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Business Context and Reporting Period

Company: H.B. Fuller Company (H.B. Fuller)

Filing Type: Form 10-Q (Quarterly Report)

Reporting Period: Quarter and six months ended May 30, 2026

Business Overview: H.B. Fuller is a global manufacturer of functional coatings, adhesives, sealants, and elastomers. The company operates through three segments: Hygiene, Health and Consumable Adhesives; Engineering Adhesives; and Building Adhesive Solutions.

Key Financial Metrics

Material Changes vs. Prior Period

• Revenue Growth: Q2 2026 revenue increased 5.8% year-over-year, driven by a 3.1% positive currency impact, 3.0% pricing, and 0.1% acquisitions, partially offset by a 0.4% volume decline. YTD revenue grew 2.0%.
• Margin Expansion: Gross profit margin improved by 170 basis points in Q2 and 190 basis points YTD, primarily due to higher product pricing and restructuring benefits, offset by higher manufacturing costs.
• Profitability: Net income attributable to H.B. Fuller surged 62.2% in Q2 and 61.4% YTD. This was significantly aided by a reduction in discrete tax expenses compared to the prior year (which included withholding taxes on earnings no longer permanently reinvested).
• Segment Performance:
  • Hygiene, Health and Consumable Adhesives: Q2 revenue up 6.1%; Adjusted EBITDA up 21.7%.
  • Engineering Adhesives: Q2 revenue up 2.5%; Adjusted EBITDA flat (0.3% increase).
  • Building Adhesive Solutions: Q2 revenue up 9.4%; Adjusted EBITDA up 10.4%.
• Acquisitions: Completed acquisition of ND Industries Turkey in Nov 2025. Acquisitions of GEM S.r.l. and Medifill Limited (Jan 2025) contributed to YTD growth.

Guidance, Outlook, Risks, and Unusual Items

• Restructuring: The company is executing two restructuring plans. The FY2023 plan expects total costs of $85–$90 million (approx. $84.4 million incurred to date). A new FY2025 footprint optimization plan expects costs of $11.2–$13.0 million (approx. $7.3 million incurred to date).
• Legal Contingency: A settlement accrual of $34.8 million (pre-tax) was recorded for the Rouse et al. v. H.B. Fuller Company litigation regarding grout defects. The company expects significant reimbursement from insurers.
• Subsequent Event (Acquisition): On June 25, 2026, the company agreed to acquire Advanced Medical Solutions Group plc (AMS) for approximately £659 million. To fund this, the company secured bridge credit agreements totaling up to $3.0 billion.
• Capital Allocation: The company repurchased $45.6 million of common stock in Q2 2026. Dividends paid were $26.0 million YTD 2026.
• Risk Factors: Exposure to foreign currency fluctuations, raw material price volatility, and ongoing asbestos-related litigation (though management does not expect a material adverse effect).

Investor Verification Checklist

• AMS Acquisition Financing: Verify the final terms and closing conditions of the £659 million acquisition of Advanced Medical Solutions Group plc and the utilization of the $3.0 billion bridge facility.
• Discrete Tax Impact: Confirm the sustainability of the effective tax rate, noting the significant reduction in discrete tax expenses compared to the prior year's withholding tax charges.
• Restructuring Execution: Monitor the remaining cash outflows for the two active restructuring plans and their impact on future operating expenses.
• Legal Settlement Reimbursement: Track the progress of insurance recoveries related to the $34.8 million accrual for the Rouse litigation.
• Organic Volume Trends: Assess the underlying sales volume decline (-0.4% in Q2, -3.5% YTD) which was masked by pricing and currency tailwinds.