FULLER H B CO Income Taxes Disclosure

Note 11: Income Taxes

 

Income before income taxes and income from equity method investments		2025				2024				2023
United States		$	(6,541	)		$	(46,064	)		$	15,276
Non-U.S.			221,959				228,727				218,884
Total		$	215,418			$	182,663			$	234,160

 

Components of the provision for income tax expense (benefit)		2025				2024				2023
Current:
U.S. federal		$	23,754			$	14,150			$	18,347
State			5,046				4,104				5,529
Non-U.S.			78,930				92,721				87,449
			107,730				110,975				111,325
Deferred:
U.S. federal			(33,712	)			(44,784	)			(100	)
State			(2,907	)			(4,442	)			(4,111	)
Non-U.S.			(3,982	)			(5,368	)			(13,585	)
			(40,601	)			(54,594	)			(17,796	)
Total		$	67,129			$	56,381			$	93,529

 

Reconciliation of effective income tax		2025				2024				2023
Tax at statutory U.S. federal income tax rate		$	45,238			$	38,359			$	49,174
State income taxes, net of federal benefit			1,635				(307	)			1,137
Foreign dividend repatriation			12,567				1,943				21,730
Foreign operations			13,620				13,232				12,558
Executive compensation over $1.0 million			1,834				1,690				784
Non-U.S. stock option expense			630				676				730
Change in valuation allowance			398				(1,800	)			725
Research and development tax credit			(1,480	)			(1,460	)			(1,400	)
Foreign-derived intangible income			(1,718	)			(625	)			(2,665	)
Global intangible low-taxed income			2,124				1,581				2,345
Provision to return			1,314				(1,595	)			1,336
Contingency reserve			(10,778	)			3,416				5,951
Excess tax benefit related to stock options and restricted stock			(248	)			(3,083	)			(850	)
Goodwill impairment related to North America Flooring			-				2,373				-
Other			1,993				1,981				1,974
Total income tax expense		$	67,129			$	56,381			$	93,529

 

¹ Foreign dividend repatriation line includes impact of withholding tax recorded on earnings that are no longer permanently reinvested.

 

Deferred income tax balances at each year-end related to:		2025				2024
Deferred tax assets:
Pension and other postretirement benefit plans		$	2,679			$	4,318
Employee benefit costs			28,206				28,116
Foreign tax credit carryforward			8,740				7,555
Tax loss carryforwards			20,297				20,059
Leases			14,017				16,203
Hedging activity			26,023				11,688
Interest deduction limitation			80,521				57,233
Product and other claims			9,709				1,496
Other			25,071				29,530
Gross deferred tax assets			215,263				176,198
Less: valuation allowance			(11,054	)			(11,696	)
Total net deferred tax assets			204,209				164,502
Deferred tax liability:
Depreciation and amortization			(197,069	)			(187,897	)
Pension and other postretirement benefit plans			(69,431	)			(58,119	)
Undistributed earnings of non-U.S. subsidiaries			(5,598	)			(4,933	)
Leases			(13,655	)			(15,948	)
Total deferred tax liability			(285,753	)			(266,897	)
Net deferred tax liability		$	(81,544	)		$	(102,395	)

 

The difference between the change in the deferred tax liability on the balance sheet and the deferred tax provision is primarily related to the defined benefit pension plan adjustment and hedges recorded in accumulated other comprehensive income (loss) offset by liabilities established in purchase accounting.

 

Valuation allowances primarily relate to foreign net operating loss carryforwards and branch foreign tax credit carryforwards where the future potential benefits do not meet the more-likely-than-not realization test. The decrease in the valuation allowance is primarily related to a decrease in foreign net operating losses for which the Company does not expect to receive a full tax benefit.

 

Deferred tax assets and liabilities are measured using the currently enacted tax rates that apply to taxable income in effect for the years in which those deferred tax assets and liabilities are expected to be realized or settled. We record a valuation allowance to reduce deferred tax assets to the amount that is believed more-likely-than-not to be realized. We believe it is more-likely-than-not that reversal of deferred tax liabilities and forecasted income will be sufficient to fully recover the net deferred tax assets not already offset by a valuation allowance. In the event that all or part of the gross deferred tax assets are determined not to be realizable in the future, an adjustment to the valuation allowance would be charged to earnings in the period such determination is made.

 

U.S. income taxes have not been provided on approximately $1,365,208 of undistributed earnings of non-U.S. subsidiaries. We intend to indefinitely reinvest these undistributed earnings. Cash available in the United States has historically been sufficient and we expect it will continue to be sufficient to fund U.S. cash flow requirements. In the event these earnings are later distributed to the U.S., such distributions would likely result in additional U.S. tax.

 

While non-U.S. operations have been profitable overall, there are cumulative tax losses of $69,673 in various countries. These tax losses can be carried forward to offset the income tax liabilities on future income in these countries. Cumulative tax losses of $46,198 can be carried forward indefinitely, while the remaining $23,475 of tax losses must be utilized during 2026 to 2043.

 

The U.S. has a branch foreign tax credit carryforward of $4,337. A valuation allowance has been recorded against this foreign tax credit carryforward to reflect that this amount is not more-likely-than-not to be realized.

 

The table below sets forth the changes to our gross unrecognized tax benefit as a result of uncertain tax positions, excluding accrued interest.  We do not anticipate that the total unrecognized tax benefits will change significantly within the next twelve months.

 

		2025				2024
Balance at beginning of year		$	15,590			$	14,254
Tax positions related to the current year:
Additions			363				1,027
Tax positions related to prior years:
Additions			3,635				4,434
Reductions			(1,398	)			(755	)
New balance sheet reserve			760				-
Settlements			(8,770	)			(775	)
Lapses in applicable statutes of limitation			(974	)			(2,595	)
Balance at end of year		$	9,206			$	15,590

 

Included in the balance of unrecognized tax benefits as of  November 29, 2025 and November 30, 2024 are potential benefits of $8,871 and $12,431 respectively, that, if recognized, would affect the effective tax rate.

 

We report accrued interest and penalties related to unrecognized tax benefits in income tax expense. For the year ended November 29, 2025, we recognized a net expense for interest and penalties of $1,523 relating to unrecognized tax benefits and had net accumulated accrued interest and penalties of $2,487 as of November 29, 2025. For the year ended November 30, 2024, we recognized a net benefit for interest and penalties of $658 relating to unrecognized tax benefits and had net accumulated accrued interest and penalties of $4,840 as of November 30, 2024.

 

We are subject to U.S. federal income tax as well as income tax in numerous state and foreign jurisdictions. We are no longer subject to U.S. federal tax examination for years prior to 2022 or Swiss income tax examination for years prior to 2022. During the fourth quarter of 2025, H.B. Fuller (China) Adhesives, Ltd. settled its transfer pricing audit covering the calendar years 2015 through 2023. Also during the fourth quarter of 2025, ADCO Europe Holding GmbH settled its transfer pricing audit covering the fiscal years 2017 through 2019. We are in various stages of examination and appeals in other states and foreign jurisdictions. Although the final outcomes of these examinations cannot currently be determined, we believe that we have recorded adequate liabilities with respect to these examinations.