurred. It is not practical to estimate the amount of these additional tax liabilities.
The Hygiene, Health and Consumable Adhesives operating segment manufactures and supplies adhesives products in the assembly, packaging, converting, nonwoven and hygiene, health and beauty, flexible packaging, graphic arts and envelope markets. The Engineering Adhesives operating segment provides high-performance adhesives to the transportation, electronics, medical, clean energy, aerospace and defense, performance wood, insulating glass, textile, appliance and heavy machinery markets.
The Hygiene, Health and Consumable Adhesives operating segment manufactures and supplies adhesives products in the assembly, packaging, converting, nonwoven and hygiene, health and beauty, flexible packaging, graphic arts and envelope markets. The Engineering Adhesives operating segment provides high-performance adhesives to the transportation, electronics, clean energy, aerospace and defense, performance wood, insulating glass, textile, appliance and heavy machinery markets.
This revolving credit agreement creates a secured multi-currency revolving credit facility that we can draw upon to repay existing indebtedness, finance working capital needs, finance acquisitions and for general corporate purposes up to a maximum of $700 million.
This revolving credit agreement creates a secured multi-currency revolving credit facility that we can draw upon to repay existing indebtedness, finance working capital needs, finance acquisitions and for general corporate purposes up to a maximum of $700.0 million.
A change of 0.5 percentage points for the expected return on assets assumption would impact U.S. net pension and other postretirement plan expense by approximately $2.2 million (pre-tax).
A change of 0.5 percentage points for the expected return on assets assumption would impact U.S. net pension and other postretirement plan expense by approximately $2.6 million (pre-tax).
Projected salary increase assumptions for non-U.S. plans are determined in a manner consistent with the U.S. plans. 17 Table of Contents Recoverability of Long-Lived Assets The assessment of the recoverability of long-lived assets reflects our assumptions and estimates. Factors that we must estimate when performing impairment tests include sales volume, prices, inflation, currency exchange rates, tax rates and capital spending.
Projected salary increase assumptions for non-U.S. plans are determined in a manner consistent with the U.S. plans. 24 Table of Contents Recoverability of Long-Lived Assets The assessment of the recoverability of long-lived assets reflects our assumptions and estimates. Factors that we must estimate when performing impairment tests include sales volume, prices, inflation, currency exchange rates, tax rates and capital spending.
The expected long-term rate of return on plan assets for the United Kingdom was 2.50 percent and the expected long-term rate of return on plan assets for Germany was 4.50 percent. Management, in conjunction with our external financial advisors, uses actual historical returns of the asset portfolio to assess the reasonableness of the expected rate of return for each plan.
The expected long-term rate of return on plan assets for the United Kingdom was 4.50 percent and the expected long-term rate of return on plan assets for Germany was 5.50 percent. Management, in conjunction with our external financial advisors, uses actual historical returns of the asset portfolio to assess the reasonableness of the expected rate of return for each plan.
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. 27 Table of Contents
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.
Free cash flow after dividends 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.
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.
Note 10 to the Consolidated Financial Statements includes disclosure of assumptions employed in these measurements for both the non-U.S. and U.S. plans. The discount rate assumption is determined using an actuarial yield curve approach, which results in a discount rate that reflects the characteristics of the plan.
Note 10 to the Consolidated Financial Statements includes disclosure of assumptions employed in these measurements for both the non-U.S. and U.S. plans. 23 Table of Contents The discount rate assumption is determined using an actuarial yield curve approach, which results in a discount rate that reflects the characteristics of the plan.
For example, adhesives-related revenues from durable goods customers in areas such as appliances, furniture and other woodworking applications tend to fluctuate with the overall economic activity. In business components such as Construction Adhesives and insulating glass in Engineering Adhesives, revenues tend to move with more specific economic indicators such as housing starts and other construction-related activity.
For example, adhesives-related revenues from durable goods customers in areas such as appliances, furniture and other woodworking applications tend to fluctuate with the overall economic activity. In our Construction Adhesives operating segment and business components such as insulating glass in Engineering Adhesives, revenues tend to move with more specific economic indicators such as housing starts and other construction-related activity.
With approximately 75 percent of our cost of sales accounted for by raw materials, our financial results are extremely sensitive to changing costs in this area. 14 Table of Contents The pace of economic growth directly impacts certain industries to which we supply products.
With approximately 75 percent of our cost of sales accounted for by raw materials, our financial results are extremely sensitive to changing costs in this area. The pace of economic growth directly impacts certain industries to which we supply products.
The following table reflects the manner in which free cash flow after dividends is determined and provides a reconciliation of free cash flow after dividends to net cash provided by operating activities, the most directly comparable financial measure calculated and reported in accordance with U.S. GAAP.
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.
Pension Plan Historical Actual Rates of Return Portfolio Equities Income 10-year period 6.3 % 8.4 % 2.6 % 20-year period 7.2 % 7.5 % 5.9 %* * Beginning in 2022, our target allocation migrated from 60 percent equities and 40 percent fixed-income to 55 percent equities and 45 percent fixed income.
Pension Plan Historical Actual Rates of Return Portfolio Equities Income 10-year period 5.4 % 6.9 % 3.0 % 20-year period 6.1 % 6.8 % 4.6 % Beginning in 2022, our target allocation migrated from 60 percent equities and 40 percent fixed-income to 55 percent equities and 45 percent fixed income.
Implementation of Project ONE began in our North America adhesives business in 2014 and, through 2022, we completed implementation of this system in various parts of our business including Latin America (except Brazil), Australia, and various other businesses in North America and EIMEA. During 2023 and beyond, we will continue implementation in North America, EIMEA and Asia Pacific.
Implementation of Project ONE began in our North America adhesives business in 2014 and, through 2024 , we completed implementation of this system in various parts of our business including Latin America (except Brazil), Australia, and various other businesses in North America and EIMEA. During 2025 and beyond, we will continue implementation in North America, EIMEA, Brazil and Asia Pacific.
In assessing the reasonableness of the determined fair values, we also reconciled the aggregate determined fair value of the Company to the Company's market capitalization, which, at the date of our 2022 impairment test, included a 6 percent control premium.
In assessing the reasonableness of the determined fair values, we also reconciled the aggregate determined fair value of the Company to the Company's market capitalization, which, at the date of our 2024 impairment test, included a 16 percent control premium.
For 2022 , the expected long-term rate of return on the target equities allocation was 8.50 percent and the expected long-term rate of return on the target fixed-income allocation was 5.60 percent. The total plan rate of return assumption included an estimate of the effect of diversification and the plan expense.
For 2024 , the expected long-term rate of return on the target equities allocation was 8.50 percent and the expected long-term rate of return on the target fixed-income allocation was 5.62 percent. The total plan rate of return assumption included an estimate of the effect of diversification and the plan expense.
See Note 1 to our Consolidated Financial Statements for further information. Project ONE In December 2012, our Board of Directors approved a multi-year project to replace and enhance our existing core information technology platforms. The scope for this project includes most of the basic transaction processing for the company including customer orders, procurement, manufacturing and financial reporting.
Project ONE In December 2012, our Board of Directors approved a multi-year project to replace and enhance our existing core information technology platforms. The scope for this project includes most of the basic transaction processing for the Company including customer orders, procurement, manufacturing and financial reporting.
The project envisions harmonized business processes for all of our operating segments supported with one standard software configuration. The execution of this project, which we refer to as Project ONE, is being supported by internal resources and consulting services.
The project envisions harmonized business processes for each of our operating segments supported with one standard software configuration. The execution of this project, which we refer to as Project ONE, is being supported by internal resources and consulting servic es.
See reconciliation to net cash provided by operating activities to free cash flow after dividends below. 5 Total debt divided by (total debt plus total stockholders’ equity). Free cash flow after dividends, a non-GAAP financial measure, is defined as net cash provided by operating activities less purchased property, plant and equipment and dividends paid.
See reconciliation to 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.
These factors include: ● Changes in the prices of our raw materials that are primarily derived from refining crude oil and natural gas, ● Global supply of and demand for raw materials, ● Economic growth rates, and ● Currency exchange rates compared to the U.S. dollar.
These factors include: ● Changes in the prices of our raw materials that are primarily derived from refining crude oil and natural gas, ● Global supply of and demand for raw materials, ● Economic growth rates, and ● Currency exchange rates compared to the U.S. dollar. We purchase thousands of raw materials, the majority of which are petroleum/natural gas derivatives.
Discount rates for non-U.S. plans are determined in a manner consistent with the U.S. plans. The expected long-term rat e of return on plan assets assumption for the U.S. pension plan was 7.00 percent in 2022 , 7.25 percent in 2021 and 7.50 percent in 2020 .
Discount rates for non-U.S. plans are determined in a manner consistent with the U.S. plans. The expected long-term rat e of return on plan assets assumption for the U.S. pension plan was 7.75 percent in 2024 , 7.75 percent in 2023 and 7.00 percent in 2022 .
Net periodic pension cost for a given fiscal year is based on assumptions developed at the end of the previous fiscal year. A discount rate change of 0.5 percentage points at December 3, 2022 would impact U.S. pension and other postretirement plan (income) expense by less than $0.1 million (pre-tax) in fiscal 2023.
Net periodic pension cost for a given fiscal year is based on assumptions developed at the end of the previous fiscal year. A discount rate change of 0.5 percentage points at November 30, 2024 would impact U.S. pension and other postretirement plan (income) expense by $0.1 million (pre-tax) in fiscal 2025.
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 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.
Information pertaining to fiscal year 2020 was included in the Company’s Annual Report on Form 10-K for the year ended November 27, 2021, under Part II, Item 7 “Management’s Discussion and Analysis of Financial Position and Results of Operations,” which was filed with the SEC on January 25, 2022.
Information pertaining to fiscal year 2022 was included in the Company’s Annual Report on Form 10-K for the year ended December 2, 2023, under Part II, Item 7 “Management’s Discussion and Analysis of Financial Position and Results of Operations,” which was filed with the SEC on January 24, 2024.
Expenses and liabilities for the pension plans and other postretirement plans are actuarially calculated. These calculations are based on our assumptions related to the discount rate, expected return on assets, projected salary increases and health care cost trend rates.
Also in the U.S., we sponsor other postretirement plans for health care and life insurance benefits. Expenses and liabilities for the pension plans and other postretirement plans are actuarially calculated. These calculations are based on our assumptions related to the discount rate, expected return on assets, projected salary increases and health care cost trend rates.
The historical actual rate of return for the fixed income of 5.9 percent is since inception (16 years, 11 months). The expected long-term rate of return on plan assets assumption for non-U.S. pension plans was a weighted-average of 3.49 percent in 2022 compared to 6.15 percent in 2021 and 6.23 percent in 2020.
The historical actual rate of return for the fixed income of 4.6 percent is since inception (18 years, 11 months). The expected long-term rate of return on plan assets assumption for non-U.S. pension plans was a weighted-average of 5.01 percent in 2024 compared to 5.02 percent in 2023 and 3.49 percent in 2022.
For the Total Indebtedness / TTM EBITDA ratio, TTM EBITDA is adjusted for the pro forma results from Material Acquisitions and Material Divestitures as if the acquisition or divestiture occurred at the beginning of the calculation period.
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.
Of the $75.2 million of cash held outside the U.S., earnings on $73.3 million are indefinitely reinvested outside of the U.S. It is not practical for us to determine the U.S. tax implications of the repatriation of these funds.
Of the $166.4 million of cash held outside the U.S., earnings of $152.5 million are indefinitely reinvested outside of the U.S. It is not practical for us to determine the U.S. tax implications of the repatriation of these funds.
Based upon our analysis of tax positions taken on prior year returns and expected tax positions to be taken for the current year tax returns, we have identified gross uncertain tax positions of $17.6 million as of December 3, 2022 and $13.3 million as of November 27, 2021.
Based upon our analysis of tax positions taken on prior year returns and expected tax positions to be taken for the current year tax returns, we have identified gross uncertain tax positions of $15.6 million as of November 30, 2024 and $14.3 million as of December 2, 2023.
The tables below provide certain information regarding the net revenue and segment operating income of each of our operating segments. Corporate Unallocated includes business acquisition and integration-related charges, organizational restructuring-related charges, the results of business divestitures and costs related to the implementation of Project ONE.
We have three reportable segments: Hygiene, Health and Consumable Adhesives, Engineering Adhesives and Construction Adhesives. The tables below provide certain information regarding the net revenue and operating income of each of our operating segments. Corporate Unallocated includes business acquisition and integration costs, organizational restructuring charges and project costs related to the implementation of Project ONE.
A higher discount rate reduces the present value of the pension obligations. The discount rate for the U.S. pension plan was 5.36 percent at December 3, 2022, 2.76 percent at November 27, 2021 and 2.53 percent at November 28, 2020.
A higher discount rate reduces the present value of the pension obligations. The discount rate for the U.S. pension plan was 5.23 percent at November 30, 2024, 5.66 percent at December 2, 2023 and 5.36 percent at December 3, 2022.
Total expenditures for Project ONE are estimated to be $200 to $210 million, of which 55-60% is expected to be capital expenditures. Our total project-to-date expenditures are approximatel y $163 million, of which approximately $94 million are capital expenditures. Given the complexity of the implementation, the total investment to complete the project may exceed our estimate.
Total expenditures for Project ONE are estimated to be $270 to $290 million, of which 60 - 65% is expected to be capital expenditures. Our total project-to-date expenditures are approximately $230 million, of which approximately $140 million are capital expenditures. Given the complexity of the implementation, the total investment to complete the project may exceed our estimate.
There are no contractual or regulatory restrictions on the ability of consolidated and unconsolidated subsidiaries to transfer funds in the form of cash dividends, loans or advances to us, except for: 1) a credit facility limitation restricting investments, loans, advances or capital contributions from Loan Parties to non-Loan Parties in excess of $100.0 million, 2) a credit facility limitation that provides total investments, loans, advances or guarantees not otherwise permitted in the credit agreement for all subsidiaries shall not exceed $125.0 million in the aggregate, 3) a credit facility limitation that provides total investments, dividends, and distributions shall not exceed the Available Amount defined in these agreements, all three of which do not apply once our secured leverage ratio drops below 4.0x and 4) typical statutory restrictions, which prohibit distributions in excess of net capital or similar tests.
Our credit facilities have the following restrictions related to investments and general limitations: 1) a credit facility limitation restricting investments, loans, advances or capital contributions from Loan Parties to non-Loan Parties in excess of $150.0 million, 2) a credit facility limitation that provides total investments, loans, advances or guarantees not otherwise permitted in the credit agreement for all subsidiaries shall not exceed $150.0 million in the aggregate, 3) a credit facility limitation that provides total investments, dividends, and distributions shall not exceed the Available Amount defined in these agreements, all three of which do not apply when our secured leverage ratio is below 4.0x, and 4) typical statutory restrictions, which prohibit distributions in excess of net capital or similar tests.
Results of Operations Net revenue ($ in millions) 2022 2021 2022 vs 2021 Net revenue $ 3,749.2 $ 3,278.0 14.4 % 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.
Results of Operations Net revenue ($ in millions) 2024 2023 2024 vs 2023 Net revenue $ 3,568.7 $ 3,510.9 1.6 % 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.
December 3, November 27, 2022 2021 Net working capital as a percentage of annualized net revenue 1 16.7 % 15.7 % Trade receivables DSO (in days) 2 62 62 Inventory days on hand (in days) 3 71 65 Free cash flow after dividends 4 $ 87.3 $ 82.3 Debt capitalization ratio 5 52.3 % 50.2 % 1 Current quarter 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 4). 2 Trade receivables net of allowance for doubtful accounts multiplied by 91 (13 weeks) and divided by the net revenue for the quarter. 3 Total inventory multiplied by 91 and divided by cost of sales (excluding delivery costs) for the quarter. 4 Net cash provided by operating activities less purchased property, plant and equipment and dividends paid.
November 30, December 2, 2024 2023 Net working capital as a percentage of annualized net revenue 1 14.5 % 16.1 % Trade receivables DSO (in days) 2 55 58 Inventory days on hand (in days) 3 67 67 Trade accounts payable DPO (in days) 4 68 64 Free cash flow 5 $ 163.2 $ 259.3 Debt capitalization ratio 6 50.8 % 51.1 % 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 4). 2 Trade receivables net of 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 the net revenue for the quarter. 5 Net cash provided by operating activities less purchased property, plant and equipment.
Total long and short-term debt was $1,765.1 million as of December 3, 2022 and $1,616.5 million as of November 27, 2021. We believe that cash flows from operating activities will be adequate to meet our short-term and long-term liquidity and capital expenditure needs.
Total long and short-term debt was $2,010.6 million as of November 30, 2024 and $1,838.4 million as of December 2, 2023. We believe that cash flows from operating activities will be adequate to meet our short-term and long-term liquidity and capital expenditure needs.
For the 2022 impairment test, the fair value of the reporting units exceeded the respective carrying values by 10 percent to 84 percent ("headroom"). Significant assumptions used in the DCF analysis included discount rates that ranged from 9.4 percent to 10.9 percent and long-term revenue growth rates.
For the 2024 impairment test, the fair value of the reporting units exceeded the respective carrying values by 20 percent to 147 percent. Significant assumptions used in the DCF analysis included discount rates that ranged from 9.1 percent to 10.1 percent and long-term revenue growth rates. See Note 5 to the Consolidated Financial Statements for further information regarding goodwill.
Raw material costs as a percentage of net revenue increased 150 basis points due to higher raw material costs partially offset by higher net revenue. Other manufacturing costs as a percentage of net revenue decreased 160 basis points primarily due to higher net revenue and the impact of acquisitions.
SG&A expenses as a percentage of net revenue decreased 190 basis points due to increased net revenue, partially offset by the impact of acquisitions and higher compensation costs.
Construction Adhesives ($ in millions) 2022 2021 2022 vs 2021 Net revenue $ 520.6 $ 433.5 20.1 % Segment operating income (loss) $ 23.0 $ 14.1 63.1 % Segment profit margin % 4.4 % 3.3 % The following tables provide details of Construction Adhesives net revenue variances: 2022 vs 2021 Organic revenue growth 7.0 % Extra week (53 week year) 1.9 % M&A 12.4 % Currency (1.2 )% Net revenue growth 20.1 % Net revenue increased 20.1 percent in 2022 compared to 2021.
Construction Adhesives ($ in millions) 2024 2023 2024 vs 2023 Net revenue $ 563.2 $ 480.7 17.2 % Segment operating income (loss) $ 25.3 $ 6.0 321.7 % Segment profit margin % 4.5 % 1.2 % The following tables provide details of Construction Adhesives net revenue variances: 2024 vs 2023 Organic revenue growth 9.5 % M&A 7.5 % Currency 0.2 % Net revenue growth 17.2 % Net revenue increased 17.2 percent in 2024 compared to 2023.
The lower use of cash in 2022 compared to 2021 was related to higher collections in the current year compared to the prior year.
The lower source of cash in 2024 compared to 2023 was related to lower collections in the current year compared to the prior year.
Enterprise value allocation methodology requires management to make assumptions and apply judgment to estimate the fair value of assets acquired and liabilities assumed.
We complete valuation procedures and record the resulting fair value of the acquired assets and assumed liabilities based upon the valuation of the business enterprise and the tangible and intangible assets acquired. Enterprise value allocation methodology requires management to make assumptions and apply judgment to estimate the fair value of assets acquired and liabilities assumed.
Increases in the valuation allowance result in additional expense to be reflected within the tax provision in the Consolidated Statements of Income. As of December 3, 2022, the valuation allowance to reduce deferred tax assets totaled $14.4 million.
Increases in the valuation allowance result in additional expense to be reflected within the tax provision in the Consolidated Statements of Income. The valuation allowance to reduce deferred tax assets totaled $11.7 million as of November 30, 2024, and $15.6 million as of December 2, 2023.
There were no repurchases from our share repurchase program in 2022 and 2021. We are subject to mandatory prepayments in the first quarter of each fiscal year equal to 50% of Excess Cash Flow, as defined in the Term Loan B Credit Agreement, of the prior fiscal year less any voluntary prepayments made during that fiscal year.
We are subject to mandatory prepayments in the first quarter of each fiscal year equal to 50 percent of Excess Cash Flow, as defined in our debt agreement, of the prior fiscal year less any voluntary prepayments made during that fiscal year.
As a percentage of net revenue, raw material costs increased 300 basis points due to higher raw material costs partially offset by higher net revenue. Other manufacturing costs as a percentage of net revenue decreased 250 basis points due to higher net revenue.
As a percentage of net r evenue, raw material costs decreased 80 basis points due to lower raw material costs. Other manufacturing costs as a percentage of net revenue decreased 60 basis points due to higher sales volume, partially offset by lower product pricing.
Raw material cost as a percentage of net revenue increased 230 basis points in 2022 compared to 2021 due to higher raw material costs.
Raw material cost as a percentage of net revenue decreased 210 basis points in 2024 compared to 2023 due to lower raw material costs.
Excluding the discrete tax expense of $4.3 million, the overall effective tax rate was 27.1 percent. The decrease in the overall effective tax rate for 2022 compared to 2021 , excluding the impact of discrete items, is primarily due to the change in the foreign rate differential resulting from a change in mix of earnings across jurisdictions.
Excluding the discrete tax expense of $26.1 million, the overall effective tax rate was 28.8 percent. The increase in the overall effective tax rate for 2024 compared to 2023 , excluding the impact of discrete items, is primarily due to the change in the mix of earnings across jurisdictions.
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.
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.
The negative 5.8 percent currency impact was primarily driven by a weaker Euro, Turkish lira, Chinese renminbi, British pound and Argentinian peso compared to the U.S. dollar.
The negative 1.0 percent currency impact was primarily driven by a weaker Egyptian pound, Turkish lira, Brazilian real, Chinese renminbi and Chilean peso offset by a stronger Euro, British pound sterling and Colombian peso compared to the U.S. d ollar.
The following table shows the net revenue variance analysis for fiscal 2022 compared to fiscal 2021: 2022 vs 2021 Organic revenue growth 16.6 % Extra week (53 week year) 2.0 % M&A 1.6 % Currency (5.8 )% Net revenue growth 14.4 % Organic revenue growth was 16.6 percent in 2022 compared to 2021 driven by a 20.0 percent increase in Hygiene, Health and Consumable Adhesives, a 15.9 percent increase in Engineering Adhesives and a 7.0 percent increase in Construction Adhesives.
The following table shows the net revenue variance analysis for fiscal 2024 compared to fiscal 2023. 2024 vs 2023 Organic revenue growth (1.0 )% M&A 3.6 % Currency (1.0 )% Net revenue growth 1.6 % Organic revenue in 2024 compared to 2023 decreased 1.0 percent and consisted of a 9.5 percent increase in Construction Adhesives, a 4.0 percent decrease in Hygiene, Health and Consumable Adhesives and a 1.0 percent decrease in Engineering Adhesives.
Segment operating income increased 63.1 percent and segment operating margin increased 110 basis points compared to 2021. 22 Table of Contents Corporate Unallocated ($ in millions) 2022 2021 2022 vs 2021 Segment operating loss $ (34.9 ) $ (35.8 ) (2.5 )% Segment profit margin % NMP NMP NMP = Non-meaningful percentage Corporate Unallocated includes acquisition and integration-related charges, restructuring-related charges, the results of business divestitures and costs related to the implementation of Project ONE.
Segment operating income increased 321.7 percent and segment operating margin as a percentage of net revenue increased 330 basis points in 2024 as compared to 2023. 30 Table of Contents Corporate Unallocated ($ in millions) 2024 2023 2024 vs 2023 Segment operating loss $ (57.5 ) $ (53.3 ) 7.9 % Segment profit margin % NMP NMP NMP = Non-meaningful percentage Corporate Unallocated includes acquisition and integration-related charges, restructuring-related charges and costs related to the implementation of Project ONE.
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.
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.
The 7.0 percent increase in organic growth was attributable to favorable product pricing, partially offset by lower sales volume. The increase in net revenue from M&A was primarily due to the acquisitions of Fourny and Apollo during the first quarter of 2022.
The 1.0 percent decrease in organic revenue growth was attributable to a decrease in product pricing, partially offset by an increase in sales volume. The 3.7 percent increase in net revenue from M&A was due to the acquisition of ND Industries in the second quarter of 2024.
See Note 5 to the Consolidated Financial Statements for further information regarding goodwill. 16 Table of Contents Pension and Other Postretirement Plan Assumptions We sponsor defined-benefit pension plans in both the U.S. and non-U.S. entities. Also in the U.S., we sponsor other postretirement plans for health care and life insurance benefits.
See Note 2 to the Consolidated Financial Statements for further information regarding the impairment of goodwill associated with the North America Flooring business that is held for sale. Pension and Other Postretirement Plan Assumptions We sponsor defined-benefit pension plans in both the U.S. and non-U.S. entities.
Income from equity method investments ($ in millions) 2022 2021 Income from equity method investments $ 5.7 $ 7.7 The income from equity method investments relates to our 50 percent ownership of the Sekisui-Fuller joint venture in Japan.
Income from equity method investments ($ in millions) 2024 2023 Income from equity method investments $ 4.1 $ 4.4 The income from equity method investments relates to our 50 percent ownership of the Sekisui-Fuller joint venture in Japan. The lower income for 2024 compared to 2023 is due to the lower net income in our joint venture for the year.
Acquisition Accounting As we enter into business combinations, we perform acquisition accounting requirements including the following: ● Identifying the acquirer, ● Determining the acquisition date, ● Recognizing and measuring the identifiable assets acquired and the liabilities assumed, and ● Recognizing and measuring goodwill or a gain from a bargain purchase. 18 Table of Contents We complete valuation procedures and record the resulting fair value of the acquired assets and assumed liabilities based upon the valuation of the business enterprise and the tangible and intangible assets acquired.
See Note 11 to the Consolidated Financial Statements for further information on income tax accounting. 25 Table of Contents Acquisition Accounting As we enter into business combinations, we perform acquisition accounting requirements including the following: ● Identifying the acquirer, ● Determining the acquisition date, ● Recognizing and measuring the identifiable assets acquired and the liabilities assumed, and ● Recognizing and measuring goodwill or a gain from a bargain purchase.
The components of goodwill and other identifiable intangible assets, net of amortization, by segment are as follows: 2022 Hygiene, Health and Consumable Engineering Construction ($ in millions) Adhesives Adhesives Adhesives Total Goodwill $ 329.0 $ 637.9 $ 425.7 $ 1,392.6 Purchased technology and patents 5.7 31.5 15.1 52.3 Customer relationships 105.8 228.5 281.3 615.6 Tradenames 4.5 14.6 9.8 28.9 Other finite-lived intangible assets 1.9 0.1 2.8 4.8 Indefinite-lived intangible assets - 0.5 - 0.5 2021 Hygiene, Health and Consumable Engineering Construction ($ in millions) Adhesives Adhesives Adhesives Total Goodwill $ 325.4 $ 662.0 $ 311.4 $ 1,298.8 Purchased technology and patents 7.0 36.4 10.2 53.6 Customer relationships 108.0 253.9 235.6 597.5 Tradenames 4.6 16.5 8.7 29.8 Other finite-lived intangible assets 2.3 0.2 3.2 5.7 Indefinite-lived intangible assets - 0.5 - 0.5 25 Table of Contents Selected Metrics of Liquidity and Capital Resources Key metrics we monitor are net working capital as a percent of annualized net revenue, trade receivables days sales outstanding (DSO), inventory days on hand, free cash flow after dividends and debt capitalization ratio.
Goodwill and Other Intangible Assets As of November 30, 2024, goodwill totaled $1,532.2 million (31.1 percent of total assets) and other intangible assets, net of accumulated amortization, totaled $770.2 million (15.6 percent of total assets). 33 Table of Contents The components of goodwill and other identifiable intangible assets, net of amortization, by segment are as follows: 2024 Hygiene, Health and Consumable Engineering Construction ($ in millions) Adhesives Adhesives Adhesives Total Goodwill $ 399.5 $ 726.7 $ 406.0 $ 1,532.2 Purchased technology and patents 37.5 38.1 14.0 89.6 Customer relationships 111.2 309.8 217.8 638.8 Tradenames 9.2 19.7 9.5 38.4 Other finite-lived intangible assets 1.0 - 2.0 3.0 Indefinite-lived intangible assets - 0.5 - 0.5 2023 Hygiene, Health and Consumable Engineering Construction ($ in millions) Adhesives Adhesives Adhesives Total Goodwill $ 402.6 $ 651.1 $ 432.8 $ 1,486.5 Purchased technology and patents 41.7 28.9 14.5 85.1 Customer relationships 126.8 226.9 250.6 604.3 Tradenames 11.6 13.6 10.2 35.4 Other finite-lived intangible assets 1.5 - 2.4 3.9 Indefinite-lived intangible assets - 0.5 - 0.5 34 Table of Contents Selected Metrics of Liquidity and Capital Resources Key metrics we monitor are net working capital as a percent of annualized net revenue, trade receivables days sales outstanding (DSO), inventory days on hand, free cash flow and debt capitalization ratio.
Reconciliation of “Net cash provided by operating activities” to "Free cash flow after dividends" ($ in millions) 2022 2021 Net cash provided by operating activities $ 256.5 $ 213.3 Less: Purchased property, plant and equipment 130.0 96.1 Less: Dividends paid 39.2 34.9 Free cash flow after dividends $ 87.3 $ 82.3 Summary of Cash Flows Cash Flows from Operating Activities ($ in millions) 2022 2021 Net cash provided by operating activities $ 256.5 $ 213.3 Net income including non-controlling interest was $180.4 million in 2022 and $161.5 million in 2021.
GAAP. 35 Table of Contents Reconciliation of “Net cash provided by operating activities” to "Free cash flow" ($ in millions) 2024 2023 Net cash provided by operating activities $ 302.4 $ 378.4 Less: Purchased property, plant and equipment 139.2 119.1 Free cash flow $ 163.2 $ 259.3 Summary of Cash Flows Cash Flows from Operating Activities ($ in millions) 2024 2023 Net cash provided by operating activities $ 302.4 $ 378.4 Net income including non-controlling interest was $130.4 million in 2024 and $145.0 million in 2023.
Following is an assessment of each of the net working capital components: ● Trade Receivables, net – Changes in trade receivables resulted in a $24.8 million use of cash in 2022 compared to a $124.8 million use of cash in 2021.
Following is an assessment of each of the net working capital components: ● Trade Receivables, net – Changes in trade receivables resulted in a $10.7 million and $68.7 million source of cash in 2024 and 2023, respectively.
The increase was driven by a 15.4 percent increase in product pricing and a 1.2 percent increase in sales volume. The 1.6 percent from M&A is due to the acquisitions of Fourny and Apollo.
The decrease was driven by a 2.6 percent decrease in product pricing, partially offset by a 1.6 percent increase in sales volume. The 3.6 percent increase from M&A was due to our acquisitions that occurred during the last year.
The DSO was 62 days at December 3, 2022 and November 27, 2021. ● Inventory – Changes in inventory resulted in a $55.8 million use of cash in 2022 compared to a $135.4 million use of cash in 2021.
The DSO was 55 days at November 30, 2024 and 58 days at December 2, 2023. ● Inventory – Changes in inventory resulted in a $30.1 million use of cash in 2024 compared to a $72.6 million source of cash in 2023.
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.
This Annual Report on Form 10-K 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.
Cash paid for dividends were $39.2 million and $34.9 million in 2022 and 2021, respectively. Cash generated from the exercise of stock options was $30.1 million and $32.3 million in 2022 and 2021, respectively. Repurchases of common stock related to statutory minimum tax withholding upon vesting of restricted stock were $4.0 million in 2022 compared to $2.7 million in 2021.
Cash generated from the exercise of stock options was $35.9 million and $14.6 million in 2024 and 2023, respectively. Indirect repurchases of common stock through a net-settlement feature related to statutory minimum tax withholding upon vesting of restricted stock were $7.8 million in 2024 compared to $2.6 million in 2023.
Net Financial Assets (Liabilities) ($ in millions) 2022 2021 Financial assets: Cash and cash equivalents $ 79.9 $ 61.8 Foreign exchange contracts 10.3 5.7 Cash flow hedges - 14.5 Financial liabilities: Notes payable (28.9 ) (25.0 ) Long-term debt (1,736.3 ) (1,591.5 ) Foreign exchange contracts (4.6 ) (6.1 ) Interest rate and cross currency swaps (42.5 ) (22.9 ) Net investment hedges (54.0 ) - Net financial liabilities $ (1,776.1 ) $ (1,563.5 ) Of the $79.9 million in cash and cash equivalents as of December 3, 2022, $75.2 million was held outside the U.S.
Net Financial Assets (Liabilities) ($ in millions) 2024 2023 Financial assets: Cash and cash equivalents $ 169.4 $ 179.5 Foreign exchange contracts 2.1 13.5 Interest rate swaps 1.8 3.6 Financial liabilities: Notes payable (0.6 ) (1.8 ) Long-term debt (2,010.1 ) (1,836.6 ) Foreign exchange contracts (7.1 ) (5.0 ) Interest rate swaps (33.0 ) (41.6 ) Net investment hedges 51.9 (72.6 ) Net financial liabilities $ (1,825.6 ) $ (1,761.1 ) Of the $169.4 million in cash and cash equivalents as of November 30, 2024, $166.4 million was held outside the U.S.
Operating Segment Results 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. For segment evaluation by the chief operating decision maker, segment operating income is defined as gross profit less SG&A expenses.
Diluted earnings per share were $2.30 per share in 2024 and $2.59 per share in 2023. Operating Segment Results We are required to report segment information in the same way that we internally organize our business for assessing performance and making decisions regarding allocation of resources.
($ in millions) 2022 2021 Segment operating income $ 322.7 $ 252.6 Other income, net 12.9 32.9 Interest expense (91.5 ) (78.1 ) Interest income 7.8 9.5 Income before income taxes and income from equity method investments $ 251.9 $ 216.9 21 Table of Contents Hygiene, Health and Consumable Adhesives ($ in millions) 2022 2021 2022 vs 2021 Net revenue $ 1,695.9 $ 1,472.7 15.2 % Segment operating income $ 165.8 $ 138.4 19.8 % Segment profit margin % 9.8 % 9.4 % The following tables provide details of Hygiene, Health and Consumable Adhesives net revenue variances: 2022 vs 2021 Organic revenue growth 20.0 % Extra week (53 week year) 2.1 % Currency (6.9 )% Net revenue growth 15.2 % Net revenue increased 15.2 percent in 2022 compared to 2021.
($ in millions) 2024 2023 Segment operating income $ 348.2 $ 355.1 Other (expense) income, net (37.1 ) 9.8 Interest expense (133.1 ) (134.6 ) Interest income 4.7 3.9 Income before income taxes and income from equity method investments $ 182.7 $ 234.2 Hygiene, Health and Consumable Adhesives ($ in millions) 2024 2023 2024 vs 2023 Net revenue $ 1,546.4 $ 1,601.5 (3.4 )% Segment operating income $ 187.4 $ 215.1 (12.9 )% Segment profit margin % 12.1 % 13.4 % The following tables provide details of Hygiene, Health and Consumable Adhesives net revenue variances: 2024 vs 2023 Organic revenue growth (4.0 )% M&A 2.3 % Currency (1.7 )% Net revenue growth (3.4 )% Net revenue decreased 3.4 percent in 2024 compared to 2023.
We have incurred costs of $20.3 million under this plan as of December 3, 2022, which is substantially complete. 15 Table of Contents Critical Accounting Policies and Significant Estimates Management’s discussion and analysis of our results of operations and financial condition are based upon the Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America.
The restructuring costs will be spread across the next several fiscal quarters as the measures are implemented with the majority of the charges recognized and cash payments occurring in fiscal 2023 and 2024. 22 Table of Contents Critical Accounting Policies and Significant Estimates Management’s discussion and analysis of our results of operations and financial condition are based upon the Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America.
We entered into interest rate swap agreements to convert $150.0 million of our $300.0 million Public Notes that were issued on February 14, 2017 to a variable interest rate of 1-month LIBOR plus 1.86 percent. See Note 7 to the Consolidated Financial Statements for further discussion on the issuance of our Public Notes.
We currently have no intention to prepay the Public Notes. On February 12, 2021, we entered into an interest rate swap agreement to convert our 8-year Public Notes to a variable interest rate of 1-month LIBOR plus 3.28 percent. See Note 12 to the Consolidated Financial Statements for further discussion of this interest rate swap.
Interest on the revolving credit facility is payable at the SOFR plus a credit spread adjustment (0.11448 percent) plus 1.75 percent (5.94 percent at December 3, 2022). A facility fee of 0.25 percent of the unused commitment under the revolving credit facility is payable quarterly. The interest rate and the facility fee are based on a leverage grid.
Interest on the revolving credit facility is payable at SOFR plus an adjustment of 0.10 percent and an interest rate spread of 1.50 percent (6.17 percent at November 30, 2024). A facility fee of 20 basis points of the unused commitment under the revolving credit facility is payable quarterly.
Reserves for loss contingencies associated with these matters are established when it is determined that a liability is probable and the amount can be reasonably estimated. The assessment of the probable liabilities is based on the facts and circumstances known at the time that the financial statements are being prepared.
The assessment of the probable liabilities is based on the facts and circumstances known at the time that the financial statements are being prepared.
Segment operating loss increased 2.5 percent in 2022 reflecting increased acquisition project costs compared to 2021. Financial Condition, Liquidity and Capital Resources Total cash and cash equivalents as of December 3, 2022 were $79.9 million compared to $61.8 million as of November 27, 2021.
Segment operating loss increased 7.9 percent in 2024 compared to 2023 due to higher restructuring costs , partia lly offset by lower acquisition project costs and a gain on insurance claims. Financial Condition, Liquidity and Capital Resources Total cash and cash equivalents as of November 30, 2024 were $169.4 million compared to $179.5 million as of December 2, 2023.
The fluctuations of the Euro, the Tur kish lira and the Chinese renminbi against the U.S. dollar have the largest impact on our financial results as compared to all other currencies. In 2022, currency fluctuations had a negative impact on net revenue of approximately $191.7 million as compared to 2021.
The fluctuations of the Euro, Chinese renminbi, British pound sterling, Egyptian pound, Turkish lira, Brazilian real, Chilean peso and Colombian peso against the U.S. dollar have the largest impact on our financial results as compared to all other currencies.
Segment operating income increased 24.2 percent and segment operating margin increased 110 basis points compared to 2021.
Segment operating income increased 3.0 percent and segment operating margin increased 10 basis points in 2024 as compared to 2023.
Inter-segment revenues are recorded at cost plus a markup for administrative costs. Corporate expenses, other than those included in Corporate Unallocated, are allocated to each operating segment. We have three reportable segments: Hygiene, Health and Consumable Adhesives, Engineering Adhesives and Construction Adhesives.
For segment evaluation by the chief operating decision maker, segment operating income is defined as gross profit less SG&A expenses. Inter-segment revenues are recorded at cost plus a markup for administrative costs. Corporate expenses, other than those included in Corporate Unallocated, are allocated to each operating segment.
Inventory days on hand were 71 days at the end of 2022 compared to 65 days at the end of 2021. ● Trade Payables – Changes in trade payables resulted in a $22.6 million use of cash in 2022 and a $176.3 million source of cash in 2021.
Inventory days on hand were 67 days at November 30, 2024 and December 2, 2023. ● Trade Payables – Changes in trade payables resulted in a $47.9 million source of cash in 2024 compared to a $57.8 million use of cash in 2023.
Debt Outstanding and Debt Capacity Notes Payable Notes payable were $28.9 million at December 3, 2022 and $25.0 million at November 27, 2021. These amounts primarily represented various foreign subsidiaries’ short-term borrowings that were not part of committed lines. The weighted-average interest rates on these short-term borrowings were 16.2 percent in 2022 and 8.1 percent in 2021.
Additionally, we have taken the income tax position that the majority of our cash in non-U.S. locations is indefinitely reinvested. Debt Outstanding and Debt Capacity Notes Payable Notes payable were $0.6 million at November 30, 2024 and $1.8 million at December 2, 2023. These amounts primarily represented various foreign subsidiaries’ short-term borrowings that were not part of committed lines.
SG&A expenses as a percentage of net revenue decreased 100 basis points also due to higher net revenue.
Other manufacturing costs as a percentage of net revenue increased 100 basis points due to lower product pricing and the impact of acquisitions. SG&A expenses as a percentage of net revenue increased 150 basis points due to the impact of acquisitions, lower net revenue and higher compensation costs.
Proceeds from the sale of property, plant and equipment were $1.6 million in 2022 compared to $2.9 million in 2021. Purchased businesses, net of cash acquired, were $250.8 million in 2022 compared to $5.4 million in 2021.
The higher purchases in 2024 reflect the timing of capital projects and expenditures related to growth initiatives. Proceeds from the sale of property, plant and equipment were $1.2 million in 2024 compared to $5.0 million in 2023. We paid cash, net of cash acquired, of $273.9 million and $205.1 million for purchased businesses in 2024 and 2023, respectively.
Engineering Adhesives ($ in millions) 2022 2021 2022 vs 2021 Net revenue $ 1,532.7 $ 1,371.8 11.7 % Segment operating income $ 168.8 $ 135.9 24.2 % Segment profit margin % 11.0 % 9.9 % The following tables provide details of Engineering Adhesives net revenue variances: 2022 vs 2021 Organic revenue growth 15.9 % Extra week (53 week year) 2.0 % Currency (6.2 )% Net revenue growth 11.7 % Net revenue increased 11.7 percent in 2022 compared to 2021.
Segment operating income decreased 12.9 percent and segment operating margin as a percentage of net revenue decreased 130 basis points in 2024 as compared to 2023. 29 Table of Contents Engineering Adhesives ($ in millions) 2024 2023 2024 vs 2023 Net revenue $ 1,459.1 $ 1,428.7 2.1 % Segment operating income $ 193.0 $ 187.3 3.0 % Segment profit margin % 13.2 % 13.1 % The following tables provide details of Engineering Adhesives net revenue variances: 2024 vs 2023 Organic revenue growth (1.0 )% M&A 3.7 % Currency (0.6 )% Net revenue growth 2.1 % Net revenue increased 2.1 percent in 2024 compared to 2023.
Other manufacturing costs as a percentage of net revenue decreased 220 basis points in 2022 compared to 2021 due to higher net revenue. 19 Table of Contents Gross profit ($ in millions) 2022 2021 2022 vs 2021 Gross profit $ 963.7 $ 845.3 14.0 % Percent of net revenue 25.7 % 25.8 % Gross profit in 2022 increased 14.0 percent and gross profit margin decreased 10 basis points compared to 2021.
Other manufacturing costs as a percentage of net revenue increased 100 basis points in 2024 compared to 2023 primarily due to a decrease in product pricing partially offset by higher sales volume. 26 Table of Contents Gross profit ($ in millions) 2024 2023 2024 vs 2023 Gross profit $ 1,061.9 $ 1,008.9 5.3 % Percent of net revenue 29.8 % 28.7 % Gross profit in 2024 increased 5.3 percent and gross profit margin increased 110 basis points compared to 2023.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeOur financial performance may be negatively affected by unfavorable economic conditions. Recessionary economic conditions may have an adverse impact on our sales volumes, pricing levels and profitability. As domestic and international economic conditions change, trends in discretionary consumer spending also become unpredictable and subject to reductions due to uncertainties about the future.
Biggest changeMarket risk is the potential loss arising from adverse changes in market rates and prices, such as interest rates and foreign currency exchange rates. 37 Table of Contents Our financial performance may be negatively affected by unfavorable economic conditions. Recessionary economic conditions may have an adverse impact on our sales volumes, pricing levels and profitability.
Foreign Exchange Risk As a result of being a global enterprise, there is exposure to market risks from changes in foreign currency exchange rates. Our operating results, financial condition and net investment in foreign subsidiaries are subject to both currency translation and currency transaction risk. Approximately 55 percent of net revenue was generated outside of the United States in 2022.
Foreign Exchange Risk As a result of being a global enterprise, there is exposure to market risks from changes in foreign currency exchange rates. Our operating results, financial condition and net investment in foreign subsidiaries are subject to both currency translation and currency transaction risk. Approximately 55 percent of net revenue was generated outside of the United States in 2024.
Committed floating rate credit facilities are used to fund a portion of operations. We believe that probable near-term changes in interest rates would not materially affect financial condition, results of operations or cash flows.
Interest Rate Risk Exposure to changes in interest rates results primarily from borrowing activities used to fund operations. Committed floating rate credit facilities are used to fund a portion of operations. We believe that probable near-term changes in interest rates would not materially affect our financial condition, results of operations or cash flows.
Based on 2022 financial results, a hypothetical one percent change in our cost of sales due to foreign currency rate changes would have resulted in a change in net income attributable to H.B. Fuller of approximately $10.5 million or $0.19 per diluted share.
Based on 2024 financial results, a hypothetical one percent change in our cost of sales due to foreign currency rate changes would have resulted in a change in net income attributable to H.B. Fuller of approximately $8.4 million or $0.15 per diluted share.
Principal foreign currency exposures relate to the Euro, British pound sterling, Canadian dollar, Chinese renminbi, Japanese yen, Australian dollar, Argentine peso, Brazilian real, Colombian peso, Mexican peso, Turkish lira, Egyptian pound, Indian rupee, Indonesian rupiah and Malaysian ringgit. We enter into cross border transactions through importing and exporting goods to and from different countries and locations.
Principal foreign currency exposures relate to the Euro, Chinese renminbi, British pound sterling, Egyptian pound, Turkish lira, Brazilian real, Canadian dollar, Australian dollar and Mexican peso . We enter into cross border transactions through importing and exporting goods to and from different countries and locations.
Based on 2022 financial results and foreign currency balance sheet positions as of December 3, 2022, a hypothetical overall 10 percent change in the U.S. dollar would have resulted in a change in net income of approximately $16.4 million or $0.30 per diluted share.
Based on 2024 financial results and foreign currency balance sheet positions as of November 30, 2024, a hypothetical overall 10 percent change in the U.S. dollar would have resulted in a change in net income of approximately $15.7 million or $0.28 per diluted share.
The annual impact on interest expense of a one-percentage point interest rate change on the outstanding balance of our variable rate debt, net of interest rate swap derivatives as of December 3, 2022, would have resulted in a change in net income of approximately $10.7 million or $0.19 per diluted share.
The annual impact on interest expense of a one-percentage point interest rate change on the outstanding balance of our variable rate debt, net of interest rate swap derivatives as of November 30, 2024, would have resulted in a change in net income of approximately $6.0 million or $0.11 per diluted share.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk Market Risk We are exposed to various market risks, including changes in interest rates, foreign currency rates and prices of raw materials. Market risk is the potential loss arising from adverse changes in market rates and prices, such as interest rates and foreign currency exchange rates.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk Market Risk We are exposed to various market risks, including changes in interest rates, foreign currency rates and prices of raw materials.
A general reduction in consumer discretionary spending due to a recession in the domestic and international economies, or uncertainties regarding future economic prospects, could have a material adverse effect on our results of operations. Interest Rate Risk Exposure to changes in interest rates results primarily from borrowing activities used to fund operations.
As domestic and international economic conditions change, trends in discretionary consumer spending also become unpredictable and subject to reductions due to uncertainties about the future. A general reduction in consumer discretionary spending due to a recession in the domestic and international economies, or uncertainties regarding future economic prospects, could have a material adverse effect on our results of operations.
Recently Issued Accounting Pronouncements See Note 1 to the Consolidated Financial Statements for information concerning new accounting standards and the impact of the implementation of these standards on our financial statements. 28 Table of Contents
Based on 2024 financial results, a hypothetical one percent change in our raw material costs would have resulted in a change in net income of approximately $12.0 million or $0.21 per diluted share. 38 Table of Contents Recently Issued Accounting Pronouncements See Note 1 to the Consolidated Financial Statements for information concerning new accounting standards and the impact of the implementation of these standards on our financial statements.
Removed
Based on 2022 financial results, a hypothetical one percent change in our raw material costs would have resulted in a change in net income of approximately $15.7 million or $0.28 per diluted share. See Item 1A. Risk Factors for a discussion of the effects of the COVID-19 pandemic on raw material cost and availability.

Other FUL 10-K year-over-year comparisons