-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, E90woQdz3z//JBIF012wDPcWV6eozHb/58YHDzwK1h2AkwRumyNvqAwUynL98Qvk inEbuQzBiMuknL+8QFkFWw== 0000950109-97-001762.txt : 19970303 0000950109-97-001762.hdr.sgml : 19970303 ACCESSION NUMBER: 0000950109-97-001762 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 19961130 FILED AS OF DATE: 19970228 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: FULLER H B CO CENTRAL INDEX KEY: 0000039368 STANDARD INDUSTRIAL CLASSIFICATION: ADHESIVES & SEALANTS [2891] IRS NUMBER: 410268370 STATE OF INCORPORATION: MN FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-03488 FILM NUMBER: 97547734 BUSINESS ADDRESS: STREET 1: 2400 ENERGY PK DR CITY: ST PAUL STATE: MN ZIP: 55108 BUSINESS PHONE: 6126453401 10-K 1 FORM 10-K - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended November 30, 1996 Commission File No. 0-3488 H. B. FULLER COMPANY A Minnesota Corporation IRS Employer Identification No. 41-0268370 1200 Willow Lake Boulevard, Vadnais Heights, Minnesota 55110 Telephone - (612) 415-5900 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock (par value of $1.00 per share) Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ----- Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 of 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 ----- ----- As of January 31, 1997, 14,087,166 Common Shares were outstanding and the aggregate market value of the Common Shares held by non-affiliates of the Registrant on that date was approximately $651,278,000. DOCUMENTS INCORPORATED BY REFERENCE Parts I, II and IV incorporate information by reference from the H. B. Fuller Company 1996 Annual Report to Stockholders. Part III incorporates information by reference from the Registrant's Proxy Statement dated March 5, 1997. - -------------------------------------------------------------------------------- -1- H. B. FULLER COMPANY 1996 Form 10-K Annual Report Table of Contents Page ---- PART I ------ Item 1. Business 3 Item 2. Properties 6 Item 3. Legal Proceedings 7 Item 4. Submission of Matters to a Vote of Security Holders 9 Executive Officers of the Registrant 10 PART II ------- Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters 11 Item 6. Selected Financial Data 11 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 11 Item 8. Financial Statements and Supplementary Data 11 Item 9. Change in and Disagreements with Accountants on Accounting and Financial Disclosure 11 PART III -------- Item 10. Directors and Executive Officers of the Registrant 11 Item 11. Executive Compensation 11 Item 12. Security Ownership of Certain Beneficial Owners and Management 11 Item 13. Certain Relationships and Related Transactions 11 PART IV ------- Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 12 Signatures 15 -2- PART I Item 1. Business - -------- Founded in 1887 and incorporated as a Minnesota corporation in 1915, H.B. Fuller Company today is a worldwide manufacturer and marketer of adhesives, sealants, coatings, paints and other specialty chemical products. The Company currently employs approximately 5,900 people and has sales operations in 42 countries in North America, Europe, Latin America and the Asia/Pacific region. The Company's largest worldwide business category is adhesives, sealants and coatings, which generated more than 88 percent of 1996 sales. These products, in thousands of formulations, are sold to customers in a wide range of industries, including packaging, woodworking, automotive, aerospace, graphic arts (books/magazines), appliances, filtration, windows, sporting goods, nonwovens, shoes and ceramic tile. H.B. Fuller also is a quality producer and supplier of powder coatings to metal finishing industries; commercial and industrial paints in Latin American markets; specialty waxes in European markets, as well as mastics and coatings for thermal insulation, indoor air quality and asbestos abatement applications in the U.S. Segment Information - ------------------- For financial information relating to major geographic areas of H. B. Fuller, see Note 14, "Business Segment Information", on page 35 of the Company's 1996 Annual Report to Stockholders, incorporated herein by reference. Line of Business and Classes of Similar Products - ------------------------------------------------ The Company is engaged in one line of business, the manufacturing of specialty chemical products which includes formulating, compounding and marketing adhesives, sealants and coatings, paints, specialty waxes and related chemicals. The following tabulation sets forth information concerning the approximate contribution to consolidated sales of the Company's classes of products: Class of Product Sales ------------------------------------- 1996 1995 1994 ------ ------ ------ Adhesives, sealants and coatings 88% 87% 86% Paints 7 7 7 Other 5 6 7 ------ ------ ----- 100% 100% 100% ====== ====== ===== -3- Non-U.S. Operations - ------------------- Wherever feasible, H. B. Fuller's practice has been to establish manufacturing units outside of the United States to service the local markets. The principal markets, products and methods of distribution in the non-U.S. business vary with the country or business practices of the country. The products sold include not only those developed by the local manufacturing plants but also those developed within the United States and elsewhere in the world. The Company's operations overseas face varying degrees of economic and political risk. At year-end 1996, the Company had plants in 31 countries outside the United States and satellite sales offices in another ten countries and license agreements used to maintain a worldwide manufacturing network. In the opinion of management, there are several countries where the Company has operating facilities which have political risks higher than in the United States. Where possible, the Company insures its physical assets against damage from civil unrest. Competition - ----------- The Company encounters a high degree of competition in the marketing of its products. Because of the large number and variety of its products, the Company does not compete directly with any one competitor in all of its markets. The Company competes with several large firms as well as many smaller local, independent firms. In North America there are a large number of competitors. Since adhesives of all types are widely used, it is not possible to identify a few competitors who would represent the major competition. In Latin America, the Company experiences substantial competition in marketing its printing inks and industrial adhesives. In Central America, it is a major factor in the industrial adhesives market and, along with several other large paint manufacturing firms, in the residential paint market. In Europe, the Company is a large manufacturer of adhesives and specialty waxes and competes in certain areas of this market with several large companies. The principal competitive factors in the sale of adhesives, paints, coatings and sealants are product performance, customer and technical service, quality, and price. Customers - --------- Of the Company's $1,275,716,000 total sales to unaffiliated customers in 1996, $733,683,000 was sold through North American operations. The Company's largest customer accounts for less than 5% of consolidated sales. Backlog - ------- Orders for the Company's products are generally processed within one week. Therefore, the Company had no significant backlog of unfilled orders at November 30, 1996, 1995 or 1994. -4- Raw Materials - ------------- The Company purchases from large chemical suppliers raw materials including solvents, plasticizers, waxes, resins, polymers and vinyl acetate monomer which the Company uses to manufacture its principal products. Natural raw materials are also purchased from outside suppliers and include starch, dextrines, natural latex and resins. The Company attempts to find multiple sources for all of its raw materials and alternate sources of supply are generally available. An adequate supply of the raw materials used by the Company is presently available in the open market. The Company's Latin American operations import many of their raw materials. Extended delivery schedules of these materials are common, thereby requiring maintenance of higher inventory levels than those maintained in North America and Europe. A significant portion of the Company's raw materials are derived from petroleum- based products and this is common to all adhesive manufacturers. The Company is not a large consumer of energy and, therefore, has not experienced any difficulties in obtaining energy for its manufacturing operations. It anticipates it will be able to obtain needed energy supplies in the future. Patents, Trademarks and Licenses - -------------------------------- Much of the technology used in the manufacturing of adhesives, coatings and other specialty chemicals is in the public domain. To the extent that it is not, the Company relies on trade secrets and patents to protect its know-how. The Company has agreements with many of its employees for the purpose of protecting the Company's rights to technology and intellectual property. The Company also routinely obtains confidentiality commitments from customers, suppliers and others to safeguard its proprietary information. Company trademarks such as HB Fuller(R), Kativo(R), Protecto(R) and Rakoll(R) are of continuing importance in marketing its products. Research and Development - ------------------------ The Company conducts research and development activities in an effort to improve existing products and to design new products and processes. The Company's research and development expenses during 1996, 1995 and 1994 aggregated $25,823,000, $26,541,000, and $23,624,000, respectively. Environmental - ------------- The Company regularly reviews and upgrades its environmental policies, practices and procedures and seeks improved production methods that reduce waste, particularly toxic waste, coming out of its facilities, based upon evolving societal standards and increased environmental understanding. The Company's high standards of environmental consciousness are supported by an organizational program supervised by environmental professionals and the Worldwide Environment, Health and Safety Committee, a committee with management membership from around the world which proactively monitors practices at all facilities. Company practices are often more stringent than local government standards. The Company integrates environmental programs into operating objectives, thereby translating philosophy into every day practice. -5- The Company believes that as a general matter its current policies, practices and procedures in the areas of environmental regulations and the handling of hazardous waste are designed to substantially reduce risks of environmental and other damage that would result in litigation and financial liability. Some risk of environmental and other damage is, however, inherent in particular operations and products of the Company, as it is with other companies engaged in similar businesses. The Company is and has been engaged in the handling, manufacture, use, sale and/or disposal of substances, some of which are considered by federal or state environmental agencies to be hazardous. The Company believes that its manufacture, handling, use, sale and disposal of such substances are generally in accord with current applicable environmental regulations. Increasingly strict environmental laws, standards, and enforcement policies may increase the risk of liability and compliance costs associated with such substances. Environmental expenditures, reasonably known to management, to comply with environmental regulations over the Company's next two fiscal years are estimated to be approximately $12.0 million. The effects of compliance with environmental laws and regulations are not expected to be material to the Company's consolidated capital expenditures, earnings, or competitive position. See additional disclosure under Item 3, Legal Proceedings. Employees - --------- H. B. Fuller Company and consolidated subsidiaries employed approximately 5,900 persons on November 30, 1996, of which approximately 2,200 persons were employed in the United States. Item 2. Properties - ---------- The principal manufacturing plants and other properties are located in 32 countries: U.S. Locations -------------- California Michigan Chatsworth Grand Rapids Los Angeles (1 owned, 1 leased) Warren (1 owned, 1 leased) Roseville Minnesota Florida Minneapolis and St. Paul Gainesville (7 owned, 1 leased) Pompano Beach New Jersey - Edison Georgia (1 owned, 1 leased) Conyers* North Carolina - Greensboro Covington Ohio Forest Park Cincinnati* Tucker Dayton Illinois Tennessee - Memphis* Palatine Texas Tinley Park Dallas Indiana - Elkhart Fort Worth Kansas - Kansas City Houston Kentucky - Paducah Washington - Vancouver Massachusetts - Wilmington *Leased properties -6- Other Locations --------------- Argentina - Buenos Aires Honduras Australia San Pedro Sula (2 owned) Melbourne Tegucigalpa Sydney* Italy - Borgolavezzaro Austria - Wels Japan - Hamamatsu Brazil - Sao Paulo Mexico - Mexico City* Canada Netherlands - Amerongen St. Andre est New Zealand - Auckland (2 owned) Montreal Nicaragua - Managua Toronto People's Republic of Chile - Santiago China - Guangzhou* Colombia - Itagui* Peru - Lima Costa Rica - San Jose (5 owned) Philippines - Manila* Dominican Republic - Santo Domingo Puerto Rico - Bayamon Ecuador - Guayaquil (2 owned) Republic of Panama - Panama City El Salvador - San Salvador Spain - Alicante Federal Republic of Germany Switzerland - Basel* Luneburg Taiwan - Taipei Nienburg* United Kingdom France - Le Trait Birmingham* Guatemala - Guatemala City Derbyshire* Venezuela - Caracas *Leased properties The Company's principal executive offices and central research facilities are Company owned and located in the St. Paul, Minnesota metropolitan area. The Company has facilities for the manufacture of various products with total floor space of approximately 1,540,000 square feet, including 201,000 square feet of leased space. In addition, the Company has approximately 2,009,000 square feet of warehouse, including 409,000 square feet of leased space. Offices and other facilities total 1,906,000 square feet, including 353,000 square feet of leased space. The Company believes that the properties owned or leased are suitable and adequate for its business. Item 3. Legal Proceedings. - ----------------- ENVIRONMENTAL REMEDIATION. - ------------------------- The Company currently is deemed a potentially responsible party ("PRP"), in conjunction with numerous other parties, in a number of government enforcement and private actions associated with hazardous waste sites ("Sites"). As a PRP or defendant, the Company may be required to pay a share of the cost of investigation and cleanup of these Sites. In some cases, the Company may have rights of indemnification from other parties. The Company's future liability for such claims is difficult to predict because of uncertainty as to the cost of investigation and cleanup of the Sites, the Company's responsibility for such hazardous wastes and the number or financial condition of other PRPs or defendants. Reserves for future liabilities at the Sites are established as soon as an estimate of potential cleanup costs and allocation can be determined. The reserves are reviewed and revised quarterly in light of currently available technical and legal information. Based upon such available information, it is the Company's opinion that these environmental claims will not result in material liability to the Company. -7- Following is a list of Sites where the Company has or may have more than a de -- minimis share of liability for remedial investigation and/or remediation costs - ------- or which are too new to make an assessment. The expected or anticipated costs for these Sites are included in the current reserves of the Company. Helen Kramer, Mantua, New Jersey. The Company is named as a third-party -------------------------------- defendant by both the EPA and the New Jersey EPA for remediation at this Federal Superfund Site. Currently, the Company is participating in an allocation process for third-party generators. An outside waste accountant has found no evidence of any of the Company's waste at the Site. Negotiations for a settlement proposal between third-party defendants and the EPA continue. Because the waste accountant has found no evidence that any Company waste was disposed of at the Site, the Company does not believe that any liability allocated to it will materially affect its business or financial condition. Wauconda Sand & Gravel, Wauconda, Illinois. The Company and other PRPs ------------------------------------------ signed a consent decree with the EPA that provides for payment of remedial work at this Site. The Company has paid assessments of approximately $440,000. The Company believes that any future costs will be minimal, and will not materially affect its business or financial condition. Bay Drums, Tampa, Florida. The Company has been identified as a PRP at ------------------------- this Site. The Company has joined a PRP Group which has retained an outside waste accountant for allocating cleanup costs amongst the PRPs. The Company is allocated 175 drums or .673% of the Group's total. Based on this allocation, the Company's estimated share is approximately $47,188. While the allocation may change due to the ability or willingness of additional PRPs to share in the cleanup costs, the Company believes that its final cost will be minimal, and will not materially affect its business or financial condition. Seaboard Chemical, Jamestown, North Carolina. In September of 1991, the -------------------------------------------- Company's Pompano Beach, Florida and Covington, Georgia facilities were identified as having contributed 40,590 pounds of waste to the Site. The Company joined a PRP and de minimis Group and signed the Consent Order and the -- ------- Buy-Out Agreement for the Phase I remediation. The North Carolina Department of Natural Resources asserts that additional response costs are necessary to complete the remediation of the Site. The Company believes that any future costs will be minimal, and will not materially affect its business or financial condition. Solvents Recovery Services, Southington, Connecticut. The Company has ---------------------------------------------------- been named a PRP (ranked 325 out of 885) as a result of allegedly generating 12,240 gallons of hazardous waste disposed of through Solvents Recovery Service. The Company at issue was acquired from the Terrell Corp. in July, 1986. The EPA offered a de minimis settlement to PRPs who have been allocated less than 10,000 -- ------- gallons at the Site. The Company accepted the de minimis settlement and paid -- ------- $61,635.89 for a full and final settlement of this Site. The EPA subsequently rejected the Company as a de minimis party. The Company has requested the EPA to -- ------- clarify its status, and objected to the EPA's determination that the Company is not a de minimis party. Although the Company's allocation may change due to the -- ------- ability or willingness of additional PRPs to share in the cleanup costs, the Company believes that its future costs will be minimal, and will not materially affect its business or financial condition. Sunrise, Wayland, Michigan. The Company has received a notice of demand -------------------------- for payment and response activities from the Michigan Department of Natural Resources ("DNR") requesting that the Company participate in the cleanup of the Sunrise Landfill. At this time, the DNR has estimated that clean-up may cost in excess of $17 million. The Company has joined a PRP Group, which has submitted a good faith proposal to the DNR for a Remedial Investigation and Feasibility Study, the cost of which is expected to range from $337,000 to -8- $471,000. In addition, the State has incurred $3,744,744 in response costs to date. The Company has paid $30,000 for a remedial investigation. It is expected that numerous additional PRPs will be located to participate in these costs, as well as final remediation. Because of the participation of other financially viable PRPs, it is the Company's opinion that its future costs will not materially affect its business or financial condition. Waste Oil Tank Service, Houston, Texas. The Texas Water Commission -------------------------------------- ("Commission") notified the Company that it is a PRP at the Waste Oil Tank Service Site. The Site was used as a waste oil and collection facility from 1975 to 1984, and has been included on the State's Superfund registry. Although the Site is relatively small, approximately 1/2 acre, it has a high priority for cleanup by the Commission because its investigation has shown hydrocarbon and heavy metal contamination in the soil and surface water. The Commission's investigation indicated that on one occasion in April of 1982, one of the Company's facilities arranged for 2,600 gallons of hazardous waste to be disposed of at the Site. The Company has joined a PRP Group which has submitted a good faith proposal to the Commission for a Remedial Investigation and Feasibility Study, the cost of which may range from $105,000 to $236,000. Because of the participation of numerous other financially viable PRPs, it is the Company's opinion that its allocation at this Site will not materially affect its business or financial condition. Schnitzer Iron & Metal, St. Paul, Minnesota. The Company recently ------------------------------------------- received a Request for Information from the Minnesota Pollution Control Agency with respect to the Company's use of this Site. Records indicate that the Company disposed of a small amount of material at this Site on two occasions in the early-1980's. Because of the Company's limited use of this Site, it is the Company's opinion that any future costs at this Site will be minimal, and will not materially affect its business or financial condition. ArChem Company, Houston, Texas. The Company has received notice from the ------------------------------ Texas Water Commission that it is a PRP concerning remediation of the ArChem property in Houston, Texas. The Company acquired the property in June of 1976, and in 1978, the property was sold. The Commission's focus is on the companies that sent chemicals to the Site pursuant to tolling agreements or otherwise had specialty products manufactured by ArChem. The materials at issue were not generated by or attributable to the Company. Because of an indemnification agreement with a financially able indemnitor, and because the materials at issue were not generated by the Company, it is the Company's opinion that this Site will not have a material affect on the Company's business or financial condition. Other Legal Proceedings. - ----------------------- On August 30, 1995, the Company was named one of 94 defendants, including numerous other chemical companies, in a purported class action filed in Federal District Court for the District of Texas on behalf of approximately 114 plaintiffs that worked at the Army Depot in Corpus Christi, Texas. The plaintiffs seek $100 million in compensatory damages and $400 million in punitive damages for injuries allegedly resulting from exposure to various chemicals manufactured by the 94 defendants. As with other types of litigation and proceedings to which the Company is a party, based upon currently available information, it is the Company's opinion that none of the matters will result in material liability to the Company. Item 4. Submission of Matters to a Vote of Security Holders - --------------------------------------------------- Not applicable. -9- Executive Officers of the Registrant - ------------------------------------ The executive officers of the Company as of November 30, 1996, their ages and current offices are set forth below:
Name Age Position Period Served - ---- --- -------- ------------- Anthony L. Andersen 60 Chair, Board of Since 1992 Directors Director Since 1966 Walter Kissling 65 President Since 1992 Chief Executive Officer Since 1995 Director Since 1968 Jorge Walter Bolanos 52 Chief Financial Officer Since 1992 and Treasurer Senior Vice President Since 1995 Lars T. Carlson 58 Senior Vice President - Since 1996 Administration John T. Ray, Jr. 59 Senior Vice President - Since 1984 North American Adhesives, Sealants and Coatings Group Jerald L. Scott 55 Senior Vice President - Since 1996 Operations Richard C. Baker 44 Vice President Since 1993 Corporate Secretary Since 1995 General Counsel Since 1990 Sarah R. Coffin 44 Vice President Since 1994 Hermann Lagally 55 Group President, Europe Since 1996 Antonio Lobo 53 Vice President Since 1989 Alan R. Longstreet 50 Vice President Since 1986 David J. Maki 55 Vice President Since 1990 Controller Since 1987 Rolf Schubert 58 Vice President Since 1982 Director Since 1972
Officers are elected by the Board of Directors or appointed by the Chief Executive Officer. Each of the Company's officers has served in various capacities with the Company for more than five years, except Sarah R. Coffin. Sarah R. Coffin joined the Company and was named Vice President/Specialty Group Manager in 1994. In her most recent position prior to joining the Company, Ms. Coffin served as Managing Director, Specialty Chemicals, General Electric Plastics, a position she had held since 1991. -10- PART II Information for Items 5 through 8 of this report appear in the 1996 H.B. Fuller Company Annual Report to Stockholders as indicated on the following table and are incorporated by reference to this Report: Annual Report to Stockholders Item Page ---- -------------- Item 5. Market for Registrant's Common Stock - -------------------------------------------- and Related Stockholder Matters ------------------------------- Trading Market 40 High and Low Market Value 40 Dividend Payments 40 Dividend Restrictions (Note 13) 33 Holders of Common Stock 41 Item 6. Selected Financial Data - ------------------------------- 1969 - 1996 in Review and Selected Financial Data 38-39 Item 7. Management's Discussion and Analysis of - ----------------------------------------------- Financial Condition and Results of Operations --------------------------------------------- Management's Analysis of Results of Operations and Financial Condition 17-21 Item 8. Financial Statements and Supplementary Data - --------------------------------------------------- Consolidated Financial Statements 22-35 Quarterly Data (Unaudited)(Note 15) 36 Item 9. Changes in and Disagreements with Accountants - ----------------------------------------------------- on Accounting and Financial Disclosure -------------------------------------- None PART III Items 10, 11, 12 and 13. Directors and Executive Officers of the Registrant; Executive Compensation; - --------------------------------------------------------------------------- Security Ownership of Certain Beneficial Owners and Management; and Certain - --------------------------------------------------------------------------- Relationships and Related Transactions - -------------------------------------- The information required by these Items other than the information set forth in Part I, "Executive Officers of the Registrant", is omitted because the Company will file within 120 days after the close of the Company's last fiscal year a definitive proxy statement pursuant to Regulation 14A, which information, other than the sections entitled "Compensation Committee Report on Executive Compensation" and "Shareholder Return Performance Presentation" contained therein, is herein incorporated by reference as if set out in full. -11- PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K - -------------------------------------------------------------------------
Reference ------------------------- Form 10-K Annual Report Annual Report to Stockholders Page Page ---------- ---------- (a)(1.) Index to Consolidated Financial Statements Incorporated by Reference to the 1996 Annual Report to Stockholders of H. B. Fuller Company: Consolidated Statements of Earnings for the Three Years Ended November 30, 1996 22 Consolidated Balance Sheets as of November 30, 1996 and 1995 23 Consolidated Statements of Stockholders' Equity for the Three Years Ended November 30, 1996 24 Consolidated Statements of Cash Flows for the Three Years Ended November 30, 1996 25 Notes to Consolidated Financial Statements 26-36 Report of Independent Accountants 37 (a)(2.) Index to Consolidated Financial Statement Schedules for the Three Years Ended November 30, 1996: Auditors' Report on Financial Statement Schedules 16 Schedule II Valuation and Qualifying Accounts 17
All other financial statement schedules are omitted as the required information is inapplicable or the information is given in the financial statements or related notes. -12- (a)(3.) Exhibits -------- Exhibit Number 3(a) Restated Articles of Incorporation - incorporated by reference to Exhibit 3(a) to the Registrant's Annual Report on Form 10-K for the year ended November 30, 1992. 3(b) By-Laws of H.B. Fuller Company - incorporated by reference to Exhibit 3(b) to the Registrant's Annual Report on Form 10-K for the year ended November 30, 1995. 4(a) Rights Agreement, dated as of July 18, 1996, between H.B. Fuller Company and Norwest Bank Minnesota, National Association, as Rights Agent, which includes as an exhibit the form of Right Certificate, incorporated by reference to Exhibit 4 to the Registrant's Form 8-K, dated July 24, 1996. 4(b) Restated Articles of Incorporation referring to rights of security holders, Articles III, VII - incorporated by reference to Exhibit 4(b) to the Registrant's Annual Report on Form 10-K for the year ended November 30, 1992. 4(c) Specimen Stock Certificate - incorporated by reference to Exhibit 4(c) to the Registrant's Annual Report on Form 10-K for the year ended November 30, 1995. *10(a) H.B. Fuller Company 1992 Stock Incentive Plan - incorporated by reference to Exhibit 10(a) to the Registrant's Annual Report on Form 10-K for the year ended November 30, 1992. *10(b) H.B. Fuller Company Restricted Stock Plan - incorporated by reference to Exhibit 10(c) to the Registrant's Annual Report on Form 10-K for the year ended November 30, 1993. *10(c) H.B. Fuller Company Restricted Stock Unit Plan - incorporated by reference to Exhibit 10(d) to the Registrant's Annual Report on Form 10-K for the year ended November 30, 1993. *10(d) Director's Stock Plan - incorporated by reference to Exhibit 10(d) to the Registrant's Annual Report on Form 10-K for the year ended November 30, 1994. *10(e) H.B. Fuller Company 1987 Stock Incentive Plan - incorporated by reference to Exhibit 4(a) to the Registrant's Registration Statement on Form S-8 (Commission File No. 33-16082). *10(f) H.B. Fuller Company Nonqualified Retirement Plan for Costa Rica - incorporated by reference to Exhibit 10(f) to the Registrant's Annual Report on Form 10-K for the year ended November 30, 1988 (Commission File No. 0-3488). *10(g) Form of Employment Agreement signed by executive officers and certain other employees - incorporated by reference to Exhibit 10(e) to the Registrant's Annual Report on Form 10-K for the year ended November 30, 1990. -13- (a)(3.) Exhibits (continued) -------- *10(h) Pension Plan Agreement with Dr. Hermann Lagally signed February 5, 1980 (English translation). *10(i) Managing Director Agreement with Dr. Hermann Lagally signed December 1, 1995. *10(j) H.B. Fuller Company Supplemental Executive Retirement Plan - incorporated by reference to Exhibit 10(j) to the Registrant's Annual Report on Form 10-K for the year ended November 30, 1992. *10(k) Deferred Compensation Agreement with Walter Kissling - incorporated by reference to Exhibit 10(m) to the Registrant's Annual Report on Form 10-K405 for the year ended November 30, 1994. *10(l) Retirement Plan for Directors of H.B. Fuller Company - incorporated by reference to Exhibit 10(n) to the Registrant's Annual Report on Form 10-K405 for the year ended November 30, 1994. *10(m) Stock Exchange Agreement, dated July 18, 1996, between H.B. Fuller Company and Elmer L. Andersen, including Designations for Series B Preferred Stock, incorporated by reference to Exhibit 10 to the Registrant's Form 8-K, dated July 24, 1996. *10(n) 1996 Performance Unit Plan. *Asterisked items are management contracts or compensatory plans or arrangements required to be filed as an exhibit pursuant to Item 14(a) of this Form 10-K. 11 Statement re: Computation of Net Earnings Per Common Share 13 Pages 17-43 of the 1996 Annual Report to Shareholders. 21 Subsidiaries of the Registrant 23 Consent of Price Waterhouse LLP 24 Manually signed Powers of Attorney 27 Financial Data Schedule (b) Reports on Form 8-K ------------------- No reports on Form 8-K were filed during the fourth quarter of the fiscal year ended November 30, 1996. -14- S I G N A T U R E S ------------------- Pursuant to the requirements of Section 13 or 15(d) 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: February 25, 1997 By/s/ Walter Kissling -------------------------------- WALTER KISSLING President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated: Signature Title - --------- ----- /s/ Walter Kissling President and - --------------------------- Chief Executive Officer and Director WALTER KISSLING (Principal Executive Officer) /s/ Jorge Walter Bolanos Senior Vice President, - --------------------------- Chief Financial Officer and Treasurer JORGE WALTER BOLANOS (Principal Financial Officer) /s/ David J. Maki Vice President and Controller - --------------------------- (Principal Accounting Officer) DAVID J. MAKI *ANTHONY L. ANDERSEN Chair, Board of Directors and Director *NORBERT R. BERG Director *EDWARD L. BRONSTIEN, JR. Director *ROBERT J. CARLSON Director *FREEMAN A. FORD Director *GAIL D. FOSLER Director *REATHA CLARK KING Director *JOHN J. MAURIEL, JR. Director *LEE R. MITAU Director *ROLF SCHUBERT Vice President and Director *LORNE C. WEBSTER Director By: /s/ Richard C. Baker Dated: February 25, 1997 - --------------------------- RICHARD C. BAKER Attorney in Fact *Power of Attorney filed with this report as Exhibit 24 hereto. 15 REPORT OF INDEPENDENT ACCOUNTANTS ON ------------------------------------ FINANCIAL STATEMENT SCHEDULES ----------------------------- To the Board of Directors of H.B. Fuller Company Our audits of the consolidated financial statements referred to in our report dated January 10, 1997 appearing in the 1996 Annual Report to Stockholders of H.B. Fuller Company (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the Financial Statement Schedules listed in Item 14(a) of this Form 10-K. In our opinion, these Financial Statement Schedules present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Price Waterhouse LLP Minneapolis, Minnesota January 10, 1997 16 Schedule II ----------- H.B. Fuller Company and Consolidated Subsidiaries Valuation and Qualifying Accounts Years Ended November 30, 1996, 1995, and 1994 (Dollars in thousands)
Allowance for doubtful receivables ------------------------------------------ 1996 1995 1994 -------- -------- -------- Balance at beginning of period $ 6,256 $ 6,221 $ 5,519 Additions(deductions): Charged to costs and expenses 2,745 1,954 1,391 Accounts charged off during year (1,897) (2,073) (1,091) Accounts of acquired businesses - - 288 Effect of currency exchange rate changes on beginning of year balance (61) 154 114 -------- -------- -------- Balance at end of period $ 7,043 $ 6,256 $ 6,221 ======== ======== ========
-17- EX-10.H 2 PENSION PLAN AGREEMENT WITH DR. HERMANN Exhibit 10(h) ------------- PENSION PLAN AGREEMENT Between Kleber and Bindemittel-Gesellschaft m.b.H 4600 Wels, Kaplanstr. 30 - hereinafter "Company" - and Dr. Hermann Lagally, 4600 Wels, Schafwiesenstr.70 - hereafter "Managing Director" - the following Pension Agreement has been concluded: 1 The Managing Director will receive at the date of his retirement - at the earliest at age 63 - a monthly pension of 1% of his average monthly salary during the last 5 years (on the basis of 12 monthly salaries per annum) prior to retirement, multiplied by the number of years of service as of April 1, 1973. Service years as of age 65 will not be considered. 2 In case of disability or death prior to the age of 65 the pension will be calculated on the basis of the number of years of service the Managing Director would have achieved at the age of 65. The average monthly salary will be based on the last twelve months prior to disability or death. As of age 61 the average monthly salary will be based on the monthly salaries received in the period from the age of 60 until the moment of disability or death. Disability is proven when entitlement for the statutory disability pension exists. 3 Pension payments resulting from this Agreement as well as statutory social security may not exceed 75% of the average gross income received during the last 5 years prior to becoming eligible for pension payment. 4 In case of death of the Managing Director a) after the age of 63 the widow is entitled to 60%, a full orphan to 25% and a half orphan to 12.5% of the pension the Managing Director would have been entitled to in accordance with Section 1 of this Agreement b) In case of pension entitlements due to disability or death prior to the age of 65, the survivors remain entitled to the same pension percentages as described under Section 4(a), but the pension will be calculated in accordance with Section 2 of this Agreement. c) The entitlement to survivor pension (widow pension) exists when the Managing Director was married for at least 3 years at the moment of this death and marriage was entered before retirement. Orphan pension will be paid to natural or adopted children until the age of 18. In case orphans have not yet completed their professional education, orphan pension can be paid until the age of 25. 5 Any indemnity payment by the Company that the Managing Director might be legally entitled to when leaving the Company will be offset against pension payments, in this way that pension payments start after expiration of the indemnity period. 6 The Company is confident to be able to maintain and fulfill its pension obligations in full. However, the Company reserves the right to cut pension payments in full or in part when its financial position has undergone a lasting deterioration in such a substantial manner that maintaining the agreed pension payments can no longer be reasonably expected and would constitute an endangerment of the Company's viability. Kleber and Bindermittel-Gesellschaft m.b.H represented by its sole Quotaholder ISAR-RAKOLL CHEMIE Ges.mbH Munchen /s/Dr. Voigt /s/Lehmann - ---------------------------- ----------------------------- (Dr. Voigt) (Lehmann) February 5, 1980 /s/Dr.Hermann Lagally - ------------------------------------------------------------------- (Date and signature of Managing Director) P.S.: Apart from the aforesaid the valid and relevant articles of the general Company Pension Plan for the ISAR-RAKOLL CHEMIE Ges.mbH Munich employees are applicable. On behalf of H.B. Fuller Company, I acknowledge that the above is a fair and accurate translation of the Pension Plan Agreement between Kleber and Bindemittel-Gesellschaft, Ges.mbH and Dr. Hermann Lagally. /s/Walter Kissling ---------------------------------------- Walter Kissling President, Chief Executive Officer EX-10.I 3 MANAGING DIRECTOR AGREEMENT WITH DR. HERMANN Exhibit 10(i) ------------- MANAGING DIRECTOR AGREEMENT between H.B. Fuller GmbH An der Roten Bleiche 2-3 D-21335 Luneburg - hereinafter called the "Company" - represented by its shareholder H.B. Fuller Company which is represented by Mr. Jerry Scott and Dr. Hermann Lagally Schafwiesenstr. 70 A-4600 Wels, Austria 1. Position ----------- 1.1 Dr. Hermann Lagally will become Managing Director (Geschaftsfuhrer) of the Company as of December 1, 1995. He is entitled to represent the Company with sole signature. 1.2 The Managing Director is Vice-President and Group Manager Europe. His responsibility as Group Manager Europe includes strategic management, coordination and integration of the European Fuller-Companies, setting objectives for and operative control of the individual companies; distributing, planning, and managing resources that support the following fields of the companies: - general management including acquisitions and investment policy - marketing, sales promotion, competition analysis - technical and product development, processing, patents - quality, environment, health and safety policy - finance, data-processing, taxes and insurance, legal - internal auditing - personnel policy and organization development 1.3 The Managing Director has to observe the guidelines and instructions which may be forthcoming from the shareholders meeting, all statutory provisions and the provisions of the by-laws of the Company as well as the applicable policies and procedures of H.B. Fuller Company. 2. Remuneration ----------------- 2.1 The Managing Director shall receive as remuneration for his services a gross annual base salary of DM 455,000 payable in thirteen equal installments becoming due at the end of each month. The gross annual base salary includes annual holiday allowance. The base salary will be periodically reviewed within the framework of the normal review process. 2.2 Additionally the Managing Director is eligible to receive incentive payment according to the rules as established by the shareholder from year to year. 2.3 Furthermore the Managing Director will be eligible for all additional benefits as granted to comparable members of management, which benefits may be changed from time to time, including the participation in health and retirement insurance contributions corresponding to the premium of the statutory health and retirement insurance system. 2.4 In case of inability to work due to illness or accident the Managing Director will receive after 42 days (for which period his legal claim for continued payment of salary will endure) the difference between his regular net income and the sickness benefit paid by social health insurance, but not longer than for six months from the beginning of his inability to work. 2.5 In case of death of the Managing Director during service the Company will pay the monthly salary for the respective month and additional three months to the heirs. 2.6 The Company shall continue the pension promise granted to the Managing Director by H.B. Fuller GmbH Austria in accordance with the agreement of 28. April 1978 (att.) resp. 23.3.1979 resp. 5.2.1980. Periodic adjustments of pension payments will be made in accordance with standard practice. Early retirement is possible in accordance with Section 5.2 of the Company pension plan of December 7, 1994. 2.7 The Company shall provide the Managing Director with an accident insurance in accordance with the corporate Business Travel Accident Insurance Policy. This insurance provides the Managing Director with a Class I coverage. The Austrian health insurance for employees will be continued. 2 2.8 The above payments shall constitute consideration for all and any activities and services of the Managing Director as member of the Management, the Board of Directors, the Board of Supervision or any other administrative or supervisory institution of the Company or one of the affiliated companies. 3. Travel Expenses and Company Car ------------------------------------ 3.1 Travel expenses shall be reimbursed upon presentation of invoices in compliance with the applicable tax regulations and company policy. 3.2 The Managing Director is entitled to use a company car (make and model to be determined by the management in line with good common local business practice) in compliance with the applicable tax regulations and company policy. The Company absorbs the costs for private usage. The Managing Director carries the taxes associated with this benefit in kind. 4. Vacation ------------- The Managing Director is entitled to an annual vacation of currently 30 working days. Working days are all calendar days which are neither Saturdays nor Sundays nor legal holidays at the place of business of the Company. 5. Side Activities ------------------- The Managing Director shall devote his efforts exclusively to the Company and he shall promote the interest of the Company with his best ability. He must not engage in any additional professional occupations against remuneration or participation of any kind in any other business without the consent of the shareholders meeting or the consent of the President of the parent company. The assumption of any professional or public honorary position shall be reconciled with the immediate superior. 6. Secrecy and Inventions -------------------------- 6.1 The Managing Director is committed, in particular with respect to the period after termination of this agreement, to keep strictly secret all confidential matters and trade secrets of the Company which will have come to his attention within the scope of his activities for the Company and which are not public domain. When leaving the Company the Managing Director shall return to the Company all files and other documents concerning the business of the Company in his possession -- specifically all customer lists, printed material, documents, sketches, notes, drafts -- as well as copies thereof. 6.2 1. All rights pertaining to inventions, whether patentable or not, and to proposals for technical improvements made and to computer software developed by the Managing Director (hereinafter jointly called "inventions") during the term of this Service 3 Contract shall be deemed acquired by the Company. The Managing Director shall inform the Company of any inventions immediately in writing and shall assist the Company in acquiring patent or other industrial property rights, if the Company so desires. 2. Subsection (6.2.1) above shall apply to any inventions no matter whether they a) are related to the business of the Company, b) are based on experience and Know-how of the Company, c) emanate from such duties of activities as are to be performed by the Managing Director within the Company, or d) materialize during or outside normal business hours of the Company. 3. The Company's right to inventions acquired hereunder shall in no way be affected by any amendments to or the termination of this Service Contract. The Company shall be entitled to claim and utilize all inventions which have been achieved by the Managing Director during the term of this Agreement and which are either developed from the activities and services owed to the Company and the affiliated companies or substantially based on experiences or works of the Company or the affiliated companies. In detail, the provisions of the Employee-Invention Act of 25.7.1957 shall apply according to the version in force at the relevant time. 6.3 Any compensation for inventions will be made in accordance with the Employee-Inventions Act of 25.7.1957 in the version in force at the relevant time. 7. Duration ------------- 7.1 This Agreement will be entered for a period of three years. If no notice is given six months before the expiration date, this Agreement will become an agreement for an indefinite period of time and can then be terminated at any time by either party giving six months notice to a month end. The Agreement will end in any case at the end of the month in which the Managing Director has completed the 65th year of his life (Dec. 4, 2005). 8. Post-Termination Non-Compete Agreement ------------------------------------------- In consideration of the Managing Director's activities for the Company and his additional far-reaching European responsibilities which have provided him and will further provide him with comprehensive business contacts and knowledge in the field of the economic activities of the Company and/or other companies of the Fuller Europe-Group, the parties agree to the following 4 terms and conditions of a post-termination non-compete agreement which they acknowledge necessary and reasonable to protect the proper business interests of the Company and/or other companies of the Fuller Europe-Group. 8.1 The Managing Director shall, during a period of two years after the termination of this Employment, neither on his own account nor in an employment, advisory or any supporting capacity, neither occasionally or permanently, neither directly or indirectly be engaged for any company or affiliated company having business activities in the economic fields of the Company and/or other companies of the Fuller Europe-Group ("competitive business"). The Managing Director shall also not set up a competitive business or participate in such competitive business, neither directly nor indirectly, provided that such participation exceeds 5%. 8.2 This Post-Termination Non-Compete Agreement shall apply within the area of Germany and Europe. 8.3 During the term of this Post-Termination Non-Compete Agreement the Company shall pay to the Managing Director a monthly compensation in the amount of the last monthly gross base salary, set out in 2.1, subject to the usual tax and social security duties. 8.4 Any other income which the Managing Director receives for professional activity or which he refuses to achieve in bad faith, shall be credited against the compensation, set out in 8.3. The Managing Director shall inform the Company of such other income and its amount immediately and satisfactorily, including a formal and sufficient declaration that his professional activity does not constitute a competing activity according to 8.1, 8.2. Irrespective of the aforementioned, upon request, the Managing Director shall inform the Company of any income and/or any opportunities of professional activity. In case the Managing Director should refuse such information, he shall not receive the compensation set out in 8.3 for the time of such refusal. The obligation of non-compete shall continue to apply. 8.5 The Company shall not pay any compensation if the Managing Director receives pension payments out of an old age, invalidity and descendant's pension system provided by the company and/or any company of the Fuller Europe-Group. 8.6. In case of the Managing Director's activity for a company of the Fuller Europe-Group, the Company shall not pay the compensation set out in 8.3, if the Managing Director's remuneration in respect of such activity exceeds the amount of this compensation. 5 8.7 The Company shall be entitled to waive this Post-Termination Non-Compete Agreement with immediate effect within two months after having received or given notice of termination, in which case the Company will have no payment obligation under Section 8.3. 8.8 If any regulation of this agreement of Clause 8 should be or become fully or partly invalid, the validity of the remaining regulations shall not be affected. The invalid regulation shall be replaced by such valid regulation achieving the closest possible purpose of the invalid regulation. This shall also apply if the invalidity of regulation should be based on reasons of time, subject, area or compensation; in such case the legally admissible shall apply. 9. Miscellaneous ------------------ 9.1 Indemnity payments ------------------ a) In view of the fact that an indemnity payment of ATS 2,551,950 -- (in DM 364,564 --) has been made due to the transfer to H.B. Fuller (Luneburg) GmbH and the subsequent termination of the employment contract with H.B. Fuller Austria GmbH, past years of service are excluded from any eventual future indemnity calculation. b) In accordance with Section 5 of the pension agreement of 28.4.1978 resp. 22.3.1979 resp. 5.2.1980 pension payments will be offset by the indemnity payment in this way that monthly pension payments during the first 10 months will be reduced by the amount of DM 5.232. 9.2 Relocation ---------- a) The company will absorb during the first 24 months of the assignment of the Managing Director the commuting expenses (Luneburg-Wels) for 12 trips either of the Managing Director or a family member. b) The relocation policy (attached) is applicable as far as relevant and appropriate for the European circumstances. 9.3 For all internal regulations resp. employment conditions, in which the entrance date is of interest, 1.April 1973 is the relevant date. 9.4 This Agreement replaces all prior understanding with respect to the employment and non-competition with the Company or an affiliated company with the exception of the pension agreement, as stated in 2.6. Amendments and additions must be in writing to be effective. 9.5 In the case of contradiction between both versions the German version shall prevail. 9.6 The Agreement shall be subject to German law. 6 9.7 The court in which jurisdiction the Company fails, is the competent court. 9.8 The Collective Labour Agreement for university graduates in the chemical industry will be used as reference for the determination of the benefit levels. Date: December 1, 1995 /s/ Jerald L. Scott /s/Dr. Hermann Lagally - ------------------------------- --------------------------------- H.B. Fuller GmbH, Luneburg Dr. Hermann Lagally 7 Relocations ================================================================================ References All references as listed under Relocation Policy, Policies, Section IV, Subject 10. Overview See Policies, Section IV, Subject 10 for an overview of the Relocation Policy and its purpose and scope. Throughout the relocation process, the employee should consult with the new manager and the appropriate Human Resources Manager. A letter of agreement (Attachment A) must be completed and signed by the employee and the new manager prior to beginning the relocation process, outlining the conditions of the relocation. All costs associated with relocation will be charged to the organization of the hiring manager. All H.B. Fuller benefits will continue without interruption. The employee's unused PTO will be transferred to the new location (no charges are to be made between divisions for accrued or unused PTO). EXPENSES COVERED UNDER THE INTERNAL RELOCATION POLICY
- - Basic expenses Page ----------------------------------------------------------------------------- A. House hunting trip. 3 B. Travel to new location. 3 C. Renter's assistance. 3 D. Move of household goods. 3 E. Temporary living expenses. 4 F. Transfer allowance. 5 G. New home purchase expenses. (Limited to $3,000. These expenses 5 are covered for current homeowners only). H. Expenses associated with the current home. 5 I. Gross-up Allowance 6
Expenses covered under this policy are paid according to pay grade and type of --------- relocation according to the following grid: RELOCATION EXPENSES By Pay Grade and Type of Relocation NOTE: This grid refers to relocation assignments of one year or greater.
- ----------------------------------------------------------------------------------------- Expenses Internal Internal Expatriate New Domestic International International Hires - ----------------------------------------------------------------------------------------- A. House/apartment Y Y Y Y hunting trip -------------------------------------------------------------------------------- B. Travel to new location Y Y Y Y -------------------------------------------------------------------------------- C. Renter's assistance Y Y Y Y Basic -------------------------------------------------------------------------------- Expenses D. Move of household Y Y /1/ Y - -------- --------------------------------------------------------------------------------
- ------------------------------------ /1/ Dependent upon expected length of assignment, country, etc. H.B. Fuller Supervisor Handbook, Procedures and Guidelines, rev. 08/01/95, Section IV, 6 Page 1 of 9
- ---------------------------------------------------------------------------------------------- Expenses Internal Internal Expatriate New Domestic International International Hires -------------------------------=================================================== goods ---------------------------------------------------------------------------------- Pay Grades E. Temporary living Y Y Y Y expenses ---------------------------------------------------------------------------------- 20-26 F. Transfer allowance Y Y Y N/2/ ---------------------------------------------------------------------------------- G. New home purchase Y Y N N/3/ expenses ---------------------------------------------------------------------------------- and sales H. Expenses associated Y Y Y Y with current home ---------------------------------------------------------------------------------- I. Gross-up allowance Y Y Y Y - ---------------------------------------------------------------------------------------------- Extra Gross-up of certain moving Y Y Y Y ----- expenses ---------------------------------------------------------------------------------- Pay Grades Mortgage interest rate Y Y Y N differential 27 and above Sale of current home Y Y Y N - ----------------------------------------------------------------------------------------------
An "internal international" move is a move from one nation to another. This type of move will be considered a permanent move for all intents and purposes. An "expatriate international" move is not considered a permanent move. Please refer to the expatriate policy, available from your HR representative upon request. Exceptions Approval Exceptions to this policy should only be requested in response to a compelling business need. Any exceptions should be submitted in writing by the hiring manager to the appropriate Human Resources representative and approved by the Group Vice President/Senior Vice President. This covers internal relocation and new hire relocation. - -------------------------------- /2/ Exceptions may be made for new employees pay grade 27 and up. /3/ See #2 above. H.B. Fuller Supervisor Handbook, Procedures and Guidelines, rev. 08/01/95, Section IV, 6 Page 2 of 9 SUMMARY OF BASIC EXPENSES ------------------------- ELIGIBILITY: All eligible pay grades. A. House Hunting Trip Actual travel expenses for the most economical method of travel (automobile, rail, or airplane) plus reasonable costs for meals and lodging, will be reimbursed to the employee. These expenses will be covered for the employee and spouse for a five day period. During this trip, the employee's sole function will be to secure new housing. B. Travel to New Location ---------------------- ____ The following expenses will be covered while traveling to the new location: 1. Automobile expense for the primary automobile will be equal to the current rate of reimbursement for company use of a personal car; an equal allowance is also provided for a second automobile. 2. Reimbursement of reasonable food and lodging expenses for the employee and dependents while traveling to the new location. Three hundred and fifty miles per day is used as the minimum mileage expected under normal conditions. Travel time and associated expenses should be agreed on between the employee and hiring manager prior to actual travel. 3. Miscellaneous expenses: Occasionally, other incidental expenses will occur during a move. Reimbursement of these expenses is subject to approval by the hiring manager and accurate documentation is required. The employee should keep careful records. C. Renter's Assistance ------------------- If an employee is leasing a home, apartment, or any other permanent living quarters, the Company will reimburse the cost necessary to break the lease in the event that the rental property cannot be sublet. D. Move of Household Goods ----------------------- The employee should directly contact Allied Transfer to make moving arrangements. Call the Benefits Hotline at 800/328-9625 to obtain the contact name and telephone number. All transportation charges for moving the employee's household goods from the point of origin to the point of destination will be paid by the Company. The household goods will be insured by insurance purchased through the moving company at full replacement value. The maximum value of the insurance is calculated by multiplying the total weight of the shipment by $3.50. The cost to Fuller for this coverage is $.85 per $100 of insurance. If the employee desires insurance limits that are higher than those provided under this policy, this would be the employee's personal expense. It is the employee's responsibility to transport all personal documents, jewelry, furs, coin collections and other similar valuables which typically require special riders on personal property insurance policies. These will not be covered by insurance through the van line or H.B. Fuller. Check with your homeowner's insurance carrier to make certain that all valuables are adequately covered before, during and after you move. Covered expenses include: 1. All packing and crating of the employee's goods. 2. Servicing of household appliances prior to the move, such as disconnecting washers, dryers, refrigerators, freezers, etc. 3. Shipment of pets, up to a maximum of $200. 4. An allowance of up to $200 will be allocated for servicing and packing hobby equipment. H. B. Fuller Supervisor Handbook, Procedures and Guidelines, rev. 08/01/95, Section IV, 6 Page 3 of 9 5. If an employee has a boat or second car, arrangements should be made to haul the boat or drive the car rather than loading them on the moving van. However, should the employee choose to have these items transported by the moving company, the additional cost will be at the employee's expense. (The cost for transporting the second car would be reduced by the amount allowed had the employee driven the car.) 6. Normal household goods. 7. Unpacking and uncrating all household goods at the point of destination, including setting up basic goods such as beds, dismantled tables, etc. 8. Servicing and connection of the household appliances included in the move. 9. Temporary storage of household goods for up to 30 days if the employee is unable to move directly into permanent housing. (See Item E Temporary Living Expenses.) No stop-offs in transit will be allowed to pick up additional goods, unless - --------------------------------------------------------------------------- prior approval has been received from the hiring manager. - --------------------------------------------------------- E. Temporary Living Expenses ------------------------- In the event that the employee and family arrive at the new location and cannot move directly into their new quarters, the Company will reimburse reasonable living costs for up to a maximum of 30 days. These expenses will be covered only under the following conditions: 1. The employee's household goods have not arrived. 2. There is a delay in utility connections. 3. The employee has not had an opportunity to make housing arrangements. 4. The employee is awaiting completion of construction of a new home. 5. The employee is waiting for escrow to close on the new home. F. Transfer Allowance ------------------ A one-time allowance of 120% of one month's straight time pay (sales reps or sales specialists use base plus the average of the last 12 months commission) will be paid when the employee has completed the move (managers may approve advance payment of this expense if circumstances warrant). The 120% Transfer Allowance is intended to cover many of the miscellaneous expenses associated with a relocation, which are not otherwise covered under this policy. (For example: connection of utilities and phone service, purchase of window coverings in the new residence, etc. This allowance may also be used to supplement reimbursed costs associated with purchase of the new home, such as closing costs). For payment to be made, a check requisition form must be submitted to --------------------------------------------------------------------- Payroll. This allowance will be based upon the employee's current base -------- ------- salary and not on any adjustments made to the salary caused by the transfer. G. New Home Purchase Expenses -------------------------- Costs associated with the purchase of a new home up to a maximum of $3,000 will be reimbursed by the Company. These costs include closing costs, points, lawyer's fees, and other miscellaneous expenses. Reimbursement of these costs applies to current homeowners only. Additional costs in excess ----------------------------------- of $3,000 are meant to be covered under the Transfer Allowance (Item F above). A completed expense report with documentation attached should be ---------------------------------------------------------------- H.B.Fuller Supervisor Handbook, Procedures and Guidelines, rev. 08/01/95, Section IV, 6 Page 4 of 9 submitted to Payroll. If advance reimbursement is requested, at the approval -------------------- of the manager, the employee should obtain a Good Faith Estimate of closing costs from his/her mortgage lender. H. Expenses Associated with the Current Home ----------------------------------------- In the event that an employee who is a homeowner does not qualify for the Sale of the Current Home under this policy, and the manager expects the employee to move prior to the sale of the current home, the hiring manager will pay certain expenses associated with the home, some of which will be covered only for a limited time as outlined in this policy. Employees will also have access to services provided by National Equity, Inc. in the form of Home Marketing Assistance. These services include obtaining an appraisal and a Broker's Price Opinion on the home in order to assist the employee in setting a realistic list price. Employees are encouraged to list the home with a reliable and aggressive real estate agent as soon as possible, to set a reasonable list price for the home, and to market the home aggressively in order to achieve a timely sale. The policy provides the following: 1. Home Marketing Assistance through National Equity, Inc. (for three months). 2. Appraisal and Broker's Price Opinion. 3. Reimbursement of mortgage interest (not principal), taxes, and basic -------- --------- maintenance expenses (lawn care, utilities, and snow removal) associated with the current home. Reimbursement of these expenses will begin on the date the employee closes escrow on a home in the new location, or begins rental payments if not purchasing a home in the new location. Coverage will be 100% of eligible expenses for the first three months and 50% for the next three months, for a total period of six months. 4. Reimbursement of the real estate commission on the sale of the home, as long as the home sells within one year of listing. Reimbursed expenses associated with the current home are considered taxable income and, as such, will be subject to income tax withholding. These expenses will be included in gross income reported on the employee's W-2 form. Employees should consult their personal tax advisors for further information. A completed expense report should with documentation attached ------------------------------------------------------------- should be submitted to Payroll. ------------------------------- I. Gross-Up Allowance ------------------ From an income tax perspective, moving expenses are broken down as follows: TOTALLY DEDUCTIBLE (not eligible for gross-up) ------------------ - Moving and storage of household goods - Travel and lodging expenses of moving from previous home to new home (one trip, one way) - Mortgage Interest Rate Differential (MID) EXPENSES WHICH ARE ELIGIBLE FOR GROSS-UP ---------------------------------------- - Temporary living expenses - House hunting trip expenses - (Combined total of temporary living expenses and house hunting expenses: up to $1,500) ----- - Real estate expenses up to $1,500 ----- H.B. Fuller Supervisor Handbook, Procedures and Guidelines, rev. 08/01/95, Section IV, 6 Page 5 of 9 EXPENSES WHICH ARE NOT ELIGIBLE FOR GROSS-UP - ------------------------------------------------- - Transfer allowance (the Transfer Allowance is set at 120% in order to partially off-set any tax exposure). - Profit from the sale of the former home. The gross-up is determined by calculating the employee's annualized salary and bonus and subtracting from this personal exemptions and an average of itemized deductions to arrive at taxable income. The gross-up rate is determined from the marginal federal tax rate plus the marginal state tax rate (as adjusted for the federal tax benefit). Gross-up allowances are reflected only in the taxes paid by H.B. Fuller on the employee's behalf; a ---- separate payment is not made directly to the employee. --- Expense reimbursement forms submitted by the employee in connection with a relocation must have receipts and supporting documentation attached. This documentation serves as a basis for preparation of Form 4782 (Attachment D) by the Company which, in turn, is furnished to the Tax Department and the employee. The employee uses the information for preparation of Form 3903 ---- (Attachment E) to be included with his/her personal income tax return. Many expenses must be reported on the employee's W-2 in the wages, salary and other compensation box. EXCEPTIONAL EXPENSES -------------------- ELIGIBILITY: Pay grades 27 and above. A. FULL GROSS-UP FOR CERTAIN EXPENSES ---------------------------------- - Temporary living expenses - House hunting trip expenses - Real estate expenses B. Mortgage Interest Rate Differential ----------------------------------- The Company will pay the difference between the old and new interest rate minus 1% X the new mortgage balance of the home being purchased (see Attachment B). The cost of upgrading housing is excluded from reimbursement. The amount, to be determined after the old home has been sold (or acquired by NEI), will then be paid in a lump sum payment once each year for a total period of 36 months. The first payment is made at the time of the move, with the two subsequent payments made at the same time during the next two years. This is handled through Payroll. If an interest rate which fluctuates from year-to-year has been negotiated on the new home, the interest rate amount in effect at the time of payment will be used. This is taxable income to the employee. The gross-up does not apply since --------------------------------------- --------------------------------- mortgage interest is totally deductible on the employee's tax return. --------------------------------------------------------------------- The special allowance will cease when: - The employee voluntarily terminates. - The employee is terminated for cause. C. Sale of Current Home -------------------- "Home" is defined as the primary residence which is owned by the employee. This does not include vacation cottages, vacant lots, or income property. H.B. Fuller Supervisor Handbook, Procedures and Guidelines, rev. 08/01/95, Section IV, 6 Page 6 of 9 When a relocation has been confirmed, the employee will have the option of either selling the home on their own or of making use of our third party home buying company, National Equity, Inc. (NEI). The employee should contact the --------------------------- appropriate Human Resources Manager in order to be referred to NEI. NEI will then send the employee all necessary information and assist them in marketing their home prior to acquisition by NEI if the home does not sell within the specified period of time. 1. Appraisals ---------- NEI will assist the employee in establishing the value of the home and, through the Home Marketing Assistance Program, aid the employee in marketing the home to get the best possible price that market conditions will allow. The appraisal results cannot become the subject of bargaining between ------ employee and H.B. Fuller Company. Professional estimates accurately compiled are accepted as valid. Appraisers are asked to estimate the current market value of the home. "Current market value" is defined as the highest price a willing and well informed buyer would voluntarily pay to accept property if it were placed on the market for a reasonable length of time. Two independent appraisals will be obtained. NEI will choose one and the employee will choose the other from a list provided by NEI. The two appraisals will be averaged and this amount will become the established ----------- value of the home. If, however, there is more than a 5% difference ----- between the two appraisals, a third appraisal will be obtained by NEI. The three appraisals will then be averaged and the appraisal furthest away from the average will be disregarded. The established value will then be the average of the remaining two appraisals. 2. Full House Inspection --------------------- In conjunction with the appraisal process, a full house inspection will also be conducted. Appraisers are hired only to give their opinion of the fair market value of the home, assuming its current "as is" condition. However, they are not licensed electricians, plumbers or engineers and cannot be expected to detect defects in the mechanics and structure of the house. The intent of the full house inspection is to disclose defects that are not detected by the appraisers so that either the established value can be altered to reflect the reduced value or the cost of the necessary repairs can be withheld from the amount of equity paid to the employee. 3. Listing Agreements ------------------ Whenever a home is listed for sale, the following clause must be included in the listing agreement before signing: "This listing agreement is subject to the following provisions: It is understood and agreed that regardless of whether or not an offer is presented by a ready, willing, and able buyer: a. No commission or compensation shall be earned by, or be due and payable to, the broker until the sale of the property has been consummated between seller and buyer, the deed delivered to the buyer, and the purchase price delivered to the seller; and b. The sellers reserve the right to sell the property to National Equity, Inc. (NEI) or its nominees or (individually and collectively a "Named Prospective Purchaser") at any time. Upon the execution by a "Named Prospective Purchaser: and Seller(s) of a Contract of Sale with H.B. Fuller Supervisor Handbook, Procedures and Guidelines, rev. 08/01/95, Section IV, 6 Page 7 of 9 respect to the property, this Listing Agreement shall immediately terminate without obligation on the Seller(s) part or on the part of any Named Prospective Purchaser to either pay a commission or to continue this listing. By including the above clause in the listing agreement, the employee will be free to accept NEI's offer at any time without obligation of a selling commission. 4. Listing Price ------------- Once the appraisals have been completed and NEI has made a formal offer on the home, the list price the employee sets must not be more than 10% over the ---------------------- established value. Failure to observe this restriction will make the employee ----------------- ineligible for the home sale program. 5. Equity Advance Procedure ------------------------ If the home has not sold at the time the employee needs to enter into a contract for the purchase of a residence in the new area, NEI may advance that amount of equity (defined as the established value of the employee's current residence less the amount owed on it) as may be necessary for an earnest money deposit on the purchase of a new home. The amount of equity will be reduced by NEI using a proration for taxes, assessments, etc. as outlined in Item 8 of the Contract for Sale provided by NEI (see Attachment C). 6. The Home Buying Procedure ------------------------- During the Home Marketing Assistance period, and after the value of the home has been established, NEI will present a formal written offer to the employee for the purchase of the home. The employee will then have 30 days to either accept NEI's offer or continue marketing the home in an attempt to get a higher offer than the established value, or decide to accept full responsibility for selling the house on their own, independent of any further assistance provided by the Company or NEI. Any offer received during this period must be discussed with the hiring ----------------------------------------------------------------------- manager and the Human Resources Department. If the employee does have an ------------------------------------------- offer, it should not be signed, but sent directly to NEI. If the offer is ------ subsequently accepted and it is higher than the established value, the ------ employee will be paid the difference following closing on the sale. The closing will be handled by NEI. Once the property has been formally acquired by NEI, and the signed Contract for sale has been received, all normal costs associated with the home will be paid by NEI and the employee will have no further responsibility for the home. 7. Cost to H.B. Fuller Company --------------------------- The hiring manager is responsible for all costs associated with the relocation of an employee, including the cost of services from NEI. An operating deposit is required on each home acquired by NEI, and this -------------------- amount is based on the established value of the home. If a home is acquired under the Regular Sale Option (meaning that either there is no buyer, or the ------------------- sale price is less than the established value), the operating deposit is 15% --- of the established value. If the home is acquired under the Amended Value ------------- Option (meaning there is a bona fide offer that is greater than the ------ established value), the operating deposit is 10% of the established value. --- This deposit is then applied toward the direct and indirect expenses (described below) incurred by NEI in H.B. Fuller Supervisor Handbook, Procedures and Guidelines, rev. 08/01/95, Section IV, 6 Page 8 of 9 connection with the acquisition. Following the sale and closing on the home the balance, if any, will be refunded to H.B. Fuller Company. Summary of costs: i Direct Expenses: These expenses included all carrying costs, closing costs, ---------------- broker's commissions, and all specific expenses associated with the home. ii Indirect Expenses: These expenses include administrative and service fees ------------------ for the services of NEI. This cost is based on a percentage of the established value of the home: 3% for the Regular Sale Option and 1.5% for the Amended Value Option. iii Appraisals and Inspection: These services are billed as the actual costs -------------------------- plus a flat fee of $150 per property. iv Home Marketing Assistance Program: When use of this program leads to the ---------------------------------- sale of the home, it is billed at $750 per property and is treated as an Amended Value Sale. H.B. Fuller Supervisor Handbook, Procedures and Guidelines, rev. 08/01/95, Section IV, 6 Page 9 of 9 EX-10.N 4 1996 PERFORMANCE UNIT PLAN Exhibit 10(n) ------------- EXHIBIT A H.B. FULLER COMPANY 1996 PERFORMANCE UNIT PLAN (December 1, 1995 through November 30, 1998) Section 1. General. ------------------- This Plan is adopted pursuant to the H.B. Fuller Company 1992 Stock Incentive Plan (the "Stock Incentive Plan") and is subject to its terms. This Plan shall be known as the "H.B. Fuller Company Performance Unit Plan" and is hereinafter referred to as the "Performance Unit Plan." Section 2. Definitions. ---------------------- As used in this Performance Unit Plan, the following terms shall have the meanings set forth below: "Affiliate" shall mean (i) any entity that, directly or indirectly through one or more intermediaries, is controlled by the Company and (ii) any entity in which the Company has a significant equity interest, as determined by the Committee. "Award" shall mean any right granted under this Performance Unit Plan. "Award Agreement" shall mean any written agreement contract or other instrument or document evidencing any Award granted under the Performance Unit Plan. "Change in Control" shall mean: (a) a change in control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Exchange Act, whether or not the Company is then subject to such reporting requirement; (b) the public announcement (which, for purposes of this definition, shall include, without limitation, a report filed pursuant to Section 13(d) of the Exchange Act) by the Company or any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) that such person has become the "beneficial owner" (as defined in Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of securities of the Company representing 15% or more of the combined voting power of the Company's then outstanding securities; (c) the Continuing Directors cease to constitute a majority of the Company's Board of Directors; (d) the shareholders of the Company approve (A) any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation or pursuant to which shares of Company stock would be converted into cash, securities or other property, other than a merger of the Company in which shareholders immediately prior to the merger have the same proportionate ownership of stock of the surviving corporation immediately after the merger; (B) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of the Company; or (C) any plan of liquidation or dissolution of the Company; or (e) the majority of the Continuing Directors determine in their sole and absolute discretion that there has been a change in control of the Company; provided, however, that within ten business days following the date of the Change in Control, a majority of the Continuing Directors, if any, determines that there shall be no acceleration of vesting with respect to such Change in Control, then the acceleration provisions will not apply. "Continuing Director" shall mean any person who is a member of the Board of Directors of the Company, while such person is a member of the Board of Directors, who is not an Acquiring Person (as defined below) or an Affiliate or Associate (as defined below) of an Acquiring Person, or a representative of an Acquiring Person or any such Affiliate or Associate, and who (A) was a member of the Board of Directors on the date of this Agreement as first written above or (B) subsequently becomes a member of the Board of Directors, if such person's initial nomination for election or initial election to the Board of Directors is recommended or approved by a majority of the Continuing Directors. For purposes of this subparagraph (e), "Acquiring Person" shall mean any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) who or which, together with all Affiliates and Associates of such person, is the "beneficial owner" (as defined in Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of securities of the Company representing 15% or more of the combined voting power of the Company's then outstanding securities, but shall not include the Company, any subsidiary of the Company or any employee benefit plan of the Company or of any subsidiary of the Company or any entity holding shares of the Common Stock organized, appointed or established for, or pursuant to the terms of, any such plan, Elmer L. Andersen, alone or together with any of his Affiliates, or Anthony L. Andersen, alone or together with any of his Affiliates; and "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 promulgated under the Exchange Act. "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time, and any regulations promulgated thereunder. "Committee" shall mean a committee of the Board of Directors of the Company designated by such Board to administer this Performance Unit Plan and comprised of not less than such number of directors as shall be required to permit this Performance Unit Plan to satisfy 2 the requirements of Rule 16b-3. Each member of the Committee shall be a "disinterested person" within the meaning of Rule 16b-3. "Eligible Person" shall mean any employee or officer of the Company or any Affiliate who the Committee determines to be an Eligible Person. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. "Fair Market Value" shall mean, with respect to any property (including, without limitation, any Shares or other securities), the fair market value of such property determined by such methods or procedures as shall be established from time to time by the Committee. Notwithstanding the foregoing, for purposes of this Performance Unit Plan, the Fair Market Value of Shares on a given date shall be (i) the last sale price of the Shares as reported on the NASDAQ National Market System on such date, if the Shares are then quoted on the NASDAQ National Market System or (ii) the closing price of the Shares on such date on a national securities exchange, if the Shares are then being traded on a national securities exchange. "Participant" shall mean an Eligible Person designated to be granted a Performance Award under this Performance Unit Plan. "Performance Unit" shall mean any unit granted under this Performance Unit Plan evidencing the right to receive Restricted Stock or Restricted Stock Units at some future date. "Person" shall mean any individual, corporation, partnership, association or trust. "Restricted Stock" shall mean any Share into which a Performance Unit is convertible under the Performance Unit Plan. "Restricted Stock Unit" shall mean a unit evidencing the right to receive one Share (subject to adjustment pursuant to Section 4.3 hereof) at some future date. "Rule 16b-3" shall mean Rule 16b-3 promulgated by the Securities and Exchange Commission under the Exchange Act or any successor rule or regulation. "Shares" shall mean shares of Common Stock, $1.00 par value, of the Company or such other securities or property as may become subject to Awards pursuant to an adjustment made under Section 4.3 of this Performance Unit Plan. 3 Section 3. Administration. - ---------------------------- Section 3.1. Power and Authority of the Committee. This Performance -------------------------------------------------- Unit Plan shall be administered by the Committee. Subject to the terms of this Performance Unit Plan and applicable law, the Committee shall have full power and authority to: (i) designate Participants; (ii) determine the number of Performance Units to be granted to each Participant under this Performance Unit Plan; (iii) determine the number of Shares with respect to which payments, rights or other matters are to be calculated in connection with each Award; (iv) determine the terms and conditions of any Award or Award Agreement; (v) amend the terms and conditions of any Award or Award Agreement and accelerate the lapse of restrictions relating to Restricted Stock; (vi) determine whether, to what extent and under what circumstances Awards may be canceled, forfeited or suspended; (vii) interpret and administer this Performance Unit Plan and any instrument or agreement relating to, or Award made under, this Performance Unit Plan; (viii) establish, amend, suspend or waive such rules and regulations and appoint such agents as it shall deem appropriate for the proper administration of this Performance Unit Plan; and (ix) make any other determination and take any other action that the Committee deems necessary or desirable for the administration of this Performance Unit Plan. Unless otherwise expressly provided in this Performance Unit Plan, all designations, determinations, interpretations and other decisions under or with respect to this Performance Unit Plan or any Award shall be within the sole discretion of the Committee, may be made at any time and shall be final, conclusive and binding upon any Participant, any holder or beneficiary of any Award and any employee of the Company or any Affiliate. Section 3.2. Meetings of the Committee. The Committee shall select --------------------------------------- one of its members as its chairman and shall hold its meetings at such times and places as the Committee may determine. A majority of the Committee's members shall constitute a quorum. All determinations of the Committee shall be made by not less than a majority of its members. Any decision or determination reduced to writing and signed by all of the members of the Committee shall be fully effective as if it had been made by a majority vote at a meeting duly called and held. The Committee may appoint a secretary and may make such rules and regulations for the conduct of its business as it shall deem advisable. Section 3.3. Delegation. The Committee may delegate to one or more ------------------------ officers of the Company or any Affiliate or a committee of such officers the authority, subject to such terms and limitations as the Committee shall determine, to grant Awards to Eligible Persons who are not officers or directors of the Company or Affiliate for purposes of Section 16 of the Exchange Act. Only the Committee is permitted to grant Awards to Eligible Persons who are officers or directors of the Company for purposes of Section 16 of the Exchange Act. Section 4. Shares Available for Awards. - --------------------------------------- Section 4.1. Shares Available. Subject to adjustment as provided in ------------------------------ Section 4(c), the number of Shares with respect to which Awards may be granted under this Performance Unit Plan shall not exceed the maximum number of Shares available for issuance under the Stock Incentive Plan less the number of Shares available for issuance under any other plan adopted 4 pursuant to the Stock Incentive Plan. Shares issued pursuant to the Performance Unit Plan may be either from the authorized but unissued shares of the Company's Common Stock or from shares of Common Stock reacquired by the Company, including shares purchased in the open market. If any shares of Restricted Stock or any Restricted Stock Units to which an Award relates are forfeited, or if an Award otherwise terminates without delivery of any Shares, then the number of Shares counted against the aggregate number of Shares available under this Performance Unit Plan with respect to such Award, to the extent of any such forfeiture or termination, shall again be available for granting Awards under the Performance Unit Plan. Section 4.2. Accounting for Awards. For purposes of this Section 4, ----------------------------------- the number of Shares to which such Award relates shall be counted on the date of grant of such Award against the aggregate number of Shares available for granting Awards under this Performance Unit Plan. Section 4.3. Adjustments. In the event that the Committee shall ------------------------- determine that any dividend or other distribution (whether in the form of cash, Shares, other securities or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange of Shares or other securities of the Company, issuance of warrants or other rights to purchase Shares or other securities of the Company or other similar corporate transaction or event affects the Shares such that an adjustment is determined by the Committee to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under this Performance Unit Plan, then the Committee shall, in such manner as it may deem equitable, adjust any or all of the number and type of Shares (or other securities or other property) which thereafter may be made the subject of Awards and the number and type of Shares (or other securities or other property) subject to outstanding Awards. Section 5. Eligibility. ----------------------- Any Eligible Person, including any Eligible Person who is an officer or director of the Company or any Affiliate, shall be eligible to be designated a Participant. Section 6. Performance Units. ----------------------------- The Committee is hereby authorized to grant Performance Units to Participants subject to the terms of this Performance Unit Plan and any applicable Award Agreement. A Performance Unit granted under this Performance Unit Plan (a) shall be denominated in cash and payable in Restricted Stock or Restricted Stock Units, as applicable, and (b) shall confer on the holder thereof the right to receive a payment, in whole but not in part, upon the achievement of the performance goals set forth in Schedule I hereto during the performance three-year period ending November 30, 1998 as set forth in such schedule or the Award Agreement (the "Performance Period"). Subject to the terms of this Performance Unit Plan and any applicable Award Agreement, the number of any Performance Units granted and the value of any Performance Unit shall be determined by the Committee. 5 Section 6.1. Number of Performance Units. Performance Units may be ----------------------------------------- granted in the sole discretion of the Committee to the Participant for any fiscal year (a "Performance Year") in the Performance Period. Following any such grant the Participant will be notified of the number of Performance Units, if any, granted to the Participant by the Committee. The Participant may or may not receive a grant in any given Performance Year during the Performance Period. Section 6.2. Payment of Performance Units. If Performance Units are ------------------------------------------ granted to the Participant for a Performance Period, such Performance Units will be credited to the Participant during such Performance Period; however, such Performance Units shall be paid only at the end of the Performance Period upon the attainment of the cumulative Performance Objectives for the Performance Period established by the Committee. The Performance Objectives for each of the Performance Years ending November 30, 1996, 1997 and 1998 are set forth in Schedule I hereto. The value of each Performance Unit shall be based on cumulative Performance Objectives established by the Committee for the entire Performance Period and shall have the value set forth in the matrix contained in the Schedule I hereto. Section 6.3. Payment of Performance Units. Performance Units shall ------------------------------------------ be credited to a Participant annually following the end of the Company's fiscal year; however, Performance Units shall be paid only upon the attainment of the performance goals set forth in Schedule I hereto. Section 6.4. Restrictions. Performance Units shall be subject to -------------------------- such restrictions as the Committee may impose, which restrictions may lapse separately or in combination at such time or times, in such installments or otherwise as the Committee may deem appropriate. Section 6.5. Forfeiture Prior to Conversion to Restricted Stock or ------------------------------------------------------------------- Restricted Stock Units. Except as otherwise determined by the Committee, ---------------------- upon termination of employment during the Performance Period, all Performance Units credited to the terminating Participant at such time which have not yet been converted to Restricted Stock or Restricted Stock Units, as applicable, shall be forfeited. Section 6.6. Limits on Transfer of Awards. No Award and no right ------------------------------------------ under any such Award shall be transferable by a Participant otherwise than by will or by the laws of descent and distribution; provided, however, -------- -------- that, if so determined by the Committee, a Participant may, in the manner established by the Committee, designate a beneficiary or beneficiaries to exercise the rights of the Participant and receive any property distributable with respect to any Award upon the death of the Participant. Each right under any Award shall be exercisable during the Participant's lifetime only by the Participant or, if permissible under applicable law, by the Participant's guardian or legal representative. No Award or right under any such Award may be pledged, alienated, attached or otherwise encumbered, and any purported pledge, alienation, attachment or encumbrance thereof shall be void and unenforceable against the Company or any Affiliate. 6 Section 7. Conversion of Performance Units to Restricted Stock or ------------------------------------------------------------------ Restricted Stock Units. ----------------------- As of the last day of the Performance Period, the Participant's Performance Units will be converted to the largest number of whole shares of Restricted Stock or Restricted Stock Units as specified in the Award Agreement that equals the aggregate value of Performance Units earned during such Performance Period divided by the Fair Market Value of the Shares as of such day. No fractional Shares shall be issued or converted pursuant to this Performance Unit Plan or any Award, and the Committee shall determine whether cash shall be paid in lieu of any fractional Shares or whether such fractional Shares or any rights thereto shall be canceled, terminated or otherwise eliminated. Section 7.1. Forfeiture After Conversion to Restricted Stock or ---------------------------------------------------------------- Restricted Stock Units. Except as provided in Section 7.5 hereof or as ----------------------- otherwise determined by the Committee, all Restricted Stock or Restricted Stock Units, as applicable, shall be forfeited and reacquired by the Company and all rights of the Participant in such Restricted Stock or Restricted Stock Units, as applicable, thereto shall terminate unless the Participant remains in the continuous employment of the Company or any Affiliate for a period (the "Restricted Period"), of three years from the date of the conversion of the Performance Units to Restricted Stock or Restricted Stock Units, as applicable; provided,however, that the Committee -------- ------- may, when it finds that a waiver would be in the best interest of the Company, waive in whole or in part any or all remaining restrictions with respect to Restricted Stock or Restricted Stock Units, as applicable. Shares of Restricted Stock or Shares representing the equivalent of whole Restricted Stock Units that are no longer subject to restrictions shall be delivered to the holder thereof promptly after the applicable Restricted Period lapses or is waived. Section 7.2. Stock Certificates Representing Restricted Stock. At -------------------------------------------------------------- the time that the Participant's Performance Units are converted to Restricted Stock, such Restricted Stock shall be issued and held by the Company or held in nominee name by the stock transfer agent or brokerage service selected by the Company to provide such services for the Performance Unit Plan. No stock certificates evidencing such shares of Restricted Stock shall be issued to the Participant prior to the lapse or waiver of restrictions applicable to such Restricted Stock. Neither this Section 7(b) nor any action taken pursuant to nor in accordance with this Section 7(b) shall be construed to create a trust of any kind. At the end of the Restricted Period, certificates for the shares of Restricted Stock issued upon the conversion of Performance Units awarded to the Participant shall be delivered to the Participant within 30 days following the end of the Restricted Period subject only to such restrictive legend, if any, as may be required under the then applicable securities laws. Section 7.3. Conversion of Restricted Stock Units. On the first -------------------------------------------------- business day subsequent to the termination of the Restricted Period, each Restricted Stock Unit shall, automatically and without further action of the Company, be converted to one Share (subject to adjustment pursuant to Section 4(c) hereof) and the Participant shall thereupon become a record holder of each such Share for all purposes. No fractional Shares shall be issued or delivered pursuant to 7 this Restricted Stock Unit Plan or any Award, and the Committee shall determine whether cash shall be paid in lieu of any fractional Shares or whether such fractional Shares or any rights thereto shall be canceled, terminated or otherwise eliminated. Section 7.4. Special Provisions Upon a Change in Control. --------------------------------------------------------- Notwithstanding any other provision in this Performance Unit Plan to the contrary, the Restricted Period pertaining to any Restricted Stock or Restricted Stock Units issued upon the conversion of Performance Units awarded under this Performance Unit Plan will immediately lapse upon the occurrence of a Change in Control. Section 7.5. Termination of Employment by Reason of Death, ----------------------------------------------------------- Disability or Retirement. In the event that a Participant shall cease to ------------------------ be employed by the Company or its subsidiaries due to death, permanent disability, normal retirement at age 65 or older, or early retirement with the consent of the Compensation Committee of the Board of Directors, the Restricted Period with respect to the Restricted Stock or Restricted Stock Unit, as applicable, held by such Participant shall be deemed to have ended on the date of such termination of employment. Section 7.6. Prohibition on Transfer of Restricted Stock. Shares of --------------------------------------------------------- Restricted Stock or Restricted Stock Units may not be sold, assigned, transferred, pledged, hypothecated or otherwise disposed of during the Restricted Period. Section 7.7. Leave of Absence. The Committee may make such ------------------------------ provision as it deems equitable respecting the continuance of the restrictions contained herein on any Restricted Stock held by a Participant during an approved leave of absence. Section 8. Rights as a Shareholder. ----------------------------------- Section 8.1. Voting Rights. Upon the issuance of Restricted Stock --------------------------- upon conversion of Performance Units awarded to a Participant, such Participant shall be entitled to voting rights with respect to such Shares of Restricted Stock. At no time prior to the conversion of Restricted Stock Units into Shares shall a participant be entitled to voting rights with respect to such Shares or the Restricted Stock Units. Section 8.2. Dividends on Restricted Stock. As a condition to ------------------------------------------- receiving an Award under the Performance Unit Plan, each Participant shall be required to elect in writing to defer the receipt of dividends paid on shares of Restricted Stock issued upon conversion of Performance Units awarded to such Participant. All cash dividends otherwise payable on and with respect to Restricted Stock shall be reinvested in additional shares of Restricted Stock at the Fair Market Value of the Shares. All Restricted Stock issued pursuant to this Section 7(g)(ii) shall be held in nominee name by the stock transfer agent or brokerage service selected by the Company to provide such services for the Plan. A report showing the number of shares of Restricted Stock so purchased with reinvested dividends shall be sent to the Participant within 30 days following the applicable dividend payment date. No stock certificates evidencing such Restricted Stock shall be issued to the Participant prior to the lapse or waiver of restrictions applicable to the shares of Restricted Stock with respect to which the reinvested dividends were 8 paid. Shares of Restricted Stock resulting from the reinvestment of dividends shall be forfeited in the event that the shares of Restricted Stock with respect to which the reinvested dividends were paid are forfeited. Stock certificates registered in the name of the Participant shall be delivered to the Participant within 30 days after such restrictions lapse or are waived. Only whole Shares shall be issued to the Participant following the lapse or waiver of such restrictions; the value of any fractional Shares shall be paid in cash at the time such Shares are issued to the Participant. Section 8.3. Dividend Equivalents. As long as a Participant holds ----------------------------------- outstanding Restricted Stock Units, the Company shall credit to such Participant, on each date that the Company pays a cash dividend to holders of Shares generally, a number of Restricted Stock Units equal to the total number of whole Restricted Stock Units previously credited to such Participant multiplied by the cash dividend per Share paid on such date to such holders, divided by the Fair Market Value of a Share on such date. Any fractional Restricted Stock Units resulting from such calculation shall be carried over and added to any additional Restricted Stock Units as may be credited to the Participant in connection with similar calculations in the future. A report showing the number of Shares so credited shall be sent to the Participant periodically, as determined by the Committee. Restricted Stock Units credited pursuant to this Section 8.3 will be forfeited if and when the Restricted Stock Units to which such dividend equivalents were paid are forfeited. Section 9. Payment of Cash Value of Award. ------------------------------------------- The Committee, in its sole discretion, may elect to cause a Participant to be paid the cash value of Performance Units, Restricted Stock or Restricted Stock Units held by such Participant prior to the expiration of the applicable Performance Period or Restricted Period and terminate such Participant's rights with respect to such Performance Units, Restricted Stock or Restricted Stock Units. Section 10. Securities Matters. ------------------------------- No shares of Restricted Stock shall be issued hereunder prior to such time as counsel to the Company shall have determined that the issuance and delivery of such Restricted Stock will not violate any federal or state securities or other laws. The Participant may be required by the Company, as a condition to the Award granted hereunder, to agree in writing that all Restricted Stock to be acquired pursuant to this Performance Unit Plan shall be held for his or her own account without a view to any further distribution thereof, that the certificates for such shares of Restricted Stock shall bear an appropriate legend to that effect, and that such shares of Restricted Stock will not be transferred or disposed of except in compliance with applicable federal and state laws. The Company may, in its sole discretion, defer the effectiveness of any Award or the conversion of Performance Units to Restricted Stock hereunder in order to allow the issuance of Restricted Stock pursuant thereto to be made pursuant to registration or an exemption from registration or other methods for compliance 9 available under federal or state securities laws. The Company shall be under no obligation to effect the registration pursuant to the Securities Act of 1933 of any Restricted Stock to be issued hereunder or to effect similar compliance under any state laws. If Shares are traded on a securities exchange, the Company shall not be required to deliver to the Participant certificates representing any shares of Restricted Stock unless and until such shares of Restricted Stock have been admitted for trading on such securities exchange. The Company shall inform the Participant in writing of its decision to defer the effectiveness of any award of Restricted Stock hereunder. Section 11. Amendment and Termination; Adjustments. --------------------------------------------------- Except to the extent prohibited by applicable law and unless otherwise expressly provided in an Award Agreement, the Stock Incentive Plan or in this Performance Unit Plan: Section 11.1. Amendments to Performance Unit Plan. The Committee may -------------------------------------------------- amend, alter, suspend, discontinue or terminate this Performance Unit Plan; provided, however, that, notwithstanding any other provision of this ----------------- Performance Unit Plan or any Award Agreement, without the approval of the shareholders of the Company, no such amendment, alteration, suspension, discontinuation or termination shall be made that, absent such approval, (i) would cause Rule 16b-3 to become unavailable with respect to this Performance Unit Plan, and/or (ii) would violate the rules or regulations of the National Association of Securities Dealers, Inc. or any securities exchange that are applicable to the Company. Section 11.2. Amendments to Awards. The Committee may waive any ----------------------------------- conditions of or rights of the Company under any outstanding Award, prospectively or retroactively. The Committee may not amend, alter, suspend, discontinue or terminate any outstanding Award, prospectively or retroactively, without the consent of the Participant or holder or beneficiary thereof, except as otherwise herein provided. Section 11.3. Correction of Defects, Omissions and Inconsistencies. ------------------------------------------------------------------- The Committee may correct any defect, supply any omission or reconcile any inconsistency in this Performance Unit Plan or any Award in the manner and to the extent it shall deem desirable to carry this Performance Unit Plan into effect. Section 12. General Provisions. -------------------------------- Section 12.1. Income Tax Withholding. In order to comply with all ------------------------------------- applicable income, social, payroll or other tax laws or regulations, the Company may take such action as it deems appropriate to ensure that all applicable income, social, payroll or other taxes, which are the sole and absolute responsibility of a Participant, are withheld or collected from such Participant. Section 12.2. No Rights to Awards. No Eligible Person, Participant ---------------------------------- or other Person shall have any claim to be granted any Award under this Performance Unit Plan, and there is no obligation for uniformity of treatment of Eligible Persons, Participants or holders or beneficiaries 10 of Awards under this Performance Unit Plan. The terms and conditions of Awards need not be the same with respect to different Participants. Section 12.3. No Cash Consideration for Awards. Awards shall be ----------------------------------------------- granted for no cash consideration. Section 12.4. Awards May Be Granted Separately or Together. Awards ----------------------------------------------------------- may, in the discretion of the Committee, be granted either alone or in addition to, in tandem with or in substitution for any award granted under any plan of the Company or any Affiliate other than this Performance Unit Plan. Awards granted in addition to or in tandem with awards granted under any such other plan of the Company or any Affiliate may be granted either at the same time as or at a different time from the grant of such other Awards or awards. Section 12.5. Award Agreements. No Participant will have rights ------------------------------- under an Award granted to such Participant unless and until an Award Agreement shall have been duly executed on behalf of the Company. Section 12.6. No Limit on Other Compensation Arrangements. Nothing ---------------------------------------------------------- contained in this Performance Unit Plan shall prevent the Company or any Affiliate from adopting or continuing in effect other or additional compensation arrangements, and such arrangements may be either generally applicable or applicable only in specific cases. Section 12.7. No Right to Employment. The grant of an Award shall ------------------------------------- not be construed as giving a Participant the right to be retained in the employ of the Company or any Affiliate. In addition, the Company or an Affiliate may at any time dismiss a Participant from employment, free from any liability or any claim under this Performance Unit Plan, unless otherwise expressly provided in this Performance Unit Plan or in any Award Agreement. Section 12.8. Governing Law. The internal law, and not the law of ---------------------------- conflicts, of the State of Minnesota will govern all questions concerning the validity, construction and effect of this Performance Unit Plan and any rules and regulations relating to this Performance Unit Plan. Section 12.9. Severability. If any provision of this Performance --------------------------- Unit Plan or any Award is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction or would disqualify this Performance Unit Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended without, in the determination of the Committee, materially altering the purpose or intent of this Performance Unit Plan or the Award, such provision shall be stricken as to such jurisdiction or Award, and the remainder of this Performance Unit Plan or any such Award shall remain in full force and effect. Section 12.10. No Trust or Fund Created. Neither this Performance ---------------------------------------- Unit Plan nor any Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary 11 relationship between the Company or any Affiliate and a Participant or any other Person. To the extent that any Person acquires a right to receive payments from the Company or any Affiliate pursuant to an Award, such right shall be no greater than the right of any unsecured general creditor of the Company or any Affiliate. Section 12.11. Headings. Headings are given to the Sections and ------------------------ subsections of this Performance Unit Plan solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the construction or interpretation of this Performance Unit Plan or any provision thereof. Section 12.12. Effective Date of Performance Unit Plan. This ------------------------------------------------------- Performance Unit Plan shall be effective as of the later of the date of its adoption by the Committee or the date of the approval of the Stock Incentive Plan by the shareholders of the Company. 12 EX-11 5 COMPUTATION OF NET EARNINGS PER COMMON SHARE Exhibit 11 ---------- H.B. Fuller Company and Consolidated Subsidiaries Computation of Net Earnings Per Common Share Years Ended November 30, 1996, 1995, and 1994 (Dollars in thousands, except share amounts)
Pro Forma 1996 1995 1995 1994 ---------- ---------- ---------- ---------- Primary - ------- Earnings: Earnings before accounting change $45,430 $28,195 $31,195 $30,863 Dividends on preferred stock (15) (15) (15) (15) ---------- ---------- ---------- ---------- Earnings before acctg. chg. applicable to common stock 45,415 28,180 31,180 30,848 Cumulative effect of accounting change (2,532) (2,532) ---------- ---------- ---------- ---------- Earnings applicable to common stock $45,415 $25,648 $28,648 $30,848 ========== ========== ========== ========== Shares: Weighted average number of common shares outstanding 14,027,303 13,967,716 13,967,716 13,926,957 Common share equivalents of stock options outstanding (determined by the treasury stock method using average quarterly prices) 86,564 91,000 91,000 109,377 ---------- ---------- ---------- ---------- Weighted average shares outstanding and common stock equivalent shares 14,113,867 14,058,716 14,058,716 14,036,334 ========== ========== ========== ========== Primary earnings per common share: Earnings before accounting change per share $3.22 $2.01 $2.22 $2.20 Cumulative effect of accounting change per share (0.18) (0.18) ---------- ---------- ---------- ---------- Net earnings per common share $3.22 $1.83 $2.04 $2.20 ========== ========== ========== ==========
This calculation is submitted in accordance with Securities Exchange Act of 1934 Release No. 9083 although not required by footnote 2 to paragraph 14 of APB Opinion No. 15 because it results in dilution of less that 3%. Assuming full dilution - ---------------------- Earnings: Earnings are exactly the same as presented above under primary. Shares: Weighted average number of common shares outstanding 14,027,303 13,967,716 13,967,716 13,926,957 Common share equivalents of stock options outstanding (determined by the treasury stock method using higher of quarter end or average quarterly prices) 92,122 90,701 90,701 109,936 ---------- ---------- ---------- ---------- Weighted average shares outstanding and common stock equivalent shares 14,119,425 14,058,417 14,058,417 14,036,893 ========== ========== ========== ========== Earnings per common share assuming full dilution: Earnings before accounting change per share $3.22 $2.01 $2.22 $2.20 Cumulative effect of accounting change per share (0.18) (0.18) ---------- ---------- ---------- ---------- Net earnings per common share $3.22 $1.83 $2.04 $2.20 ========== ========== ========== ==========
EX-13 6 ANNUAL REPORT - -------------------------------------------------------------------------------- Management's Analysis of Results of Operations and Financial Condition - -------------------------------------------------------------------------------- (Dollars in thousands) The following discussion includes comments and data relating to the Company's financial condition and results of operations for the three fiscal years ended November 30, 1996. This section should be read in conjunction with the Consolidated Financial Statements and related notes as they contain important information for evaluation of the Company's comparative financial condition and operating results. Results of Operations: 1996 Compared to 1995 Effective December 1, 1995, in the first quarter of the Company's 1996 fiscal year, the Company's non-U.S. subsidiaries that previously reported on a fiscal year ending September 30 changed their reporting period to a Company-wide 52- week fiscal year ending on the Saturday closest to November 30. This change was made to reflect the results of operations and financial position of these subsidiaries on a more timely basis and to increase operating and planning efficiency. The pro forma 1995 column in the income statement reflects the impact of this change on 1995 earnings. (See Notes 1 and 15 to the Consolidated Financial Statements.) All comparisons of 1996 results to 1995 results will be made to the pro forma 1995 results. Worldwide sales for 1996 were a record $1,275,716, an increase of $26,904 or 2.2 percent over 1995 sales of $1,248,812. Net earnings for 1996 were $45,430, an increase of $19,767 or 77.0 percent from 1995 earnings of $25,663. 1995 net earnings were adversely affected by an accounting change charge of $2,532 relating to the Company's adoption of the Financial Accounting Standards Board Statement No. 112, "Employers' Accounting for Postemployment Benefits." Sales changes by geographic area were as follows:
Area Increase/(Decrease) - ----------------------------------------------- North America $ 40,775 6% Latin America 385 - Europe (13,792) (5%) Asia/Pacific (464) (1%) ---------- Total $ 26,904 2%
In North America, the 6 percent increase in sales is composed of a 5 percentage point increase due to volume and change in product mix and one percentage point related to acquisitions and divestitures. North American operating earnings increased 36.3 percent compared to 1995. Within North America, the Adhesives, Sealants and Coatings (ASC) Group produced a 7 percent sales increase over 1995 with 3 percentage points of the increase a result of expanded sales within core industrial markets and strong sales by the ASC structural group, especially in the engineered systems and window markets. Sales to the automotive markets, as a result of labor strikes at General Motors in 1996, approximated 1995 sales. Sales to the nonwoven market were down slightly from 1995. ASC Group operating earnings had a substantial increase over 1995 supported by relatively stable raw material costs and lower operating expenses resulting from continuing cost containment programs. The North American Specialty Group, adjusted for the sale of the Monarch Division in the Third Quarter of 1996, experienced an 8 percent sales increase and strong operating earnings increase in 1996 compared to 1995. Foster Products Corporation, TEC Incorporated and Linear Products Incorporated had strong sales increases and Industrial Coatings Division had a moderate increase in sales. Sales by the Company's Latin American operations approximated the sales of the prior year with a 3 percentage point increase resulting from pricing, a 2 percentage point decrease in volume and product mix and a one percentage point decrease from closing the Acrylicos Division in Costa Rica. The decrease in volume was primarily the result of economic slowdowns in Ecuador, El Salvador, Guatemala, Panama and Venezuela. Operating earnings for Latin America decreased 13.6 percent compared to 1995 due to increasing raw material costs, competitive pressures, and the impact of reduced volumes in 1996. Exhibit 13 Page 17 SALES TO UNAFFILIATED CUSTOMERS 58% North America 21% Europe 14% Latin America 7% Asia/Pacific Exhibit 13 Page 17 OPERATING EARNINGS 71% North America 16% Latin America 15% Europe -2% Asia/Pacific Exhibit 13 Page 17 TRADE SALES BY CLASS OF PRODUCT 88% Adhesives, Sealants and Coatings 7% Paints 5% Other 17 1996 H.B. FULLER ANNUAL REPORT - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Sales in Europe decreased 5 percent in 1996 compared to 1995, with the strengthening of the U.S. dollar negatively affecting the sales by one percentage point. The 4 percentage point decrease in local currency sales was primarily from a decreased volume and change in product mix. In spite of a continuing weak German economy, which was the primary cause for the volume declines, stringent cost control measures and stable raw material costs produced operating earnings which increased 18.2 percent in 1996 compared to the prior year. Sales in Asia/Pacific decreased one percent in 1996 from 1995. The strengthening of the U.S. dollar accounted for a decrease of 5 percentage points. The 4 percentage point increase in local currency sales included 7 percentage points from increased volume and change in product mix which was partially offset by 3 percentage points of negative pricing. Operating losses in the region approximated the losses of 1995. The Company continues to develop its organization and implement strategies to effectively serve large global customers, recognizing that, along with significant opportunities for sales growth, such an approach also carries the usual risks of increasing dependence on fewer large customers. In 1996, no single customer accounted for over 5 percent of Company-wide sales. Increasing globalization of corporate functions such as information technology, purchasing, research and development, manufacturing, engineering and quality programs should result in improved productivity and customer service. Consolidated gross margin for the Company, as a percent of sales, increased to 31.7 percent in 1996 from 31.3 percent in 1995. During 1996, the Company overall experienced relatively stable raw material costs and expects the same in 1997. Gross margins, as a percent of sales, in North America and Europe improved from 1995 levels. Consolidated selling, administrative and other expenses for the Company were down $1,701 or 0.5 percent from 1995, and as a percent of sales, decreased from 26.0 percent in 1995 to 25.4 percent in 1996. This was primarily the result of employee headcount control, cost control efforts and globalization of the Company. The year-end 1996 employee headcount was 8 percent less than the 6,400 employees at year-end 1995. Divestiture of the Monarch Division caused 2 percent of the reduction. Interest expense was $18,881 in 1996, up $749 or 4.1 percent from prior year. Total Company borrowing at year-end 1996 was above that at year-end 1995, primarily as a result of borrowing to fund capital expenditures. Capitalized interest costs associated with major property and equipment projects decreased from $2,634 in 1995 to $2,518 in 1996. Other income/expense, net, changed from $3,161 expense in 1995 to $1,995 expense in 1996, primarily as a result of decreased currency losses and a gain on the sale of equity investments in 1996 which was partially offset by an expense of $1,188 for an environmental clean up reserve. (See Notes 1 and 2 to the Consolidated Financial Statements.) Gain on sale of assets increased from $1,764 of $0.08 per share in 1995 to $16,673 or $0.71 per share in 1996. (See Note 4 to the Consolidated Financial Statements.) Income taxes totaled $31,233 in 1996, a 72.6 percent increase from $18,094 in 1995. The effective tax rate increased from 39.2 percent in 1995 to 40.8 percent in 1996. The increase is primarily due to reduced losses or turnarounds in earnings of non-U.S. loss operations in 1995 which reduced the 1995 effective tax rate. Exhibit 13 Page 18 RETURN ON NET SALES 1996 3.6% 1995 * 2.3% 1994 2.8% 1993 * 2.2% 1992 3.8% 1991 3.2% 1990 2.7% 1989 2.1% 1988 3.1% 1987 4.3% * Excludes cumulative effect of charge in accounting principles. 1995 is pro forma 1995. Exhibit 13 Page 18 RETURN ON AVERAGE EQUITY 1996 14.3% 1995 * 9.8% 1994 11.5% 1993 * 8.4% 1992 15.0% 1991 13.3% 1990 11.0% 1989 8.6% 1988 12.4% 1987 17.4% * Excludes cumulative effect of change in accounting principles. 1995 is pro forma 1995. 18 1996 H.B. FULLER ANNUAL REPORT - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Results of Operations: 1995 Compared to 1994 Worldwide sales for 1995 were $1,243,818, an increase of $146,451 or 13.3 percent over 1994 sales of $1,097,367. Net earnings for 1995 were $28,663, a decrease of $2,200 or 7.1 percent from 1994 earnings of $30,863. 1995 net earnings were adversely affected by an accounting change charge of $2,532 relating to the Company's adoption of the Financial Accounting Standards Board Statement No. 112. Sales changes by geographic area were as follows:
Area Increase - ---------------------------------------------- North America $ 54,467 9% Latin America 23,393 15% Europe 52,455 23% Asia/Pacific 16,136 23% --------- Total $146,451 13%
In North America, the 9 percent increase in sales is composed of a 5 percentage point increase due to pricing and 4 percentage points related to an acquisition in the United States in 1994. North American operating earnings increased 11.5 percent compared to 1994. Within North America, the Adhesives, Sealants and Coatings (ASC) Group produced an 11 percent sales increase over 1994 with 5 percentage points of the increase a result of expanded sales within core industrial markets and strong sales by the ASC structural group, especially in the engineered systems and window markets. Sales to the automotive markets were down significantly from 1994 sales, excluding the impact of the 1994 automotive acquisition which accounted for the remaining 6 percentage points of ASC sales growth. ASC Group operating earnings had a strong increase over 1994 supported by price increases to cover raw material increases and lower operating expenses resulting from continuing cost containment programs. The North American Specialty Group, as a whole, experienced a 3 percent sales increase and slight operating earnings decrease due primarily to low volume increases in 1995. The Industrial Coatings Division completed construction of a new plant in early 1995. TEC Incorporated, Industrial Coatings Division and Monarch Division all had slight increases in sales when compared to 1994 due to a reduced demand in 1995 in some of the industries they sell to. Foster Products Corporation had strong sales and Linear Products Incorporated a moderate increase in sales when compared to 1994. Sales by the Company's Latin American operations increased 15 percent in 1995 compared to the prior year with the increase equally generated by pricing and by volume and product mix changes. The sales growth particularly occurred in 1995 in Argentina, Brazil, Bolivia, Chile, Colombia, Ecuador, Peru and Venezuela. The paint divisions in Costa Rica, El Salvador, Guatemala and Nicaragua also contributed significant sales growth. The restructuring of the paint divisions announced in late 1993 was completed in 1995. Paint manufacture in Costa Rica was consolidated into one plant in late 1994. In 1995, paint manufacture in Panama was also consolidated into one plant. The paint plant in El Salvador was closed, with plans to service sales to this country from a plant in Honduras. Operating earnings for Latin America decreased 6.3 percent compared to 1994 due to increasing raw material costs and competitive pressure. Sales in Europe increased 23 percent in 1995 compared to 1994, with the weakening of the U.S. dollar positively affecting the increase by 13 percentage points. The 10 percentage point increase in local currency sales included 3 percentage points from increased volume and change in product mix, 2 percentage points from an acquisition in the United Kingdom (in 1994) and 5 percentage points from increased pricing. Operating earnings increased 20.1 percent in 1995 compared to the prior year. All of the improvement in operating earnings occurred in the first three quarters of the year. In the fourth quarter, a weakening German economy caused volume declines and an unfavorable impact on operating earnings compared to 1994. Exhibit 13 Page 19 RETURN ON AVERAGE ASSETS 1996 5.4% 1995 * 3.6% 1994 4.7% 1993 * 3.9% 1992 6.7% 1991 5.5% 1990 4.5% 1989 3.5% 1988 5.5% 1987 8.3% * Excludes cumulative effect of change in accounting principles. 1995 is pro forma 1995. Exhibit 13 Page 19 RETURN ON INVESTED CAPITAL (a) 1996 10.3% 1995 * 7.8% 1994 9.4% 1993 * 8.0% 1992 13.3% 1991 11.6% 1990 9.6% 1989 7.7% 1988 10.4% 1987 14.8% (a) Average invested capital is a two-point average of long-term and short-term debt, minority interest and stockholders' equity. After tax interest expense and minority interest are added back to net earnings. * Excludes cumulative effect of change in accounting principles. 1995 is pro forma 1995. 19 1996 H.B. FULLER ANNUAL REPORT - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Sales in Asia/Pacific increased 23 percent in 1995 over 1994, with an acquisition in New Zealand (in 1994) producing 4 percentage points of the gain. The weakening of the U.S. dollar accounted for 10 percentage points of the sales increase. A weak Japanese economy and expenditures to support the ongoing expansion of operations in this region contributed to a $1,497 decline in operating earnings compared to last year. Consolidated gross margin for the Company, as a percent of sales, decreased to 31.6 percent in 1995 from 32.2 percent in 1994. Pricing pressures in a weak European economy (particularly Germany), initial gross margins on 1994 acquisitions which were lower than the Company's overall gross margins, and a low volume increase, contributed to the gross margin percentage reduction. During most of 1995, the Company experienced rapidly increasing material costs. In North America, the Company was able to offset these material cost increases, for the most part, with price increases to maintain gross margin, as a percent of sales. Pricing efforts to offset raw material increases were less successful in other geographic areas, particularly Europe. Consolidated selling, administrative and other expenses for the Company were up 12.2 percent from 1994, and as a percent of sales, decreased from 26.2 percent in 1994 to 25.9 percent in 1995. Interest expense was $18,132 in 1995, up $6,385 or 54.4 percent from prior year. Total Company borrowing at year-end 1995 was above that at year-end 1994, primarily as a result of borrowing to fund 1994 acquisitions and to fund increased capital expenditures. Capitalized interest costs associated with major property and equipment projects increased from $1,179 in 1994 to $2,634 in 1995. Other income/expense, net, decreased from $3,188 expense in 1994 to $2,967 expense in 1995, primarily as a result of decreased currency losses offset by increased goodwill. (See Notes 1 and 3 to the Consolidated Financial Statements.) Income taxes totaled $19,148 in 1995, a 3.2 percent decrease from $19,782 in 1994. The effective tax rate decreased from 38.8 percent in 1994 to 38.0 percent in 1995. The reduction is primarily due to reduced losses or turnarounds in earnings of non-U.S. loss operations. Liquidity and Capital Resources The Company generated $81,261 in funds from operations in 1996 compared to $78,813 in 1995 and $50,789 in 1994. The increase in 1996 resulted primarily from increased depreciation and amortization and an increase in earnings partially offset by an increase in accounts receivable balances. The Company also generated funds from the sale of assets. (See Note 4 to the Consolidated Financial Statements.) Major other uses of cash during 1996 were capital expenditures, funding of postretirement benefits, purchase of a business and payment of dividends. Cash was $3,515 at November 30, 1996, compared to $9,061 at November 30, 1995. The $3,515 cash balance is considered adequate to meet Company needs in light of its unused lines of credit at November 30, 1996. Working capital was $141,617 at November 30, 1996, compared to $142,056 at November 30,1995. The current ratio at year-end 1996 was 1.6, equal to the ratio at year-end 1995. The number of days sales in trade accounts receivable was 52 at November 30, 1996, an increase of one days sales from 51 at November 30, 1995. The average days sales in inventory on hand was 63 in 1996, compared to 68 in 1995. Exhibit 13 Page 20 RESEARCH AND DEVELOPMENT EXPENSES (In millions) 1996 $25.8 1995 $26.5 1994 $23.6 1993 $21.8 1992 $20.4 1991 $17.2 1990 $16.1 1989 $15.5 1988 $14.4 1987 $12.3 Exhibit 13 Page 20 WORKING CAPITAL (In millions) 1996 $141.6 1995 $142.1 1994 $129.7 1993 $119.9 1992 $130.8 1991 $108.8 1990 $96.1 1989 $95.6 1988 $104.1 1987 $86.6 20 1996 H.B. FULLER ANNUAL REPORT - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Management believes that the Company will continue to have access to short-term and long-term credit markets to fund its working capital requirements, capital expenditure programs and future acquisitions. The Company's ratio of long-term debt to total capitalization was 34.0 percent at November 30, 1996, compared to 35.7 percent at November 30, 1995. At year-end 1996, the Company had short-term and long-term lines of credit of $358,064 of which $160,000 was committed. The unused portion of these lines of credit was $262,019. Subsequent to the year- end, the Company increased the lines of credit to $458,064 of which $260,000 is committed. (See Notes 7 and 8 to the Consolidated Financial Statements.) Capital expenditures for property, plant and equipment of $89,847 in 1996 were primarily for completion of construction of a manufacturing plant in the Philippines, to complete construction of a research and development facility in Minnesota, for an information systems project, for general improvements in manufacturing productivity and operating efficiency and for environmental projects. Environmental capital expenditures, less than 10 percent of total expenditures, are not a material portion of overall Company expenditures. Future commitments related to 1996 capital projects are estimated to be approximately $16,000 in 1997. The Company plans to decrease its capital expenditures in 1997 from 1996 levels. Over the recent past, approximately 50 percent of H.B. Fuller's sales and earnings have come from its foreign subsidiaries. In any one quarter, swings in exchange rates, particularly the deutsche mark and Japanese yen, can have an impact on Fuller's results. (See Note 1 to Consolidated Financial Statements.) The Company's operations in Canada and Europe use forward foreign exchange contracts to hedge foreign currency denominated accounts receivable/payable and intercompany loans. Exhibit 13 Page 21 CAPITAL EXPENDITURES GROSS (In millions) 1996 $89.8 1995 $90.7 1994 $65.0 1993 $41.8 1992 $34.5 1991 $30.0 1990 $31.5 1989 $40.9 1988 $40.2 1987 $29.6 Exhibit 13 Page 21 CAPITALIZATION RATIO 1996 34.0% 1995* 35.7% 1994 32.1% 1993* 19.5% 1992 17.3% 1991 24.7% 1990 30.9% 1989 35.1% 1988 35.5% 1987 17.0% * Excludes cumulative effect of change in accounting principles. 1995 is pro forma 1995. 21 1996 H.B. FULLER ANNUAL REPORT - -------------------------------------------------------------------------------- Consolidated Statements of Earnings - -------------------------------------------------------------------------------- H.B. Fuller Company and Subsidiaries (Dollars in thousands, except per share amounts)
Pro Forma YEAR ENDED NOVEMBER 30 1996* 1995** 1995 1994 - ------------------------------------------------------------------------------------------------------------------- Net sales $1,275,716 $1,248,812 $1,243,818 $1,097,367 Cost of sales 871,501 857,941 851,291 743,843 - ------------------------------------------------------------------------------------------------------------------- Gross profit 404,215 390,871 392,527 353,524 Selling, administrative and other expenses 323,461 325,162 322,762 287,571 - ------------------------------------------------------------------------------------------------------------------- Operating earnings 80,754 65,709 69,765 65,953 Interest expense (18,881) (18,132) (18,132) (11,747) Gain from sale of assets 16,673 1,764 1,764 - Other income (expense), net (1,995) (3,161) (2,967) (3,188) - ------------------------------------------------------------------------------------------------------------------- Earnings before income taxes, minority interests and accounting change 76,551 46,180 50,430 51,018 Income taxes (31,233) (18,094) (19,148) (19,782) Net earnings of consolidated subsidiaries applicable to minority interests 112 109 (87) (373) - ------------------------------------------------------------------------------------------------------------------- Earnings before cumulative effect of accounting change 45,430 28,195 31,195 30,863 Cumulative effect of accounting change - (2,532) (2,532) - - ------------------------------------------------------------------------------------------------------------------- Net earnings $45,430 $25,663 $28,663 $30,863 - ------------------------------------------------------------------------------------------------------------------- Earnings (loss) per common share: Earnings before accounting change $3.22 $2.01 $2.22 $2.20 Accounting change - (0.18) (0.18) - - ------------------------------------------------------------------------------------------------------------------- Net earnings $3.22 $1.83 $2.04 $2.20 - ------------------------------------------------------------------------------------------------------------------- Average number of common and common equivalent shares outstanding 14,114 14,059 14,059 14,036 - -------------------------------------------------------------------------------------------------------------------
* 52-week year ** See Consolidated Financial Statements Note 1, Change in Year-end. See accompanying Notes to Consolidated Financial Statements. 22 1996 H.B. FULLER ANNUAL REPORT - -------------------------------------------------------------------------------- Consolidated Balance Sheets - --------------------------------------------------------------------------------
NOVEMBER 30 1996 1995 H.B. Fuller Company and - ----------------------------------------------------------------------------------------------------- Subsidiaries Assets (Dollars in thousands) Current Assets: Cash $ 3,515 $ 9,061 Trade receivables, less allowance for doubtful accounts of $7,043 in 1996 and $6,256 in 1995 192,743 178,565 Inventories 151,212 159,024 Other current assets 40,728 40,991 - ----------------------------------------------------------------------------------------------------- Total current assets 388,198 387,641 Net property, plant and equipment 391,201 355,123 Deposits and miscellaneous assets 38,457 31,094 Other intangibles, less accumulated amortization of $17,613 in 1996 and $16,956 in 1995 15,383 16,761 Excess of cost over net assets acquired, less accumulated amortization of $13,179 in 1996 and $10,095 in 1995 36,036 38,310 - ----------------------------------------------------------------------------------------------------- Total assets $869,275 $828,929 - ----------------------------------------------------------------------------------------------------- Liabilities and Stockholders' Equity Current Liabilities: Notes payable $ 47,920 $ 53,749 Current installments of long-term debt 11,141 5,722 Accounts payable - trade 118,181 117,446 Accrued payroll and employee benefits 32,697 28,276 Other accrued expenses 28,513 31,228 Income taxes 8,129 9,164 - ------------------------------------------------------------------------------------------------------ Total current liabilities 246,581 245,585 Long-term debt, excluding current installments 172,779 166,459 Accrued pensions 89,735 85,689 Other liabilities 22,685 26,111 Minority interests in consolidated subsidiaries 2,755 5,671 Stockholders' Equity: Series A preferred stock 306 306 Common stock 14,066 14,007 Additional paid-in capital 22,493 20,771 Retained earnings 292,828 256,489 Foreign currency translation adjustment 9,097 11,319 Unearned compensation - restricted stock (4,050) (3,478) - ------------------------------------------------------------------------------------------------------ Total stockholders' equity 334,740 299,414 - ------------------------------------------------------------------------------------------------------ Total liabilities and stockholders' equity $869,275 $828,929 - ------------------------------------------------------------------------------------------------------
See accompanying Notes to Consolidated Financial Statements. 23 1996 H.B. FULLER ANNUAL REPORT - -------------------------------------------------------------------------------- Consolidated Statements of Stockholders' Equity - -------------------------------------------------------------------------------- H.B. Fuller Company and Subsidiaries (Dollars in thousands)
YEARS ENDED NOVEMBER 30, 1996, 1995 AND 1994 Unearned Foreign Compen- Additional Currency sation Preferred Common Paid-in Retained Translation Restricted Stock Stock Capital Earnings Adjustment Stock - ----------------------------------------------------------------------------------------------------------------------------------- Balances at November 30, 1993 $306 $13,898 $16,908 $215,148 $ 4,357 $(1,221) Stock compensation plans, net - 76 2,050 - - (1,226) Retirement of common stock - (39) (51) (1,418) - - Net earnings - 1994 - - - 30,863 - - Dividends paid - - - (8,021) - - Change in foreign currency translation - - - - 3,175 - - ----------------------------------------------------------------------------------------------------------------------------------- Balances at November 30, 1994 306 13,935 18,907 236,572 7,532 (2,447) Stock compensation plans, net - 72 1,864 - - (1,031) Net earnings - 1995 - - - 28,663 - - Dividends paid - - - (8,746) - - Change in foreign currency translation - - - - 3,787 - - ----------------------------------------------------------------------------------------------------------------------------------- Balances at November 30, 1995 306 14,007 20,771 256,489 11,319 (3,478) Stock compensation plans, net - 59 1,722 - - (572) Net earnings - change in non-U.S. year-end* - - - 118 - - Net earnings - 1996 - - - 45,430 - - Dividends paid - - - (9,209) - - Changes in foreign currency translation: Translation gain adjustment included in net earnings due to substantial liquidation of non-U.S. assets - - - - 208 - Other - - - - (2,430) - - ----------------------------------------------------------------------------------------------------------------------------------- Balances at November 30, 1996 $306 $14,066 $22,493 $292,828 $ 9,097 $(4,050) - -----------------------------------------------------------------------------------------------------------------------------------
* See Consolidated Financial Statements Note 1, Change in Year-end. See accompanying Notes to Consolidated Financial Statements. 24 1996 H.B. FULLER ANNUAL REPORT - -------------------------------------------------------------------------------- Consolidated Statements of Cash Flows - --------------------------------------------------------------------------------
YEAR ENDED NOVEMBER 30 1996* 1995 1994 H.B. Fuller Company and - ----------------------------------------------------------------------------------------------------- Subsidiaries Cash flows from operating activities: (Dollars in thousands) Net earnings $ 45,430 $ 28,663 $ 30,863 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 46,992 41,203 33,379 Pension costs 13,132 10,817 10,453 Gain on sale of assets (10,041) (1,076) - Other items 4,324 7,135 338 Change in current assets and liabilities (net of effect of acquisitions/divestitures): Accounts receivable (28,781) (6,617) (18,206) Inventory 7,727 (2,344) (15,172) Other current assets (929) (1,672) (1,985) Accounts payable 5,138 8,646 7,010 Accrued expense 3,466 (3,960) 4,564 Income taxes payable (5,197) (1,982) (455) - ----------------------------------------------------------------------------------------------------- Net cash provided by operating activities 81,261 78,813 50,789 Cash flows from investing activities: Purchased property, plant and equipment (89,847) (90,664) (65,018) Proceeds from sale of assets 29,194 2,103 - Purchased businesses, net of cash acquired (8,120) (2,664) (76,327) - ----------------------------------------------------------------------------------------------------- Net cash used in investing activities (68,773) (91,225) (141,345) Cash flows from financing activities: New long-term debt 62,643 79,954 74,976 Long-term debt paid (58,504) (46,421) (4,204) Notes payable (5,237) (584) 23,410 Dividends paid (9,209) (8,746) (8,021) Fund postretirement benefits (5,899) (6,682) - Other (1,666) (6,150) (3,680) - ----------------------------------------------------------------------------------------------------- Net cash (used) provided by financing activities (17,872) 11,371 82,481 Effect of exchange rate changes (162) 272 528 - ----------------------------------------------------------------------------------------------------- Net change in cash (5,546) (769) (7,547) Cash at beginning of year 9,061 9,830 17,377 - ----------------------------------------------------------------------------------------------------- Cash at end of year $ 3,515 $ 9,061 $ 9,830 - ----------------------------------------------------------------------------------------------------- Supplemental disclosure of cash flow information: Cash paid for interest $ 21,901 $ 18,506 $ 12,628 Cash paid for income taxes $ 36,599 $ 30,083 $ 26,291 Noncash investing and financing activities: Assets acquired by incurring notes payable $ 6,831 $ 750 $ 8,008
* Includes the fifty-two weeks ended November 30, 1996 for all entities and the two month stub period for non-U.S. entities. See Consolidated Financial Statements Note 1, Change in Year-end. See accompanying Notes to Consolidated Financial Statements. 1996 H.B. FULLER ANNUAL REPORT - -------------------------------------------------------------------------------- Notes to Consolidated Financial Statements - -------------------------------------------------------------------------------- H.B. Fuller Company and Subsidiaries (In thousands, except share amounts) 1/ Summary of Significant Accounting Policies The following information is presented to explain the accounting policies used to prepare H.B. Fuller Company's Consolidated Financial Statements. Principles of Consolidation: The Consolidated Financial Statements include the accounts of the Company and all subsidiaries. Beginning with 1996, the Company's fiscal year ends on the Saturday closest to November 30th. All significant intercompany items have been eliminated in consolidation. Change in Year-end: Effective December 1, 1995, in the first quarter of the Company's 1996 fiscal year, the Company's non-U.S. subsidiaries that previously reported on a fiscal year ending September 30, changed their reporting period to a Company wide 52-week fiscal year ending on the Saturday closest to November 30. This change was made to reflect the results of operations and financial position of these subsidiaries on a more timely basis and to increase operating and planning efficiency. The results of operations of these subsidiaries for the period October 1 through November 30, 1995, income of $118 or $0.01 per share, have been reflected as an adjustment to retained earnings. Sales for the period were $104,811 and cost of sales was $73,341. The Company also changed to thirteen-week quarters. Use of Estimates: Generally accepted accounting principles require management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Foreign Currency Translation: The financial statements of non-U.S. operations are translated into U.S. dollars for inclusion in the Consolidated Financial Statements. Translation gains or losses resulting from the process of translating foreign currency financial statements are reported as a separate component of stockholders' equity for businesses not considered to be operating in highly inflationary economies. Translation effect of subsidiaries operating in highly inflationary economies and subsidiaries using the dollar as the functional currency are included in determining net earnings. Transaction losses included in determining earnings before income taxes and minority interests were as follows:
1996 1995 1994 - -------------------------------------------------------------------------------- Currency translation gains, net $ 2,182 $ 638 $ 4,450 Flow-through effect of inventory valuation, net (246) (1,233) (3,729) - -------------------------------------------------------------------------------- 1,936 (595) 721 Currency exchange losses, net (3,090) (2,199) (7,629) - -------------------------------------------------------------------------------- Total $(1,154) $(2,794) $(6,908) - --------------------------------------------------------------------------------
The net loss from the flow-through effects of inventory valuation results from differences between translation of cost of sales at historic rates versus average exchange rates. H.B. Fuller Company's Latin American operations, whenever possible, raise local selling prices on their products to offset this loss. The result of these efforts to keep pace with inflation appears in the sales revenue of each operation. Cash: The Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. Inventories: Inventories in the United States are recorded at cost (not in excess of market value) as determined primarily by the last-in, first-out method (LIFO). Inventories of non-U.S. operations are valued at the lower of cost (mainly average cost) or market. Inventories at November 30 are summarized as follows:
1996 1995 - -------------------------------------------------------------------------------- Raw materials $ 67,562 $ 78,180 Finished goods 94,642 92,629 LIFO reserve (10,992) (11,785) - -------------------------------------------------------------------------------- Total $ 151,212 $ 159,024 - -------------------------------------------------------------------------------- Property, Plant and Equipment: The major classes are: 1996 1995 - -------------------------------------------------------------------------------- Land $ 51,597 $ 52,161 Buildings and improvements 178,704 171,439 Machinery and equipment 338,727 318,437 Construction in progress 95,164 66,224 - -------------------------------------------------------------------------------- Total, at cost 664,192 608,261 Accumulated depreciation (272,991) (253,138) - -------------------------------------------------------------------------------- Net property, plant and equipment $ 391,201 $ 355,123 - --------------------------------------------------------------------------------
Depreciation is generally computed on a straight-line basis over the useful lives of the assets including assets acquired by capital leases. Accelerated depreciation is used for income tax purposes where permitted. 1996 H.B. FULLER ANNUAL REPORT 26 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Amortization: Other intangible assets, primarily technology, are amortized over the estimated lives of 3 to 15 years. The excess of cost over net assets of businesses acquired is charged against earnings over periods of 15 to 25 years. The recoverability of unamortized intangible assets is assessed on an ongoing basis by comparing anticipated undiscounted future cash flows from operations to net book value. Capitalized Interest Costs: Interest costs associated with major construction of property and equipment are capitalized. Interest expense for the years ended November 30, includes the following components:
1996 1995 1994 - -------------------------------------------------------------------------------- Interest costs incurred $ 21,399 $ 20,766 $ 12,926 Capitalized interest costs (2,518) (2,634) (1,179) - -------------------------------------------------------------------------------- Interest expense $ 18,881 $ 18,132 $ 11,747 - --------------------------------------------------------------------------------
Non-U.S. Operations: Net earnings and equity of non-U.S. operations for the years ended November 30 are:
Pro Forma 1996 1995 1995 1994 - -------------------------------------------------------------------------------- Net earnings $ 1,984 $ 613 $ 3,613 $ 7,161 Equity $147,439 $137,174 $137,056 $128,312 - --------------------------------------------------------------------------------
Financial Instruments: Financial instruments are used to hedge financial risk caused by fluctuating currency and interest rates. The differential to be paid or received is accrued as rates change and is recognized over the life of the agreements. The Company enters into foreign exchange contracts as a hedge against firm commitment foreign currency intercompany receivables/payables/debt. Market value gains and losses are recognized and the resulting credit or debit offsets foreign exchange gains or losses on those receivables/payables/debt. The carrying amounts and estimated fair values of the Company's significant other financial instruments at November 30 are as follows:
Carrying Fair Amount Value - -------------------------------------------------------------------------------- 1996: Cash and short-term investments $ 3,515 $ 3,515 Notes payable $ 47,920 $ 47,920 Long-term debt $183,920 $194,412 1995: Cash and short-term investments $ 9,061 $ 9,061 Notes payable $ 53,749 $ 53,749 Long-term debt $172,181 $184,944
Fair values of short-term financial instruments approximate their carrying values due to their short maturity. 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 to the Company for debt of similar maturities. The estimates presented above on long-term financial instruments are not necessarily indicative of the amounts that would be realized in a current market exchange. Environmental Costs: The Company has a policy of expensing environmental costs relating to "cleaning up" of a problem caused during the time the Company owned the asset. If the problem was caused by a previous or other owner, the amount may be capitalized if the expenditure significantly increases the value of the asset. If there are doubts as to the impact on the value of the asset, the amount is expensed. For further information on environmental expense, see Item 3 of the 1996 10-K. Income Taxes: The Company uses the asset and liability method of accounting for income taxes. Under the asset and liability method, deferred income taxes are recognized for the tax consequences of temporary differences by applying enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts and the tax basis of existing assets and liabilities. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date. Other Postretirement Benefits: The Company provides medical benefits for eligible retired employees, employee's beneficiaries and covered dependents. These costs are accrued during the years the employee renders the necessary service. Postemployment Benefits: The Company provides postemployment benefits to inactive and former employees, employee's beneficiaries and covered dependents after employment, but prior to retirement. The cost of providing these benefits was 1996 H.B. FULLER ANNUAL REPORT 27 ================================================================================ previously recognized as a charge to income in the year the benefits were provided. In November of 1992, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS)No. 112 requiring accrual accounting for these costs during the years the employee renders the necessary service. The Company adopted this Standard in Fiscal Year 1995, the required effective date. The cumulative effect of adopting this Standard as of December 1, 1994 resulted in a charge of $2,532 ($0.18 per share) to 1995 earnings, net of $793 of income taxes. Stock-Based Compensation: In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based Compensation." As permitted by this Standard, the Company will continue to measure compensation cost using the intrinsic value- based method of accounting prescribed by the Accounting Principles Board Opinion No. 25. Earnings Per Common Share: Earnings per common share are determined by dividing earnings by the weighted-average number of common shares, including common share equivalents, outstanding during each year. Earnings used in the calculation are reduced by the dividends paid to the preferred stockholder. Purchase of Company Common Stock: The Minnesota Business Corporation Act and the Company's Articles of Incorporation require that repurchased stock is included in the authorized shares of the Company, but is not included in shares outstanding. The excess of cost over par value is charged proportionally to the Additional Paid-In Capital and to the Retained Earnings. During 1996 the Board of Directors authorized a stock repurchase program under which up to 300,000 shares of H.B. Fuller Company common stock may be repurchased by the Company. The shares of common stock repurchased will be available for compensation plans of the Company. The program may be discontinued at any time. No shares were repurchased during fiscal 1996. Reclassification: Certain prior years' amounts have been reclassified to conform to the 1996 presentation. 2/ Other Income (Expense), Net Other income (expense), net in 1996 included a $1,496 gain on the sale of equity investments. All years include foreign currency losses. (See Note 1 to the Consolidated Financial Statements.) 3/ Acquisitions In 1996 the Company purchased certain assets of a business for $8,120. In 1995 the Company purchased certain assets of a business for $2,664. In 1994 the Company purchased three businesses and certain assets of another business for $76,327 in cash. Assets acquired included other intangibles of $4,100 and $5,141 in 1996 and 1994, respectively and excess of cost over net assets acquired of $165 and $33,598 in 1996 and 1994, respectively. The acquisitions were accounted for as purchases and the accompanying Consolidated Financial Statements include the results of these businesses since the purchase date. The historical results of operations on a pro forma basis are not presented as the effects of the acquisitions were not material. 4/ Sale of Assets The Company sold assets and two product lines, including epoxy tooling slabs and Monarch's sanitation chemicals for $29,194 in 1996 and assets and a product line in 1995 for $2,103 resulting in before tax gains of $16,673 and $1,764, respectively. 5/ Research and Development Expenses Research and development expenses charged against earnings were $25,823, $26,541 and $23,624 in 1996, 1995 and 1994, respectively. 6/ Income Taxes Earnings before income taxes, minority interests and cumulative effect of accounting changes for the years ended November 30 are as follows:
Pro Forma 1996 1995 1995 1994 - -------------------------------------------------------------------------------- United States (U.S.) $66,403 $40,468 $40,468 $36,525 Outside U.S. 10,148 5,712 9,962 14,493 - -------------------------------------------------------------------------------- Total $76,551 $46,180 $50,430 $51,018 ================================================================================
The components of the provision for income taxes excluding cumulative effect of accounting changes are:
Pro Forma 1996 1995 1995 1994 - -------------------------------------------------------------------------------- Current: U.S. federal $23,225 $13,020 $13,020 $13,379 State 3,555 1,750 1,750 1,842 Outside U.S. 6,487 9,791 10,845 7,024 - -------------------------------------------------------------------------------- 33,267 24,561 25,615 22,245 - -------------------------------------------------------------------------------- Deferred: U.S. federal (2,453) 724 724 (1,746) State (82) 83 83 (199) Outside U.S. 501 (7,274) (7,274) (518) - -------------------------------------------------------------------------------- (2,034) (6,467) (6,467) (2,463) - -------------------------------------------------------------------------------- Total $31,233 $18,094 $19,148 $19,782 ================================================================================
1996 H.B. FULLER ANNUAL REPORT 28 ================================================================================ The difference between the statutory U.S. federal income tax rate and the Company's effective income tax rate is explained below:
Pro Forma 1996 1995 1995 1994 - -------------------------------------------------------------------------------- Statutory U.S. federal income tax rate 35.0% 35.0% 35.0% 35.0% State income taxes 3.0 2.3 2.3 2.0 U.S. federal income taxes on dividends received from non-U.S. subsidiaries, before foreign tax credits 3.6 7.3 7.3 1.0 Foreign tax credits (3.3) (4.8) (4.8) (0.7) Non-U.S. taxes 3.1 (1.1) (2.3) 1.5 Other (0.6) 0.5 0.5 - - -------------------------------------------------------------------------------- Total 40.8% 39.2% 38.0% 38.8% ================================================================================
Deferred income tax balances at November 30 were:
1996 1995 - -------------------------------------------------------------------------------- Deferred tax assets $63,790 $57,378 Valuation allowance (6,258) (5,229) - -------------------------------------------------------------------------------- Deferred tax assets net of valuation allowance 57,532 52,149 Deferred tax liabilities (43,778) (40,495) - -------------------------------------------------------------------------------- Net deferred tax assets $13,754 $11,654 ================================================================================
Deferred income tax balances at November 30 were related to:
1996 1995 - -------------------------------------------------------------------------------- Depreciation $(23,215) $(23,825) Pension 16,053 14,845 Deferred compensation 5,640 4,786 Postretirement medical benefits 6,546 4,588 Tax loss carryforwards 12,871 12,267 Inventory 1,096 1,022 Provisions for expenses (1,754) 1,752 Difference between assigned value and tax basis of acquisition (1,564) (1,656) Currency gains/losses 1,581 1,510 Other 2,758 1,594 - -------------------------------------------------------------------------------- 20,012 16,883 Valuation allowance (6,258) (5,229) - -------------------------------------------------------------------------------- Net deferred tax assets $ 13,754 $ 11,654 ================================================================================
U.S. income taxes have not been provided on approximately $69,630 of undistributed earnings of non-U.S. subsidiaries. The Company plans to reinvest these undistributed earnings. If any portion were to be distributed, the related U.S. tax liability would be reduced by foreign income taxes paid on those earnings plus any available foreign tax credit carryforwards. Determination of the unrecognized deferred tax liability related to these undistributed earnings is not practicable. While non-U.S. operations of the Company have been profitable overall, cumulative losses of $31,195 are carried as net operating losses in 24 different countries. These losses can be carried forward to offset income tax liability on future income in those countries. Cumulative losses of $14,801 can be carried forward indefinitely, while the remaining $16,394 must be used during the 1997- 2003 period. 7/ Notes Payable The primary component of notes payable relates to the Company's short-term lines of credit with banks. This component totals $36,666. The amount of unused available borrowings under these lines at November 30, 1996 was $128,808. The weighted average interest rate on short-term borrowings was 7.7% and 9.1% in 1996 and 1995, respectively. Subsequent to year-end, the Company established revolving credit agreements with a group of major banks which provide committed short-term lines of credit of $102,000 through December 18, 1997. At the Company's option, interest is payable at the London Interbank Offered Rate plus 0.195%-0.4%, adjusted quarterly based on the Company's capitalization ratio, or a bid rate. A facility fee of 0.055%- 0.15% is payable quarterly. 1996 H.B. FULLER ANNUAL REPORT 29 ================================================================================ 8/ Long-Term Debt Long-term debt, including obligations under capital leases, is summarized as follows:
1996 1995 - ------------------------------------------------------------------------------------------------------------------------------------ Revolving credit agreements (a) (b) $ 46,518 $ 33,217 10.1% Senior Note, due 12/19/95 -- 10,000 10.32% Senior Note, due 12/19/98 25,000 25,000 8.49% Senior Note Series A, due 12/19/01 26,000 26,000 8.54% Senior Note Series B, due 3/31/02 5,000 5,000 8.58% Senior Note Series C, due 2/3/05 22,000 22,000 8.73% Senior Note Series D, due 4/28/10 12,000 12,000 Industrial and commercial development bonds: TENR plus 1/4 of 1%, secured by a letter of credit, due 12/1/04 4,100 4,100 7.75%, due 11/1/16 3,000 3,000 6.1%-7.76% other U.S. dollar notes, due at various dates through 2/05 10,359 5,056 8.15%-10.5% New Zealand dollar notes, due 4/99 8,046 8,106 6.8% Australian dollar notes, due 1/20/98 5,677 747 10.81% Italian lira notes, due 11/00 3,698 3,078 33%-38% lempira notes, payments due through 1999 1,125 2,251 24%-32% colones notes, payments due through 2001 950 2,208 22% Dominican peso note, payments due through 1997 587 594 1.65%-4.2% yen notes, due at various dates through 2005 5,351 5,404 5%-28.5% other notes less than $500 each, due at various dates through 2002 1,721 913 Obligations under capital leases 2,788 3,507 - ------------------------------------------------------------------------------------------------------------------------------------ 183,920 172,181 Current installments (11,141) (5,722) - ------------------------------------------------------------------------------------------------------------------------------------ Total $172,779 $166,459 ====================================================================================================================================
(a) The Company has revolving credit agreements with a group of major banks which provide committed lines of credit of $160,000 through August 31, 2002. At the Company's option, interest is payable at floating rates based on the prime interest rate, the London Interbank Offered Rate plus 1/2 of 1%, certificate of deposit rates plus 1/2 of 1% and a negotiated transaction rate. A commitment fee is payable on the unused portion at 1/4% per annum on the first $80,000 and at 1/8% per annum on the second $80,000. (b) Subsequent to year-end, the Company established revolving credit agreements with a group of major banks which provide committed long-term lines of credit of $158,000 through December 20, 2003. At the Company's option, interest is payable at the London Interbank Offered Rate plus 0.175%-0.375%, adjusted quarterly based on the Company's capitalization ratio, or a bid rate. A facility fee of 0.075%-0.175% is payable quarterly. 1996 H.B. FULLER ANNUAL REPORT 30 ================================================================================ The most restrictive debt agreements place limitations on secured and unsecured borrowings, operating leases, and contain minimum interest coverage, current assets and net worth requirements. In addition, the Company cannot be a member of any "consolidated group" for income tax purposes other than with its subsidiaries. At November 30, 1996 the Company exceeded minimum requirements for all financial covenants. Aggregate maturities of long-term debt, including obligations under capital leases, amount to $11,141, $11,095, $35,340, $7,707 and $2,239 during the five fiscal years 1997 through 2001. 9/ Lease Commitments Assets under capital leases are summarized as follows:
1996 1995 - -------------------------------------------------------------------------------- Land $ 5,584 $ 6,348 Buildings and improvements 10,006 10,463 Machinery and equipment 35 262 - -------------------------------------------------------------------------------- 15,625 17,073 Accumulated amortization (4,068) (4,225) - -------------------------------------------------------------------------------- Net assets under capital leases $11,557 $12,848 ================================================================================
The following are the minimum lease payments that will have to be made in each of the years indicated based on capital and operating leases in effect as of November 30, 1996:
Capital Operating - -------------------------------------------------------------------------------- Fiscal year: 1997 $576 $8,460 1998 569 6,848 1999 554 5,387 2000 538 3,584 2001 476 3,101 Later years 565 3,980 - -------------------------------------------------------------------------------- Total minimum lease payments $3,278 $31,360 ======= Amount representing interest (490) - --------------------------------------------------------------------- Present value of minimum lease payments $2,788 =====================================================================
Rental expense for all operating leases charged against earnings amounted to $13,385, $14,051 and $11,853 in 1996, 1995 and 1994, respectively. 10/Contingencies Legal: The Company and its subsidiaries are parties to various lawsuits and governmental proceedings. For further information on certain legal proceedings, see Item 3 of the 1996 10-K. In particular, the Company is currently deemed a potentially responsible party (PRP) or defendant, generally in conjunction with numerous other parties, in a number of government enforcement and private actions associated with hazardous waste sites. As a PRP or defendant, the Company may be required to pay a share of the costs of investigation and cleanup of these sites. In some cases the Company may have rights of indemnification from other parties. The Company's liability in the future for such claims is difficult to predict because of the uncertainty as to the cost of the investigation and cleanup of the sites, the Company's responsibility for such hazardous waste and the number or financial condition of other PRPs or defendants. As is the case with other types of litigation and proceedings to which the Company is a party, based upon currently available information, it is the Company's opinion that none of these matters will result in material liability to the Company. Off Balance Sheet Financing: At November 30, 1996, the aggregate contract value of instruments to sell 4,823 pound sterling, 6,988 deutche marks, and $4,569 to buy foreign currency (primarily 29,942 Dutch guilders) was $17,683. The contracts mature between December 20, 1996 and November 20, 2000. 11/Retirement Plans The Company has a noncontributory defined benefit plan covering all U.S. employees. Benefits for the plan are based primarily on years of service and employees' average compensation during their final five consecutive years of service. The Company's funding policy is consistent with the funding requirements of federal law and regulations. Plan assets consist principally of listed equity securities and an Immediate Participation Guarantee contract with an insurance company. Certain non-U.S. consolidated subsidiaries provide pension benefits for their employees consistent with local practices and regulations. Most of these plans are noncontributory, unfunded, defined benefit plans covering substantially all employees upon completion of a specified period of service. Benefits for the plans are generally based on years of service and annual compensation. The plans are mostly unfunded book reserved plans. Related pension obligations are provided through accrued pension costs. 1996 H.B. FULLER ANNUAL REPORT 31 ================================================================================
Pension cost consists of the following: U.S. Plan Non-U.S. Plans ---------------------------------------- -------------------------------------- 1996 1995 1994 1996 1995 1994 - ------------------------------------------------------------------------------------ -------------------------------------- Service cost-benefits earned during the period $5,440 $4,190 $4,755 $2,586 $2,052 $1,961 Interest cost on projected benefit obligation 10,026 9,287 8,413 5,087 3,778 3,306 Return on plan assets - actual (11,607) (33,954) (1,055) (690) (406) (317) - deferred 1,096 24,668 (7,551) 373 93 29 Amortization of transition (asset) liability (27) (27) (27) 107 94 80 All other cost components 772 409 768 104 85 104 - ------------------------------------------------------------------------------------ -------------------------------------- Net pension cost $5,700 $4,573 $5,303 $7,567 $5,696 $5,163 ==================================================================================== ======================================
The funded status of the plans and the amount recognized on the balance sheet at November 30 are:
Non-U.S. Plans ---------------------------------------------------- U.S. Plan Assets Exceed ABO ABO Exceeds Assets --------------------------- --------------------------- ----------------------- 1996 1995 1996 1995 1996 1995 - ----------------------------------------------------------------------- --------------------------- ----------------------- Actuarial present value of benefit obligations: - vested benefits $(95,720) $(99,677) $(3,086) $(3,152) $(44,133) $(42,573) - non-vested benefits (3,830) (4,403) (15) (15) (705) (567) - ----------------------------------------------------------------------- --------------------------- ----------------------- Accumulated benefit obligation (ABO) (99,550) (104,080) (3,101) (3,167) (44,838) (43,140) Effect of projected future compensation increases (35,137) (36,267) (402) (422) (8,516) (8,859) - ----------------------------------------------------------------------- --------------------------- ----------------------- Projected benefit obligation (134,687) (140,347) (3,503) (3,589) (53,354) (51,999) Plan assets at fair value 141,474 132,977 4,795 4,422 - - - ----------------------------------------------------------------------- --------------------------- ----------------------- Plan assets in excess of (less than) projected benefit obligation 6,787 (7,370) 1,292 833 (53,354) (51,999) Unrecognized prior service cost 6,315 6,770 85 128 397 307 Unrecognized transition (asset) liability (206) (233) (108) (140) 1,527 1,847 Unrecognized net (gain) loss (44,744) (28,269) (105) 320 (625) (2,517) - ----------------------------------------------------------------------- --------------------------- ----------------------- (Accrued) prepaid pension costs $ (31,848) $ (29,102) $ 1,164 $ 1,141 $(52,055) $(52,362) ======================================================================= =========================== =======================
Assumptions used:
U.S. Plan Non-U.S. Plans ---------------------------------------- ------------------------------------ 1996 1995 1994 1996 1995 1994 - --------------------------------------------------------------------------------------- ------------------------------------ Weighted average discount rate 8.0%(1) 7.25%(1) 8.75%(1) 7.0-8.0% 7.0-8.0% 7.0-8.0% 7.25%(2) 8.75%(2) 7.5%(2) Rate of increase in compensation levels 4.5%(1) 4.5%(1) 5.5%(1) 3.0-5.0% 5.0-6.0% 5.0-6.0% 4.5%(2) 5.5%(2) 5.0%(2) Expected long-term rate of return on plan assets 10.0% 10.0% 10.0% 8.0% 8.0% 8.0%
(1) August 31, 1996 and November 30, 1995 and 1994 assumptions used for funded status of U.S. plan. (2) December 1, 1995, 1994 and 1993 assumptions used for U.S. plan pension cost. The impact of a one percent increase in the discount rate is an approximate $1,400 decrease in annual pension cost. The charge to earnings relating to all plans was $15,934, $12,627, and $11,983 in 1996, 1995 and 1994, respectively. 1996 H.B. FULLER ANNUAL REPORT 32 ================================================================================ 12/Other Postretirement Benefits The Company and certain of its consolidated subsidiaries provides health care and life insurance benefits for eligible retired employees and their eligible dependents. These benefits are provided through various insurance companies and health care providers. The obligation for these benefits was determined by application of the terms of health and life insurance plans, together with relevant actuarial assumptions and health-care cost trend rates, as of December 1, 1995, projected at annual rates ranging from 9.1 percent in 1996 graded down to 4.9 percent for the year 2001 and after. The benefit obligation discount rate at that time was 7.25 percent. The effect of a one percent annual increase in the assumed health-care cost trend rates would increase the accumulated postretirement benefits obligation at August 31, 1996, by $3,767 and the aggregate of service and interest cost components of net periodic postretirement benefit costs by $915. The funded status of the plan was determined based on actuarial assumptions and health-care trend rates, as of August 31, 1996, projected at annual rates ranging from 8.3 percent in 1996 graded down to 4.9 percent for the year 2001 and after. The benefit obligation discount rate at that time was 8.0 percent. The Company funds postretirement benefits through a Voluntary Employees' Beneficiaries Association Trust which was established in 1991. The funds are invested primarily in common stocks with an expected long-term rate of return of 8.5 percent. The funded status of the plan at November 30, is as follows:
1996 1995 - -------------------------------------------------------------------------------- Actuarial present value of postretirement benefit obligation: Current $(10,927) $(13,022) Active employees fully eligible for benefits (9,146) (10,236) Other active employees (7,837) (15,295) - -------------------------------------------------------------------------------- Accumulated postretirement benefit obligation (27,910) (38,553) Fair value of plan assets 29,886 22,991 Unrecognized prior service cost (5,738) - Unrecognized net (gain) loss 54 7,633 - -------------------------------------------------------------------------------- (Accrued) unfunded postretirement benefit obligation $(3,708) $(7,929) - -------------------------------------------------------------------------------- Benefit obligation discount rate 8.0% 7.25%
The components of net periodic postretirement benefit cost are as follows:
1996 1995 1994 - ---------------------------------------------------------------------------------------- Service cost-benefits earned during the period $2,128 $1,820 $1,696 Interest cost on projected benefit obligation 2,437 2,623 1,951 Return on assets - actual (1,643) (5,265) (71) - deferred (421) 3,889 (942) All other components (425) 182 17 - ---------------------------------------------------------------------------------------- Net periodic postretirement benefit cost $2,076 $3,249 $2,651 - ----------------------------------------------------------------------------------------
13/Stockholders' Equity Preferred Stock:The Board of Directors is authorized to issue up to 10,000,000 additional shares of preferred stock that may be issued in one or more series and with such stated value and terms as may be determined by the Board of Directors. Series A Preferred Stock: There were 45,900 Series A preferred shares with a par value of $6.67 authorized and issued at November 30, 1996 and 1995. The holder of Series A preferred stock is entitled to cumulative dividends at the rate of $0.33 per share per annum. Common stock dividends may not be paid unless provision has been made for payment of Series A preferred dividends. The Series A preferred stock has multiple voting rights entitling the Series A preferred stockholder to 80 votes per share. The terms of the Series A preferred stock include the right of the Company to purchase the shares at specified times and the right of the Company to redeem all shares at par value if authorized by the shareholders. Series B Preferred Stock: In connection with the adoption of the shareholder rights plan, (see footnote below) the Board of Directors authorized a new series of preferred stock ("Series B preferred shares") that would be exchanged for the Company's existing Series A preferred shares, if and at such time as the rights issued pursuant to the new shareholder rights plan become exercisable. The Series B preferred shares have the same terms as the Series A preferred shares except that the voting rights of the Series B preferred shares are increased proportionately according to the number of shares issued upon the exercise or exchange of rights. The Company entered into a Stock Exchange Agreement dated July 18, 1996, with Elmer L. Andersen by which the Series B preferred shares would be exchanged for all Series A preferred shares on the date the rights under the shareholder rights plan become exercisable. The exchange of the Series A preferred shares, all of which are held by Elmer L. Andersen, for the new Series B preferred shares is intended to preserve Mr. Andersen's voting power, in the event any rights are exercised. No event has occurred which would cause the exchange to be effected. Common Stock: There were 40,000,000 par value $1.00 common shares authorized and 14,065,752 and 14,006,719 shares issued at November 30, 1996 and 1995, respectively. 1996 H.B. FULLER ANNUAL REPORT 33 ================================================================================ Shareholder Rights Plan: The Company has a shareholder rights plan under which each holder of a share of common stock also has one right to purchase one share of common stock for $180. The rights are not presently exercisable. Upon the occurrence of certain "flip-in" events, each right becomes exercisable and then entitles its holder to purchase $180 worth of stock of another party at one-half of its then market value. One flip-in event is when a person or group (an "acquiring person") acquires 15 percent or more of the Company's outstanding common stock. Rights held by an acquiring person or an adverse person are void. The Company may redeem the rights for one cent per share, but the redemption right expires upon the occurrence of a flip-in event. In addition, at any time after a person or group acquires 15 percent or more of the Company's outstanding common stock, but less than 50 percent, the Board of Directors may, at its option, exchange all or part of the rights (other than rights held by the acquiring person) for shares of the Company's common stock at a rate of one share of common stock for every right. The rights expire on July 30, 2006. Directors' Stock Plan: The Directors' Stock Plan reserves 75,000 shares of common stock for allocation as payment of retainer fees. Directors, who are not employees, can choose to receive all or a portion of the payment of their retainer and meeting fees in shares of Company common stock when they leave the Board rather than cash payments each year. At November 30, 1996, 43,987 shares remained available for future allocation. 1992 Stock Incentive Plan: Under the 1992 Stock Incentive Plan a total of 900,000 shares of the Company's common stock are available for the granting of awards during a period of up to ten years from April 16, 1992. The Stock Incentive Plan permits the granting of (a) stock options; (b) stock appreciation rights; (c) restricted stock and restricted stock units; (d) performance awards; (e) dividend equivalents; and (f) other awards valued in whole or in part by reference to or otherwise based upon the Company's stock. A total of 38,900, 39,800 and 37,346 restricted shares of the Company's common stock were granted to certain employees in 1996, 1995 and 1994, respectively. The market value of shares awarded $1,352, $1,403 and $1,419 has been recorded as unearned compensation - restricted stock in 1996, 1995 and 1994, respectively and is shown as a separate component of stockholders' equity. Unearned compensation is being amortized to expense over the ten-year vesting period and amounted to $473, $315 and $180 in 1996, 1995 and 1994, respectively. A total of 25,500, 29,650 and 34,400 restricted share units of the Company's common stock were allocated to certain employees in 1996, 1995 and 1994, respectively. The market value of units allocated of $886, $1,045 and $1,307 in 1996, 1995 and 1994, respectively, is being charged to expense over the ten-year vesting period. At November 30, 1996, 643,129 shares remained available for future grants or allocations. 1987 Stock Option Plan: Options outstanding at November 30, 1996 are 211,869 shares under the Company's 1987 non-qualified plan. Options are exercisable over varying periods ending on October 10, 2000. At November 30, 1996, no shares remained available for grants under this plan. Information on stock options is shown in the following table:
Option Shares - ----------------------------------------------------------------------------------------------------------------------------------- Outstanding Exercisable Price Range - ----------------------------------------------------------------------------------------------------------------------------------- Balances at November 30, 1993 303,846 303,846 $8.13-16.33 Exercised (36,563) (36,563) 8.13-14.33 Cancelled (500) (500) 10.83 - ----------------------------------------------------------------------------------------------------------------------------------- Balances at November 30, 1994 266,783 266,783 14.33-16.33 Exercised (33,321) (33,321) 14.33 Cancelled (3,300) (3,300) 14.33 - ----------------------------------------------------------------------------------------------------------------------------------- Balances at November 30, 1995 230,162 230,162 14.33-16.33 Exercised (17,918) (17,918) 14.33-15.50 Cancelled (375) (375) 14.33 - ----------------------------------------------------------------------------------------------------------------------------------- Balances at November 30, 1996 211,869 211,869 $14.33-16.33 ===================================================================================================================================
1996 H.B. FULLER ANNUAL REPORT 34 ================================================================================ 14/Business Segment Information The Company is a manufacturer of specialty chemical products, which includes the formulation, compounding and marketing of adhesives, sealants, coatings, paints and other specialty chemical products. The Company considers its manufacturing of specialty chemical and related products to be its dominant industry segment. This segment is served commonly by corporate/regional service departments including manufacturing, administration, research and development and marketing services. The segment uses many common raw materials which are either petroleum-based or of a nonsynthetic nature. The segment is not capital intensive and the manufacturing facilities and raw materials are relatively interchangeable and are not, in general, highly specialized. Operating earnings are net sales less operating costs and expenses pertaining to specific geographic areas. A summary of Company operations by geographic areas for the years ended November 30 is as follows:
Sales to Pro Forma unaffiliated customers: 1996 1995 1995 1994 - ------------------------------------------------------------------------------- North America $733,683 $692,908 $692,099 $637,632 Europe 272,085 285,877 284,049 231,594 Latin America 184,208 183,823 182,009 158,616 Asia/Pacific 85,740 86,204 85,661 69,525 - ------------------------------------------------------------------------------- Total trade sales $1,275,716 $1,248,812 $1,243,818 $1,097,367 =============================================================================== Pro Forma Intercompany sales: 1996 1995 1995 1994 - ------------------------------------------------------------------------------- North America $14,379 $16,032 $16,014 $14,341 Europe 2,432 1,457 1,448 1,468 Latin America 9,897 7,342 7,270 7,570 Asia/Pacific 51 164 163 1 Eliminations (26,759) (24,995) (24,895) (23,380) - ------------------------------------------------------------------------------- Total intercompany sales - - - - =============================================================================== Pro Forma Net sales: 1996 1995 1995 1994 - ------------------------------------------------------------------------------- North America $748,062 $708,940 $708,113 $651,973 Europe 274,517 287,334 285,497 233,062 Latin America 194,105 191,165 189,279 166,186 Asia/Pacific 85,791 86,368 85,824 69,526 Eliminations (26,759) (24,995) (24,895) (23,380) - ------------------------------------------------------------------------------- Total net sales $1,275,716 $1,248,812 $1,243,818 $1,097,367 =============================================================================== Pro Forma Earnings: 1996 1995 1995 1994 - ------------------------------------------------------------------------------- North America $57,485 $42,165 $41,908 $37,587 Europe 11,864 10,036 12,567 10,464 Latin America 13,140 15,208 16,516 17,631 Asia/Pacific (1,735) (1,700) (1,226) 271 - ------------------------------------------------------------------------------- Operating earnings 80,754 65,709 69,765 65,953 Interest expense (18,881) (18,132) (18,132) (11,747) Gain on sale of assets 16,673 1,764 1,764 - Other (expense)income (1,995) (3,161) (2,967) (3,188) - ------------------------------------------------------------------------------- Earnings before income taxes, minority interest and accounting change $76,551 $46,180 $50,430 $51,018 =============================================================================== Identifiable assets: 1996 1995 1994 - -------------------------------------------------------------------------------- North America $503,976 $460,895 $440,025 Europe 183,993 191,194 155,290 Latin America 135,031 139,005 123,139 Asia/Pacific 74,439 70,985 64,679 Eliminations (30,408) (37,296) (41,736) General corporate assets 2,244 4,146 1,220 - -------------------------------------------------------------------------------- Total assets $869,275 $828,929 $742,617 ================================================================================
1996 H.B. FULLER ANNUAL REPORT 35 ================================================================================ 15/Quarterly Data (unaudited)
1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr. Year - ----------------------------------------------------------------------------------------------------------------------------------- Net Sales: 1996 $303,571 $320,223 $318,100 $333,822 $1,275,716 Pro Forma 1995* 291,579 321,381 309,063 326,789 1,248,812 1995 295,649 322,434 312,590 313,145 1,243,818 Gross Profit: 1996 $92,061 $101,266 $102,458 $108,430 $404,215 Pro Forma 1995* 91,068 101,811 97,920 100,072 390,871 1995 93,379 103,768 99,329 96,051 392,527 Operating Earnings: 1996 $10,027 $17,075 $26,989 $26,663 $80,754 Pro Forma 1995* 13,149 18,198 17,996 16,366 65,709 1995 15,094 21,980 19,629 13,062 69,765 Earnings before cumulative effect of accounting change: 1996 $2,670 $8,415 $22,015 $12,330 $45,430 Pro Forma 1995* 4,617 8,020 7,332 8,226** 28,195 1995 6,033 10,069 8,762 6,331** 31,195 Cumulative effect of accounting change: Pro Forma 1995* $(2,532) - - - $(2,532) 1995 (2,532) - - - (2,532) Net Earnings: 1996 $2,670 $8,415 $22,015 $12,330 $45,430 Pro Forma 1995* 2,085 8,020 7,332 8,226** 25,663 1995 3,501 10,069 8,762 6,331** 28,663 Earnings before cumulative effect of accounting change per share: 1996 $0.19 $0.60 $1.56 $0.87 $3.22 Pro Forma 1995* 0.33 0.57 0.52 0.59** 2.01 1995 0.43 0.72 0.62 0.45** 2.22 Cumulative effect of accounting change per share: Pro Forma 1995* $(0.18) - - - $(0.18) 1995 (0.18) - - - (0.18) Net earnings per share: 1996 $0.19 $0.60 $1.56 $0.87 $3.22 Pro Forma 1995* 0.15 0.57 0.52 0.59** 1.83 1995 0.25 0.72 0.62 0.45** 2.04
* See Consolidated Financial Statements Note 1, Change in Year-end. ** Effective tax rates for fourth quarter 1995 and pro forma 1995 were 29.3% and 34.4%, respectively, versus 39.8% and 43.3% in the third quarter, respectively, due to the geographical mix of earnings and the impact of determining the valuation reserve on deferred tax assets. 1996 H.B. FULLER ANNUAL REPORT 36 - -------------------------------------------------------------------------------- Management's Report Report of Independent Accountants - -------------------------------------------------------------------------------- The management of H.B. Fuller Company is responsible for the integrity, objectivity and accuracy of the financial statements of the Company and its subsidiaries. The accompanying financial statements, including the notes, were prepared in conformity with generally accepted accounting principles appropriate in the circumstances and include amounts based on the best judgment of management. Management is also responsible for maintaining a system of internal accounting control to provide reasonable assurance that established policies and procedures are followed, that the records properly reflect all transactions of the Company and that assets are safeguarded against material loss from unauthorized use or disposition. Management believes that the Company's accounting controls provide reasonable assurance that errors or irregularities that could be material to the financial statements are prevented or would be detected within a timely period by employees in the normal course of performing their assigned duties. /s/ Jorge Walter Bolanos Jorge Walter Bolanos Senior Vice President, Chief Financial Officer and Treasurer /s/ Walter Kissling Walter Kissling President and Chief Executive Officer To the Board of Directors and Stockholders of H.B. Fuller Company In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of earnings, stockholders' equity and of cash flows present fairly, in all material respects, the financial position of H.B. Fuller Company and its subsidiaries at November 30, 1996 and 1995, and the results of their operations and their cash flows for each of the three years in the period ended November 30, 1996, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. As discussed in Note 1 to the consolidated financial statements, the Company adopted the provisions of Statement of Financial Accounting Standards No. 112, "Employers' Accounting for Postemployment Benefits" in 1995. /s/ Price Waterhouse LLP Price Waterhouse LLP Minneapolis, Minnesota January 10, 1997 1996 H.B. FULLER ANNUAL REPORT 37 - -------------------------------------------------------------------------------- 1969-1996 In Review and Selected Data - -------------------------------------------------------------------------------- H.B. Fuller Company and Subsidiaries
Annual Growth Rate 1-yr 5-yr 10-yr 1995- 1991- 1986- (Dollars in thousands, Pro Forma 1996 1996 1996 except per share amounts) 1996* 1995** 1995 1994 1993 1992 1991 1990 - ----------------------------------------------------------------------------------------------------------------------------------- % % % Income Statement Data: 2.2# 8.2 9.2 Net sales $1,275,716 1,248,812 1,243,818 1,097,367 975,287 942,438 861,024 792,230 22.9# 6.2 7.4 Operating earnings $80,754 65,709 69,765 65,953 53,470 71,406 59,846 51,911 Earnings from 61.1# 10.4 9.2 continuing operations $45,430 28,195 31,195 30,863 21,701 35,622 27,687 21,145 77.0# 10.4 9.2 Net earnings $45,430 25,663 28,663 30,863 9,984 35,622 27,687 21,145 16.3 13.4 14.5 Depreciation $40,878 35,134 28,177 24,934 24,865 21,787 20,376 4.1 5.0 11.8 Interest expense $18,881 18,132 11,747 10,459 12,537 14,788 14,028 72.6# 10.3 8.3 Income taxes $31,233 18,094 19,148 19,782 19,191 24,716 19,173 15,234 Balance Sheet Data: 4.9 11.3 11.6 Total assets $869,275 828,929 742,617 564,521 561,204 508,911 489,634 (0.3) 5.4 6.7 Working capital $141,617 142,056 129,665 119,905 130,817 108,779 96,097 Current ratio 1.6 1.6 1.6 1.7 1.8 1.7 1.7 Net property, 10.2 13.5 13.6 plant and equipment $391,201 355,123 295,090 232,547 223,153 207,378 202,341 Long-term debt, excluding 3.8 19.2 16.6 current installments $172,779 166,459 130,009 60,261 53,457 71,814 88,240 11.8# 8.9 9.5 Stockholders' equity $334,740 299,532 299,414 274,805 249,396 255,040 219,050 197,191 Stockholder Data: Earnings from continuing operations: 60.2# 10.0 9.2 Per common share $3.22 2.01 2.22 2.20 1.55 2.55 2.00 1.53 Percent of net sales 3.6 2.3 2.5 2.8 2.2 3.8 3.2 2.7 Net earnings: 76.0# 10.0 9.2 Per common share $3.22 1.83 2.04 2.20 0.71 2.55 2.00 1.53 Percent of net sales 3.6 2.1 2.3 2.8 1.0 3.8 3.2 2.7 Dividends paid: 4.8 9.8 11.0 Per common share $0.655 0.625 0.575 0.54 0.46 0.41 0.40 Stockholders' equity: 11.3# 8.3 9.5 Per common share $23.78 21.36 21.35 19.70 17.92 18.43 15.96 14.56 Return on average stockholders' equity 14.3 9.8 10.0 11.5 4.0 15.0 13.3 11.0 Common stock price: 20.1 4.5 8.7 High $47.75 39.75 42.25 42.75 53.25 38.33 19.17 6.3 9.4 11.2 Low $29.50 27.75 29.00 31.25 32.58 18.83 13.75 Average common shares outstanding 0.4 0.4 (0.1) (in thousands) 14,114 14,059 14,036 14,018 13,989 13,854 13,798 (7.8) 1.0 2.7 Number of employees 5,900 6,400 6,400 6,000 5,800 5,600 5,600 Annual Growth Rate 1-yr 5-yr 10-yr 1995- 1991- 1986- (Dollars in thousands, 1996 1996 1996 except per share amounts) 1989 1988 - -------------------------------------------------------------------- % % % Income Statement Data: 2.2# 8.2 9.2 Net sales 753,374 684,034 22.9# 6.2 7.4 Operating earnings 46,009 46,430 Earnings from 61.1# 10.4 9.2 continuing operations 15,671 21,081 77.0# 10.4 9.2 Net earnings 15,671 21,081 16.3 13.4 14.5 Depreciation 16,571 14,469 4.1 5.0 11.8 Interest expense 13,237 8,477 72.6# 10.3 8.3 Income taxes 13,936 14,361 Balance Sheet Data: 4.9 11.3 11.6 Total assets 455,172 434,293 (0.3) 5.4 6.7 Working capital 95,645 104,071 Current ratio 1.8 1.9 Net property, 10.2 13.5 13.6 plant and equipment 186,631 161,605 Long-term debt, excluding 3.8 19.2 16.6 current installments 100,974 98,473 11.8# 8.9 9.5 Stockholders' equity 186,515 178,871 Stockholder Data: Earnings from continuing operations: 60.2# 10.0 9.2 Per common share 1.09 1.46 Percent of net sales 2.1 3.1 Net earnings: 76.0# 10.0 9.2 Per common share 1.09 1.46 Percent of net sales 2.1 3.1 Dividends paid: 4.8 9.8 11.0 Per common share 0.38 0.35 Stockholders' equity: 11.3# 8.3 9.5 Per common share 13.27 12.56 Return on average stockholders' equity 8.6 12.4 Common stock price: 20.1 4.5 8.7 High 22.83 25.83 6.3 9.4 11.2 Low 13.83 16.00 Average common shares outstanding 0.4 0.4 (0.1) (in thousands) 14,358 14,387 (7.8) 1.0 2.7 Number of employees 5,500 5,200
* 52-week year ** See Consolidated Financial Statements Note 1, Change in Year-end. # 1-year growth compared to pro forma 1995 38 1996 H.B. FULLER ANNUAL REPORT
Annual Growth Rate 1-yr 5-yr 10-yr 1995- 1991- 1986- (Dollars in thousands, 1996 1996 1996 except per share amounts) 1987 1986 1985 1984 1983 1982 1981 1980 1979 1978 - ----------------------------------------------------------------------------------------------------------------------------------- % % % Income Statement Data: 2.2# 8.2 9.2 Net sales 597,061 528,483 457,937 447,984 414,210 321,502 318,793 288,653 251,558 219,962 22.9# 6.2 7.4 Operating earnings 47,748 39,483 30,733 32,179 32,452 24,940 30,531 23,958 20,739 18,681 Earnings from 61.1# 10.4 9.2 continuing operations 25,812 18,922 13,335 13,033 13,624 9,188 13,327 8,538 7,433 7,122 77.0# 10.4 9.2 Net earnings 25,812 18,922 14,909 11,895 13,832 9,493 13,587 8,921 7,527 7,122 16.3 13.4 14.5 Depreciation 13,197 10,566 9,318 7,898 6,786 5,014 4,592 4,507 3,986 3,319 4.1 5.0 11.8 Interest expense 5,479 6,208 7,627 8,894 6,546 5,482 5,106 6,012 4,106 3,161 72.6# 10.3 8.3 Income taxes 16,320 14,107 9,525 9,944 10,108 8,151 12,069 7,954 7,807 7,355 Balance Sheet Data: 4.9 11.3 11.6 Total assets 329,636 291,180 253,571 236,489 225,154 206,752 157,417 146,674 139,190 116,222 (0.3) 5.4 6.7 Working capital 86,598 74,232 69,477 68,072 59,848 48,969 42,370 41,229 32,696 32,575 Current ratio 1.9 1.9 2.0 2.1 2.0 1.8 1.9 1.9 1.7 1.9 Net property, 10.2 13.5 13.6 plant and equipment 126,905 108,989 97,173 87,357 80,427 73,077 46,938 47,245 42,193 35,478 Long-term debt, excluding 3.8 19.2 16.6 current installments 33,015 37,211 44,207 51,381 51,755 44,083 23,072 26,049 23,375 22,235 11.8# 8.9 9.5 Stockholders' equity 161,355 135,479 113,417 99,908 92,212 81,645 75,842 64,951 57,867 50,698 Stockholder Data: Earnings from continuing operations: 60.2# 10.0 9.2 Per common share 1.79 1.33 0.96 0.93 0.98 0.67 0.97 0.63 0.55 0.53 Percent of net sales 4.3 3.6 2.9 2.9 3.3 2.9 4.2 3.0 3.0 3.2 Net earnings: 76.0# 10.0 9.2 Per common share 1.79 1.33 1.07 0.86 0.99 0.69 0.99 0.66 0.56 0.53 Percent of net sales 4.3 3.6 3.3 2.7 3.3 3.0 4.3 3.1 3.0 3.2 Dividends paid: 4.8 9.8 11.0 Per common share 0.27 0.23 0.21 0.20 0.18 0.17 0.15 0.13 0.12 0.11 Stockholders' equity: 11.3# 8.3 9.5 Per common share 11.35 9.62 8.19 7.23 6.67 5.90 5.48 4.83 4.31 3.74 Return on average stockholders' equity 17.4 15.2 14.0 12.4 15.9 12.1 19.3 14.5 13.7 15.0 Common stock price: 20.1 4.5 8.7 High 32.33 20.67 11.25 13.63 13.25 8.50 8.71 4.46 4.29 4.75 6.3 9.4 11.2 Low 16.17 10.25 8.17 7.83 7.63 4.75 3.92 2.92 3.25 2.79 Average common shares outstanding 0.4 0.4 (0.1) (in thousands) 14,379 14,196 13,880 13,881 13,908 13,785 13,704 13,479 13,473 13,473 (7.8) 1.0 2.7 Number of employees 4,600 4,500 4,400 4,300 4,100 4,000 3,300 3,400 3,400 3,300
Annual Growth Rate 1-yr 5-yr 10-yr 1995- 1991- 1986- (Dollars in thousands, 1996 1996 1996 except per share amounts) 1977 1976 1975 1974 1973 1972 1971 1970 1969 - --------------------------------------------------------------------------------------------------------------------------- % % % Income Statement Data: 2.2# 8.2 9.2 Net sales 192,848 167,892 129,426 121,839 91,572 78,257 60,167 53,024 47,248 22.9# 6.2 7.4 Operating earnings 15,504 13,571 9,060 12,745 8,657 7,394 5,088 5,273 4,726 Earnings from 61.1# 10.4 9.2 continuing operations 6,181 5,382 3,785 5,323 3,274 3,112 2,247 2,347 2,018 77.0# 10.4 9.2 Net earnings 6,181 5,382 3,785 5,323 3,274 3,112 2,247 2,347 2,018 16.3 13.4 14.5 Depreciation 2,897 2,383 2,000 1,705 1,518 1,464 1,147 851 789 4.1 5.0 11.8 Interest expense 2,524 2,369 1,900 2,098 1,370 1,173 687 515 434 72.6# 10.3 8.3 Income taxes 6,584 5,322 3,290 5,023 3,470 3,080 1,960 2,322 1,978 Balance Sheet Data: 4.9 11.3 11.6 Total assets 100,847 90,670 78,643 70,830 61,021 51,194 40,210 33,294 27,352 (0.3) 5.4 6.7 Working capital 32,135 29,194 28,410 20,244 17,087 14,599 12,795 9,542 10,262 Current ratio 2.1 2.1 2.5 1.9 2.0 2.1 2.3 2.0 2.5 Net property, 10.2 13.5 13.6 plant and equipment 30,154 28,110 24,446 20,739 18,676 16,498 12,578 10,037 7,822 Long-term debt, excluding 3.8 19.2 16.6 current installments 20,977 21,247 21,368 12,537 13,108 10,336 6,033 3,194 3,178 11.8# 8.9 9.5 Stockholders' equity 45,016 40,075 35,666 32,787 28,259 25,603 23,083 17,848 15,543 Stockholder Data: Earnings from continuing operations: 60.2# 10.0 9.2 Per common share 0.46 0.40 0.28 0.40 0.24 0.23 0.18 0.19 0.18 Percent of net sales 3.2 3.2 2.9 4.4 3.6 4.0 3.7 4.4 4.3 Net earnings: 76.0# 10.0 9.2 Per common share 0.46 0.40 0.28 0.40 0.24 0.23 0.18 0.19 0.18 Percent of net sales 3.2 3.2 2.9 4.4 3.6 4.0 3.7 4.4 4.3 Dividends paid: 4.8 9.8 11.0 Per common share 0.09 0.07 0.07 0.06 0.05 0.05 0.05 0.04 0.03 Stockholders' equity: 11.3# 8.3 9.5 Per common share 3.35 2.97 2.65 2.43 2.09 1.91 1.72 1.47 1.29 Return on average stockholders' equity 14.5 14.2 11.1 17.4 12.2 12.8 11.0 14.1 15.3 Common stock price: 20.1 4.5 8.7 High 3.54 3.04 2.29 1.87 4.33 3.71 4.71 4.00 3.97 6.3 9.4 11.2 Low 2.46 1.75 1.00 1.04 1.08 1.33 3.21 2.53 2.55 Average common shares outstanding 0.4 0.4 (0.1) (in thousands) 13,362 13,362 13,362 13,362 13,371 13,419 12,390 12,048 11,175 (7.8) 1.0 2.7 Number of employees 3,000 2,800 2,600 2,300 2,100 1,800 1,700 1,600 1,500
1996 H.B. FULLER ANNUAL REPORT 39 - -------------------------------------------------------------------------------- Investor Information - -------------------------------------------------------------------------------- [LINE GRAPH OF H.B. FULLER COMPANY COMMON STOCK PERFORMANCE APPEARS HERE] Market Price (Common Stock*)
Exhibit 13 Page 40 MARKET PRICE Highs Lows Q1F96 $39.25 $32.00 Q1F95 $35.50 $27.75 Q2F96 $36.50 $29.50 Q2F95 $39.75 $32.50 Q3F96 $37.50 $31.50 Q3F95 $39.25 $32.00 Q4F96 $47.75 $34.50 Q4F95 $36.00 $30.00
Dividends (per share)
Exhibit 13 Page 40 DIVIDENDS Q1F96 $0.16 Q1F95 $0.145 Q2F96 $0.165 Q2F95 $0.16 Q3F96 $0.165 Q3F95 $0.16 Q4F96 $0.165 Q4F95 $0.16
Annual Meeting The annual meeting of shareholders will be held on Thursday, April 17, 1997 at 3:00 p.m. at Bandana Square, Banquet and Conference Centre, 1021 Bandana Boulevard East, St. Paul, MN. All shareholders are cordially invited to attend. Available Publications The company's annual report is distributed regularly to stockholders. In addition, other publications are available upon request. They include: . Automatic Dividend Reinvestment Brochure . Community Affairs Report . Corporate Profile . Environmental Report . Form 10-K as filed with the Securities Exchange Commission . The Story of H.B. Fuller Company 1887-1987 . Quarterly Reports . Research and Development Brochure When you want to receive shareholder material through the mail or if you'd like to be added to our mailing list, call our Shareholder Services Line at 1-800-214-2523. For a fax of the year's earnings releases, as well as faxes on up-to-date information on the company call 1-800-758-5804 -- Pin #336719. Coming in 1997, H.B. Fuller will be on the Internet. Watch for more details. Dividend Reinvestment Plan The dividend reinvestment plan is designed for all H.B. Fuller shareholders. It provides a convenient and economical way to purchase additional shares of Fuller Common Stock, and to invest all or a portion of cash dividends in additional shares of stock at a discount, all without payments of brokerage fees or service charges. Using the plan you can: save on brokerage fees; pay 3% less for shares purchased with dividends; buy additional shares as often as you like; have the plan administrator maintain your stock certificates; give a gift of H.B. Fuller stock; obtain updates of your account easily. Approximately 77% of our shareholders of record currently are participants. 1996 H.B. FULLER ANNUAL REPORT 40 ================================================================================ Form 10-K Report H.B. Fuller Company's Form 10-K annual report for the year ended November 30, 1996, filed with Securities and Exchange Commission, Washington, DC, is available upon request at no charge. Exhibits to the Form 10-K are available at a charge sufficient to cover postage and handling. This material may be obtained by writing to: Corporate Secretary, H.B. Fuller Company, P.O. Box 64683, St. Paul, MN 55164-0683. Independent Accountants Price Waterhouse LLP, Minneapolis, MN Investor Contact Richard Edwards Director of Investor Relations 612-415-5150 Market Makers The following firms made a market in H.B. Fuller as of November 30, 1996: . Merrill Lynch, Pierce, Fenner . Smith Barney Inc. . Piper Jaffray Companies Inc. . Mayer & Schweitzer Inc. . Cantor, Fitzgerald & Co. . Lehman Brothers Inc. . Everen Securities Inc. Number of Common Shareholders As of November 30, 1996, there were approximately 5,020 common shareholders of record. Transfer Agent and Registrar Norwest Bank Minnesota, N.A., 161 North Exchange, South St. Paul, MN 55075, 1-800-468-9716 or 612-450-4064 (in MN). Shareholder Composition November 1996 [SHAREHOLDER COMPOSITION PIE CHART APPEARS HERE]
Exhibit 13 Page 41 SHAREHOLDER COMPOSITION November 1996 54% Institutions 26% Individuals 14% Employees 6% Directors & Officers
World Headquarters H.B. Fuller Company, World Headquarters, 1200 Willow Lake Boulevard, St. Paul, MN 55110-5132. Send all correspondence to: H.B. Fuller Company, World Headquarters, P.O. Box 64683, St. Paul, MN 55164-0683 1996 H.B. FULLER ANNUAL REPORT 41 EX-21 7 SUBSIDIARIES Exhibit 21 ---------- H.B. FULLER COMPANY AND CONSOLIDATED SUBSIDIARIES AS OF NOVEMBER 30, 1996
PERCENTAGE JURISDICTION OF OF VOTING SUBSIDIARY ORGANIZATION SECURITIES - ------------------------------- ----------------- ---------- H.B. Fuller Company United States Branches: Indonesia, Korea H.B. Fuller Company Puerto Rico, Inc. United States 100.0 H.B. Fuller International Inc. United States 100.0 Branches: Hong Kong, Singapore ChemEquity, Inc. ChemEquity Communications, Inc. United States 100.0 F.A.I. Trading Company United States 100.0 Fiber-Resin Corporation United States 100.0 H.B. Fuller Automotive Company United States 100.0 Foster Products Corporation United States 100.0 TEC Incorporated United States 100.0 Linear Products, Inc. United States 100.0 Branches: Netherlands H.B. Fuller Licensing & Financing Inc. United States 100.0 Aireline, Inc. United States 100.0 note a Kativo Chemical Industries, S.A. Panama 97.4 (See listing of subsidiaries on the following pages.) Pinturas Centroameriacanas Costa Rica S.A. Costa Rica 100.0 Mundo de Colores Pintica, S.A. Costa Rica 100.0 note a Pinturas Ecuatorianas, S.A. Ecuador 100.0 Distribuidora Americana, S.A. Ecuador 100.0 note a Glidden Avenida Nacional, S.A. Panama 100.0 Fabrica Pinturas Glidden, S.A. Panama 100.0 H.B. Fuller Holding Panama Co. Panama 100.0 Glidden Panama S.A. Panama 100.0 ProColor, S.A. Panama 100.0 Adhesivos Industriales, S.A. Panama 100.0 H.B. Fuller Austria GesmbH Austria 100.0 H.B. Fuller Belgium N.V./S.A. Belgium 99.8 note b Harved Oy Finland 100.0 note a H.B. Fuller GmbH, Luneburg Germany 99.9 Karl Sager, GmbH, Germany 100.0 H.B. Fuller GmbH, Munich Germany 100.0 Isar-Rakoll Chemie, GmbH Germany 100.0 note a H.B. Fuller France S.A. France 99.9 note c H.B. Fuller Blattmann AG Switzerland 65.0 H.B. Fuller Italia s.r.l. Italy 97.0 note d H.B. Fuller (Jersey) Limited Jersey 100.0 H.B. Fuller Nederland B.V. Netherlands 100.0 Prakoll, S.A. Spain 100.0 H.B. Fuller Sverige AB Sweden 100.0 H.B. Fuller Holdings Limited U.K. 100.0 H.B. Fuller U.K. Limited U.K. 100.0 H.B. Fuller Coatings Limited U.K. 100.0 H.B. Fuller Linear Products Limited U.K. 100.0
Page 1 of 5 Exhibit 21 ---------- H.B. FULLER COMPANY AND CONSOLIDATED SUBSIDIARIES AS OF NOVEMBER 30, 1996
PERCENTAGE JURISDICTION OF OF VOTING SUBSIDIARY ORGANIZATION SECURITIES - ---------------------------------------------- --------------- ------------ H.B. Fuller Canada, Inc. Canada 100.0 H.B. Fuller Mexico, S.A. Mexico 100.0 H.B. Fuller Company Australia Pty. Ltd. Australia 100.0 H.B. Fuller (China) Adhesives Ltd. China 95.0 H.B. Fuller India Private Limited India 100.0 note a H.B. Fuller Japan Company, Ltd. Japan 100.0 H.B. Fuller Korea Co., Ltd. Korea 100.0 H.B.F. Adhesives (Malaysia) Sdn. Bhd. Malaysia 100.0 H.B. Fuller Company (N.Z.) Ltd. New Zealand 99.9 H.B. Fuller Holdings (NZ) Ltd. New Zealand 99.9 H.B. Fuller Powder Coatings (NZ) Ltd. New Zealand 100.0 H.B. Fuller Powder Coatings Pty. Ltd. Australia 100.0 H.B. Fuller (Philippines), Inc. Philippines 80.0 H.B. Fuller-Realty (Philippines) Company Philippines 40.0 H.B. Fuller Taiwan Company Ltd. Taiwan 100.0 H.B. Fuller (Thailand) Co., Ltd. Thailand 100.0 Multi-Clean Products Pty. Ltd. Australia 100.0 note a Multi-Clean (Lebanon) S.A.R.L. Lebanon 100.0 note a H.B. Fuller Lebanon S.A.R.L. Lebanon 100.0 note a Nippon Tilement Company, Ltd. Japan 9.1 - ----------------------------------------------
Notes: - ------ a Shell corporation b An additional 0.2% of the outstanding voting securities is owned by H.B. Fuller GmbH, Luneburg c An additional 0.1% of the outstanding voting securities is owned by H.B. Fuller Company d An additional 3.0% of the outstanding voting securities is owned by H.B. Fuller Nederland B.V. Page 2 of 5 Exhibit 21 ---------- KATIVO CHEMICAL INDUSTRIES, S.A. AND CONSOLIDATED SUBSIDIARIES AS OF NOVEMBER 30, 1996
PERCENTAGE JURISDICTION OF OF VOTING SUBSIDIARY OWNER OF VOTING SECURITIES ORGANIZATION SECURITIES - ------------------------------------- ---------------------------------------- -------------------- ------------------- Chemical Supply, S.A. Chemical Supply Corporation Argentina 100.00 /*/ H.B. Fuller Argentina, S.A. Kativo Chemical Industries, S.A. Argentina 99.995 H.B. Fuller Company 0.005 - -------------------------------------------------------------------------------------------------------------------------------- H.B. Fuller Latin America Kativo Chemical Industries, S.A. Bahamas 100.00 /*/ - -------------------------------------------------------------------------------------------------------------------------------- H.B. Fuller Bolivia, Ltda. Kativo Chemical Industries, S.A. Bolivia 50.00 Chemical Supply Corporation 50.00 - -------------------------------------------------------------------------------------------------------------------------------- H.B. Fuller Brasil, Ltda. Kativo Chemical Industries, S.A. Brazil 100.000 Kativo de Panama, S.A. 0.000 H.B. Fuller Brasil - Sul, Ltda. H.B. Fuller Brasil, Ltda. Brazil 16.75 /*/ Chemical Supply Corporation 27.28 Kativo Chemical Industries, S.A. 55.97 - -------------------------------------------------------------------------------------------------------------------------------- H.B. Fuller Chile, S.A. Kativo Chemical Industries, S.A. Chile 99.99 Minority 0.01 - -------------------------------------------------------------------------------------------------------------------------------- H.B. Fuller Colombia, Ltda. Kativo Chemical Industries, S.A. Colombia 98.01 Minority 1.99 - -------------------------------------------------------------------------------------------------------------------------------- Kativo Costa Rica, S.A. Kativo Chemical Industries, S.A. Costa Rica 100.00 Reca Quimica, S.A. Kativo Chemical Industries, S.A. Costa Rica 100.00 H.B. Fuller Costa Rica, S.A. Kativo Chemical Industries, S.A. Costa Rica 100.00 Analko, S.A. Kativo Chemical Industries, S.A. Costa Rica 100.00 /*/ Deco Tintas, S.A. Kativo Chemical Industries, S.A. Costa Rica 100.00 - -------------------------------------------------------------------------------------------------------------------------------- H.B. Fuller Dominicana, S.A. Kativo Chemical Industries, S.A. Dominican Republic 79.08 Chemical Supply Corporation 20.92 - -------------------------------------------------------------------------------------------------------------------------------- H.B. Fuller Ecuador, S.A. Kativo Chemical Industries, S.A. Ecuador 50.000 Chemical Supply Corporation 49.999 Minority 0.001 - -------------------------------------------------------------------------------------------------------------------------------- Kativo de El Salvador, S.A. Kativo Chemical Industries, S.A. El Salvador 100.00 /*/ Minority 0.00 Kativo Industrial de El Salvador, S.A. Kativo Chemical Industries, S.A. El Salvador 80.00 Chemical Supply Corporation 20.00 H.B. Fuller El Salvador, S.A. Kativo Chemical Industries, S.A. El Salvador 80.00 Chemical Supply Corporation 20.00 Deco Tintas de El Salvador, S.A. Kativo Chemical Industries, S.A. El Salvador 80.00 /*/ Chemical Supply Corporation 20.00 - -------------------------------------------------------------------------------------------------------------------------------- Norchem, Ltda. Kativo Chemical Industries, S.A. Grand Cayman 100.00 /*/ - -------------------------------------------------------------------------------------------------------------------------------- Kativo Comercial de Guatemala, S.A. Kativo Chemical Industries, S.A. Guatemala 80.00 Chemical Supply Corporation 20.00 Compania Mercantil de Pinturas Kativo Chemical Industries, S.A. Guatemala 100.00 /*/ Kativo de Guatemala, S.A. Minority 0.00 Kiosko de Pinturas, S.A. Kativo de Guatemala, S.A. Guatemala 100.00 /*/ Minority 0.00 H.B. Fuller Guatemala, S.A. Chemical Supply Corporation Guatemala 100.00 Sinteticos de Guatemala, S.A. Kativo Chemical Industries, S.A. Guatemala 80.00 /*/ Chemical Supply Corporation 20.00 Punto de Viniles, S.A. Sinteticos de Guatemala, S.A. Guatemala 100.00 /*/ Alfombras Canon de Guatemala, S.A. Sinteticos de Guatemala, S.A. Guatemala 100.00 /*/ - --------------------------------------------------------------------------------------------------------------------------------
/*/ Inactive Entities Page 3 of 5 Exhibit 21 ---------- KATIVO CHEMICAL INDUSTRIES, S.A. AND CONSOLIDATED SUBSIDIARIES AS OF NOVEMBER 30, 1996
PERCENTAGE JURISDICTION OF OF VOTING SUBSIDIARY OWNER OF VOTING SECURITIES ORGANIZATION SECURITIES - ------------------------------------ ----------------------------------- ------------------ ---------------- Kativo de Honduras, S.A. Kativo Chemical Industries, S.A. Honduras 69.29 Fuller Istmena, S.A. 30.65 Colorcentro, S.A. 0.02 H.B. Fuller Panama, S.A. 0.02 Kativo de Panama, S.A. 0.02 Aerosoles de Centroamerica, S.A. Kativo Chemical Industries, S.A. Honduras 99.88 H.B. Fuller Panama, S.A. 0.09 Minority 0.03 Alfombras Canon, S.A. Kativo Chemical Industries, S.A. Honduras 78.00 * H.B. Fuller Panama, S.A. 5.00 Kativo de Panama, S.A. 10.00 Fuller Istmena, S.A. 5.00 Colorcentro 2.00 Comercial Punto de Viniles, S.A. Kativo Chemical Industries, S.A. Honduras 68.00 * Fuller Istmena, S.A. 8.00 H.B. Fuller Panama, S.A. 8.00 Kativo de Panama, S.A. 8.00 Colorcentro, S.A. 8.00 Kiosko Comercial, S.A. Kativo Chemical Industries, S.A. Honduras 60.00 * Fuller Istmena, S.A. 8.00 Kativo de Panama, S.A. 16.00 H.B. Fuller Panama, S.A. 8.00 Colorcentro, S.A. 8.00 Kativo Comercial, S.A. Kativo Chemical Industries, S.A. Honduras 15.00 Fuller Istmena, S.A. 25.00 Kativo de Panama, S.A. 25.00 H.B. Fuller Panama, S.A. 15.00 Colorcentro, S.A. 20.00 Punto de Viniles, S.A. Kativo Chemical Industries, S.A. Honduras 72.00 * Fuller Istmena, S.A. 8.00 Kativo de Panama, S.A. 10.00 H.B. Fuller Panama, S.A. 8.00 Colorcentro, S.A. 2.00 Kiosko de Pinturas, S.A. Kativo Chemical Industries, S.A. Honduras 62.00 * Fuller Istmena, S.A. 8.00 Kativo de Panama, S.A. 20.00 H.B. Fuller Panama, S.A. 8.00 Colorcentro, S.A. 2.00 Fabrica de Pinturas Surekote Kativo Chemical Industries, S.A. Honduras 0.19 * de Honduras, S.A. Kativo de Nicaragua 0.10 H.B. Fuller Nicaragua 0.10 Kativo de Honduras, S.A. 99.52 Minority 0.10 Servicios e Inversiones Kiosko de Pinturas, S.A. Honduras 0.40 * de Honduras, S.A. Kiosko Comercial, S.A. 0.40 Kativo Comercial, S.A. 0.40 Aerosoles de Centroamerica, S.A. 0.40 Kativo de Honduras, S.A. 98.40 Deco Tintas De Honduras, S.A. Kativo Chemical Industries, S.A. Honduras 80.00 * Chemical Supply Corporation 19.95 Kativo de Panama, S.A. 0.02 H.B. Fuller Panama, S.A. 0.02 Decontintas de Panama, S.A. 0.02 H.B. Fuller Honduras, S.A. Kativo Chemical Industries, S.A. Honduras 20.00 Fuller Istmena, S.A. 20.00 Kativo de Panama, S.A. 20.00 H.B. Fuller Panama, S.A. 20.00 Chemical Supply Corporation 20.00 Comercial Fuller, S.A. Kativo Chemical Industries, S.A. Honduras 61.00 * Kativo Comercial, S.A. (Panama) 10.00 Kativo de Panama, S.A. 10.00 H.B. Fuller Panama, S.A. 4.00 Chemical Supply Corporation 15.00 - -------------------------------------------------------------------------------------------------------------------
* -Inactive Entities Page 4 of 5 Exhibit 21 ---------- KATIVO CHEMICAL INDUSTRIES, S.A. AND CONSOLIDATED SUBSIDIARIES AS OF NOVEMBER 30, 1996
PERCENTAGE JURISDICTION OF OF VOTING SUBSIDIARY OWNER OF VOTING SECURITIES ORGANIZATION SECURITIES - ----------------------------- ------------------------------------ --------------------------- --------------------- Industrias Kativo de Nicaragua, S.A. Kativo Chemical Industries, S.A. Nicaragua 99.99 Minority 0.01 Distribuidora Industrial y Comercial, S.A. Sinteticos, S.A Nicaragua 86.00 * Minority 14.00 H.B. Fuller Nicaragua, S.A. Kativo Chemical Industries, S.A. Nicaragua 99.80 Minority 0.20 - ---------------------------------------------------------------------------------------------------------------------------------- Chemical Supply Corporation Kativo Chemical Industries, S.A. Panama 100.00 Kativo de Panama, S.A. Kativo Chemical Industries, S.A. Panama 100.00 * Colorcentro, S.A. Kativo de Panama, S.A. Panama 100.00 Fuller Istmena, S.A. Kativo de Panama, S.A. Panama 100.00 * Procesamientos Contables, S.A. Kativo de Panama, S.A. Panama 100.00 * Alquileres Industriales, S.A. Kativo de Panama, S.A. Panama 100.00 * Alfombras Canon, S.A. Kativo de Panama, S.A. Panama 100.00 * Deco Tintas Comerciales, S.A. Kativo Chemical Industries, S.A. Panama 100.00 H.B. Fuller Panama, S.A. Kativo Chemical Industries, S.A. Panama 100.00 Deco Tintas de Panama, S.A. Kativo Chemical Industries, S.A. Panama 100.00 * Vigilia, S.A. Kativo de Panama, S.A. Panama 100.00 * Sistema Integrados, S.A. H.B. Fuller Panama, S.A. Panama 100.00 - ---------------------------------------------------------------------------------------------------------------------------------- Chemical Supply Peruana, S.A. Chemical Supply Corporation Peru 99.999 Minority 0.001 H.B. Fuller Peru, S.A. Chemical Supply Peruana, S.A. Peru 50.00 Kativo Chemical Industries, S.A. 50.00 - ---------------------------------------------------------------------------------------------------------------------------------- H.B. Fuller Uruguay, S.A. H.B. Fuller Argentina, S.A. Uruguay 100.00 - ---------------------------------------------------------------------------------------------------------------------------------- H.B. Fuller Venezuela, S.A. Kativo Chemical Industries, S.A. Venezuela 100.00 - ----------------------------------------------------------------------------------------------------------------------------------
* -- Inactive Entities Page 5 of 5 EX-23 8 CONSENT OF PRICE WATERHOUSE Exhibit 23 ---------- CONSENT OF INDEPENDENT ACCOUNTANTS ---------------------------------- We hereby consent to the incorporation by reference in the Prospectus constituting part of the Registration Statements on Form S-3 (Registration Nos. 33-53169 and 33-53387) and to the incorporation by reference in the Registration Statements on Form S-8 (Registration Nos. 33-50786, 33-16082, 1-9225, 2-73650 and 2-89810) of H.B. Fuller Company of our report dated January 10, 1997 appearing in the 1996 Annual Report to Stockholders of H.B. Fuller Company which is incorporated in this Annual Report on Form 10-K. We also consent to the incorporation by reference of our report on the Financial Statement Schedules, which appears in this Form 10-K. /s/ Price Waterhouse LLP Price Waterhouse LLP Minneapolis, Minnesota February 25, 1997 EX-24 9 POWER OF ATTORNEY Exhibit 24 ---------- POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned directors of H.B. FULLER COMPANY, a Minnesota corporation, which proposes to file with the Securities and Exchange Commission, Washington D.C. 20549, under the provisions of the Securities Exchange Act of 1934, as amended, a Form 10-K Annual Report for the Company's fiscal year ended November 30, 1996, hereby constitute and appoint ANTHONY L. ANDERSEN, JORGE WALTER BOLANOS AND RICHARD C. BAKER his/her true and lawful attorneys-in-fact and agents, and each of them, with full power to act without the other, for him/her and in his/her name, place and stead to sign such annual report with power, where appropriate, to affix the corporate seal of said Company thereto, and to attest said seal, and to file such annual report so signed, with all exhibits thereto, and any and all other documents in connection therewith, with the Securities and Exchange Commission and with the appropriate office of any state, hereby granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform any and all acts and things requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he/she might do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or either of them, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned have hereunto set their hands as of the 5th day of December, 1996. /s/Anthony L. Andersen /s/Reatha C. King - ---------------------------- ---------------------------- ANTHONY L. ANDERSEN REATHA CLARK KING Chairman of the Board Director /s/Norbert R. Berg /s/Walter Kissling - ---------------------------- ---------------------------- NORBERT R. BERG WALTER KISSLING Director President and Chief Executive Officer and Director /s/Edward L. Bronstien, Jr. /s/John J. Mauriel, Jr. - ---------------------------- ---------------------------- EDWARD L. BRONSTIEN, JR. JOHN J. MAURIEL, JR. Director Director /s/Robert J. Carlson /s/Lee R. Mitau - ---------------------------- ---------------------------- ROBERT J. CARLSON LEE R. MITAU Director Director /s/Freeman A. Ford /s/Rolf Schubert - ---------------------------- ---------------------------- FREEMAN A. FORD ROLF SCHUBERT Director Vice President of Corporate Research and Development and Director /s/Gail D. Fosler /s/Lorne C. Webster - ---------------------------- ---------------------------- GAIL D. FOSLER LORNE C. WEBSTER Director Director EX-27 10 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BALANCE SHEET, INCOME STATEMENT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENT. 1,000 12-MOS NOV-30-1996 DEC-01-1995 NOV-30-1996 3,515 0 199,786 7,043 151,212 388,198 664,192 272,991 869,275 246,581 172,779 0 306 14,066 320,368 869,275 1,275,716 1,275,716 871,501 323,461 (14,678) 2,745 18,881 76,551 31,233 45,430 0 0 0 45,430 3.22 3.22
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