H.B. Fuller 10Q 2017 Q1 Quarterly report

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

[X]

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 4, 2017

[ ]

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)

(651) 236-5900

(Registrant’s telephone number, including area code)

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 [X] No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes [X] No [ ]

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

Large accelerated filer [X]	Accelerated filer [ ]
Non-accelerated filer [ ] (Do not check if a smaller reporting company)	Smaller reporting company [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes [ ] No [X]

The number of shares outstanding of the Registrant’s Common Stock, par value $1.00 per share, was 50,527,216 as of March 24, 2017.

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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)	3

	Condensed Consolidated Statements of Income for the three months ended March 4, 2017 and February 27, 2016	3

	Condensed Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 4, 2017 and February 27, 2016	4

	Condensed Consolidated Balance Sheets as of March 4, 2017 and December 3, 2016	5

	Condensed Consolidated Statements of Total Equity as of March 4, 2017 and December 3, 2016	6

	Condensed Consolidated Statements of Cash Flows for the three months ended March 4, 2017 and February 27, 2016	7

	Notes to Condensed Consolidated Financial Statements	8

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

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	37

ITEM 4.	CONTROLS AND PROCEDURES	38

PART II. OTHER INFORMATION		39

ITEM 1.	LEGAL PROCEEDINGS	39

ITEM 1A.	RISK FACTORS	40

ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	41

ITEM 6.	EXHIBITS	42

SIGNATURES		43

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PARTI. FINANCIAL INFORMATION

Item1. Financial Statements

H.B. FULLER COMPANY AND SUBSIDIARIES

CondensedConsolidated Statements of Income

(In thousands, except per share amounts)

(Unaudited)

	Three Months Ended
	March 4,			February 27,
	2017			2016
Net revenue	$	503,323		$	474,326
Cost of sales		(364,327	)		(336,721	)
Gross profit		138,996			137,605
Selling, general and administrative expenses		(112,915	)		(99,767	)
Special charges, net		-			(413	)
Other income (expense), net		621			(5,082	)
Interest expense		(8,380	)		(6,308	)
Income from continuing operations before income taxes and income from equity method investments		18,322			26,035
Income taxes		(5,765	)		(8,760	)
Income from equity method investments		2,274			1,692
Net income including non-controlling interests		14,831			18,967
Net income attributable to non-controlling interests		(36	)		(49	)
Net income attributable to H.B. Fuller	$	14,795		$	18,918

Earnings per share attributable to H.B. Fuller common stockholders:
Basic		0.29			0.38
Diluted		0.29			0.37

Weighted-average common shares outstanding:
Basic		50,243			49,958
Diluted		51,460			50,995

Dividends declared per common share	$	0.14		$	0.13

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

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H.B. FULLER COMPANY AND SUBSIDIARIES

CondensedConsolidated Statements of Comprehensive Income (Loss)

(In thousands)

(Unaudited)

	Three Months Ended
	March 4,			February 27,
	2017			2016
Net income including non-controlling interests	$	14,831		$	18,967
Other comprehensive (loss) income
Foreign currency translation		(10,519	)		(950	)
Defined benefit pension plans adjustment, net of tax		1,590			2,665
Interest rate swaps, net of tax		10			10
Cash-flow hedges, net of tax		129			249
Other comprehensive (loss) income		(8,790	)		1,974
Comprehensive income		6,041			20,941
Less: Comprehensive income attributable to non-controlling interests		31			44
Comprehensive income attributable to H.B. Fuller	$	6,010		$	20,897

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

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H.B. FULLER COMPANY AND SUBSIDIARIES

CondensedConsolidated Balance Sheets

(In thousands, except share and per share amounts)

	(Unaudited)
	March 4,			December 3,
	2017			2016
Assets
Current assets:
Cash and cash equivalents	$	116,518		$	142,245
Trade receivables (net of allowances of $12,427 and $12,310, as of March 4,2017 and December 3, 2016, respectively)		358,145			351,130
Inventories		286,254			247,399
Other current assets		71,055			70,479
Total current assets		831,972			811,253

Property, plant and equipment		1,086,268			1,093,141
Accumulated depreciation		(576,333	)		(577,866	)
Property, plant and equipment, net		509,935			515,275

Goodwill		423,581			366,248
Other intangibles, net		243,598			205,359
Other assets		160,242			157,733
Total assets	$	2,169,328		$	2,055,868

Liabilities, redeemable non-controlling interest and total equity
Current liabilities:
Notes payable	$	47,120		$	37,334
Current maturities of long-term debt		-			80,178
Trade payables		181,460			162,964
Accrued compensation		45,105			52,444
Income taxes payable		7,812			7,985
Other accrued expenses		43,569			50,939
Total current liabilities		325,066			391,844

Long-term debt, excluding current maturities		757,661			585,759
Accrued pension liabilities		70,370			73,545
Other liabilities		66,466			62,174
Total liabilities		1,219,563			1,113,322

Commitments and contingencies (Note 16)
Redeemable non-controlling interest		-			4,277

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 – 50,490,659 and 50,141,343, as of March 4, 2017 and December 3, 2016, respectively		50,491			50,141
Additional paid-in capital		71,758			59,564
Retained earnings		1,098,645			1,090,900
Accumulated other comprehensive loss		(271,514	)		(262,729	)
Total H.B. Fuller stockholders' equity		949,380			937,876
Non-controlling interests		385			393
Total equity		949,765			938,269
Total liabilities, redeemable non-controlling interest and total equity	$	2,169,328		$	2,055,868

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

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H.B. FULLER COMPANY AND SUBSIDIARIES

CondensedConsolidated Statements of Total Equity

(In thousands)

(Unaudited)

	H.B. Fuller Company Shareholders
	Common Stock			Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Non- Controlling Interests			Total
Balance at November 28, 2015	$	50,074		$	55,522		$	994,608		$	(227,284	)	$	406		$	873,326
Comprehensive income (loss)		-			-			124,128			(35,445	)		226			88,909
Dividends		-			-			(27,836	)		-			-			(27,836	)
Stock option exercises		519			10,750			-			-			-			11,269
Share-based compensation plans other, net		116			14,485			-			-			-			14,601
Tax benefit on share-based compensation plans		-			1,467			-			-			-			1,467
Repurchases of common stock		(568	)		(22,660	)		-			-			-			(23,228	)
Redeemable non-controlling interest		-			-			-			-			(239	)		(239	)
Balance at December 3, 2016		50,141			59,564			1,090,900			(262,729	)		393			938,269
Comprehensive income (loss)		-			-			14,795			(8,785	)		31			6,041
Dividends		-			-			(7,050	)		-			-			(7,050	)
Stock option exercises		261			8,288			-			-			-			8,549
Share-based compensation plans other, net		140			5,138			-			-			-			5,278
Tax benefit on share-based compensation plans		-			1,053			-			-			-			1,053
Repurchases of common stock		(51	)		(2,379	)		-			-			-			(2,430	)
Purchase of redeemable non-controlling interest		-			94			-			-			-			94
Redeemable non-controlling interest		-			-			-			-			(39	)		(39	)
Balance at March 4, 2017	$	50,491		$	71,758		$	1,098,645		$	(271,514	)	$	385		$	949,765

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

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H.B. FULLER COMPANY AND SUBSIDIARIES

CondensedConsolidated Statements of Cash Flows

(In thousands)

(Unaudited)

	Three Months Ended
	March 4, 2017			February 27, 2016
Cash flows from operating activities:
Net income including non-controlling interests	$	14,831		$	18,967
Adjustments to reconcile net income including non-controlling interests to net cash provided by operating activities:
Depreciation		11,945			13,258
Amortization		7,355			6,698
Deferred income taxes		(246	)		63
Income from equity method investments, net of dividends received		(2,274	)		(1,692	)
(Gain)/loss on sale of assets		(95	)		-
Share-based compensation		5,032			4,267
Excess tax benefit from share-based compensation		(1,053	)		341
Non-cash loss on mark to market adjustment related to contingent consideration liability		37			-
Non-cash charge for the sale of inventories revalued at the date of acquisition		193			-
Changes in assets and liabilities, net of effects of acquisitions
Trade receivables, net		4,884			28,947
Inventories		(32,597	)		(15,861	)
Other assets		3,960			9,298
Trade payables		23,989			(4,301	)
Accrued compensation		(7,540	)		(13,235	)
Other accrued expenses		(8,089	)		(5,258	)
Income taxes payable		(1,109	)		5,673
Accrued / prepaid pensions		(1,361	)		662
Other liabilities		1,754			(1,445	)
Other		(3,157	)		(3,821	)
Net cash provided by operating activities		16,459			42,561
Purchased property, plant and equipment		(19,899	)		(23,361	)
Purchased businesses, net of cash acquired		(123,305	)		-
Purchased investments		(1,250	)		-
Proceeds from sale of property, plant and equipment		109			863
Net cash used in investing activities		(144,345	)		(22,498	)
Proceeds from issuance of long-term debt		453,000			-
Repayment of long-term debt and payment of debt issuance costs		(356,610	)		(5,625	)
Net proceeds from notes payable		8,438			6,378
Dividends paid		(7,048	)		(6,498	)
Purchase of redeemable non-controlling interest		(3,127	)		-
Proceeds from stock options exercised		8,549			32
Excess tax benefit from share-based compensation		1,053			(341	)
Repurchases of common stock		(2,430	)		(6,518	)
Net cash provided by (used in) financing activities		101,825			(12,572	)
Effect of exchange rate changes on cash and cash equivalents		334			112
Net change in cash and cash equivalents		(25,727	)		7,603
Cash and cash equivalents at beginning of period		142,245			119,168
Cash and cash equivalents at end of period	$	116,518		$	126,771

Supplemental disclosure of cash flow information:
Dividends paid with company stock	$	2		$	64
Cash paid for interest, net of amount capitalized of $23 and $117 for the periods ended March 4, 2017 and February 27, 2016, respectively	$	6,979		$	5,566
Cash paid for income taxes, net of refunds	$	6,539		$	4,066

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

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H.B. FULLER COMPANY AND SUBSIDIARIES

NotestoCondensedConsolidated Financial Statements

(Amounts in thousands, except share and per share amounts)

(Unaudited)

Note1:Basis of Presentation

The accompanying unaudited interim Condensed 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 Condensed 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 Condensed 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 3, 2016 as filed with the Securities and Exchange Commission.

On December 4, 2016, for our subsidiaries in Latin America, we changed the functional currency from the U.S. dollar to the entity’s local currency based on management’s analysis of the changes of the economic facts and circumstances in which these subsidiaries operate. The change in functional currency is accounted for prospectively from December 4, 2016 and financial statements prior to and including the quarter ended February 27, 2016 and the year ended December 3, 2016 have not been restated for the change in functional currency.Monetary assets and liabilities have been remeasured to the U.S. dollar at current exchange rates. Non-monetary assets (property, plant and equipment, net; goodwill; and intangible assets, net)have been remeasured to reflect the difference between the exchange rate when the asset arose and the exchange rate on the date of the change in functional currency. As a result of this change in functional currency, we recorded an $11,317 cumulative translation adjustment included in other comprehensive loss for the quarter ended March 4, 2017.

New Accounting Pronouncements

In March 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2017-07, Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which requires employers to include only the service cost component of net periodic pension cost and net periodic postretirement benefit cost in operating expenses. The other components of net benefit cost, including amortization of prior service cost/credit, and settlement and curtailment effects, are to be included in nonoperating expenses. The ASU also stipulates that only the service cost component of net benefit cost is eligible for capitalization. Our effective date for adoption of this guidance is our fiscal year beginning December 2, 2018 with early adoption permitted. We are currently evaluating the effect that this guidance will have on our Consolidated Financial Statements.

In February 2017, the FASB issued ASU No. 2017-05, Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets. The ASU was issued to clarify the scope of the previous standard and to add guidance for partial sales of nonfinancial assets. Our effective date for adoption of this guidance is our fiscal year beginning December 2, 2018. We have evaluated the effect that this guidance will have on our Consolidated Financial Statements and related disclosures and determined it will not have a material impact.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which removes Step 2 of the goodwill impairment test. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. Our effective date for prospective adoption of this guidance is our fiscal year beginning November 29, 2020 with early adoption permitted. We will apply this guidance to applicable impairment tests after the adoption date.

In January 2017, the FASB issued ASU No. 2017-01,Business Combinations (Topic 805): Clarifying the Definition of a Business. This ASU clarifies the definition of a business when evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. Our effective date for prospective adoption of this guidance is our fiscal year beginning December 2, 2018. We will apply this guidance to applicable transactions after the adoption date.

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In November 2016, the FASB issued ASU No. 2016-18,Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force).This ASU requires that the reconciliation of the beginning-of-period and end-of-period amounts shown in the statement of cash flows include cash and restricted cash equivalents. Our effective date for adoption of this guidance is our fiscal year beginning December 2, 2018. We have evaluated the effect that this guidance will have on our Consolidated Financial Statements and related disclosures and determined it will not have a material impact.

In October 2016, the FASB issued ASU No. 2016-17,Consolidation (Topic 810): Interests Held through Related Parties That Are under Common Control.This ASU changes how a decision maker treats indirect interests in a managed variable interest entity held through an entity under common control in its primary beneficiary (consolidation) analysis. Our effective date for adoption of this guidance is our fiscal year beginning December 3, 2017. We have evaluated the effect that this guidance will have on our Consolidated Financial Statements and related disclosures and determined it will not have a material impact.

In October 2016, the FASB issued ASU No. 2016-16,Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory.This ASU changes the timing of income tax recognition for an intercompany sale of assets. The ASU requires the seller’s tax effects and the buyer’s deferred taxes to be recognized immediately upon the sale instead of deferring accounting for the income tax implications until the assets are sold to a third party or recovered through use. Our effective date for adoption of this guidance is our fiscal year beginning December 2, 2018. We are currently evaluating the effect that this guidance will have on our Consolidated Financial Statements.

In August 2016, the FASB issued ASU No. 2016-15,Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force).This ASU requires changes in the presentation of certain items including but not limited to debt prepayment or debt extinguishment costs; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance policies and distributions received from equity method investees. Our effective date for adoption of this guidance is our fiscal year beginning December 2, 2018. We are currently evaluating the effect that this guidance will have on our Consolidated Financial Statements.

In June 2016, the FASB ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Statements.This ASU requires a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset. Our effective date for adoption of this guidance is our fiscal year beginning November 29, 2020. We are currently evaluating the effect that this guidance will have on our Consolidated Financial Statements.

In March 2016, the FASB issued ASU No. 2016-09,Compensation - Stock Compensation (Topic 718), Improvements to Employee Share-Based Payment Accounting.This ASU provides simplification in the accounting for share-based payment transactions including the accounting for income taxes, forfeitures, statutory tax withholding requirements and classification in the statement of cash flows.Our effective date for adoption of this guidance is our fiscal year beginning December 3, 2017.We are currently evaluating the effect that this guidance will have on our Consolidated Financial Statements.

In March 2016, the FASB issued ASU No. 2016-08,Revenue from Contracts with Customers (Topic 606), Principal versus Agent Considerations (Reporting Revenue Gross versus Net). This ASU provides guidance on recording revenue on a gross basis versus a net basis based on the determination of whether an entity is a principal or an agent when another party is involved in providing goods or services to a customer. The amendments in this ASU affect the guidance in ASU No. 2014-09 and are effective in the same timeframe as ASU No. 2014-09 as discussed below.

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In February 2016, the FASB issued ASU No. 2016-02,Leases (Subtopic 842). This guidance changes accounting for leases and requires lessees to recognize the assets and liabilities arising from all leases, including those classified as operating leases under previous accounting guidance, on the balance sheet and requires disclosure of key information about leasing arrangements to increase transparency and comparability among organizations. Our effective date for adoption of this guidance is our fiscal year beginning December 1, 2019 with early adoption permitted. The new guidance must be adopted using a modified retrospective transition approach, and provides for certain practical expedients. We are currently evaluating the impact that the new guidance will have on our Consolidated Financial Statements.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, which requires that equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) are to be measured at fair value with changes in fair value recognized in net income. However, an entity may choose to measure equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. Furthermore, equity investments without readily determinable fair values are to be assessed for impairment using a quantitative approach.Our effective date for adoption of this guidance is our fiscal year beginning December 2, 2018. We have evaluated the effect that this guidance will have on our Consolidated Financial Statements and related disclosures and determined it will not have a material impact.

In July 2015, the FASB issued ASU No. 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory, which requires a company to measure inventory within the scope of this guidance (inventory measured using first-in, first-out (FIFO) or average cost) at the lower of cost and net realizable value methods. Subsequent measurement is unchanged for inventory measured using the last-in, first-out (LIFO) or retail inventory method. Our effective date for adoption of this guidance is our fiscal year beginning December 3, 2017. We have evaluated the effect that this guidance will have on our Consolidated Financial Statements and related disclosures and determined it will not have a material impact.

In May 2014, the FASB issued ASU No. 2014-09,Revenue from Contracts with Customers (Topic 606), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. This guidance will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The new standard is effective for fiscal years and interim periods beginning after December 15, 2017 (as stated in ASU No. 2015-14 which defers the effective date and was issued in August 2015) and is now effective for our fiscal year beginning December 2, 2018. Early application as of the original effective date is permitted under ASU 2015-14. The standard permits the use of either the retrospective or cumulative effect transition method. We are currently evaluating the impact of the new guidance on the Consolidated Financial Statements. We have identified an implementation project team and related oversight processes and have commenced the assessment phase of the project. We have not concluded as to whether the new guidance will be adopted on a full or modified retrospective basis, but will not apply the early adoption provisions of the new guidance.

Note 2: Acquisitions

Wisdom Adhesives

On January 27, 2017, we acquired substantially all of the assets of H.E. Wisdom & Sons, Inc. and its affiliate Wisdom Adhesives Southeast, L.L.C., (“Wisdom Adhesives”) headquartered in Elgin, Illinois. Wisdom Adhesives is a provider of adhesives for the packaging, paper converting and assembly markets. The acquisition will help strengthen our position in the North America adhesives market. The purchase price of $123,305 was financed through borrowings on our revolving credit facility and was recorded in our Americas Adhesives operating segment. We incurred acquisition related costs of approximately $547, which were recorded as selling, general and administrative (“SG&A”) expenses in the Condensed Consolidated Statements of Income for the three months ended March 4, 2017.

The acquisition fair value measurement was preliminary as of March 4, 2017, subject to the completion of the valuation of Wisdom Adhesives and further management reviews and assessment of the preliminary fair values of the assets acquired and liabilities assumed. We expect the fair value measurement process to be completed when the final appraisals are available, but no later than twelve months from the acquisition date.

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The following table summarizes the preliminary fair value measurement of the assets acquired and liabilities assumed as of the date of acquisition:

	Amount
Current assets	$	13,729
Property, plant and equipment		10,516
Goodwill		60,313
Other intangibles
Customer relationships		33,300
Trademarks/trade names		13,600
Current liabilities		(8,153	)
Total purchase price	$	123,305

The preliminary expected lives of the acquired intangible assets are 15 years for customer relationships and 10 years for trademarks/trade names.

Based on the preliminary fair value measurement of the assets acquired and liabilities assumed, we allocated $60,313 to goodwill for the expected synergies from combining Wisdom Adhesives with our existing business. Such goodwill is deductible for tax purposes. The goodwill was assigned to our Americas Adhesives operating segment. The Wisdom Adhesives acquisition does not represent a material business combination, therefore pro forma financial information is not provided.

Cyberbond

On June 8, 2016, we acquired Cyberbond, L.L.C., (“Cyberbond”) headquartered in Batavia, Illinois with operations in the United States and Europe. Cyberbond is a provider of industrial adhesives for the electronics, medical, audio equipment, automotive and structural markets. The acquisition will help us to broaden our global position and accelerate our growth in the high margin, high growth Engineering Adhesives segment. The purchase price of $42,182, net of cash acquired of $332, was funded through existing cash and was recorded in our Engineering Adhesives operating segment. We incurred acquisition related costs of approximately $527, which were recorded as SG&A expenses in the Condensed Consolidated Statements of Income for the year ended December 3, 2016.

The following table summarizes the final fair value measurement of the assets acquired and liabilities assumed as of the date of acquisition:

	Amount
Current assets	$	4,425
Property, plant and equipment		2,038
Goodwill		23,654
Other intangibles
Developed technology		2,000
Customer relationships		14,400
Trademarks/trade names		700
Other assets		161
Current liabilities		(1,889	)
Long-term liabilities		(3,307	)
Total purchase price	$	42,182

The expected lives of the acquired intangible assets are seven years for developed technology, 15 years for customer relationships and 10 years for trademarks/trade names.

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Based on the fair value measurement of the assets acquired and liabilities assumed, we allocated $23,654 to goodwill for the expected synergies from combining Cyberbond with our existing business. Such goodwill is not deductible for tax purposes. The goodwill was assigned to our Engineering Adhesives operating segment. The Cyberbond acquisition does not represent a material business combination, therefore pro forma financial information is not provided.

Advanced Adhesives

On April 29, 2016, we acquired Advanced Adhesives Pty Limited and the business assets of Advanced Adhesives (New Zealand) Limited (together referred to as “Advanced Adhesives”), providers of industrial adhesives in Australia and New Zealand. The acquisition will help us to strengthen our industrial adhesives market position and leverage a broader technology portfolio in both Australia and New Zealand. The combined purchase price of $10,365 was funded through existing cash and was recorded in our Asia Pacific operating segment. We incurred acquisition related costs of approximately $646, which were recorded as SG&A expenses in the Condensed Consolidated Statements of Income for the year ended December 3, 2016.

The following table summarizes the final fair value measurement of the assets acquired and liabilities assumed as of the date of acquisition:

	Amount
Current assets	$	5,704
Property, plant and equipment		594
Goodwill		102
Other intangibles
Customer relationships		7,575
Trademarks/trade names		146
Current liabilities		(2,671	)
Long-term liabilities		(1,085	)
Total purchase price	$	10,365

The expected lives of the acquired intangible assets are 15 years for customer relationships and one year for trademarks/trade names.

Based on the fair value measurement of the assets acquired and liabilities assumed, we allocated $102 to goodwill for the expected synergies from combining Advanced Adhesives with our existing business. Such goodwill is not deductible for tax purposes. The goodwill was assigned to our Asia Pacific operating segment. The Advanced Adhesives acquisition does not represent a material business combination, therefore pro forma financial information is not provided.

Note3:Restructuring Actions

Business Integration Project

The integration of the industrial adhesives business we acquired in March 2012 involved a significant amount of restructuring and capital investment to optimize the new combined entity. In addition, we took a series of actions in our existing EIMEA operating segment to improve the profitability and future growth prospects of this operating segment. We combined these two initiatives into a single project which we refer to as the “Business Integration Project.” During the first quarter ended February 27, 2016, weincurred costs of $413 related to transformation costs, workforce reduction costs, facility exit costs and other related costs for the Business Integration Project, which are included in special charges, net. The Business Integration Project was substantially complete at the end of 2016.

2017 Restructuring Plan

During the first quarter of 2017, we approved a restructuring plan (the “2017 Restructuring Plan”) related to organizational changes and other actions to optimize operations. The 2017 Restructuring Plan was implemented in the first quarter of 2017 and is currently expected to be completed by mid-year of fiscal 2018. The 2017 Restructuring Plan resulted in a pre-tax charge of $10,168 during the quarter ended March 4, 2017.

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

	Three Months Ended
	March 4, 2017
Cost of sales	$	3,647
Selling, general and administrative		6,521
	$	10,168

The following table summarizes the pre-tax impact of restructuring charges by segment:

	Three Months Ended
	March 4, 2017
Americas Adhesives	$	1,978
EIMEA		4,628
Asia Pacific		1,679
Construction Products		1,262
Engineering Adhesives		621
	$	10,168

A summary of the restructuring liability during the first quarter ended March 4, 2017 is presented below:

	Employee-Related			Asset-Related			Other			Total
Balance at December 3, 2016	$	-			-			-			-
Expenses incurred		8,759			861			548			10,168
Non-cash charges		-			(417	)		-			(417	)
Cash payments		(4,479	)		(444	)		(210	)		(5,133	)
Foreign currency translation		(49	)		-			-			(49	)
Balance at March 4, 2017	$	4,231		$	-		$	338		$	4,569

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

Note 4: Inventories

The composition of inventories is as follows:

	March 4,			December 3,
	2017			2016
Raw materials	$	133,615		$	116,200
Finished goods		164,471			142,397
LIFO reserve		(11,832	)		(11,198	)
Total inventories	$	286,254		$	247,399

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Note5: Goodwill and Other Intangible Assets

The goodwill activity for the quarter ended March 4, 2017 is presented below:

	Americas							Asia			Construction		Engineering
	Adhesives				EIMEA			Pacific			Products		Adhesives			Total
Balance at December 3, 2016	$	59,821			$	98,876		$	17,481		$	21,901	$	168,169		$	366,248
Acquisitions		60,313		¹		-			-			-		-			60,313
Currency impact		(1,676	)			(533	)		(8	)		1		(764	)		(2,980	)
Balance at March 4, 2017	$	118,458			$	98,343		$	17,473		$	21,902	$	167,405		$	423,581

¹	Preliminary goodwill balance as of March 4, 2017.

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

March 4, 2017

Amortizable Intangible Assets

Purchased

Technology &

Patents

Customer

Relationships

All Other

Total

Original cost

69,527

286,161

64,164

419,852

Accumulated amortization

(26,919

)

(118,071

)

(31,728

)

(176,718

)

Net identifiable intangibles

42,608

168,090

32,436

243,134

	December 3, 2016
Amortizable Intangible Assets	Purchased Technology & Patents			Customer Relationships			All Other			Total
Original cost	$	70,504		$	251,329		$	51,116		$	372,949
Accumulated amortization		(21,448	)		(116,411	)		(30,198	)		(168,057	)
Net identifiable intangibles	$	49,056		$	134,918		$	20,918		$	204,892

Amortization expense with respect to amortizable intangible assets was $7,355 and $6,698 for the first three months of 2017 and 2016, respectively.

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

	Remainder of
Fiscal Year	2017		2018		2019		2020		2021		Thereafter
Amortization Expense	$	24,749	$	32,076	$	29,910	$	27,534	$	26,088	$	102,777

Non-amortizable intangible assets as of March 4, 2017 are $464 and are related to trademarks and trade names.

Note 6: Long-Term Debt

On February 14, 2017, we issued $300,000 aggregate principal of 10-year long-term unsecured public notes (“4.000% Notes”) due February 15, 2027 with a fixed coupon of 4.00 percent. Proceeds from this debt issuance were used to repay $138,000 outstanding under the revolving credit facility and prepay $158,750 of our term loan. We entered into interest rate swap agreements to convert $150,000 of the $300,000 4.000% Notes to a variable interest rate of 1-month LIBOR (in advance) plus 1.86 percent. See Note 13 for further discussion of the interest rate swaps.

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We adopted ASU No. 2015-03,Interest-Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issue Costs, during the quarter ended March 4, 2017 on a retrospective basis. The impact of adopting ASU No. 2015-03 on our financial statements was the reclassification of deferred debt issuance costs related to our long-term debt, with the exception of our revolving credit line, from an asset to a direct deduction to the corresponding debt. Reclassifications from an asset to a direct deduction to the corresponding debt of $4,411 and $2,386 were included in our Condensed Consolidated Balance Sheets as of March 4, 2017 and December 3, 2016, respectively.

Note 7: Redeemable Non-Controlling Interest

We account for the non-controlling interest in H.B. Fuller Kimya Sanayi Ticaret A.S. (“HBF Kimya”) as a redeemable non-controlling interest because both the non-controlling shareholder and H.B. Fuller had an option, exercisable beginning August 1, 2018, to require the redemption of the shares owned by the non-controlling shareholder at a price determined by a formula based on 24 months trailing EBITDA. Since the option made the redemption of the non-controlling ownership shares of HBF Kimya outside of our control, these shares are classified as a redeemable non-controlling interest in temporary equity in the Condensed Consolidated Balance Sheets. The non-controlling shareholder was entitled to increase his ownership by 1 percent per year for 5 years up to a maximum of 13 percent ownership based on the achievement of profitability targets in each year. The option was subject to a minimum price of €3,500. The redemption value of the option, if it were currently redeemable, was estimated to be €3,500.

The results of operations for the HBF Kimya non-controlling interest is consolidated in our financial statements. Both the non-controlling interest and the accretion adjustment to redemption value are included in net income attributable to non-controlling interests in the Condensed Consolidated Statements of Income and in the carrying value of the redeemable non-controlling interest on the Condensed Consolidated Balance Sheets. HBF Kimya’s functional currency is the Turkish lira and changes in exchange rates affect the reported amount of the redeemable non-controlling interest.

During the first quarter of 2017, we entered into an agreement with the non-controlling shareholder to purchase the remaining shares for €4,206. The difference between the non-controlling interest balance and the purchase price was recorded in equity in the first quarter of 2017.

	Redeemable
	Non-Controlling
	Interest
Balance at December 3, 2016	$	4,277
Net income attributed to redeemable non-controlling interest		39
Purchase of redeemable non-controlling interest		(4,468	)
Foreign currency translation adjustment		152
Balance at March 4, 2017	$	-

Note 8: Accounting for Share-Based Compensation

Overview

We have various share-based compensation programs, which provide for equity awards including non-qualified stock options, restricted stock shares, restricted stock units, performance awards and deferred compensation. These equity awards fall under several plans and are described in detail in our Annual Report on Form 10-K for the year ended December 3, 2016.

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Grant-Date Fair Value

We use the Black-Scholes option pricing model to calculate the grant-date fair value of an award. The fair value of options granted during the quarter ended March 4, 2017 and February 27, 2016 were calculated using the following weighted average assumptions:

	Three Months Ended
	March 4, 2017				February 27, 2016
Expected life (in years)			4.75				4.75
Weighted-average expected volatility			24.87%				29.03%
Expected volatility		24.84%	-	24.88%		29.03%	-	29.23%
Risk-free interest rate			1.89%				1.44%
Expected dividend yield			1.12%				1.56%
Weighted-average fair value of grants			$10.81				$7.64

Expected life – We use historical employee exercise and option expiration data to estimate the expected life assumption for the Black-Scholes grant-date valuation. We believe that this historical data is currently the best estimate of the expected term of a new option. We use a weighted-average expected life for all awards.

Expected volatility – Volatility is calculated using our stock’s historical volatility for the same period of time as the expected life. We have no reason to believe that our future volatility will differ materially from historical volatility.

Risk-free interest rate – The rate is based on the U.S. Treasury yield curve in effect at the time of the grant for the same period of time as the expected life.

Expected dividend yield – The calculation is based on the total expected annual dividend payout divided by the average stock price.

Expense

We use the straight-line attribution method to recognize share-based compensation expense for option awards, restricted stock shares and restricted stock units with graded and cliff vesting. Incentive stock options and performance awards are based on certain performance-based metrics and the expense is adjusted quarterly, based on our projections of the achievement of those metrics. The amount of share-based compensation expense recognized during a period is based on the value of the portion of the awards that are ultimately expected to vest. The expense is recognized over the requisite service period, which for us is the period between the grant date and the earlier of the award’s stated vesting term or the date the employee is eligible for early vesting based on the terms of the plans.

Total share-based compensation expense of $5,032 and $4,267 was included in our Condensed Consolidated Statements of Income for the first quarter ended March 4, 2017 and February 27, 2016, respectively. All share-based compensation expense was recorded as SG&A expense. For the first quarter ended March 4, 2017, there was $1,053 of excess tax benefit recognized. For the first quarter ended February 27, 2016, there was $341 charged against the APIC pool for tax deficiencies.

As of March 4, 2017, there was $11,388 of unrecognized compensation costs related to unvested stock option awards, which is expected to be recognized over a weighted-average period of 1.6 years. Unrecognized compensation costs related to unvested restricted stock units was $18,035, which is expected to be recognized over a weighted-average period of 1.7 years.

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Stock Option Activity

The stock option activity for the quarter ended March 4, 2017 is presented below:

				Average
	Options			Exercise Price
Outstanding at December 3, 2016		2,986,481		$	34.92
Granted		683,425			49.95
Exercised		(261,346	)		32.71
Forfeited or cancelled		(66,589	)		36.68
Outstanding at March 4, 2017		3,341,971		$	38.13

The total fair value of options granted during the quarter ended March 4, 2017 and February 27, 2016 were $7,384 and $6,138, respectively. Total intrinsic value of options exercised during the first quarter ended March 4, 2017 and February 27, 2016 were $4,420 and $11, respectively. Intrinsic value is the difference between our closing stock price on the respective trading day and the exercise price, multiplied by the number of options exercised. Proceeds received from option exercises during the first quarter ended March 4, 2017 and February 27, 2016 was $8,549 and $32, respectively.

Restricted Stock Activity

The nonvested restricted stock activity for the quarter ended March 4, 2017 is presented below:

											Weighted-
									Weighted-		Average
									Average		Remaining
									Grant		Contractual
									Date Fair		Life
	Units			Shares		Total			Value		(in Years)
Nonvested at December 3, 2016		352,744			36,953		389,697		$	38.36		1.0
Granted		278,043			-		278,043			49.68		1.9
Vested		(137,891	)		(36,953)		(174,844	)		39.62		-
Forfeited		(16,095	)		-		(16,095	)		37.15		1.6
Nonvested at March 4, 2017		476,801			-		476,801		$	44.54		1.7

Total fair value of restricted stock vested during the first quarter ended March 4, 2017 and February 27, 2016 was $6,941 and $5,833, respectively. The total fair value of nonvested restricted stock at March 4, 2017 was $21,214.

We repurchased 50,687 and 66,447 restricted stock shares during the first quarter ended March 4, 2017 and February 27, 2016, respectively. The repurchases relate to statutory minimum tax withholding.

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Deferred Compensation Activity

We have a Directors’ Deferred Compensation plan that allows non-employee directors to defer all or a portion of their directors’ compensation in a number of investment choices, including units representing shares of our common stock. We also have a Key Employee Deferred Compensation Plan that allows key employees to defer a portion of their eligible compensation in a number of investment choices, including units, representing shares of our common stock. We provide a 10 percent match on deferred compensation invested into units, representing shares of our common stock. The deferred compensation units activity for the quarter ended March 4, 2017 is presented below:

	Non-employee
	Directors			Employees			Total
Units outstanding December 3, 2016		424,319			41,116			465,435
Participant contributions		4,462			3,964			8,426
Company match contributions		446			397			843
Payouts		(13,818	)		(6,137	)		(19,955	)
Units outstanding March 4, 2017		415,409			39,340			454,749

Deferred compensation units are fully vested at the date of contribution.

Note 9: Components of Net Periodic Cost (Benefit) related to Pension and Other Postretirement Benefit Plans

	Three Months Ended March 4, 2017 and February 27, 2016
													Other
	Pension Benefits												Postretirement
	U.S. Plans						Non-U.S. Plans						Benefits
Net periodic cost (benefit):	2017			2016			2017			2016			2017			2016
Service cost	$	28		$	27		$	508		$	480		$	52		$	84
Interest cost		3,603			3,767			1,144			1,367			398			480
Expected return on assets		(6,364	)		(6,077	)		(2,391	)		(2,482	)		(1,447	)		(1,342	)
Amortization:
Prior service cost		7			7			(1	)		(1	)		-			(10	)
Actuarial loss		1,307			1,293			842			752			253			532
Net periodic (benefit) cost	$	(1,419	)	$	(983	)	$	102		$	116		$	(744	)	$	(256	)

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Note 10: Accumulated Other Comprehensive Income (Loss)

The following table provides details of total comprehensive income (loss):

	Three Months Ended March 4, 2017												Three Months Ended February 27, 2016
	H.B. Fuller Stockholders									Non- controlling Interests			H.B. Fuller Stockholders									Non- controlling Interests
	Pre-tax			Tax			Net			Net			Pre-tax			Tax			Net			Net
Net income including non-controlling interests		-			-		$	14,795		$	36			-			-		$	18,918		$	49
Foreign currency translation adjustment¹	$	(10,514	)		-			(10,514	)		(5	)	$	(945	)		-			(945	)		(5	)
Reclassification to earnings:
Defined benefit pensionplans adjustment²		2,408		$	(818	)		1,590			-			3,997		$	(1,332	)		2,665			-
Interest rate swap³		16			(6	)		10			-			13			(3	)		10			-
Cash-flow hedges³		209			(80	)		129			-			403			(154	)		249			-
Other comprehensive income (loss)	$	(7,881	)	$	(904	)		(8,785	)		(5	)	$	3,468		$	(1,489	)		1,979			(5	)
Comprehensive income (loss)							$	6,010		$	31								$	20,897		$	44

¹Income taxes are not provided for foreign currency translation relating to permanent investments in international subsidiaries. As discussed in Note 1, the foreign currency translation adjustment for the quarter ended March 4, 2017 includes the impact of the change in functional currency for our subsidiaries in Latin America.

²Loss reclassified from accumulated other comprehensive income (“AOCI”) into earnings as part of net periodic cost related to pension and other postretirement benefit plans is reported in cost of sales, SG&A expense and special charges, net.

³Loss reclassified from AOCI into earnings is reported in other income (expense), net.

The components of accumulated other comprehensive loss is as follows:

	March 4, 2017
	Total			H.B. Fuller Stockholders			Non- controlling Interests
Foreign currency translation adjustment	$	(95,966	)	$	(95,895	)	$	(71	)
Defined benefit pension plans adjustment, net of taxesof $89,916		(174,511	)		(174,511	)		-
Interest rate swap, net of taxes of ($23)		38			38			-
Cash-flow hedges, net of taxes of $705		(1,146	)		(1,146	)		-
Accumulated other comprehensive loss	$	(271,585	)	$	(271,514	)	$	(71	)

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	December 3, 2016
	Total			H.B. Fuller Stockholders			Non- controlling Interests
Foreign currency translation adjustment	$	(85,447	)	$	(85,381	)	$	(66	)
Defined benefit pension plans adjustment, net of taxesof $90,734		(176,101	)		(176,101	)		-
Interest rate swap, net of taxes of ($17)		28			28			-
Cash-flow hedges, net of taxes of $785		(1,275	)		(1,275	)		-
Accumulated other comprehensive loss	$	(262,795	)	$	(262,729	)	$	(66	)

Note11: Income Taxes

As of March 4, 2017, we had a liability of $4,354 recorded under FASB ASC 740,Income Taxes, for gross unrecognized tax benefits (excluding interest), compared to $4,165 as of December 3, 2016. As of March 4, 2017, we had accrued $711 of gross interest relating to unrecognized tax benefits. For the quarter ended March 4, 2017, our recorded liability for gross unrecognized tax benefits increased by $189.

Note 12: Earnings Per Share

A reconciliation of the common share components for the basic and diluted earnings per share calculations is as follows:

	Three Months Ended
	March 4,		February 27,
(Shares in thousands)	2017		2016
Weighted-average common shares - basic		50,243		49,958
Equivalent shares from share-based compensations plans		1,217		1,037
Weighted-average common and common equivalent shares - diluted		51,460		50,995

Basic earnings per share is calculated by dividing net income attributable to H.B. Fuller by the weighted-average number of common shares outstanding during the applicable period. Diluted earnings per share is based upon the weighted-average number of common and common equivalent shares outstanding during the applicable period. The difference between basic and diluted earnings per share is attributable to share-based compensation awards. We use the treasury stock method to calculate the effect of outstanding shares, which computes total employee proceeds as the sum of (a) the amount the employee must pay upon exercise of the award, (b) the amount of unearned share-based compensation costs attributed to future services and (c) the amount of tax benefits, if any, that would be credited to additional paid-in capital assuming exercise of the award. Share-based compensation awards for which total employee proceeds exceed the average market price over the applicable period have an antidilutive effect on earnings per share, and accordingly, are excluded from the calculation of diluted earnings per share.

Options to purchase 632,720 and 1,495,004 shares of common stock at a weighted-average exercise price of $50.10 and $42.88 for the quarters ended March 4, 2017 and February 27, 2016, respectively, were excluded from the diluted earnings per share calculations because they were antidilutive.

Note 13: Financial Instruments

Overview

As a result of being a global enterprise, our earnings, cash flows and financial position are exposed to foreign currency risk from foreign currency denominated receivables and payables.

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We use foreign currency forward contracts, cross-currency swaps, and interest rate swaps to manage risks associated with foreign currency exchange rates and interest rates. We do not hold derivative financial instruments of a speculative nature or for trading purposes. We record derivatives as assets and liabilities on the balance sheet at fair value. Changes in fair value are recognized immediately in earnings unless the derivative qualifies and is designated as a hedge. Cash flows from derivatives are classified in the statement of cash flows in the same category as the cash flows from the items subject to designated hedge or undesignated (economic) hedge relationship. We evaluate hedge effectiveness at inception and on an ongoing basis. If a derivative is no longer expected to be effective, hedge accounting is discontinued. Hedge ineffectiveness, if any, is recorded in earnings.

We are exposed to credit risk in the event of nonperformance of counterparties for foreign currency forward exchange contracts and interest rate swap agreements. We select investment-grade multinational banks and financial institutions as counterparties for derivative transactions and monitors the credit quality of each of these banks on periodic basis as warranted. We do not anticipate nonperformance by any of these counterparties, and valuation allowances, if any, aredeminimis.

Cash Flow Hedges

Effective February 24, 2017, we entered into a cross-currency swap agreement to convert a notional amount of $42,600 of foreign currency denominated intercompany loans into U.S. dollars. The swap matures in 2020.Effective October 7, 2015, we entered into three cross-currency swap agreements to convert a notional amount of $134,736 of foreign currency denominated intercompany loans into U.S. dollars. The first swap matures in 2017, the second swap matures in 2018 and the third swap matures in 2019.

As of March 4, 2017, the combined fair value of the swaps was an asset of $4,971 and was included in other assets in the Condensed Consolidated Balance Sheets. The swaps were designated as cash-flow hedges for accounting treatment. The lesser amount between the cumulative change in the fair value of the actual swaps and the cumulative change in the fair value of hypothetical swaps is recorded in accumulated other comprehensive income (loss) in the Condensed Consolidated Balance Sheets. The difference between the cumulative change in the fair value of the actual swaps and the cumulative change in the fair value of hypothetical swaps are recorded as other income (expense), net in the Condensed Consolidated Statements of Income. In a perfectly effective hedge relationship, the two fair value calculations would exactly offset each other. Any difference in the calculation represents hedge ineffectiveness. The ineffectiveness calculations as of March 4, 2017 resulted in additional pre-tax loss of $20 for the three months ended March 4, 2017 as the change in fair value of the cross-currency swaps was less than the change in the fair value of the hypothetical swaps. The amount in accumulated other comprehensive income (loss) related to cross-currency swaps was a loss of $1,146 as of March 4, 2017. The estimated net amount of the existing loss that is reported in accumulated other comprehensive income (loss) as of March 4, 2017 that is expected to be reclassified into earnings within the next twelve months is $986. As of March 4, 2017, we do not believe any gains or losses will be reclassified into earnings as a result of the discontinuance of these cash flow hedges because the original forecasted transaction will not occur.

The following table summarizes the cross-currency swaps outstanding as of March 4, 2017:

	Fiscal Year of Expiration	Interest Rate			Notional Value		Fair Value
Pay EUR	2017		3.05	%	$	44,912	$	2,181
Receive USD			3.9145	%

Pay EUR	2018		3.45	%	$	44,912	$	1,750
Receive USD			4.5374	%

Pay EUR	2019		3.80	%	$	44,912	$	1,329
Receive USD			5.0530	%

Pay EUR	2020		1.95	%	$	42,600	$	(289	)
Receive USD			4.30375	%
Total					$	177,336	$	4,971

Except for the cross-currency swap agreements listed above, foreign currency derivative instruments outstanding are not designated as hedges for accounting purposes. The gains and losses related to mark-to-market adjustments are recognized as other income or expense in the Condensed Consolidated Statements of Income during the periods in which the derivative instruments are outstanding. See Note 14 for the fair value amounts of these derivative instruments.

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As of March 4, 2017, we had forward foreign currency contracts maturing between March 21, 2017 and April 13, 2018. The mark-to-market effect associated with these contracts, on a net basis, was a gain of $3,117 as of March 4, 2017. These gains were largely offset by the underlying transaction gains and losses resulting from the foreign currency exposures for which these contracts relate.

Fair Value Hedges

We entered into interest rate swap agreements to convert $150,000 of our $300,000 4.000% Notes that were issued on February 14, 2017 to a variable interest rate of 1-month LIBOR (in advance) plus 1.86 percent. See Note 6 for further discussion on the issuance of our 4.000% Notes. The combined fair value of the interest rate swaps in total was a liability of $3,135 at March 4, 2017 and was included in other liabilities in the Condensed Consolidated Balance Sheets. The swaps were designated for hedge accounting treatment as fair value hedges. We are applying the shortcut method in accounting for these interest rate swaps as we expect that the changes in the fair value of the swap will offset the changes in the fair value of the 4.000% Notes resulting in no ineffectiveness. As a result of applying the shortcut method, the change in the fair value of the interest rate swap and an equivalent amount for the change in the fair value of the debt will be reflected in other income (expense) and no ineffectiveness will be recognized in our Condensed Consolidated Statements of Income.

We have interest rate swap agreements to convert $75,000 of our senior notes to variable interest rates. The change in fair value of the senior notes, attributable to the change in the risk being hedged, was a liability of $1,107 at March 4, 2017 and was included in long-term debt and current maturities of long-term debt in the Condensed Consolidated Balance Sheets. The combined fair value of the swaps in total was an asset of $1,077 at March 4, 2017 and $1,579 at December 3, 2016 and were included in other assets in the Condensed Consolidated Balance Sheets. The swaps were designated for hedge accounting treatment as fair value hedges. The changes in the fair value of the swap and the fair value of the senior notes attributable to the change in the risk being hedged are recorded as other income (expense), net in the Condensed Consolidated Statements of Income. In a perfectly effective hedge relationship, the two fair value calculations would exactly offset each other. Any difference in the calculation represents hedge ineffectiveness. For the three months ended March 4, 2017 and February 27, 2016, a pre-tax gain of $3 and $143, respectively, was recorded as the fair value of the interest rate swaps decreased by more than the change in the fair value of the Senior Notes attributable to the change in the risk being hedged.

Concentrations of credit risk with respect to trade accounts receivable are limited due to the large number of entities in the customer base and their dispersion across many different industries and countries. As of March 4, 2017, there were no significant concentrations of credit risk.

Note 14: Fair Value Measurements

Overview

Estimates of fair value for financial assets and liabilities are based on the framework established in the accounting guidance for fair value measurements. The framework defines fair value, provides guidance for measuring fair value and requires certain disclosures. The framework discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow) and the cost approach (cost to replace the service capacity of an asset or replacement cost). The framework utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:

●

Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

●

Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

●

Level 3: Unobservable inputs that reflect management’s assumptions, and include situations where there is little, if any, market activity for the asset or liability.

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Balances Measured at Fair Value on a Recurring Basis

The following table presents information about our financial assets and liabilities that are measured at fair value on a recurring basis as of March 4, 2017 and December 3, 2016, and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value.

March 4,

Fair Value Measurements Using:

Description

2017

Level 1

Level 2

Level 3

Assets:

Marketable securities

1,245

Foreign exchange contract assets

3,991

Interest rate swaps

1,077

Cash-flow hedges

5,260

Liabilities:

Foreign exchange contract liabilities

874

Interest rate swaps

3,135

Contingent consideration liability

4,706

Cash-flow hedges

289

	December 3,		Fair Value Measurements Using:
Description	2016		Level 1		Level 2		Level 3
Assets:
Marketable securities	$	1,020	$	1,020	$	-	$	-
Foreign exchange contract assets		11,697		-		11,697		-
Interest rate swaps		1,579		-		1,579		-
Cash-flow hedges		4,654		-		4,654		-

Liabilities:
Foreign exchange contract liabilities	$	6,925	$	-	$	6,925	$	-
Contingent consideration liability		4,720		-		-		4,720

Long-term debt had an estimated fair value of $821,211 and $693,283 as of March 4, 2017 and December 3, 2016, respectively. The fair value of long-term debt is based on quoted market prices for the same or similar issues or on the current rates offered for debt of similar maturities. The estimated fair value of these long-term obligations is not necessarily indicative of the amount that would be realized in a current market exchange.

We use the income approach in calculating the fair value of our contingent consideration liability using a real option model with Level 3 inputs. The expected cash flows are affected by various significant judgments and assumptions, including revenue growth rates, profit margin percentages, volatility and discount rate, which are sensitive to change. Estimates of fair value are inherently uncertain and represent only management’s reasonable expectation regarding future developments. These estimates and the judgments and assumptions upon which the estimates are based will, in all likelihood, differ in some respects from actual future results. The contingent consideration liability activity for the quarter ended March 4, 2017 is presented below:

		Amount
Balance at December 3, 2016	$	4,720
Mark to market adjustment		37
Foreign currency translation adjustment		(51	)
Balance at March 4, 2017	$	4,706

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Note15: Share Repurchase Program

On September 30, 2010, the Board of Directors authorized a share repurchase program of up to $100,000 of our outstanding common shares. Under the program, we are authorized to repurchase shares for cash on the open market, from time to time, in privately negotiated transactions or block transactions, or through an accelerated repurchase agreement. The timing of such repurchases is dependent on price, market conditions and applicable regulatory requirements. Upon repurchase of the shares, we reduced our common stock for the par value of the shares with the excess being applied against additional paid-in capital.

We did not repurchase any shares during the quarter ended March 4, 2017. During the quarter ended February 27, 2016, we repurchased shares under this program, with an aggregate value of $4,210. Of this amount, $125 reduced common stock and $4,085 reduced additional paid-in capital.

Note16: Commitments and Contingencies

Environmental Matters

From time to time, we become aware of compliance matters relating to, or receive notices from, federal, state or local entities regarding possible or alleged violations of environmental, health or safety laws and regulations. We review the circumstances of each individual site, considering the number of parties involved, the level of potential liability or our contribution relative to the other parties, the nature and magnitude of the hazardous substances involved, the method and extent of remediation, the estimated legal and consulting expense with respect to each site and the time period over which any costs would likely be incurred. Also, from time to time, we are identified as a potentially responsible party (“PRP”) under the Comprehensive Environmental Response, Compensation and Liability Act and/or similar state laws that impose liability for costs relating to the clean up of contamination resulting from past spills, disposal or other release of hazardous substances. We are also subject to similar laws in some of the countries where current and former facilities are located. Our environmental, health and safety department monitors compliance with applicable laws on a global basis. To the extent we can reasonably estimate the amount of our probable liabilities for environmental matters, we establish a financial provision.

Currently we are involved in various environmental investigations, clean up activities and administrative proceedings and lawsuits. In particular, we are currently deemed a PRP in conjunction with numerous other parties, in a number of government enforcement actions associated with landfills and/or hazardous waste sites. As a PRP, we may be required to pay a share of the costs of investigation and clean up of these sites. In addition, we are engaged in environmental remediation and monitoring efforts at a number of current and former operating facilities. While uncertainties exist with respect to the amounts and timing of the ultimate environmental liabilities, based on currently available information, we have concluded that these matters, individually or in the aggregate, will not have a material adverse effect on our results of operations, financial condition or cash flow.

Other Legal Proceedings

From time to time and in the ordinary course of business, we are a party to, or a target of, lawsuits, claims, investigations and proceedings, including product liability, personal injury, contract, patent and intellectual property, environmental, health and safety, tax and employment matters. While we are unable to predict the outcome of these matters, we have concluded, based upon currently available information, that the ultimate resolution of any pending matter, individually or in the aggregate, including the asbestos litigation described in the following paragraphs, will not have a material adverse effect on our results of operations, financial condition or cash flow.

We have been named as a defendant in lawsuits in which plaintiffs have alleged injury due to products containing asbestos manufactured more than 30 years ago. The plaintiffs generally bring these lawsuits against multiple defendants and seek damages (both actual and punitive) in very large amounts. In many cases, plaintiffs are unable to demonstrate that they have suffered any compensable injuries or that the injuries suffered were the result of exposure to products manufactured by us. We are typically dismissed as a defendant in such cases without payment. If the plaintiff presents evidence indicating that compensable injury occurred as a result of exposure to our products, the case is generally settled for an amount that reflects the seriousness of the injury, the length, intensity and character of exposure to products containing asbestos, the number and solvency of other defendants in the case, and the jurisdiction in which the case has been brought.

A significant portion of the defense costs and settlements in asbestos-related litigation is paid by third parties, including indemnification pursuant to the provisions of a 1976 agreement under which we acquired a business from a third party. Currently, this third party is defending and paying settlement amounts, under a reservation of rights, in most of the asbestos cases tendered to the third party.

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In addition to the indemnification arrangements with third parties, we have insurance policies that generally provide coverage for asbestos liabilities, including defense costs. Historically, insurers have paid a significant portion of our defense costs and settlements in asbestos-related litigation. However, certain of our insurers are insolvent. We have entered into cost-sharing agreements with our insurers that provide for the allocation of defense costs and settlements and judgments in asbestos-related lawsuits. These agreements require, among other things, that we fund a share of settlements and judgments allocable to years in which the responsible insurer is insolvent

A summary of the number of and settlement amounts for asbestos-related lawsuits and claims is as follows:

	Three Months Ended				3 Years Ended
	March 4, 2017		February 27, 2016		December 3, 2016
Lawsuits and claims settled		3		2		33
Settlement amounts	$	833	$	75	$	3,061
Insurance payments received or expected to be received	$	685	$	56	$	2,253

We do not believe that it would be meaningful to disclose the aggregate number of asbestos-related lawsuits filed against us because relatively few of these lawsuits are known to involve exposure to asbestos-containing products that we manufactured. Rather, we believe it is more meaningful to disclose the number of lawsuits that are settled and result in a payment to the plaintiff. To the extent we can reasonably estimate the amount of our probable liabilities for pending asbestos-related claims, we establish a financial provision and a corresponding receivable for insurance recoveries.

Note17: Operating Segments

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 identified as gross profit less SG&A expenses. Segment operating income excludes special charges, net. Corporate expenses are fully allocated to each operating segment. Corporate assets are not allocated to the operating segments. Inter-segment revenues are recorded at cost plus a markup for administrative costs. Operating results of each segment are regularly reviewed by our chief operating decision maker to make decisions about resources to be allocated to the segments and assess their performance.

The table below provides certain information regarding net revenue and segment operating income for each of our operating segments:

	Three Months Ended
	March 4, 2017							February 27, 2016
			Inter-		Segment					Inter-		Segment
	Trade		Segment		Operating			Trade		Segment		Operating
	Revenue		Revenue		Income (Loss)			Revenue		Revenue		Income
Americas Adhesives	$	193,162	$	3,860	$	21,033		$	183,319	$	3,630	$	26,259
EIMEA		124,039		3,522		1,797			124,291		5,271		6,163
Asia Pacific		62,645		1,269		1,879			53,860		951		3,753
Construction Products		57,046		162		(683	)		60,074		104		785
Engineering Adhesives		66,431		-		2,055			52,782		-		878
Total	$	503,323			$	26,081		$	474,326			$	37,838

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Reconciliation of segment operating income to income before income taxes and income from equity method investments:

	Three Months Ended
	March 4,			February 27,
	2017			2016
Segment operating income	$	26,081		$	37,838
Special charges, net		-			(413	)
Other income (expense), net		621			(5,082	)
Interest expense		(8,380	)		(6,308	)
Income before income taxes and income from equity method investments	$	18,322		$	26,035

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Item2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Overview

The Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) should be read in conjunction with the MD&A included in our Annual Report on Form 10-K for the year ended December 3, 2016 for important background information related to our business.

Net revenue in the first quarter of 2017 increased 6.1 percent from the first quarter of 2016. Revenue increased 11.9 percent due to sales volume, including 3.2 percent from acquisitions, but was partially offset by a 2.2 percent decrease due to unfavorable sales mix and a 0.1 percent decrease in product pricing compared to the first quarter of 2016. A weaker Egyptian pound, Chinese renminbi, Turkish lira and Mexican peso compared to the U.S. dollar for the first quarter of 2017 compared to the first quarter of 2016 were the main drivers of a negative 3.5 percent currency effect. Gross profit margin decreased 140 basis points primarily due to higher raw material costs and the implementation of the 2017 Restructuring Plan.

Net income attributable to H.B. Fuller in the first quarter of 2017 was $14.8 million compared to $18.9 million in the first quarter of 2016. On a diluted earnings per share basis, the first quarter of 2017 was $0.29 per share compared to $0.37 per share for the first quarter of 2016.

Restructuring Plan

During the first quarter of 2017, we approved a restructuring plan (the “2017 Restructuring Plan”) related to organizational changes and other actions to optimize operations. In implementing the 2017 Restructuring Plan, we expect to incur costs of approximately $17.0 million to $20.0 million ($13.0 million to $16.0 million after-tax) which includes (i) cash expenditures of approximately $13.0 million ($11.0 million after-tax) for severance and related employee costs globally and (ii) $4.0 million to $7.0 million ($3.0 million to $5.0 million after-tax) related to the optimization of production facilities, streamlining of processes and accelerated depreciation of long-lived assets. Approximately $15.0 million to $16.0 million ($12.0 million to $13.0 million after-tax) of the costs are expected to be cash costs. The 2017 Restructuring Plan was implemented in the first quarter of 2017 and is currently expected to be completed by mid-year of fiscal 2018. The implementation of the 2017 Restructuring Plan resulted in a first-quarter 2017 pre-tax charge of $10.2 million.

Results of Operations

Net revenue:

	Three Months Ended
	March 4,		February 27,		2017 vs
($ in millions)	2017		2016		2016
Net revenue	$	503.3	$	474.3		6.1	%

We review variances in net revenue in terms of changes related to sales volume, product pricing, sales mix, business acquisitions and changes in foreign currency exchange rates. The impact of sales volume, product pricing, sales mix and acquisitions are viewed as constant currency growth. The following table shows the net revenue variance analysis for the first quarter of 2017 compared to the same period in 2016:

	Three Months Ended March 4, 2017
	vs February 27, 2016
Constant currency growth		9.6	%
Currency		(3.5	%)
Total		6.1	%

Constant currency growth was a positive 9.6 percent in the first quarter of 2017 compared to the first quarter of 2016. The 9.6 percent constant currency growth in the first quarter of 2017 was driven by 30.0 percent growth in Engineering Adhesives, 20.0 percent growth in Asia Pacific, 9.3 percent growth in EIMEA and 5.7 percent growth in Americas Adhesives, offset by a 5.3 percent decrease in Construction Products. The negative 3.5 percent currency impact was primarily driven by the devaluation of the Egyptian pound, Chinese renminbi, Turkish lira and Mexican peso.

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Cost of sales:

	Three Months Ended
	March 4,			February 27,			2017 vs
($ in millions)	2017			2016			2016
Raw materials	$	273.4		$	254.5			7.4	%
Other manufacturing costs		90.9			82.2			10.6	%
Cost of sales	$	364.3		$	336.7			8.2	%
Percent of net revenue		72.4	%		71.0	%

Cost of sales in the first quarter of 2017 compared to the first quarter of 2016 increased 140 basis points as a percentage of net revenue. Raw material cost as a percentage of net revenue increased 70 basis points compared to last year primarily due to higher raw materials costs. Other manufacturing costs as a percentage of revenue increased 70 basis points compared to the first quarter of last year driven primarily by the impact of acquired businesses and the implementation of the 2017 Restructuring Plan.

Gross profit:

	Three Months Ended
	March 4,			February 27,			2017 vs
($ in millions)	2017			2016			2016
Gross profit	$	139.0		$	137.6			1.0	%
Percent of net revenue		27.6	%		29.0	%

Gross profit in the firstquarter of 2017 increased 1.0 percent and gross profit margin decreased 140 basis points compared to the firstquarter of 2016. The decrease in gross profit margin was primarily due to higher raw material costs and the implementation of the 2017 Restructuring Plan.

Selling, general and administrative expenses:

	Three Months Ended
	March 4,			February 27,			2017 vs
($ in millions)	2017			2016			2016
SG&A	$	112.9		$	99.8			13.2	%
Percent of net revenue		22.4	%		21.0	%

Selling, general and administrative (“SG&A”) expenses for the first quarter of 2017 increased $13.1 million, or 13.2 percent, compared to the first quarter of 2016. The increase is mainly due to the impact of acquired businesses, the implementation of the 2017 Restructuring Plan and higher variable compensation partially offset by lower expenses related to general spending reductions and foreign currency exchange rate benefits on spending outside the U.S.

Special charges, net:

Three Months Ended

March 4,

February 27,

2017 vs

($ in millions)

2017

2016

Special charges, net

0.4

NMP

NMP = Non-meaningful percentage

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The following table provides detail of special charges, net:

	Three Months Ended
	March 4,		February 27,
($ in millions)	2017		2016
Acquisition and transformation related costs	$	-	$	0.1
Facility exit costs		-		0.3
Special charges, net	$	-	$	0.4

The integration of the industrial adhesives business we acquired in March 2012 involved a significant amount of restructuring and capital investment to optimize the new combined entity. In addition to this acquisition, we announced our intentions to take a series of actions in our existing EIMEA operating segment to improve the profitability and future growth prospects of this operating segment. We combined these two initiatives into a single project which we refer to as the “Business Integration Project”. During the first quarterended February 27, 2016, we incurred special charges, net of $0.4 million for costs related to the Business Integration Project. The Business Integration Project was substantially complete at the end of 2016.

Other income (expense), net:

Three Months Ended

March 4,

February 27,

2017 vs

($ in millions)

2017

2016

Other income (expense), net

0.6

(5.1

)

NMP

NMP = Non-meaningful percentage

Other income (expense), net in the first quarter of 2017 included $0.6 million of interest income. Other income (expense), net in the first quarter of 2016 included $5.8 million of currency translation and re-measurement losses offset by $0.2 million of net financing income and $0.5 million of interest income.

Interest expense:

	Three Months Ended
	March 4,		February 27,		2017 vs
($ in millions)	2017		2016		2016
Interest expense	$	8.4	$	6.3		32.8	%

Interest expense in the first quarter of 2017 compared to the same period last year was higher due to larger local currency debt balances at higher interest rates, higher U.S. debt balances at higher interest rates from the issuance of our 4.000% Notes, and slightly higher LIBOR rates on floating rate debt held in the U.S. In addition, and as a result of the issuance of our 4.000% Notes during the first quarter of 2017, we recorded $0.5 million of accelerated amortization of debt issuance costs related to debt facilities that were repaid with proceeds from the 4.000% Notes. We capitalized less than $0.1 million of interest expense in the first quarter of 2017 compared to $0.1 million in the same period last year.

Income taxes:

	Three Months Ended
	March 4,			February 27,			2017 vs
($ in millions)	2017			2016			2016
Income taxes	$	5.8		$	8.8			(34.2	%)
Effective tax rate		31.5	%		33.6	%

Income tax expense of $5.8 million in the first quarter of 2017 includes $0.1 million of discrete tax expense and $3.9 million of tax benefit from costs primarily related to the restructuring plans and other non-recurring items. Excluding the discrete tax expense and the effects of these items, the overall effective tax rate was 29.7 percent.

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Income from equity method investments:

	Three Months Ended
	March 4,		February 27,		2017 vs
($ in millions)	2017		2016		2016
Income from equity method investments	$	2.3	$	1.7		34.4	%

The income from equity method investments relates to our 50 percent ownership of the Sekisui-Fuller joint venture in Japan. The higher income for the first quarter of 2017 compared to the first quarter of 2016 is primarily related to higher net income in our joint venture.

Net income attributable to non-controlling interests:

Net income attributable to non-controlling interests relates to an 11 percent redeemable non-controlling interest in HBF Turkey and was not material for the quarter ended March 4, 2017 and February 27, 2016. During thefirst quarter of 2017, we entered into an agreement with the non-controlling shareholder to purchase the remaining shares.

Net income attributable to H.B. Fuller:

	Three Months Ended
	March 4,			February 27,			2017 vs
($ in millions)	2017			2016			2016
Net income attributable to H.B. Fuller	$	14.8		$	18.9			(21.8	%)
Percent of net revenue		2.9	%		4.0	%

The net income attributable to H.B. Fuller for the first quarter of 2017 was $14.8 million compared to $18.9 million for the first quarter of 2016. The diluted earnings per share for the first quarter of 2017 was $0.29 per share as compared to $0.37 per share for the first quarter of 2016.

Operating Segment Results

We have five reportable segments: Americas Adhesives, EIMEA (Europe, India, Middle East and Africa), Asia Pacific, Construction Products and Engineering Adhesives. Operating results of each of these segments are regularly reviewed by our chief operating decision maker to make decisions about resources to be allocated to the segments and assess their performance.

The tables below provide certain information regarding the net revenue and segment operating income of each of our operating segments. For segment evaluation by the chief operating decision maker, segment operating income is defined as gross profit less SG&A expenses. Segment operating income excludes special charges, net. The impact of sales volume, product pricing, sales mix and acquisitions are viewed as constant currency growth.

Net Revenue by Segment:

	Three Months Ended
	March 4, 2017					February 27, 2016
	Net		% of			Net		% of
($ in millions)	Revenue		Total			Revenue		Total
Americas Adhesives	$	193.2		38	%	$	183.3		39	%
EIMEA		124.0		25	%		124.3		26	%
Asia Pacific		62.6		13	%		53.8		11	%
Construction Products		57.1		11	%		60.1		13	%
Engineering Adhesives		66.4		13	%		52.8		11	%
Total	$	503.3		100	%	$	474.3		100	%

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Segment Operating Income (Loss):

	Three Months Ended
	March 4, 2017						February 27, 2016
($ in millions)	Segment Operating Income (Loss)			% of Total			Segment Operating Income		% of Total
Americas Adhesives	$	21.0			81	%	$	26.3		70	%
EIMEA		1.8			7	%		6.1		16	%
Asia Pacific		1.9			7	%		3.7		10	%
Construction Products		(0.7	)		-3	%		0.8		2	%
Engineering Adhesives		2.1			8	%		0.9		2	%
Total	$	26.1			100	%	$	37.8		100	%

The following table provides a reconciliation of segment operating income to income before income taxes and income from equity method investments, as reported on the Condensed Consolidated Statements of Income:

	Three Months Ended
	March 4,			February 27,
($ in millions)	2017			2016
Segment operating income	$	26.1		$	37.8
Special charges, net		-			(0.4	)
Other income (expense), net		0.6			(5.1	)
Interest expense		(8.4	)		(6.3	)
Income before income taxes and income from equity method investments	$	18.3		$	26.0

Americas Adhesives

	Three Months Ended
	March 4,			February 27,			2017 vs
($ in millions)	2017			2016			2016
Net revenue	$	193.2		$	183.3			5.4	%
Segment operating income	$	21.0		$	26.3			(19.9	%)
Segment operating margin		10.9	%		14.3	%

The following table provides details of the Americas Adhesives net revenue variances:

	Three Months Ended March 4, 2017
	vs February 27, 2016
Constant currency growth		5.7	%
Currency		(0.3	%)
Total		5.4	%

Net revenue increased 5.4 percent in thefirst quarter of2017 compared to thefirst quarter of2016. The 5.7 percent increase in constant currency growth was attributable to a 11.2 percent increase in sales volume, including a 4.4 percent increase due to the Wisdom Adhesives acquisition, offset by a 4.0 percent decrease due to unfavorable sales mix and a 1.5 percent decrease in product pricing. The negative currency effect was due to the weaker Mexican peso and Argentinian peso compared to the U.S. dollar. As a percentage of net revenue, raw material costs increased 140 basis points mainly dueto lower sales prices, higher raw material costs and the impact of valuing inventories related to the Wisdom Adhesives acquisition at fair value. Other manufacturing costs as a percentage of net revenue increased 120 basis points, primarily due to the acquisition of Wisdom Adhesives and higher delivery expense. SG&A expenses as a percentage of net revenue increased 80 basis points due to the implementation of the 2017 Restructuring Plan and the acquisition of Wisdom Adhesives. Segment operating income decreased 19.9 percent and segment operating margin as a percentage of net revenue decreased 340 basis points compared to thefirst quarter of 2016.

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EIMEA

	Three Months Ended
	March 4,			February 27,			2017 vs
($ in millions)	2017			2016			2016
Net revenue	$	124.0		$	124.3			(0.2	%)
Segment operating income	$	1.8		$	6.1			(70.8	%)
Segment operating margin		1.4	%		5.0	%

The following table provides details of the EIMEA net revenue variances:

	Three Months Ended March 4, 2017
	vs February 27, 2016
Constant currency growth		9.3	%
Currency		(9.5	%)
Total		(0.2	%)

Net revenue decreased 0.2 percent in the first quarter of 2017 compared to the first quarter of 2016. The 9.3 percent increase in constant currency growth was attributable to a 6.5 percent increase in sales volume and a 3.1 percent increase in product pricing, partially offset by unfavorable sales mix. The negative currency effect of 9.5 percent was primarily the result of a weaker Egyptian pound and Turkish lira compared to the U.S. dollar partially offset by a stronger Euro. Sales volume growth was primarily related to the hygiene and durable assembly markets, and strong growth in the emerging markets. Raw material cost as a percentage of net revenue decreased 60 basis points in the first quarter compared to the first quarter last year primarily due to higher product pricing and favorable sales mix. Other manufacturing costs as a percentage of net revenue were 170 basis points higher than the first quarter of 2016. SG&A expenses as a percentage of net revenue increased 270 basis points due to the implementation of the 2017 Restructuring Plan. Segment operating income decreased 70.8 percent and segment operating margin decreased 360 basis points compared to the first quarter of 2016.

Asia Pacific

	Three Months Ended
	March 4,			February 27,			2017 vs
($ in millions)	2017			2016			2016
Net revenue	$	62.6		$	53.8			16.3	%
Segment operating income	$	1.9		$	3.7			(49.9	%)
Segment operating margin		3.0	%		7.0	%

The following table provides details of the Asia Pacific net revenue variances:

	Three Months Ended March 4, 2017
	vs February 27, 2016
Constant currency growth		20.0	%
Currency		(3.7	%)
Total		16.3	%

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Net revenue in the first quarter of 2017 increased 16.3 percent compared to the first quarter of 2016. The 20.0 percent increase in constant currency growth was attributable to a 25.0 percent increase in sales volume, including a 7.0 percent increase due to the Advanced Adhesives acquisition, partially offset by a 2.8 percent decrease due to unfavorable sales mix and a 2.2 percent decrease in product pricing. Organic constant currency growth was primarily driven by volume growth in Greater China.Negative currency effects of 3.7 percent compared to the first quarter of 2016 were primarily driven by the weaker Chinese renminbi and Malaysian ringgit compared to the U.S. dollar partially offset by a stronger Australian dollar. Raw material costs as a percentage of net revenue increased 150 basis points compared to the first quarter of 2016 dueto unfavorable sales mix and higher raw material costs. Other manufacturing costs as a percentage of net revenue increased 70 basis points compared to the first quarter of 2016 primarily due to the acquisition of Advanced Adhesives and the impact of the 2017 Restructuring Plan. SG&A expenses as a percentage of net revenue increased 180 basis points due to the acquisition of Advanced Adhesives and the implementation of the 2017 Restructuring Plan. Segment operating income decreased 49.9 percent and segment operating margin decreased 400 basis points compared to the first quarter of 2016.

Construction Products

	Three Months Ended
	March 4,			February 27,			2017 vs
($ in millions)	2017			2016			2016
Net revenue	$	57.1		$	60.1			(5.0	%)
Segment operating income	$	(0.7	)	$	0.8			(187.1	%)
Segment operating margin		(1.2	%)		1.3	%

The following tables provide details of the Construction Products net revenue variances:

	Three Months Ended March 4, 2017
	vs February 27, 2016
Constant currency growth		(5.3	%)
Currency		0.3	%
Total		(5.0	%)

Net revenue decreased 5.0 percent in the first quarter of 2017 compared to the first quarter of 2016. The 5.3 percent decrease in constant currency growth was driven by a 3.6 percent decrease due to unfavorable sales mix and a 1.7 percent decrease in sales volume. The positive currency effect was due tothe stronger Australian dollar compared to the U.S. dollar. Raw material cost as a percentage of net revenue was 120 basis points lower in the first quarter of 2017 compared to last year primarily dueto favorable sales mix and lower raw material costs. Other manufacturing costs as a percentage of net revenue were 280 basis points higher in the first quarter of 2017 compared to the first quarter of 2016 primarily due to the implementation of the 2017 Restructuring Plan. Segment operating income decreased 187.1 percent and segment operating margin decreased 250 basis pointscompared to thefirst quarter of 2016.

Engineering Adhesives

	Three Months Ended
	March 4,			February 27,			2017 vs
($ in millions)	2017			2016			2016
Net revenue	$	66.4		$	52.8			25.9	%
Segment operating income	$	2.1		$	0.9			134.1	%
Segment operating margin		3.1	%		1.7	%

The following tables provide details of the Engineering Adhesives net revenue variances:

	Three Months Ended March 4, 2017
	vs February 27, 2016
Constant currency growth		30.0	%
Currency		(4.1	%)
Total		25.9	%

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Net revenue increased 25.9 percent in the first quarter of 2017 compared to the first quarter of 2016. The 30.0 percent increase in constant currency growth was attributable to a 29.0 percent increase in sales volume, including a 6.5 percent increase due to the acquisition of Cyberbond, and a 1.3 percent increase due to favorable sales mix, partially offset by a 0.3percent decrease in product pricing. Organic constant currency growth was driven by strong performance in the automotive, electronics and Tonsan markets.Negative currency effects of 4.1 percent compared to the first quarter of last year were primarily driven by the weaker Chinese renminbi compared to the U.S. dollar. Raw material cost as a percentage of net revenue was 220 basis points higher in the first quarter of 2017 compared to the first quarter of 2016 dueto higher raw material costs. Other manufacturing costs as a percentage of net revenue were 200 basis points lower in the first quarter of 2017 compared to the first quarter of 2016 due to higher sales volume. Segment operating income increased 134.1 percent and segment operating margin increased 140 basis pointscompared to thefirst quarter of 2016.

Financial Condition, Liquidity and Capital Resources

Total cash and cash equivalents as of March 4, 2017 were $116.5 million compared to $142.2 million as of December 3, 2016 and $126.8 million as of February 27, 2016. Of the $116.5 million in cash and cash equivalents as of March 4, 2017, $96.5 million was held outside the United States. Total long and short-term debt was $804.8 million as of March 4, 2017, $703.3 million as of December 3, 2016 and $720.4 million as of February 27, 2016. The total debt to total capital ratio as measured by Total Debt divided by (Total Debt plus Total Equity) was 45.9 percent as of March 4, 2017 as compared to 42.8 percent as of December 3, 2016 and 44.9 percent as of February 27, 2016.

We believe that cash flows from operating activities will be adequate to meet our ongoing liquidity and capital expenditure needs. In addition, we believe we have the ability to obtain both short-term and long-term debt to meet our financing needs for the foreseeable future. Cash available in the United States has historically been sufficient and we expect it will continue to be sufficient to fund U.S. operations and U.S. capital spending and U.S. pension and other postretirement benefit contributions in addition to funding U.S. acquisitions, dividend payments, debt service and share repurchases as needed. For those international earnings considered to be reinvested indefinitely, we currently have no intention to, and plans do not indicate a need to, repatriate these funds for U.S. operations.

Our credit agreements and note purchase agreements include restrictive covenants that, if not met, could lead to a renegotiation of our credit lines and a significant increase in our cost of financing. At March 4, 2017, we were in compliance with all covenants of our contractual obligations as shown in the following table:

Covenant	Debt Instrument	Measurement	Result as of March 4, 2017
TTM EBITDA / TTM Interest Expense	All Debt Instruments	Not less than 2.5	9.2

Total Indebtedness / TTM EBITDA	All Debt Instruments	Not greater than 3.5	2.9

●

TTM = Trailing 12 months

●

EBITDA for covenant purposes is defined as consolidated net income, plus interest expense, taxes, depreciation and amortization, non-cash impairment losses, extraordinary non-cash losses incurred other than in the ordinary course of business, nonrecurring extraordinary non-cash restructuring charges, cash expenses related to the Tonsan acquisition for advisory services and for arranging financing for the acquired business with cash expenses not to exceed $10.0 million, minus extraordinary non-cash gains incurred other than in the ordinary course of business. 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. Additional detail is provided in the Form 8-K dated October 31, 2014.

We believe we have the ability to meet all of our contractual obligations and commitments in fiscal 2017.

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Selected Metrics of Liquidity

Key metrics we monitor are net working capital as a percent of annualized net revenue, trade accounts receivable days sales outstanding (“DSO”), inventory days on hand, free cash flow and debt capitalization ratio.

	March 4,			February 27,
	2017			2016
Net working capital as a percentage of annualized net revenue¹		23.0	%		23.1	%
Accounts receivable DSO²(in days)		60			59
Inventory days on hand³(in days)		70			68
Free cash flow⁴	$	(10.5	)	$	12.7
Total debt to total capital ratio⁵		45.9	%		44.9	%

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 four).

Trade receivables net of the allowance for doubtful accounts at the balance sheet date multiplied by 56 (8 weeks) and divided by the net revenue for the last 2 months of the quarter.

Total inventory multiplied by 56 and divided by cost of sales (excluding delivery costs) for the last 2 months of the quarter.

⁴

Year-to-date net cash provided by (used in) operations from continuing operations, less purchased property, plant and equipment and dividends paid.

⁵

Total debt divided by (total debt plus total stockholders’ equity).

Summary of Cash Flows

Cash Flows from Operating Activities:


	Three Months Ended
	March 4,		February 27,
($ in millions)	2017		2016
Net cash provided by operating activities	$	16.5	$	42.6

Net income including non-controlling interests was $14.8 million in the first three months of 2017 compared to $19.0 million in the first three months of 2016. Depreciation and amortization expense totaled $19.3 million in the first three months of 2017 compared to $20.0 million in the first three months of 2016. Accrued compensation was a use of cash of $7.5 million in 2017 compared to a use of cash of $13.2 million last year related to lower accruals for our employee incentive plans. Other accrued expenses was a use of cash of $8.1 million in the first three months of 2017 compared to a use of cash of $5.3 million in same period last year. Other liabilities was a source of cash of $1.8 million in the first three months of 2017 compared to a use of cash of $1.4 million in the first three months of 2016.

Changes in net working capital (trade receivables, inventory and trade payables) accounted for a use of cash of $3.7 million compared to a source of cash of $8.7 million last year. The table below provides the cash flow impact due to changes in the components of net working capital:

	Three Months Ended
	March 4,			February 27,
($ in millions)	2017			2016
Trade receivables, net	$	4.9		$	28.9
Inventory		(32.6	)		(15.9	)
Trade payables		24.0			(4.3	)
Total cash flow impact	$	(3.7	)	$	8.7

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●

Trade Receivables, net – Trade Receivables, net was a source of cash of $4.9 million in 2017 compared to a source of cash of $28.9 million in 2016. The higher source of cash in 2016 compared to 2017 was due to strong collection activity of trade receivables. The DSO were 60 days at March 4, 2017 and 59 days at February 27, 2016.

●

Inventory – Inventory was a use of cash of $32.6 million and $15.9 million in 2017 and 2016, respectively. The lower use of cash in 2016 is related to lower seasonal build of inventory in 2016. Inventory days on hand were 70 days as of March 4, 2017 and 68 days as of February 27, 2016.

●

Trade Payables – For the first three months of 2017 trade payables was a source of cash of $24.0 million compared to a use of cash of $4.3 million in 2016. The use of cash in 2016 compared to the source of cash in 2017 is primarily related to higher purchases of inventory and property, plant and equipment.

Cash Flows from Investing Activities:

	Three Months Ended
	March 4,			February 27,
($ in millions)	2017			2016
Net cash used in investing activities	$	(144.3	)	$	(22.5	)

In the first quarter of 2017, we acquired Wisdom Adhesives for $123.3 million. Purchases of property, plant and equipment were $19.9 million in the first three months of 2017 as compared to $23.4 million for the same period of 2016. The decrease in 2017 compared to 2016 was primarily related to lower capital expenditures in 2017.

Cash Flows from Financing Activities:

	Three Months Ended
	March 4,		February 27,
($ in millions)	2017		2016
Net cash provided by (used in) financing activities	$	101.8	$	(12.6	)

We had $453.0 million of proceeds from the issuance of long-term debt in the first three months of 2017 which consisted of $300.0 million of proceeds from the issuance of the 4.000% Notes and $153.0 million of proceeds from our revolving credit facility. Proceeds from our revolving credit facility were drawn in conjunction with the acquisition of Wisdom Adhesives. Repayments of long-term debt were $354.2 million in the first three months of 2017 and $5.6 million in the first three months of 2016. We also paid $2.4 million in debt issuance costs associated with the issuance of the 4.000% Notes in the first three months of 2017. Net proceeds from notes payable were $8.4 million in 2017 compared to net payments of $6.4 million in 2016. Cash dividends paid were $7.0 million in 2017 compared to $6.5 million in 2016. Repurchases of common stock were $2.4 million in the first three months of 2017 compared to $6.5 million in the same period of 2016. There were no repurchases of common stock in 2017 from our 2010 share repurchase program.

Forward-Looking Statements and Risk Factors

The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. In this Quarterly Report on Form 10-Q, we discuss expectations regarding our future performance which include anticipated financial performance, savings from restructuring and process initiatives, global economic conditions, liquidity requirements, the impact of litigation and environmental matters, the effect of new accounting pronouncements and one-time accounting charges and credits, and similar matters. This Quarterly Report on Form 10-Q contains forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements may be identified by the use of words like "plan," "expect," "aim," "believe," "project," "anticipate," "intend," "estimate," "will," "should," "could" (including the negative or variations thereof) and other expressions that indicate future events and trends. These plans and expectations are based upon certain underlying assumptions, including those mentioned with the specific statements. Such assumptions are in turn based upon internal estimates and analyses of current market conditions and trends, our plans and strategies, economic conditions and other factors. These plans and expectations and the assumptions underlying them are necessarily subject to risks and uncertainties inherent in projecting future conditions and results. Actual results could differ materially from expectations expressed in the forward-looking statements if one or more of the underlying assumptions and expectations proves to be inaccurate or is unrealized. In addition to the factors described in this report, Part II, Item 1A. Risk Factors in this report and Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the fiscal year ended December 3, 2016, identify some of the important factors that could cause our actual results to differ materially from those in any such forward-looking statements. This list of important factors does not include all such factors nor necessarily present them in order of importance. In order to comply with the terms of the safe harbor, we have identified these important factors which could affect our financial performance and could cause our actual results for future periods to differ materially from the anticipated results or other expectations expressed in the forward-looking statements. Additionally, the variety of products sold by us and the regions where we do business makes it difficult to determine with certainty the increases or decreases in revenues resulting from changes in the volume of products sold, currency impact, changes in geographic and product mix and selling prices. Our best estimates of these changes as well as changes in other factors have been included. References to volume changes include volume, product mix and delivery charges, combined. These factors should be considered, together with any similar risk factors or other cautionary language, which may be made elsewhere in this Quarterly Report on Form 10-Q.

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We may refer to Part II, Item 1A. Risk Factors and this section of the Form 10-Q to identify risk factors related to other forward looking statements made in oral presentations, including investor conferences and/or webcasts open to the public.

This disclosure, including that under "Forward-Looking Statements and Risk Factors," and other forward-looking statements and related disclosures made by us in this report and elsewhere from time to time, represents our best judgment as of the date the information is given. We do not undertake responsibility for updating any of such information, whether as a result of new information, future events, or otherwise, except as required by law. Investors are advised, however, to consult any further public company disclosures (such as in filings with the Securities and Exchange Commission or in company press releases) on related subjects.

Item3. 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.

Our financial performance has been, and may continue to be, negatively affected by the unfavorable economic conditions. Continued or further 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. A general reduction in consumer discretionary spending due to 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 result 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 financial condition, results of operations or cash flows. The annual impact on interest expense of a one-percentage point interest rate change on the outstanding balance of our variable rate debt as of March 4, 2017 would have resulted in a change in net income of approximately $2.3 million or $0.04 per diluted share.

Foreign Exchange Risk

As a result of being a global enterprise, there is exposure to market risks from changes in foreign currency exchange rates, which may adversely affect operating results and financial condition. Approximately 59 percent of net revenue was generated outside of the United States for the first quarter of 2017. 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.

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Our objective is to balance, where possible, non-functional currency denominated assets to non-functional currency denominated liabilities to have a natural hedge and minimize foreign exchange impacts. We enter into cross border transactions through importing and exporting goods to and from different countries and locations. These transactions generate foreign exchange risk as they create assets, liabilities and cash flows in currencies other than their functional currency. This also applies to services provided and other cross border agreements among subsidiaries. Based on financial results for the first quarter of 2017, 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 $1.4 million or $0.03 per diluted share.

We take steps to minimize risks from foreign currency exchange rate fluctuations through normal operating and financing activities and, when deemed appropriate, through the use of derivative instruments. We do not enter into any speculative positions with regard to derivative instruments.

Based on financial results for the first quarter of 2017 and foreign currency balance sheet positions as of March 4, 2017, a hypothetical overall 10 percent change in the U.S. dollar would have resulted in a change in net income of approximately $1.5 million or $0.03 per diluted share.

Raw Materials

The principal raw materials used to manufacture products include resins, polymers, synthetic rubbers, vinyl acetate monomer and plasticizers. We generally avoid sole source supplier arrangements for raw materials. While alternate supplies of most key raw materials are available, unplanned supplier production outages may lead to strained supply-demand situations for several key raw materials such as ethylene and propylene, several polymers and other petroleum derivatives such as waxes.

The purchase of raw materials is our largest expenditure. Our objective is to purchase raw materials that meet both our quality standards and production needs at the lowest total cost. Most raw materials are purchased on the open market or under contracts that limit the frequency but not the magnitude of price increases. In some cases, however, the risk of raw material price changes is managed by strategic sourcing agreements which limit price increases to increases in supplier feedstock costs, while requiring decreases as feedstock costs decline. The leverage of having substitute raw materials approved for use wherever possible is used to minimize the impact of possible price increases. Based on financial results for the first quarter of 2017, a hypothetical one percent change in our raw material costs would have resulted in a change in net income of approximately $1.9 million or $0.04 per diluted share.

Item4. Controls and Procedures

Controls and Procedures

We conducted an evaluation, under the supervision and with the participation of our president and chief executive officer and executive vice president, chief financial officer, of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (Exchange Act)) as of March 4, 2017. We acquired Wisdom Adhesives in the first quarter of 2017. They represented approximately six percent of our total assets as of March 4, 2017. As this acquisition occurred in the first quarter of 2017, the scope of our assessment of the effectiveness of internal control over financial reporting does not include this recent acquisition. This exclusion is in accordance with the SEC’s general guidance that an assessment of a recently acquired business may be omitted from our scope in the year of acquisition. Based on this evaluation, our president and chief executive officer and executive vice president, chief financial officer concluded that, as of March 4, 2017, our disclosure controls and procedures were effective.

For purposes of Rule 13a-15(e), the termdisclosure controls and procedures means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act (15 U.S.C. 78a et seq.) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its president and chief executive officer and executive vice president, chief financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

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Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during our most recently completed fiscal quarter that have materially affected or are reasonably likely to materially affect our internal control over financial reporting, as defined in Rule 13a-15(f) under the Exchange Act.

PARTII. OTHER INFORMATION

Item1. Legal Proceedings

Environmental Matters

Other Legal Proceedings

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In addition to the indemnification arrangements with third parties, we have insurance policies that generally provide coverage for asbestos liabilities (including defense costs). Historically, insurers have paid a significant portion of our defense costs and settlements in asbestos-related litigation. However, certain of our insurers are insolvent. We have entered into cost-sharing agreements with our insurers that provide for the allocation of defense costs and settlements and judgments in asbestos-related lawsuits. These agreements require, among other things, that we fund a share of settlements and judgments allocable to years in which the responsible insurer is insolvent.

A summary of the number of and settlement amounts for asbestos-related lawsuits and claims is as follows:

	Three Months Ended				3 Years Ended
($ in millions)	March 4, 2017		February 27, 2016		December 3, 2016
Lawsuits and claims settled		3		2		33
Settlement amounts	$	0.8	$	0.1	$	3.1
Insurance payments received or expected to be received	$	0.7	$	0.1	$	2.3

Based on currently available information, we have concluded that the resolution of any pending matter, including asbestos-related litigation, individually or in the aggregate, will not have a material adverse effect on our results of operations, financial condition or cash flow. However, adverse developments and/or periodic settlements could negatively impact the results of operations or cash flows in one or more future periods.

Item1A. Risk Factors

This Form 10-Q contains forward-looking statements concerning our future programs, products, expenses, revenue, liquidity and cash needs as well as our plans and strategies. These forward-looking statements are based on current expectations and we assume no obligation to update this information. Numerous factors could cause actual results to differ significantly from the results described in these forward-looking statements, including the risk factors identified under Part I, Item 1A. Risk Factors contained in our Annual Report on Form 10-K for the fiscal year ended December 3, 2016. There have been no material changes in the risk factors disclosed by us under Part I, Item 1A. Risk Factors contained in the Annual Report on Form 10-K for the fiscal year ended December 3, 2016.

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Item2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

Information on our purchases of equity securities during the first quarter follows:

Period	(a) Total Number of Shares Purchased¹		(b) Average Price Paid per Share		(d) Maximum Approximate Dollar Value of Shares that may yet be Purchased Under the Plan or Program (millions)

December 4, 2016 - January 7, 2017		534	$	46.44	$	24,036

January 8, 2017 - February 4, 2017		-	$	-	$	24,036

February 5, 2017 - March 4, 2017		50,153	$	47.96	$	24,036

¹ The total number of shares purchased relate to shares withheld to satisfy the employees’ withholding taxes upon vesting of restricted stock.

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.

In 2010, the Board of Directors authorized a new share repurchase program of up to $100.0 million of our outstanding common shares. Under the program, we are authorized to repurchase shares for cash on the open market, from time to time, in privately negotiated transactions or block transactions, or through an accelerated repurchase agreement. The timing of such repurchases is dependent on price, market conditions and applicable regulatory requirements. Upon repurchase of the shares, we reduced our common stock for the par value of the shares with the excess being applied against additional paid-in capital.

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Item6.Exhibits

4.1

Indenture, dated February 14, 2017, between H.B. Fuller Company and U.S. Bank National Association, as Trustee (incorporated by reference to Exhibit 4.1 in H.B. Fuller’s Current Report on Form 8-K filed on February 14, 2017)

4.2

First Supplemental Indenture, dated February 14, 2017, between H.B. Fuller Company and U.S. Bank National Association, as Trustee, relating to the 4.000% Notes due 2027 (incorporated by reference to Exhibit 4.2 in H.B. Fuller’s Current Report on Form 8-K filed on February 14, 2017)

	4.3	Form of Global Note representing the 4.000% Notes due 2027 (included in Exhibit 4.2) (incorporated by reference to Exhibit 4.3 in H.B. Fuller’s Current Report on Form 8-K filed on February 14, 2017)
	10.1*	Employment Agreement between H.B. Fuller Benelux B.V. and P. Kivits fully executed on October 10, 2015

31.1

Form of 302 Certification –James J. Owens

31.2

Form of 302 Certification –John J. Corkrean

32.1

Form of 906 Certification –James J. Owens

32.2

Form of 906 Certification –John J. Corkrean

101

The following materials from the H.B. Fuller Company Quarterly Report on Form 10-Q for the quarter ended March 4, 2017 formatted in Extensible Business Reporting Language (XBRL): (i) the Condensed Consolidated Statements of Income, (ii) the Condensed Consolidated Statements of Comprehensive Income, (iii) the Condensed Consolidated Balance Sheets, (iv) the Condensed Consolidated Statements of Total Equity, (v) the Condensed Consolidated Statements of Cash Flows and (vi) the Notes to Condensed Consolidated Financial Statements.

* Management contract or compensatory plan or arrangement required to be filed.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	H.B. Fuller Company


Dated: March 31, 2017		/s/ John J. Corkrean
		John J. Corkrean
		Executive Vice President,
		Chief Financial Officer

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Exhibit Index

Exhibits

4.1

4.2

4.3

Form of Global Note representing the 4.000% Notes due 2027 (included in Exhibit 4.2) (incorporated by reference to Exhibit 4.3 in H.B. Fuller’s Current Report on Form 8-K filed on February 14, 2017)

	10.1*	Employment Agreement between H.B. Fuller Benelux B.V. and P. Kivits fully executed on October 10, 2015
	31.1	Form of 302 Certification – James J. Owens

31.2

Form of 302 Certification – John J. Corkrean

32.1

Form of 906 Certification –James J. Owens

32.2

Form of 906 Certification –John J. Corkrean

101

* Management contract or compensatory plan or arrangement required to be filed.

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H.B. Fuller (FUL) 10-Q2017 Q1 Quarterly report

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