FULLER H B CO [FUL] Filings

10-Q 1 ful20240831_10q.htm FORM 10-Q ful20240831_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended August 31, 2024

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission file number: 001-09225

H.B. FULLER COMPANY

(Exact name of registrant as specified in its charter)

Minnesota	41-0268370
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

1200 Willow Lake Boulevard, St. Paul, Minnesota	55110-5101
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (651) 236-5900

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to section 12(b) of the Act:

Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, par value $1.00 per share	FUL	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ☒	Accelerated filer ☐
Non-accelerated filer ☐	Smaller reporting company ☐
	Emerging growth company ☐

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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12(b) of the Exchange Act. Yes ☐ No ☒

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PROCEEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☐ No ☐

APPLICABLE ONLY TO CORPORATE ISSUERS

The number of shares outstanding of the Registrant’s Common Stock, par value $1.00 per share, was 54,627,124 as of September 20, 2024.

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H.B. Fuller Company

Quarterly Report on Form 10-Q

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		Page
PART 1. FINANCIAL INFORMATION

ITEM 1.	FINANCIAL STATEMENTS (Unaudited)	4

	Consolidated Statements of Income for the three and nine months ended August 31, 2024 and September 2, 2023	4

	Consolidated Statements of Comprehensive Income for the three and nine months ended August 31, 2024 and September 2, 2023	5

	Consolidated Balance Sheets as of August 31, 2024 and December 2, 2023	6

	Consolidated Statements of Total Equity for the three months and nine months ended August 31, 2024 and September 2, 2023	7

	Consolidated Statements of Cash Flows for the nine months ended August 31, 2024 and September 2, 2023	8

	Notes to Consolidated Financial Statements	9

ITEM 2.	MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	27

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	41

ITEM 4.	CONTROLS AND PROCEDURES	41

PART II. OTHER INFORMATION		42

ITEM 1.	LEGAL PROCEEDINGS	42

ITEM 1A.	RISK FACTORS	42

ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	43

ITEM 6.	EXHIBITS	43

SIGNATURES		44

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

H.B. FULLER COMPANY AND SUBSIDIARIES

Consolidated Statements of Income

(In thousands, except per share amounts)

(Unaudited)

	*Three Months Ended*						*Nine Months Ended*
	*August 31,*			*September 2,*			*August 31,*			*September 2,*
	*2024*			*2023*			*2024*			*2023*
Net revenue	$	917,927		$	900,634		$	2,645,452		$	2,608,055
Cost of sales		(642,198	)		(637,162	)		(1,848,435	)		(1,873,000	)
Gross profit		275,729			263,472			797,017			735,055
Selling, general and administrative expenses		(171,388	)		(172,153	)		(525,204	)		(493,320	)
Other income, net		2,148			1,555			7,282			4,764
Interest expense		(35,288	)		(35,105	)		(99,504	)		(101,305	)
Interest income		1,092			1,128			3,597			2,726
Income before income taxes and income from equity method investments		72,293			58,897			183,188			147,920
Income taxes		(18,264	)		(22,231	)		(48,496	)		(51,255	)
Income from equity method investments		1,310			984			2,955			3,322
Net income including non-controlling interest		55,339			37,650			137,647			99,987
Net loss (income) attributable to non-controlling interest		22			(23	)		(32	)		(71	)
Net income attributable to H.B. Fuller	$	55,361		$	37,627		$	137,615		$	99,916

Earnings per share attributable to H.B. Fuller common stockholders:
Basic	$	1.01		$	0.69		$	2.51		$	1.84
Diluted	$	0.98		$	0.67		$	2.43		$	1.79

Weighted-average common shares outstanding:
Basic		54,975			54,394			54,874			54,279
Diluted		56,650			56,033			56,620			55,890

Dividends declared per common share	$	0.223		$	0.205		$	0.651		$	0.600

See accompanying Notes to Unaudited Consolidated Financial Statements.

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H.B. FULLER COMPANY AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

(In thousands)

(Unaudited)

	*Three Months Ended*						*Nine Months Ended*
	*August 31,*			*September 2,*			*August 31,*			*September 2,*
	*2024*			*2023*			*2024*			*2023*
Net income including non-controlling interest	$	55,339		$	37,650		$	137,647		$	99,987
Other comprehensive income (loss)
Foreign currency translation		33,355			(8,717	)		(12,932	)		14,058
Defined benefit pension plans adjustment, net of tax		1,270			863			3,808			2,572
Interest rate swaps, net of tax		(25,744	)		15,898			(18,013	)		14,745
Net investment hedges, net of tax		(8,231	)		(4,641	)		(4,318	)		(10,324	)
Other comprehensive income (loss)		650			3,403			(31,455	)		21,051
Comprehensive income		55,989			41,053			106,192			121,038
Less: Comprehensive income attributable to non-controlling interest		9			16			22			59
Comprehensive income attributable to H.B. Fuller	$	55,980		$	41,037		$	106,170		$	120,979

See accompanying Notes to Unaudited Consolidated Financial Statements.

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H.B. FULLER COMPANY AND SUBSIDIARIES

Consolidated Balance Sheets

(In thousands, except share and per share amounts)

(Unaudited)

	*August 31,*			*December 2,*
	*2024*			*2023*
Assets
Current assets:
Cash and cash equivalents	$	131,412		$	179,453
Trade receivables (net of allowances of $13,389 and $11,080, as of August 31, 2024 and December 2, 2023, respectively)		574,781			577,932
Inventories		509,029			442,040
Other current assets		115,070			112,678
Total current assets		1,330,292			1,312,103

Property, plant and equipment		1,855,203			1,755,035
Accumulated depreciation		(993,884	)		(930,380	)
Property, plant and equipment, net		861,319			824,655

Goodwill		1,591,709			1,486,512
Other intangibles, net		806,148			729,140
Other assets		388,777			371,165
Total assets	$	4,978,245		$	4,723,575

Liabilities, non-controlling interest and total equity
Current liabilities
Notes payable	$	797		$	1,841
Trade payables		493,550			439,700
Accrued compensation		83,861			95,680
Income taxes payable		39,244			47,688
Other accrued expenses		87,495			107,902
Total current liabilities		704,947			692,811

Long-term debt		2,020,273			1,836,590
Accrued pension liabilities		51,739			50,189
Other liabilities		359,565			388,072
Total liabilities	$	3,136,524		$	2,967,662

Commitments and contingencies (Note 13)

Equity
H.B. Fuller stockholders' equity:
Preferred stock (no shares outstanding) shares authorized – 10,045,900		-			-
Common stock, par value $1.00 per share, shares authorized – 160,000,000, shares outstanding – 54,612,541 and 54,092,987 as of August 31, 2024 and December 2, 2023, respectively	$	54,613		$	54,093
Additional paid-in capital		316,324			301,485
Retained earnings		1,944,380			1,842,507
Accumulated other comprehensive loss		(474,326	)		(442,880	)
Total H.B. Fuller stockholders' equity		1,840,991			1,755,205
Non-controlling interest		730			708
Total equity		1,841,721			1,755,913
Total liabilities, non-controlling interest and total equity	$	4,978,245		$	4,723,575

See accompanying Notes to Unaudited Consolidated Financial Statements.

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H.B. FULLER COMPANY AND SUBSIDIARIES

Consolidated Statements of Total Equity

(In thousands)

(Unaudited)

	*H.B. Fuller Company Shareholders*
										*Accumulated*
				*Additional*						*Other*
	*Common*			*Paid-in*			*Retained*			*Comprehensive*			*Non-Controlling*
	*Stock*			*Capital*			*Earnings*			*Income (Loss)*			*Interest*		*Total*

Balance at December 2, 2023	$	54,093		$	301,485		$	1,842,507		$	(442,880	)	$	708	$	1,755,913
Comprehensive income (loss)		-			-			30,991			(15,909	)		12		15,094
Dividends		-			-			(11,246	)		-			-		(11,246	)
Stock option exercises		200			8,777			-			-			-		8,977
Share-based compensation plans and other, net		225			5,490			-			-			-		5,715
Repurchases of common stock		(80	)		(6,128	)		-			-			-		(6,208	)
Balance at March 2, 2024	$	54,438		$	309,624		$	1,862,252		$	(458,789	)	$	720	$	1,768,245
Comprehensive income (loss)		-			-			51,264			(16,156	)		1		35,109
Dividends		-			-			(12,144	)		-			-		(12,144	)
Stock option exercises		189			9,123			-			-			-		9,312
Share-based compensation plans and other, net		81			7,111			-			-			-		7,192
Repurchases of common stock		(200	)		(15,400	)		-			-			-		(15,600	)
Balance at June 1, 2024	$	54,508		$	310,458		$	1,901,372		$	(474,945	)	$	721	$	1,792,114
Comprehensive income		-			-			55,361			619			9		55,989
Dividends		-			-			(12,353	)		-			-		(12,353	)
Stock option exercises		328			15,553			-			-			-		15,881
Share-based compensation plans and other, net		2			7,650			-			-			-		7,652
Repurchases of common stock		(225	)		(17,337	)		-			-			-		(17,562	)
Balance at August 31, 2024	$	54,613		$	316,324		$	1,944,380		$	(474,326	)	$	730		1,841,721

	*H.B. Fuller Company Shareholders*
										*Accumulated*
				*Additional*						*Other*
	*Common*			*Paid-in*			*Retained*			*Comprehensive*			*Non-Controlling*
	*Stock*			*Capital*			*Earnings*			*Income (Loss)*			*Interest*		*Total*

Balance at December 3, 2022	$	53,677		$	266,491		$	1,741,359		$	(451,357	)	$	624	$	1,610,794
Comprehensive income		-			-			21,889			5,241			37		27,167
Dividends		-			-			(10,305	)		-			-		(10,305	)
Stock option exercises		76			3,520			-			-			-		3,596
Share-based compensation plans and other, net		102			5,221			-			-			-		5,323
Repurchases of common stock		(36	)		(2,412	)		-			-			-		(2,448	)
Balance at March 4, 2023	$	53,819		$	272,820		$	1,752,943		$	(446,116	)	$	661	$	1,634,127
Comprehensive income (loss)		-			-			40,401			12,411			6		52,818
Dividends		-			-			(11,129	)		-			-		(11,129	)
Stock option exercises		13			584			-			-			-		597
Share-based compensation plans other, net		30			6,818			-			-			-		6,848
Repurchases of common stock		(2	)		(102	)		-			-			-		(104	)
Balance at June 3, 2023	$	53,860		$	280,120		$	1,782,215		$	(433,705	)	$	667	$	1,683,157
Comprehensive income		-			-			37,627			3,410			16		41,053
Dividends		-			-			(11,155	)		-			-		(11,155	)
Stock option exercises		153			6,906			-			-			-		7,059
Share-based compensation plans other, net		3			7,018			-			-			-		7,021
Repurchases of common stock		-			(9	)		-			-			-		(9	)
Balance at September 2, 2023	$	54,016		$	294,035		$	1,808,687		$	(430,295	)	$	683	$	1,727,126

See accompanying Notes to Unaudited Consolidated Financial Statements.

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H.B. FULLER COMPANY AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

	*Nine Months Ended*
	*August 31, 2024*			*September 2, 2023*
Cash flows from operating activities:
Net income including non-controlling interest	$	137,647		$	99,987
Adjustments to reconcile net income including non-controlling interest to net cash provided by operating activities:
Depreciation		66,990			60,518
Amortization		61,723			58,633
Deferred income taxes		(45,998	)		(30,064	)
Loss from equity method investments, net of dividends received		622			260
Gain on insurance claims		(7,264	)		-
Loss on equity investment		1,966			-
Debt issuance costs write-off		-			2,689
Loss on fair value adjustment on contingent consideration liability		-			2,893
Gain on sale or disposal of assets		(501	)		(78	)
Share-based compensation		17,662			16,279
Pension and other post-retirement benefit plan activity		(6,671	)		(8,890	)
Change in assets and liabilities, net of effects of acquisitions:
Trade receivables, net		26,373			79,495
Inventories		(62,206	)		38,212
Other assets		(39,025	)		(30,901	)
Trade payables		49,705			(74,443	)
Accrued compensation		(11,566	)		(33,796	)
Other accrued expenses		(5,244	)		(6,992	)
Income taxes payable		(17,873	)		24,461
Other liabilities		856			12,408
Other		49,591			6,023
Net cash provided by operating activities		216,787			216,694

Cash flows from investing activities:
Purchased property, plant and equipment		(112,799	)		(109,545	)
Purchased businesses, net of cash acquired		(274,067	)		(194,248	)
Proceeds from sale of property, plant and equipment		1,048			4,257
Net cash used in investing activities		(385,818	)		(299,536	)

Cash flows from financing activities:
Proceeds from issuance of long-term debt		1,732,900			1,333,000
Repayment of long-term debt		(1,556,135	)		(1,184,900	)
Payment of debt issuance costs		(3,493	)		(10,214	)
Net payment of notes payable		(1,014	)		(18,000	)
Dividends paid		(35,440	)		(32,319	)
Proceeds from stock options exercised		34,161			11,251
Repurchases of common stock		(39,371	)		(2,560	)
Net cash provided by financing activities		131,608			96,258

Effect of exchange rate changes on cash and cash equivalents		(10,618	)		1,608
Net change in cash and cash equivalents		(48,041	)		15,024
Cash and cash equivalents at beginning of period		179,453			79,910
Cash and cash equivalents at end of period	$	131,412		$	94,934

See accompanying Notes to Unaudited Consolidated Financial Statements.

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H.B. FULLER COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Amounts in thousands, except per share amounts)

(Unaudited)

Note 1: Basis of Presentation

Overview

The accompanying unaudited interim Consolidated Financial Statements of H.B. Fuller Company and Subsidiaries have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information necessary for a fair presentation of results of operations, comprehensive income, financial position and cash flows in conformity with U.S. generally accepted accounting principles. In our opinion, the unaudited interim Consolidated Financial Statements reflect all adjustments of a normal recurring nature considered necessary for the fair presentation of the results for the periods presented. Operating results for interim periods are not necessarily indicative of results that may be expected for the fiscal year as a whole.

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures at the date of the financial statements and during the reporting period. Actual results could differ from these estimates. These unaudited interim Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in our Annual Report on Form 10-K for the year ended December 2, 2023 as filed with the Securities and Exchange Commission.

New Accounting Pronouncements

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU") No. 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures. This ASU provides new disclosure requirements including presentation of prescribed line items in the effective tax rate reconciliation and disclosures regarding state and local tax payments. Our effective date for adoption of this ASU is our fiscal year ending November 28, 2026. We are evaluating the impact the new disclosure guidance will have on our Consolidated Finance Statements.

In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures. This ASU extends the existing requirements for annual disclosures to quarterly periods and requires that both annual and quarterly disclosures present segment expenses using line items consistent with information regularly provided to the chief operating decision maker. Our effective date for adoption of this ASU is our fiscal year ending November 29, 2025. We are evaluating the impact the new disclosure guidance will have on our Consolidated Finance Statements.

Supplier Finance Program

In September 2022, the FASB issued ASU No. 2022-04, Liabilities - Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations. This ASU requires that a buyer in a supplier finance program disclose sufficient information about the program to allow a user of the financial statements to understand the program's nature, activity during the period, changes from period to period, and potential magnitude. To achieve that objective, the buyer should disclose qualitative and quantitative information about its supplier finance programs. ASU 2022-04 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, except for the requirement on rollforward information which is an annual requirement. During the first quarter of our fiscal year ending November 30, 2024, we adopted ASU 2022-04. We will present the annual roll-forward disclosure requirement within our annual report on Form 10-K.

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We have agreements with third parties to provide supplier finance programs which facilitate participating suppliers' ability to finance payment obligations of the Company with designated third-party financial institutions. Participating suppliers may, at their sole discretion, elect to finance one or more payment obligations of the Company prior to their scheduled due dates at a discounted price to participating financial institutions. The Company has no economic interest in the sale of these suppliers’ receivables and no direct financial relationship with the financial institutions concerning these services. The Company’s obligations to its suppliers, including amounts due and scheduled payment dates, are not impacted by suppliers’ decisions to finance amounts under these arrangements. The outstanding payment obligations that were confirmed as valid and remained outstanding as of August 31, 2024, were approximately $4,457. These obligations under the Company’s supplier finance programs are included in Accounts payable in the Consolidated Balance Sheets, and the associated payments are reflected in the cash flows from operating activities section of the Consolidated Statements of Cash Flows.

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

Note 2: Acquisitions

HS Butyl Limited

On August 5, 2024, we acquired HS Butyl Limited (“HS Butyl”) for a purchase price of 18,148 British pound sterling, or approximat ely $23,180 which was funded through existing cash. This includes a holdback amount of 2,700 British pound sterling that will be paid on the 18-month anniversary of the closing date. HS Butyl, headquartered in Lymington, England, is the United Kingdom's largest manufacturer and distributor of high-quality butyl tapes, which provide strong, permanent, watertight seals for a wide variety of applications within the construction, infrastructure, automotive and renewable energy industries. The acquisition of HS Butyl establishes our presence in the European waterproofing tape market, expanding our position as a solution provider to existing customers. It also expands our relevance to more markets and creates opportunities to deliver new, in-demand solutions for our customers, given the technology's relevance to multiple high-value applications. The acquisition fair value measurement was preliminary as of August 31, 2024 and includes other intangible assets of $5,620, goodwill of $4,927 and other net assets of $12,633. Goodwill represents expected synergies from combining HS Butyl with our existing business. Goodwill is not deductible for tax purposes. HS Butyl is included in our Construction Adhesives operating segment.

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ND Industries, Inc.

On May 20, 2024, we acquired the assets of ND Industries, Inc. (“ND Industries”) for a base purchase price of $255,734 which was funded through borrowings on our credit facility and existing cash. This includes a holdback amount of $1,446 that will be paid on the 4-month anniversary of the closing date. ND Industries, headquartered in Clawson, Michigan, is a leading provider of specialty adhesives and fastener locking and sealing solutions serving customers in the automotive, electronics, aerospace and other industries. The acquisition of ND Industries is expected to accelerate the realization of our top growth priorities, consistent with our strategy to proactively drive capital allocation to the highest margin, highest growth market segments within the functional coatings, adhesives, sealants and elastomer industry. The acquisition fair value measurement was preliminary as of August 31, 2024. ND Industries is included in our Engineering Adhesives operating segment.

During the three months ended August 31, 2024, intangible assets increased $4,800, goodwill decreased $5,966, and other net assets increased $1,166 in the fair value measurement of ND Industries. The following table summarizes the fair value measurement of the assets acquired and liabilities assumed as of the date of acquisition:

	*Amounts*
Current assets	$	17,461
Property, plant and equipment		22,152
Goodwill		83,859
Other intangibles
Customer relationships		111,400
Trademarks/trade names		9,300
Technology		13,900
Other assets		86
Current liabilities		(2,424	)
Total	$	255,734

The expected useful lives of the acquired intangible assets are 15 years for technology, 13 years for customer relationships and ten years for trademarks and tradenames. Based on the fair value measurement of the assets acquired and liabilities assumed, we allocated $89,825 to goodwill for the expected synergies from combining ND Industries with our existing business. Such goodwill is deductible for tax purposes. The goodwill was assigned to our Engineering Adhesives operating segment.

Sanglier Ltd.

On September 8, 2023, we acquired the assets of Sanglier Ltd. (“Sanglier”) for a base purchase price of 13,361 British pound sterling, or approximately $16,660 which was funded through existing cash. This includes a holdback amount of 2,100 British pound sterling that will be paid on the 18-month anniversary of the closing date. Sanglier, headquartered in Mansfield, United Kingdom, is a manufacturer and filler of sprayable (aerosol and cannister) industrial adhesives. The acquisition of Sanglier expands our innovation capabilities and product portfolio across the United Kingdom and Europe. Sanglier transforms adhesives applications to enable sprayable delivery providing end users with an opportunity to greatly improve labor efficiency. The acquisition fair value measurement was final as of August 31, 2024 and includes other intangible assets of $7,354, goodwill of $3,038 and other net assets of $6,261. Goodwill represents expected synergies from combining Sanglier with our existing business. Goodwill is deductible for tax purposes. Sanglier is included in our Construction Adhesives operating segment.

Adhezion Biomedical LLC

On June 23, 2023, we acquired Adhezion Biomedical LLC (“Adhezion”) for a base purchase price of $80,802 which was funded through borrowings on our credit facility. This includes a holdback amount of $780 that was paid on the 12-month anniversary of the closing date. The agreement includes a payment of contingent consideration up to $15,000 following the completion of certain performance goals and conditions. Adhezion, headquartered in Hudson, North Carolina, is a manufacturer of cyanoacrylate-based healthcare adhesives and infection prevention products. The acquisition of Adhezion positions us for expansion in the healthcare adhesives industry and creates a solid, unique platform from which to scale and innovate in the healthcare adhesives industry. The acquisition fair value measurement was final as of June 1, 2024 and includes other intangible assets of $38,500, goodwill of $37,589 and other net assets of $4,713. Goodwill represents expected synergies from combining Adhezion with our existing business. The amount of goodwill that is deductible for tax purposes is $25,717. Adhezion is included in our Hygiene, Health and Consumable Adhesives operating segment.

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XChem International LLC

On June 12, 2023, we acquired XChem International LLC ("XChem") for a base purchase price of approximately $14,496 which was funded through borrowings on our credit facility. This includes a holdback amount of $1,650, half of which was paid on the 12-month anniversary of the closing date and half to be paid on the 18-month anniversary of the closing date. XChem, headquartered in Ras Al-Khaimah, United Arab Emirates, is a manufacturer of adhesives and sealants for construction-related applications. The acquisition of XChem provides our Construction Adhesives global business with additional manufacturing presence for certain brands outside the U.S. and broadens our Construction Adhesives portfolio of highly specified applications and diversifies it toward both non-U.S. and infrastructure-oriented markets. The acquisition fair value measurement was final as of June 1, 2024 and includes other intangible assets of $4,600, goodwill of $4,318 and other net assets of $5,578. Goodwill represents expected synergies from combining XChem with our existing business. Goodwill is not deductible for tax purposes. XChem is included in our Construction Adhesives operating segment.

Beardow Adams Holdings Ltd.

On May 1, 2023, we acquired Beardow Adams Holdings Ltd. (“Beardow Adams”) for a total purchase price of 80,738 British pound sterling, or approximately $100,885, which was funded through borrowings on our credit facility. This includes a holdback amount of 8,000 British pound sterling that will be paid on the 18-month anniversary of the closing date. Beardow Adams, based in the United Kingdom, develops and manufactures adhesives, sealants and coatings, principally in the fields of packaging and related applications. The acquisition of Beardow Adams is expected to accelerate profitable growth in many of our core end markets and generate business synergies through better raw material pricing, production optimization and an expanded distribution platform. The acquisition fair value measurement was final as of June 1, 2024 and includes other intangible assets of $35,425, goodwill of $28,148 and other net assets of $37,312. Goodwill represents expected synergies from combining Beardow Adams with our existing business. The amount of goodwill that is deductible for tax purposes is $3,561. The remaining goodwill is not deductible for tax purposes. Beardow Adams is included in our Hygiene, Health and Consumable Adhesives operating segment.

Aspen Research Corporation

On January 31, 2023, we acquired the assets of Aspen Research Corporation (“Aspen”) for a total purchase price of $9,761, which was funded through existing cash. This includes a holdback amount of $500 that was paid on the 18-month anniversary of the closing date. Aspen, located in Maple Grove, Minnesota, is a contract research organization that develops and manufactures innovative solutions for some of the adhesives used in our insulating glass market. Aspen is known for their superior understanding of materials science, engineering and analytical testing and specializes in custom materials manufacturing for chemicals and adhesives products. The acquisition of Aspen is expected to expand our Engineering Adhesives footprint in North America and strengthen our capabilities in the insulating glass market, in addition to bringing additive continuous flow and process manufacturing capabilities that we plan to leverage. The acquisition fair value measurement was final as of December 2, 2023 and includes other intangible assets of $4,900, goodwill of $3,832 and other net assets of $1,029. Goodwill represents expected synergies from combining Aspen with our existing business. Goodwill is deductible for tax purposes. Aspen is included in our Engineering Adhesives operating segment.

Lemtapes Oy

On December 15, 2022, we acquired Lemtapes Oy (“Lemtapes”) for a total purchase price of $8,922 Euro, or approximately $9,482 which was funded through existing cash. This includes a holdback amount of 850 Euro that was paid on the 18-month anniversary of the closing date. Lemtapes, located in Valkeakoski, Finland, is a solutions provider of ecological, innovative tapes and adhesives for the packaging and plywood industries. The acquisition of Lemtapes is expected to reinforce our strategic position in Europe, especially for our adhesives coated solutions products. This acquisition will also accelerate our growth strategy of fast-growing, high margin businesses while adding technology capabilities and strong customer relationships. The acquisition fair value measurement was final as of December 2, 2023 and includes other intangible assets of $5,526, goodwill of $3,028 and other net assets of $928. Goodwill represents expected synergies from combining Lemtapes with our existing business. Goodwill is not deductible for tax purposes. Lemtapes is included in our Hygiene, Health and Consumable Adhesives operating segment.

All acquisitions, individually and in the aggregate, are not material and therefore pro forma financial information is not provided.

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Note 3: Restructuring Actions

During fiscal year 2023, the Company approved restructuring plans (the "Plans") related to organizational changes and other actions to optimize operations and integrate acquired businesses. The Plans were implemented in the second quarter of fiscal year 2023 and are currently expected to be completed during fiscal year 2026, with the majority of the charges recognized and cash payments occurring in fiscal 2023 and 2024. In implementing the Plans, the Company currently expects to incur pre-tax costs of approximately $39,100 to $50,100 for severance and related employee costs globally, other restructuring costs related to the streamlining of processes and the payment of anticipated income taxes in certain jurisdictions related to the Plans.

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

	*Three Months Ended*				*Nine Months Ended*
	*August 31, 2024*		*September 2, 2023*		*August 31, 2024*		*September 2, 2023*
Cost of sales	$	2,119	$	3,322	$	6,313	$	8,407
Selling, general and administrative		2,632		5,077		5,076		8,320
	$	4,751	$	8,399	$	11,389	$	16,727

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

A summary of the restructuring liability is presented below:

	*Employee-Related*			*Asset-Related*			*Other*			*Total*
Balance at December 3, 2022	$	57		$	-		$	-		$	57
Expenses incurred		22,731			1,369			487			24,587
Non-cash charges		-			(1,369	)		(453	)		(1,822	)
Cash payments		(9,802	)		-			(34	)		(9,836	)
Foreign currency translation		(1,263	)		-			-			(1,263	)
Balance at December 2, 2023	$	11,723		$	-		$	-		$	11,723
Expenses incurred		7,825			3,451			113			11,389
Non-cash charges		-			(3,451	)		(102	)		(3,553	)
Cash payments		(12,459	)		-			(11	)		(12,470	)
Foreign currency translation		(44	)		-			-			(44	)
Balance at August 31, 2024	$	7,045		$	-		$	-		$	7,045

Non-cash charges primarily include accelerated depreciation resulting from the cessation of use of certain long-lived assets and inventory disposals. Restructuring liabilities have been classified as a component of other accrued expenses on the Consolidated Balance Sheets.

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Note 4: Inventories

The composition of inventories is as follows:

	*August 31,*		*December 2,*
	*2024*		*2023*
Raw materials	$	231,152	$	206,140
Finished goods		277,877		235,900
Total inventories	$	509,029	$	442,040

Note 5: Goodwill and Other Intangible Assets

The goodwill activity by reportable segment for the nine months ended August 31, 2024 is presented below:

Hygiene, Health

and Consumable

Engineering

Construction

Adhesives

Total

Balance at December 2, 2023

402,598

651,145

432,769

1,486,512

Acquisitions

1,674

83,859

7,654

93,187

Foreign currency translation effect

4,131

6,938

941

12,010

Balance at August 31, 2024

408,403

741,942

441,364

1,591,709

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

August 31, 2024

Purchased

Technology

Customer

Amortizable Intangible Assets

and Patents

Relationships

Trade Names

Other

Total

Original cost

146,315

1,073,123

68,851

10,094

1,298,383

Accumulated amortization

(53,478

)

(404,711

)

(27,731

)

(6,797

)

(492,717

)

Net identifiable intangibles

92,837

668,412

41,120

3,297

805,666

	December 2, 2023
	Purchased
	Technology			Customer
Amortizable Intangible Assets	and Patents			Relationships			Trade Names			Other			Total
Original cost	$	144,763		$	986,470		$	58,484		$	10,911		$	1,200,628
Accumulated amortization		(59,631	)		(382,220	)		(23,099	)		(7,012	)		(471,962	)
Net identifiable intangibles	$	85,132		$	604,250		$	35,385		$	3,899		$	728,666

Amortization expense with respect to amortizable intangible assets was $22,149 and $20,820 for the three months ended August 31, 2024 and September 2, 2023, respectively, and was $61,723 and $58,633 for the nine months ended August 31, 2024 and September 2, 2023.

Estimated aggregate amortization expense based on the current carrying value of amortizable intangible assets for the next five fiscal years is as follows:

	*Remainder*
Fiscal Year	*2024*		*2025*		*2026*		*2027*		*2028*		*Thereafter*
Amortization expense	$	18,564	$	88,100	$	81,291	$	77,938	$	77,666	$	462,103

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The above amortization expense forecast is an estimate. Actual amounts may change from such estimated amounts due to fluctuations in foreign currency exchange rates, additional intangible asset acquisitions, potential impairment, accelerated amortization or other events.

Non-amortizable intangible assets as of August 31, 2024 and December 2, 2023 were $482 and $474, respectively, and relate to trademarks and trade names. The change in non-amortizable assets as of August 31, 2024 compared to December 2, 2023 was due to changes in foreign currency exchange rates.

Note 6: Long-Term Debt

On March 4, 2024, we entered into a Refinancing and Incremental Amendment (the “Refinancing and Incremental Amendment”), which amended the Second Amended and Restated Credit Agreement dated as of February 15, 2023, as previously amended. Pursuant to the Refinancing and Incremental Amendment under the Credit Agreement, the existing $794,000 principal amount of Term B loans (the “Amended TLB”) were refinanced and certain lenders to the Refinancing and Incremental Amendment made additional Term B loans to the Company in the principal amount of $200,000, thereby increasing the aggregate principal amount of the Amended TLB to $994,000. Furthermore, the interest rate margins applicable to the Amended TLB were decreased by 25 basis points (0.25% per annum) to 200 basis points for SOFR loans and 100 basis points for prime rate loans. The additional $200,000 of proceeds will be used to finance our working capital needs and for general corporate purposes, including permitted acquisitions. Interest on Term Loan B borrowings is payable at SOFR plus an interest rate spread of 200 basis points with a SOFR floor of 50 basis points (7.32 percent at August 31, 2024). The maturity date of February 15, 2030 remains unchanged. The commitment fee rates and interest rates applicable to the revolving credit facility and the Term Loan A facility remain unchanged.

Note 7: Components of Net Periodic Benefit related to Pension and Other Postretirement Benefit Plans

	*Three Months Ended August 31, 2024 and September 2, 2023*
													*Other*
	*Pension Benefits*												*Postretirement*
	*U.S. Plans*						*Non-U.S. Plans*						*Benefits*
Net periodic (benefit) cost:	*2024*			*2023*			*2024*			*2023*			*2024*			*2023*
Service cost	$	-		$	-		$	350		$	422		$	-		$	-
Interest cost		3,464			3,475			1,575			1,454			291			301
Expected return on assets		(6,555	)		(7,205	)		(1,643	)		(1,785	)		(2,727	)		(2,465	)
Amortization:
Prior service cost		-			-			16			16			-			-
Actuarial loss		1,159			635			516			506			-			-
Net periodic (benefit) cost	$	(1,932	)	$	(3,095	)	$	814		$	613		$	(2,436	)	$	(2,164	)

Nine Months Ended August 31, 2024 and September 2, 2023

Other

Pension Benefits

Postretirement