-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, CO8ZhD7NgqHG3NfWK7GXSyKfdcf0Ad1th4vOB9fJkncZWEoloFe5lzgVn1bUkOil Fe3gttM68Y4BlVpSk3HuWA== 0000950131-95-000445.txt : 19950301 0000950131-95-000445.hdr.sgml : 19950301 ACCESSION NUMBER: 0000950131-95-000445 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19941130 FILED AS OF DATE: 19950227 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-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 001-09225 FILM NUMBER: 95515391 BUSINESS ADDRESS: STREET 1: 2400 ENERGY PK DR CITY: ST PAUL STATE: MN ZIP: 55108 BUSINESS PHONE: 6126453401 10-K405 1 FORM 10-K405 - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-K405 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended November 30, 1994 Commission File No. 0-3488 H. B. FULLER COMPANY A Minnesota Corporation IRS Employer Identification No. 41-0268370 2400 Energy Park Drive, St. Paul, Minnesota 55108 Telephone - (612) 645-3401 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-K405 or any amendment to this Form 10-K405. X --- 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, 1995, 13,946,671 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 $409,777,000. DOCUMENTS INCORPORATED BY REFERENCE Parts I, II and IV incorporate information by reference from the H. B. Fuller Company 1994 Annual Report to Stockholders. Part III incorporates information by reference from the Registrant's Proxy Statement dated March 3, 1995. - -------------------------------------------------------------------------------- -1- H. B. FULLER COMPANY 1994 Form 10-K405 Annual Report Table of Contents Page ---- PART I ------ Item 1. Business 3 Item 2. Properties 7 Item 3. Legal Proceedings 8 Item 4. Submission of Matters to a Vote of Security Holders 12 Executive Officers of the Registrant 13 PART II ------- Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters 14 Item 6. Selected Financial Data 14 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 14 Item 8. Financial Statements and Supplementary Data 14 Item 9. Change in and Disagreements with Accountants on Accounting and Financial Disclosure 14 PART III -------- Item 10. Directors and Executive Officers of the Registrant 15 Item 11. Executive Compensation 15 Item 12. Security Ownership of Certain Beneficial Owners and Management 15 Item 13. Certain Relationships and Related Transactions 15 PART IV ------- Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 16 Signatures 19 -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 6,400 people and has sales operations in 43 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 85 percent of 1994 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 and sanitation chemicals to the dairy, beverage and food processing industries in the U.S. Segment Information - ------------------- For financial information relating to major geographic areas of H. B. Fuller, see Note 15, "Business Segment Information", on page 65 of the Company's 1994 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, sanitizing chemicals, 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 ------------------ 1994 1993 1992 ---- ---- ---- Adhesives, sealants and coatings 86% 84% 84% Paints 7 8 7 Sanitation chemicals 3 3 3 Specialty waxes 2 2 2 Other 2 3 4 ---- ---- ---- 100% 100% 100% ==== ==== ==== -3- International Operations - ------------------------ The international business of H. B. Fuller is conducted primarily by subsidiaries manufacturing in countries outside of the United States. Wherever feasible, H. B. Fuller's practice has been to establish manufacturing units outside of the U.S. to service the local markets. The principal markets, products and methods of distribution in the international 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 1994, the Company had plants in 32 countries outside the U.S. 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 plastics, printing inks, industrial adhesives and other specialty chemical products. 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 $1,097,367 total sales to unaffiliated customers in 1994, $637,632 was sold through North American operations. The Company's largest customer accounts for less than 4% 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, 1994, 1993 or 1992. -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), Rakoll(R), and Monarch(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 1994, 1993 and 1992 aggregated $23,624,000, $21,826,000, and $20,377,000, 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. 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 -5- 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 $11.0 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 6,400 persons on November 30, 1994, of which approximately 2,400 persons were employed in the United States. -6- Item 2. Properties - ---------- The principal manufacturing plants and other properties are located in 33 countries: U.S. Locations Other Locations -------------- --------------- California Argentina - Buenos Aires Los Angeles (1 owned, 2 leased) Australia Roseville Melbourne Tulare Sydney* Florida Austria - Wels Gainesville Brazil - Sao Paulo Pompano Beach Canada Georgia St. Andre est Conyers* Montreal Covington Toronto Forest Park Chile - Santiago Tucker Colombia - Itagui* Illinois Costa Rica - San Jose (6 owned) Palatine Dominican Republic - Santo Domingo Tinley Park Ecuador - Guayaquil (2 owned) Indiana - Elkhart El Salvador - San Salvador (1 owned, 2 leased) Kansas - Kansas City Federal Republic of Germany Kentucky - Paducah Luneburg Maryland - Baltimore Munich* Massachusetts Nienburg* Marlboro* Finland - Tikinmaa Wilmington France - Le Trait Michigan Guatemala - Guatemala City (2 leased) Grand Rapids Honduras Warren (1 owned, 2 leased) San Pedro Sula (2 owned) Minnesota Tegucigalpa Minneapolis and St. Paul Italy - Borgolavezzaro (7 owned, 1 leased) Japan - Hamamatsu New Jersey - Edison Mexico - Mexico City* (1 owned, 1 leased) Netherlands - Amerongen New York - Geneva New Zealand - Auckland (2 owned) North Carolina Nicaragua - Managua Greensboro People's Republic of Charlotte* China - Guangzhou* Ohio Peru - Lima Cincinnati* Philippines - Manila* Dayton Puerto Rico - Bayamon Oklahoma - Oklahoma City* Republic of Panama - Panama City Oregon - Portland (2 owned, 1 leased) Tennessee - Memphis* Spain - Alicante Texas Switzerland - Basel* Dallas Taiwan - Taipei Fort Worth United Kingdom Houston Birmingham* Washington - Vancouver Derbyshire* Venezuela - Caracas * Leased properties -7- 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 1,754,000 square feet, including 279,000 square feet of leased space. In addition, the Company has approximately 2,167,000 square feet of warehouse, including 397,000 square feet of leased space. Offices and other facilities total 1,663,000 square feet, including 426,000 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. Following is a list of Sites where the Company has or expects to 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. EAST BETHEL LANDFILL, EAST BETHEL, MINNESOTA. -------------------------------------------- The Company was a defendant in a private cost recovery action brought by the owners and operators of the landfill designated as a Federal Superfund Site. The defendants entered into a settlement with the plaintiffs. The Company has paid approximately $194,000 for its share of allocated cleanup costs. 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. 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. -8- GLOUCESTER ENVIRONMENTAL MANAGEMENT SERVICES, --------------------------------------------- INC., GLOUCESTER TWNSHP., NEW JERSEY. ------------------------------------ The Company has received notice from the EPA that it may be a PRP at this landfill. The New Jersey EPA served the Company with a complaint and named Paisley Products, Inc., from which the Company acquired certain assets, as the PRP. The predecessor in interest has agreed to indemnify and hold the Company harmless pursuant to the asset purchase agreement. The Company has paid approximately $149,000 as its portion of the allocation for the time period that the Company operated the acquired facility. It is estimated that the Company has a remaining contribution of approximately $20,000 for future cleanup costs. OAK GROVE LANDFILL, OAK GROVE, MINNESOTA. ---------------------------------------- The Company and other defendants have signed a consent decree with the EPA that provides for the implementation of remedial work at this Federal Superfund Site. The Company has paid approximately $128,000 as its portion of the cleanup costs. The Company expects that it will make an additional contribution for remediation of approximately $20,000. WASTE DISPOSAL ENGINEERING, ANDOVER, MINNESOTA. ---------------------------------------------- The Company and other PRPs signed a consent decree with the EPA that provides for payment of remedial work at the Site. The Company has paid assessments of approximately $84,000 for the remedial work. The Company estimates that its future share of remediation costs is approximately $36,000. 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's proposed assessment in 1995 will be $24,000. 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 $47,000. 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. Because of its de minimis status, the Company believes that any future costs will be minimal, and will not materially affect its business or financial condition. -9- 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. VANDALE JUNKYARD, DAYTON, OHIO. ------------------------------ The Company received a Request for Information from the EPA directed to its Automotive Technology Systems, Inc. facility in Dayton, Ohio. The Company responded to the EPA's Request for Information, an internal investigation has started, and preliminary contact with a PRP Group has been made. Records obtained from a Freedom of Information Request indicate that haulers interviewed by the Ohio EPA recall hauling waste in the 1980's from Protective Treatments, Inc., a predecessor corporation, to the Site. The estimated cleanup costs are approximately $4 million. Because the Company's liability at this Site is limited by an indemnification agreement from an indemnitor with adequate financial resources to cover any claim for indemnity, the Company believes any liability to the Company 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 $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. -10- NINTH AVENUE, GARY, INDIANA. --------------------------- The Company was recently named as a defendant in a private cost recovery action brought by PRPs who have conducted remedial activities at the Site. The participating PRPs have expended in excess of $20 million to date. Because the Company's use of this Site has not yet been determined, the Company does not have sufficient information to form any opinion on whether any allocation to the Company will 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 liable 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. MATTERS PREVIOUSLY DISCLOSED. - ---------------------------- A-1 DISPOSAL, PLAINWELL, MICHIGAN. --------------------------------- The Company received notice from the Michigan Department of Natural Resources ("DNR") in June, 1994, that it was named a PRP at this Site. The notice required the Company to work with participating companies (companies who had been involved with activities at the Site for some time) in contributing to the cost for remediation at the Site. The Company has resolved all disputes regarding this Site. The Company paid $24,242.83 and has no future liability with this Site. AMERICAN CHEMICAL SERVICES, GRIFFITH, INDIANA. --------------------------------------------- The Company was identified as a PRP at this Site. The Company joined a Remediation Action Group organized to study the EPA's remediation proposal and negotiate de minimis settlements. The Company was allocated .00865% of the waste volume as calculated by the Group. The Company has resolved all disputes regarding this Site. The Company paid $22,087.09 and has no future liability with this Site. -11- TSCA MATTER. - ----------- On October 19, 1990, the Company voluntarily notified the EPA that a previously unrecognized reaction may have occurred during the formation of a product that did not comply with the notice requirements of the Toxic Substances Control Act. On September 30, 1993, the EPA filed an Administrative Complaint against the Company. The Company entered into an Administrative Order on Consent with the EPA and paid $90,000.00. The Company has no future liability with this matter. OTHER LEGAL PROCEEDINGS. - ----------------------- The Company is a party to a number of other pending legal proceedings that are routine matters incidental to its business and that are not expected, individually or in the aggregate, to have a material adverse effect on its business or financial condition. Item 4. Submission of Matters to a Vote of Security Holders - --------------------------------------------------- Not applicable. -12- Executive Officers of the Registrant - ------------------------------------ The executive officers of the Company as of November 30, 1994, their ages and current offices are set forth below:
Name Age Position Period Served - ---- --- -------- ------------- Anthony L. Andersen 58 Chair, Board of Directors Since 1992 Chief Executive Officer Since 1974 Director Since 1966 Walter Kissling 63 President Since 1992 Chief Operating Officer Since 1990 Director Since 1968 John T. Ray, Jr. 57 Senior Vice President Since 1984 Richard C. Johnson 65 Senior Vice President Since 1992 Chief Administrative Officer Since 1992 Wolfgang Weber 55 Senior Vice President Since 1992 Jorge Walter Bolanos 50 Chief Financial Officer and Treasurer Since 1992 Vice President Since 1990 Lars T. Carlson 56 Vice President Since 1986 Sarah R. Coffin 42 Vice President Since 1994 Antonio Lobo 51 Vice President Since 1989 Rolf Schubert 56 Vice President Since 1982 Director Since 1972 Jerald L. Scott 53 Vice President Since 1980 David J. Maki 53 Vice President Since 1990 Controller Since 1987 Richard C. Baker 42 Vice President and Assistant Corporate Secretary Since 1993 General Counsel Since 1990
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. Prior to that she had been General Manager, Polymerland, Inc., a subsidiary of the General Electric Company. -13- PART II Information for Items 5 through 8 of this report appear in the 1994 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 70 High and Low Market Value 70 Dividend Payments 70 Dividend Restrictions (Note 14) 63-64 Holders of Common Stock 71 Item 6. Selected Financial Data - ------------------------------- 1969 - 1994 in Review and Selected Financial Data 68-69 Item 7. Management's Discussion and Analysis of - ----------------------------------------------- Financial Condition and Results of Operations --------------------------------------------- Management's Analysis of Results of Operations and Financial Condition 41-48 Item 8. Financial Statements and Supplementary Data - --------------------------------------------------- Consolidated Financial Statements 49-65 Quarterly Data (Unaudited)(Note 16) 66 Item 9. Changes in and Disagreements with Accountants - ----------------------------------------------------- on Accounting and Financial Disclosure -------------------------------------- None -14- 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. -15- PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K - -------------------------------------------------------------------------
Reference ------------------------------ Form 10-K405 Annual Report Annual Report to Stockholders Page Page ------------- --------------- (a)(1.) Index to Consolidated Financial Statements Incorporated by Reference to the 1994 Annual Report to Stockholders of H. B. Fuller Company: Consolidated Statements of Earnings for the Three Years Ended November 30, 1994 49 Consolidated Balance Sheets as of November 30, 1994 and 1993 50 Consolidated Statements of Stockholders' Equity for the Three Years Ended November 30, 1994 51 Consolidated Statements of Cash Flows for the Three Years Ended November 30, 1994 52 Notes to Consolidated Financial Statements 53-66 Report of Independent Accountants 67 (a)(2.) Index to Consolidated Financial Statement Schedules for the Three Years Ended November 30, 1994: Auditors' Report on Financial Statement Schedules 20 Schedule V Property, Plant and Equipment 21 Schedule VI Accumulated Depreciation of Property, Plant and Equipment 22 Schedule VIII Valuation and Qualifying Accounts 23 Schedule IX Short-Term Borrowings 24 Schedule X Supplementary Income Statement Information 25
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. -16- (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, 1992. 4(a) Amended and Restated Shareholder Rights Plan incorporated by reference to Exhibit 4(a) to the Registrant's Registration Statement on Form 8-A (Commission File No. 1-9225). 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, 1992. *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 as amended and restated January 1, 1995. *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 Incentive Stock Option Plan of 1982 - incorporated by reference to the Registrant's Registration Statement on Form S-8 (Commission File No. 2-89810). *10(g) 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(h) 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. -17- (a)(3.) Exhibits (continued) -------- *10(i) Managing Director Agreement with Wolfgang Weber signed March 23, 1990 - incorporated by reference to Exhibit 10(f) to the Registrant's Annual Report on Form 10-K for the year ended November 30, 1990. *10(j) Supplement Agreement, dated March 10, 1993, to Managing Director Agreement with Wolfgang Weber - incorporated by reference to Exhibit 10(k) to the Registrant's Annual Report on Form 10-K for the year ended Novemeber 30, 1993. *10(k) H.B. Fuller GmbH Pension Plan (summary of plan in English) - incorporated by reference to Exhibit 10(g) to the Registrant's Annual Report on Form 10-K for the year ended November 30, 1990. *10(l) 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(m) Deferred Compensation Agreement with Walter Kissling signed December 22, 1994. *10(n) Retirement Plan for Directors of H.B. Fuller Company, 1994 Revision. *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-K405. 11 Statement re: Computation of Net Earnings Per Common Share 13 Pages 41 - 71 of the 1994 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 99 Report on Form 11-K of H.B. Fuller Company Thrift Plan (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, 1994. -18- 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 23, 1995 By/s/ Anthony L. Andersen --------------------------------- ANTHONY L. ANDERSEN Chair, Board of Directors 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/ Anthony L. Andersen Chair, Board of Directors and - ----------------------------- Chief Executive Officer and Director ANTHONY L. ANDERSEN (Principal Executive Officer) /s/ Jorge Walter Bolanos 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 *NORBERT R. BERG Director *EDWARD L. BRONSTIEN, JR. Director *FREEMAN A. FORD Director *REATHA CLARK KING Director *WALTER KISSLING President, Chief Operating Officer and Director *JOHN J. MAURIEL, JR. Director *ROLF SCHUBERT Vice President and Director *LORNE C. WEBSTER Director *GAIL D. FOSLER Director By: /s/ Richard C. Baker Dated: February 23, 1995 ---------------------------- RICHARD C. BAKER Attorney in Fact *Power of Attorney filed with this report as Exhibit 24 hereto. -19- 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 5, 1995 appearing in the 1994 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-K405) also included an audit of the Financial Statement Schedules listed in Item 14(a) of this Form 10-K405. 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 5, 1995 Schedule V ---------- H.B. Fuller Company and Consolidated Subsidiaries Property, Plant and Equipment Years Ended November 30, 1994, 1993, and 1992 (Dollars in thousands)
Balance at Other Balance beginning Additions changes at end Classification of period at cost Retirements add(deduct) of period ---------------------------------- ----------- ----------- ----------- ----------- ----------- Year ended November 30, 1994: Land $38,456 $1,620 $500 $4,897 (b) $48,795 3,539 (a) 783 (c) Buildings and improvements 131,947 661 1,963 7,035 (b) 144,307 4,949 (a) 1,678 (c) Machinery and equipment 222,741 8,625 12,507 26,010 (b) 275,296 26,839 (a) 3,588 (c) Construction in progress 26,468 54,112 (37,942) (b) 45,495 1,114 (a) 1,743 (c) ----------- ----------- ----------- ---------- ----------- $419,612 $101,459 $14,970 $7,792 $513,893 =========== =========== =========== ========== =========== Year ended November 30, 1993: Land $38,371 $112 $1,476 (b) $38,456 (1,503) (c) Buildings and improvements 128,044 2,077 $35 5,326 (b) 131,947 221 (a) (3,686) (c) Machinery and equipment 214,172 5,535 4,436 13,980 (b) 222,741 1,897 (a) (8,407) (c) Construction in progress 14,234 34,118 (20,782) (b) 26,468 (1,102) (c) ----------- ----------- ----------- ----------- ----------- $394,821 $43,960 $4,471 ($14,698) $419,612 =========== =========== =========== =========== =========== Year ended November 30, 1992: Land $35,209 $98 $67 $1,482 (b) $38,371 30 (d) 1,619 (c) Buildings and improvements 119,668 879 350 3,644 (b) 128,044 667 (d) 3,536 (c) Machinery and equipment 185,167 9,398 4,666 16,980 (b) 214,172 557 (d) 6,736 (c) Construction in progress 11,452 24,086 (22,106) (b) 14,234 300 (d) 502 (c) ----------- ----------- ----------- ----------- ----------- $351,496 $36,015 $5,083 $12,393 $394,821 =========== =========== =========== =========== ===========
(a) Property, plant and equipment of acquired businesses. (b) Reclassification of costs. (c) Effect of currency exchange rate changes on beginning of year balance. (d) Consolidation of subsidiaries previously unconsolidated in Nicaragua. -21- Schedule VI ----------- H.B. Fuller Company and Consolidated Subsidiaries Accumulated Depreciation of Property, Plant and Equipment Years Ended November 30, 1994, 1993, and 1992 (Dollars in thousands)
Additions Balance at charged to Other Balance beginning costs and changes at end Classification of period expenses Retirements add(deduct) of period ---------------------------------- ----------- ----------- ----------- ----------- ----------- Year ended November 30, 1994: Land $4,612 $691 $308 $82 (c) $5,117 40 (a) Buildings and improvements 47,880 5,432 1,200 19 (b) 54,164 1,451 (a) 582 (c) Machinery and equipment 134,573 22,054 10,502 (19) (b) 159,522 10,972 (a) 2,444 (c) ----------- ----------- ----------- ----------- ----------- $187,065 $40,640 $12,010 $3,108 $218,803 =========== =========== =========== =========== =========== Year ended November 30, 1993: Land $4,343 $523 $2 ($96) (b) $4,612 (156) (c) Buildings and improvements 43,477 5,242 46 366 (b) 47,880 8 (a) (1,167) (c) Machinery and equipment 123,848 19,169 3,470 (270) (b) 134,573 416 (a) (5,120) (c) ----------- ----------- ----------- ----------- ----------- $171,668 $25,358 $3,518 ($6,443) $187,065 =========== =========== =========== =========== =========== Year ended November 30, 1992: Land $3,478 $541 $2 $141 (b) $4,343 185 (c) Buildings and improvements 37,170 5,061 131 (143) (b) 43,477 234 (d) 1,286 (c) Machinery and equipment 103,470 19,263 3,774 2 (b) 123,848 395 (d) 4,492 (c) ----------- ----------- ----------- ----------- ----------- $144,118 $25,494 $3,907 $5,963 $171,668 =========== =========== =========== =========== ===========
(a) Accumulated depreciation of property, plant and equipment of acquired businesses. (b) Reclassification of accumulated depreciation. (c) Effect of currency exchange rate changes on beginning of year balance. (d) Consolidation of subsidiaries previously unconsolidated in Nicaragua. -22- Schedule VIII ------------- H.B. Fuller Company and Consolidated Subsidiaries Valuation and Qualifying Accounts Years Ended November 30, 1994, 1993, and 1992 (Dollars in thousands) Allowance for doubtful receivables -------------------------------------- 1994 1993 1992 ---------- ---------- ------------ Balance at beginning of period $5,519 $5,451 $5,594 Additions(deductions): Charged to costs and expenses 1,391 1,740 1,937 Accounts charged off during year (1,091) (1,409) (2,305) Accounts of acquired businesses 288 57 Effect of currency exchange rate changes on beginning of year balance 114 (320) 225 ---------- ---------- ------------ Balance at end of period $6,221 $5,519 $5,451 ========== ========== ============ -23- Schedule IX ----------- H.B. Fuller Company and Consolidated Subsidiaries Short-Term Borrowings Years Ended November 30, 1994, 1993, and 1992 (Dollars in thousands)
1994 1993 1992 ---------- ---------- ---------- Balance at end of year: Notes payable: Banks $44,306 $18,638 $16,975 Others $ 8,819 $ 1,191 $ 1,077 ========== ========== ========== Weighted-average interest rate at end of year 11.1%(1) 16.0%(1) 20.5% ========== ========== ========== Maximum amount outstanding during the year $87,796 $22,285 $29,517 ========== ========== ========== Average amount outstanding during the year $45,430 $19,440 $24,267 ========== ========== ========== Weighted-average interest rate during the year 14.1%(1) 17.8%(1) 19.8% ========== ========== ==========
The average amount of short-term borrowings outstanding during the year was calculated by weighting the outstanding debt by the number of days it remained unpaid and then dividing this by the total number of days in the year. The weighted-average interest rate during the year was computed by dividing interest expense by average outstanding debt. (1) Smaller percent of short-term borrowings are occurring in high inflationary countries which causes the short-term interest rate to decrease. -24- Schedule X ---------- H.B. FULLER COMPANY AND CONSOLIDATED SUBSIDIARIES Supplementary Income Statement Information Years Ended November 30, 1994, 1993, and 1992 (Dollars in thousands)
Charged to costs and expenses -------------------------------------- 1994 1993 1992 ---------- ---------- ------------ Maintenance and repairs $13,961 $12,480 $12,043 ========== ========== ============
Other items did not exceed 1% of total sales as reported in the related Consolidated Statements of Earnings and therefore are not presented. -25- EX-10.D 2 DIRECTORS STOCK PLAN Exhibit 10(d) ------------- H.B. FULLER COMPANY DIRECTORS' STOCK PLAN AS AMENDED AND RESTATED JANUARY 1, 1995 Section 1. Establishment. H.B. Fuller Company hereby establishes the "H.B. FULLER COMPANY DIRECTORS' STOCK PLAN" for Eligible Directors of Company. Section 2. Effective Date. This Plan was originally approved by the Board of Directors on December 1, 1988. The Plan was approved by shareholders on April 20, 1989. The Plan was most recently amended on January 1, 1995. Section 3. Purpose. The purpose of the Plan is to provide Eligible Directors with a means of expressing their commitment to the Company by subjecting their deferred retainer fees and meeting fees to the stock market performance of Company's Stock. Section 4. Definitions. (a) Bookkeeping Reserve Account. The term "Bookkeeping Reserve Account" shall have the meaning given in Section 6 of the Plan. (b) Company. The term "Company" shall mean H.B. Fuller Company, a Minnesota corporation, and its successors and assigns. (c) Election Agreement. The term "Election Agreement" shall mean each and every "Election Agreement" executed by an Eligible Director and delivered to Company hereunder, the form of which is attached to the Plan as Exhibit A and is incorporated by reference herein. (d) Eligible Director. The term "Eligible Director" shall mean any present or future director of Company who is not an employee of Company or any subsidiary of Company. (e) Market Price. The term "Market Price" shall mean the average of the highest and lowest prices per share of the Stock as reported on the day of the required calculation or, if there were no Stock transactions on such day, on the next preceding day on which there were Stock transactions. (f) Meeting Fee. The term "Meeting Fee" shall mean any amounts that would have been paid to an Eligible Director during a calendar year with respect to attendance at a meeting of the Company's Board of Directors or a committee thereof had deferral for such year not been timely elected. In no event does the term "Meeting Fee" include any per diem amounts paid with respect to Board or committee meeting attendance. (g) Participating Director. The term "Participating Director" shall mean an Eligible Director who has executed and delivered an Election Agreement to Company. (h) Payment Date. The term "Payment Date" shall mean the earliest to occur of the following dates: (i) the later of the date of the Participating Director's Retirement or the date (if any) specified in the Participating Director's Election Agreement; or (ii) the Participating Director's death; or (iii) the Participating Director's total and permanent disability; or (iv) the date of a Potential Change in Control. (i) Plan. The term "Plan" shall mean Company's Directors' Stock Plan, as it may be amended from time to time. (j) Potential Change in Control. The term "Potential Change in Control" shall mean the earliest to occur of: (i) the close of business on the date of public announcement by Company or any other person that a person (other than Company, a subsidiary of Company or an employee benefit plan of Company or such subsidiary) has become, after the effective date of the Plan, the beneficial owner (as defined in Rule 13d-3 under the Securities Exchange Act of 1934) of 19% or more (or the lowest percentage, if lower than 19%, set in any amendment to Company's Rights Agreement dated as of July 17, 1986 with First Trust Company, Inc.) of the voting power of all securities of Company then outstanding generally entitled to vote for the election of directors of Company; or (ii) the close of business on the date of the commencement of, or first public announcement of the intent to commence, a tender or exchange offer by any person (other than Company, a subsidiary of Company or an employee benefit plan of Company or such subsidiary), if upon consummation thereof, such person would be the beneficial owner of 30% or more (or the lowest percentage, if lower than 30%, set for such event in any amendment to the aforesaid Rights Agreement) of the voting power of all securities of Company then outstanding generally entitled to vote for the election of directors of Company; or (iii) the date on which individuals who constitute Company's Board of Directors on the effective date of the Plan (the "Incumbent Board") cease for any reason to constitute at least a majority thereof, provided that any person becoming a director subsequent to such effective date whose election, or nomination for election by Company's shareholders, was approved by a vote of at least three-quarter (3/4) of the directors comprising the Incumbent Board (either by a specific vote or by approval of the proxy statement of Company in which such person is named as a nominee for director, without objection to such nomination) shall be, for purposes of this clause (iii), considered as though such person were a member of the Incumbent Board. 2 (k) Retainer Fee. The term "Retainer Fee" shall mean any of the following amounts with respect to a calendar year: (i) two-thirds of the retainer fee amount that would be paid to a Participating Director in March of the calendar year in question had deferral for such year not been timely elected such two-thirds amount representing retainer fee amounts earned in January and February of such year; (ii) the entire retainer fee amount that would be paid to a Participating Director in June, September and December of the calendar year in question had deferral for such year not been timely elected; and (iii) one-third of the retainer fee amount that would be paid to a Participating Director in March of the next calendar year had deferral for the previous calendar year not been timely elected, such one-third amount representing the retainer fee amount earned in December of such previous calendar year. (l) Retirement. The term "Retirement" shall mean the voluntary or involuntary resignation of a director, the removal of a director with or without cause or the conclusion of a director's term of office where the director is not reelected by shareholders of the Company to a succeeding term. (m) Stock. The term "Stock" shall mean the par value of $1.00 Common Stock of Company. Section 5. Directors' Elections. Each Eligible Director shall be given an opportunity by Company on an annual basis to defer receipt of all or a percentage of the Retainer Fee and Meeting Fees which such Eligible Director has the opportunity to earn during the next succeeding calendar year through service as a director of Company. In order to participate in the Plan for a particular calendar year, an Eligible Director must elect in writing to participate and such election must be effective before the beginning of the calendar year to which the election relates. To make an effective election, a properly completed and executed Election Agreement must be received by Company at the address specified on such Election Agreement. Section 6. Bookkeeping Reserve Account. (a) Establishment of Account. Company shall establish and maintain a Bookkeeping Reserve Account for each Participating Director. The Bookkeeping Reserve Account shall reflect all entries required to be made pursuant to the terms and conditions of the Participating Director's Election Agreement. There shall be a separate accounting for each Election Agreement made by each Participating Director. (b) Credits to Account. Company shall credit to a Participating Director's Bookkeeping Reserve Account a number (to four decimal places) of units that is equal to 110% of the amount of the Participating Director's Retainer Fee and Meeting Fees deferred pursuant to an Election Agreement as periodically earned by Director divided by the Market Price on the day upon which such amounts are earned. For this purpose, the amounts of a Participating Director's Retainer Fee are deemed earned on March 1 (January and February 3 amounts), June 1 (March through May amounts), September 1 (June through August amounts), December 1 (September through November amounts) and the next March 1 (December amount). Meeting Fees are deemed earned when they would have otherwise been paid if a deferral had not been elected. Company shall credit to the Bookkeeping Reserve Account, on each day that Company declares a cash dividend to holders of the Stock, that number (to four decimal places) of units that is equal to the total number of units in the Participating Director's Bookkeeping Reserve Account on the declaration date for such dividend multiplied by the cash dividend per share of Stock divided by the Market Price on the declaration date for such dividend. The number of units credited to a Bookkeeping Reserve Account shall be adjusted appropriately by Company in the event of any change in Stock by reason of stock dividends, split-ups, recapitalizations, combinations, exchanges of shares and other like capital changes, but no adjustment shall be required by reason of any sales of shares of Stock by Company at any price, whether below, at or above Market Price, and whether by or pursuant to warrant, option, right, conversion right or privilege or otherwise and a Participating Director shall have no rights as a holder of Stock unless and until a certificate for shares of stock is issued by Company. Section 7. Payment of Account Value. (a) General. Company shall, with respect to each Bookkeeping Reserve Account for each Participating Director, cause to be delivered to such Participating Director (or any applicable alternate payee, as determined under the Plan or the applicable Election Agreement) on or promptly after the applicable Payment Date, the Payment Date value of such Bookkeeping Reserve Account in the form of shares of Stock pursuant to the express terms and conditions of the Plan and the applicable Election Agreement. (b) Disability. If a Payment Date occurs by reason of a determination by Company that the Participating Director has become totally and permanently disabled, and if the disability is due to mental incapacity, the shares of Stock deliverable under the Plan and the applicable Election Agreement shall be issued in the name of and delivered to the Participating Director's legally appointed personal representative. If no such representative has been appointed, then delivery shall be in the name of and to the Participating Director's spouse, or if the Participating Director is then unmarried, then such shares of Stock shall be held until the persons who would be entitled thereto if the Participating Director were then to die intestate make proper claim of Company for such shares of Stock. (c) Death. If a Payment Date occurs because the Participating Director shall die, the shares of Stock required to be delivered under the Plan and the applicable Election Agreement shall be promptly issued in the name of and delivered to the Participating Director's beneficiary (or beneficiaries) as designated in the applicable Election Agreement, or, if none are so designated, in the name of and to the legally appointed personal representative of the 4 Participating Director's estate. If no legal proceedings for such appointment have been instituted within sixty days after receipt by Company of notice of the Participating Director's death, such delivery shall be in accordance with the last sentence of Section 7(b) above. Section 8. Administration. Directors of Company who are not Eligible Directors shall be solely responsible for the administration of the Plan but may delegate any portion of such responsibility that they determine to be appropriate. To the extent consistent with the terms of the Plan, such directors shall have the power to interpret any Plan provision, to prescribe, amend and rescind rules and regulations relating to the Plan and make all other determinations that it deems necessary or advisable to administer the Plan. Such directors shall be called the Directors' Stock Plan Committee. Section 9. "Top Hat" Plan. The Plan is intended to be, for purposes of Titles I and IV of the Employee Retirement Income Security Act of 1974, as amended, an unfunded plan for the benefit of a selected group of non-employee management persons. Section 10. Other Benefits. Except to the extent specifically provided in Company's Retirement Plan for Directors or any other plan or arrangement maintained or sponsored by Company, the Plan benefits to Eligible Directors (other than Retainer Fees and Meeting Fees) shall not be deemed to be compensation for the purpose of computing benefits under such Retirement Plan for Directors or other plan or arrangement. Section 11. Status of Account. Company shall have full and unrestricted use of all property or amounts payable pursuant to the Plan, and title to and beneficial ownership of any assets which Company may earmark to pay the amounts hereunder shall at all times remain in Company and no Eligible Director shall have any property interest whatsoever in any specific assets of Company. The Bookkeeping Reserve Account is not intended to be a trust account or escrow account for the benefit of a Participating Director or any other person or an asset segregation for the benefit of a Participating Director or any other person. The sole right of a Participating Director, or a Participating Director's heirs or personal representatives, is a right as an unsecured general creditor of Company to claim any shares of Stock to which the Participating Director becomes entitled pursuant to the terms and conditions of the Participating Director's Election Agreement and the Plan. Company shall provide each Participating Director with an annual report of his or her Bookkeeping Reserve Account balance. Section 12. Amendment or Termination. Company may, at any time and from time to time, terminate the Plan or make such amendments as it deems advisable; provided, however, that no such termination or amendment shall adversely affect or impair the contract rights of a Participating Director with respect to an effective Election Agreement unless such Participating Director shall consent in writing to such termination or amendment; and provided further, that no such amendment, without the approval of Company's shareholders, may materially increase the benefits accruing to the Eligible Directors under the Plan, increase the number of shares of Stock distributed under the Plan, or materially modify the requirements as to eligibility under the Plan. 5 Section 13. Stock Subject to Plan. The maximum number of shares that shall be reserved for issuance under the Plan shall be 75,000 shares, subject to adjustment upon changes in the capitalization of Company as provided in Section 6 of the Plan. Section 14. Non-Plan Deferral Arrangements. Company does not intend that this Plan replace or supersede any presently existing retainer deferral arrangements or preclude Company from implementing additional deferral arrangements. Section 15. Future Director Terms. Nothing in this Plan or in any Election Agreement shall obligate a director to continue as such or to accept any nomination for a future term as a director of Company or require Company to nominate or cause the nomination of the director for a future term as a director of Company. Section 16. No Alienation. No shares of Stock deliverable under the Plan or under an Election Agreement shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge, other than by will or the laws of descent and distribution. Section 17. Withholding. Company is entitled to withhold and deduct from any amounts due from Company to a Participating Director all legally required amounts necessary to satisfy any federal, state or local withholding and employment-related taxes arising directly or indirectly in connection with the Plan or any Election Agreement, and Company may require the Participating Director to remit promptly to Company the amount of such taxes before taking any future actions with respect to the Participating Director's Bookkeeping Reserve Account or Election Agreement. 6 EX-10.M 3 DEFERRED COMPENSATION AGREEMENT Exhibit 10(m) ------------- DEFERRED COMPENSATION AGREEMENT This Agreement dated December 22, 1994, is between H. B. Fuller Company, a Minnesota corporation (the "Company") and Walter Kissling, a citizen of Costa Rica and as of the date hereof, the President and Chief Operating Officer of the Company ("Kissling"). WHEREAS, both Kissling and the Company wish to enter an agreement whereby Kissling shall defer receipt of certain compensation not yet earned to a date after his expatriate assignment in the united States has ended; and WHEREAS, both Company and Kissling have agreed on an interest rate to reflect the time value of money; WHEREAS, it is the intention of the Company to establish an irrevocable grantor trust of the type commonly referred to as a "rabbi trust" to assist the Company in meeting its obligations under this Agreement; NOW THEREFORE, in consideration of the mutual covenants and agreements contained herein, Company and Kissling hereby agree to the following deferred compensation arrangement: ARTICLE 1. DEFERRED COMPENSATION ACCOUNT ---------------------------------------- 1.1. Compensation Period; Duration. The "Compensation Period" covered by this Agreement from which compensation is deferred begins January 1, 1995, and ends September 30, 1997. This Agreement shall remain in effect through the Payment Date. Kissling, by giving written notice prior to December 1 of any year, may terminate this Agreement to defer compensation earned after December 31 of the calendar year in which notice is given. Such notice shall have no effect on the Payment Date for amounts otherwise deferred under this Agreement. 1.2. Establishment of Account. The Company shall establish an account ("Account") for Kissling which shall be utilized solely as a device to measure and determine the amount of deferred compensation to be paid under this Agreement. 1.3. Property of Company. Any amounts so set aside for benefits payable under this Agreement are the property of the Company, except, and to the extent, of any assignment of such assets to an irrevocable grantor trust of the type commonly referred to as a "rabbi trust". 1.4. Amount of Base Salary and Bonus Deferred. Kissling elects to defer from his aggregate base salary for each calendar year and from any bonus payable in a calendar year during the Compensation Period a portion attributable to Kissling's actual work days page 1 outside of the US during such calendar year (hereafter referred to as the "Foreign Income Deferral"). In no event shall the Foreign Base Income exceed 35% of Kissling's base salary. In the event that the Foreign Income Deferral is less than 35% of Kissling's base salary, then Kissling elects to defer an additional amount each calendar year equal to the difference between his Foreign Income Deferral and 35% of his aggregate base salary and bonus for such calendar year (hereinafter referred to as his "US Income Deferral"). Each pay date the Company shall contribute to the trust established under this Agreement 35% of Kissling's base salary or bonus which would have been paid on such date but for this election. The Company shall determine at the end of each calendar year the portion of the deferral constituting Foreign Income Deferral and US Income Deferral. The trustee or the Company shall maintain at all times a separate accounting of the amounts attributable to such deferrals and any interest credited with respect to such amounts. 1.5. Interest Rate. Prior to the distribution of the Account balance, on the last day of each month, the Company will post to the Account interest on the Account balance (including previously accrued interest) equal to Wall Street Prime plus one percent. ARTICLE 2. DISTRIBUTION OF ACCOUNT BALANCE ------------------------------------------- 2.1. Payment of Account Balance. The entire Account balance shall be paid by the Company to Kissling, or in the event of Kissling's death to Kissling's beneficiary, on the earlier of: (i) June 30 of the year immediately following the date on which Kissling first ceases to be a US resident for US income tax purposes, (ii) sixty days following the death of Kissling, or (iii) January 10, 2001. The earlier of these dates shall be referred to herein as the "Payment Date." 2.2. Designation of Beneficiary. Kissling shall have the right to designate primary and contingent beneficiaries to receive payment of the Account balance under this Agreement in the event of his death. A beneficiary designation by Kissling shall be in writing on a form acceptable to the Company and shall only be effective upon delivery to the Company. A beneficiary designation may be revoked by Kissling at any time by delivering to the Company either written notice of revocation or a new beneficiary designation form. The beneficiary designation form last delivered to the Company prior to the death of Kissling shall control. 2.3. Hardships. Upon the application of Kissling, the Compensation Committee of the Board of Directors of the Company may permit Kissling to terminate future deferrals of Compensation or to withdraw his Account balance. Kissling must give a written petition of the termination of his deferral election at least fifteen days prior to the next semi-monthly (for base salary) or single sum (for bonuses) deferrals. Kissling must give a written petition of the intent to withdraw the Account balance at least sixty days (or shorter time as permitted by the Company) prior to the date of withdrawal. No termination or withdrawal shall be made under the provisions of this section 2.3 except for the purpose of enabling Kissling to meet immediate needs created by a financial hardship page 2 for which Kissling does not have other reasonably available sources of funds as determined by the Company. No termination or withdrawal shall be made under the provisions of this section 2.3 except for the purpose of enabling Kissling to meet immediate needs created by an "unforeseeable emergency," and then only to the extent the Compensation Committee of the Board of Directors determines the amount to be withdrawn does not exceed the amount necessary to meet the emergency. An "unforseeable emergency" is a severe financial hardship to Kissling resulting from the sudden and unexpected illness or accident of Kissling or a dependent (as defined in Section 152(a) of the Internal Revenue Code) of Kissling, loss of Kissling's property due to casualty, or similar extraordinary and unforeseeable circumstance arising as a result of events beyond Kissling's control. A withdrawal under this section 2.3 shall not be permitted to the extent Kissling's hardship is or may be relieved: (a) through reimbursement or compensation by insurance or otherwise; (b) by liquidation of Kissling's assets, to the extent the liquidation of such assets would not itself cause severe financial hardship; or (c) by termination of Kissling's deferral of compensation pursuant to this Agreement. ARTICLE 3. FUNDING ------------------ 3.1. Source of Benefits. All benefits under this Agreement shall be paid pursuant to Section 2.1 hereof out of Company assets, or from a trust of the type commonly referred to as a "rabbi trust". 3.2. No Claim on Specific Assets. The Company shall make advance provisions for payment of its obligations under this Agreement, any amount so set aside, in trust or otherwise, shall nonetheless remain the exclusive property of the Company and shall in no event be deemed to constitute a segregated fund for the benefit of Kissling. Kissling shall not be deemed to have, by virtue of this Agreement, any claim on any specific assets of the Company such that Kissling would be subject to income taxation on his benefits under this Agreement prior to distribution. The rights of Kissling and his beneficiaries to benefits to which they are otherwise entitled under this Agreement shall be those of an unsecured general creditor of the Company, this agreement constituting a mere promise by the Company to make the benefit payment in the future. ARTICLE 4. MISCELLANEOUS ------------------------- 4.1. Amendments. No amendment to this Agreement shall become effective unless and until the Compensation Committee of the Board of Directors shall approve of such amendment and the Company and Kissling shall agree in writing to such amendment. page 3 4.2. No Guarantee of Employment. This Agreement shall not be deemed to be a contract of employment between the Company and Kissling. 4.3. Non-Alienation. The rights of Kissling and his beneficiaries to receive payments under this Agreement are not subject in any manner to anticipation, alienation, sale, assignment, pledge, encumbrance, attachment or garnishment by the creditors of Kissling or his beneficiaries. 4.4. Indemnification. The Company agrees to indemnify and hold Kissling harmless from (i) any and all federal and/or state income and payroll taxes which may become due and payable relating to the Account balance, either before or following distribution of the Account balance, and (ii) foreign income taxes relating to the Account balance which Kissling is required to pay which would not have otherwise been payable by Kissling but for this Agreement. If Kissling should die while on expatriate assignment with the Company in the United States and after giving effect to any liabilities of Kissling's estate, Kissling's estate becomes subject to United States estate or gift taxes as a result of the Account balance, the Company will indemnify and hold Kissling's estate harmless from such estate or gift tax liability. 4.5. Change in Control. Notwithstanding anything to the contrary contained in this Agreement, upon the occurrence of a Change in Control of the Company, the Account balance shall automatically and simultaneously, without any further action, determination or notice of any kind, be credited with interest as ascribed under Section 1.6 hereof, and the aggregate Account balance shall be paid immediately by the Company to Kissling or, in the event of Kissling's death to Kissling's beneficiary, in a single sum. If a Change in Control of the Company occurs, the entitlement of Kissling to receive such sum from the Company shall be valid and enforceable by Kissling in any state or federal court having jurisdiction thereof. 4.6. Definitions Relating to Change in Control. Whenever used in Section 4.5, the following words and phrases shall have the meanings set forth below unless the context plainly requires a different meaning, and when a defined term is intended, the term is capitalized. 4.6.1. Change in Control. "Change in Control" shall mean the occurrence of any one of the following: (1) 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; or (2) the public announcement (which, for the purposes of this definition, shall include, without limitation, a report filed pursuant to page 4 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; or (3) the Continuing Directors cease to constitute a majority of the Company's Board of Directors; or (4) 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 (5) 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. 4.6.2. Continuing Director "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 sub-paragraph (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 page 5 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. 4.7 Funding. The Company's obligations under this Agreement are intended to be "unfunded" for purposes of the Internal Revenue Code and Title I of ERISA. However, nothing herein shall prevent the Company, in its sole discretion, from establishing a trust, of the type commonly referred to as a "rabbi trust" to assist the Company in meeting its obligations under this Agreement. 4.8. Claims Procedure. The Company shall notify Kissling in writing within ninety (90) days of the Participant's written application for benefits of his eligibility or noneligibility for benefits under this Agreement. If the Company determines that Kissling is not eligible for benefits or full benefits, the notice shall set forth (a) the specific reasons for such denial, (b) a specific reference to the provision of this Agreement on which the denial is based, (c) a description of any additional information or material necessary for Kissling to perfect his claim, and a description of why it is needed, and (d) an explanation of this Agreement's claims review procedure and other appropriate information as to the steps to be taken if Kissling wishes to have his claim reviewed. If the Company determines that there are special circumstances requiring additional time to make a decision, the Company shall notify Kissling of the special circumstances and the date by which a decision is expected to be made, and may extend the time for up to an additional 90-day period. If Kissling is determined by the Company to be not eligible for benefits, or if Kissling believes that he is entitled to greater or different benefits, he shall have the opportunity to have his claim reviewed by the Company by filing a petition for review with the Company within sixty (60) days after receipt by him of the notice issued by the Company. Said petition shall state the specific reasons Kissling believes he is entitled to benefits or greater or different benefits. Within sixty (60) days after receipt by the Company of said petition, the Company shall afford Kissling (and his counsel, if any) an opportunity to present his position to the Company orally or in writing, and Kissling (or his counsel) shall have the right to review the pertinent documents, and the Company shall notify Kissling of its decision in writing within said sixty (60) day period, stating specifically the basis of said decision written in a manner calculated to be understood by Kissling and the specific provisions of the Plan on which the decision is based. If, because of the need for a hearing, the sixty (60) day period is not sufficient, the decision may be deferred for up to another sixty (60) day period at the election of the Company, but notice of this deferral shall be given to Kissling. 4.9. Captions. Article and section headings and captions are provided for purpose of reference and convenience only and shall not be relied upon in any way to construe, define, modify, limit, or extend the scope of any provision of this Agreement. page 6 4.10. Applicable Law. This Agreement and all rights hereunder shall be governed by and construed according to the laws of the State of Minnesota, except to the extent such laws are preempted by the laws of the United States of America. IN WITNESS WHEREOF, the Company and Kissling have executed this Agreement as of the 22nd day of December, 1994. H.B. FULLER COMPANY By: /s/ Richard C. Baker ----------------------------------- Vice President, Assistant Secretary Its: and General Counsel --------------------------------- /s/ Walter Kissling --------------------- Walter Kissling page 7 EX-10.N 4 RETIREMENT - DIRECTORS Exhibit 10(n) ------------- RETIREMENT PLAN FOR DIRECTORS OF H.B. FULLER COMPANY 1994 REVISION TABLE OF CONTENTS ----------------- Section Page ------- ---- 1. Purpose.............................................................. 1 2. Definitions.......................................................... 1 (a) Administrator................................................... 1 (b) Beneficiary..................................................... 1 (c) Board........................................................... 1 (d) Company......................................................... 1 (e) Compensation.................................................... 1 (f) Director........................................................ 1 (g) Effective Date.................................................. 1 (h) Engage in a Competing Business.................................. 1 (i) Plan............................................................ 1 (j) Retire.......................................................... 2 (k) Year of Service................................................. 2 3. Eligibility.......................................................... 2 (a) 10 Years of Service............................................. 2 (b) Removal for Cause............................................... 2 4. Retirement Benefits.................................................. 2 5. Death Benefits....................................................... 2 (a) Before Eligibility.............................................. 2 (b) Before Retirement............................................... 2 (c) Before Commencement............................................. 3 (d) After Commencement.............................................. 3 (e) Present Value................................................... 3 (f) Time of Payment................................................. 3 6. Beneficiaries........................................................ 3 (a) Designation..................................................... 3 (b) Time of Determination........................................... 3 (c) Administrator's Determination................................... 4 7. Post-Retirement Services............................................. 4 8. Provision of Benefits................................................ 4 9. Amendment and Termination............................................ 4 (a) Authority To Amend.............................................. 4 (b) Retroactive Effects............................................. 4 (c) Preservation of Accruals........................................ 4 10. Administration....................................................... 5 11. Forfeiture of Benefits............................................... 5 12. Miscellaneous........................................................ 5 (a) No Effect on Director's Term.................................... 5 (b) No Assignment of Benefits....................................... 5 (c) Addition to Other Benefits...................................... 5 (d) Governing Law and Forum......................................... 5 i RETIREMENT PLAN FOR DIRECTORS OF H.B. FULLER COMPANY 1994 REVISION 1. PURPOSE The Retirement Plan for Directors of H.B. Fuller Company is designed to enhance the Company's ability to attract and retain competent and experienced Directors. 2. DEFINITIONS Except as otherwise specified or as the context may otherwise require, the following terms shall have the meanings given below for all purposes of this Plan. (a) "Administrator" means the Compensation Committee of the Board or the person performing administrative duties under the Plan pursuant to the delegation by such committee. (b) "Beneficiary" means the person or persons determined under Section 6 to be entitled to receive any benefit payable under the Plan after a Director's death. (c) "Board" or "Board of Directors" means the Board of Directors of the Company. (d) "Company" means H.B. Fuller Company and its successors. (e) "Compensation" means the amount of the annual retainer established from time to time in accordance with the Company's bylaws as compensation for service as a non-employee member of the Board, including any retainer for serving as chair of a committee of the Board. Compensation will include any portion of the annual and chair retainer payment of which is deferred pursuant to an agreement between the Company and the Director, including for this purpose the full value of the credits made to the Director's account under the H.B. Fuller Company Directors' Retainer Stock Plan on account of the Director's election to defer his or her retainer fee under that plan (currently 110% of the amount of the retainer fee payable in the absence of such an election). Except for deferred amounts described in the preceding sentence, Compensation will not include any fees paid for attendance at meetings of the Board or any committee of the Board, expense reimbursements, benefits not payable in cash, benefits payable under this Plan or other amounts in excess of the annual and chair retainers. (f) "Director" means Elmer L. Andersen and any person who is a member of the Board at any time on or after the Effective Date who has never been employed by the Company or by any subsidiary of the Company. (g) "Effective Date" means February 21, 1985, the date of adoption of this Plan by the Board. (h) "Engage in a Competing Business" means to be a member of the board of directors of, or perform services for, or in connection with, any business engaged in the manufacture or sale of any product, process, equipment, concept or service (in existence or under development) that resembles or competes with any product, process, equipment, concept or service (in existence or under development) of the Company or any of its affiliated entities. (i) "Plan" means the Retirement Plan for Directors of H.B. Fuller Company as it may be amended from time to time. (j) "Retire" or "Retirement" means any termination of a Director's membership on the Board other than by reason of the Director's death or removal for cause. (k) "Year of Service" means a whole year of service as a Director of the Company, whether before or after the Effective Date and whether or not continuous. Each period of a Director's service will be measured from the date he or she becomes a Director to the date he or she ceases to be Director, and, if the service is not continuous, 365 days will constitute one year. 3. ELIGIBILITY (a) 10 Years of Service Except as provided in clause (b), each Director who Retires after completing 10 or more Years of Service will be eligible for benefits under the Plan. (b) Removal for Cause No benefit will be payable under any provision of this Plan to a Director, or to a Beneficiary of a Director, who has been removed from the Board for cause. 4. RETIREMENT BENEFITS The annual retirement benefit payable to a Director will be an amount equal to the Director's Compensation at the rate in effect immediately preceding the Director's Retirement. Subject to the limitations of Section 11, benefits will be paid in equal quarter-annual installments for the number of years equal to the lesser of 15 or the number of the Director's Years of Service. Installments will be paid on the same dates as the annual retainer fees are payable to active directors and will commence on the first quarterly retainer fee payment date following the later of the Director's 60th birthday or the Director's Retirement. 5. DEATH BENEFITS Subject to the limitations of Sections 11, the death benefits described below will be payable following a Director's death. (a) Before Eligibility If a Director who has not completed at least 10 Years of Service dies while a member of the Board, the Director's Beneficiary will receive a lump-sum death benefit equal to five times the Director's Compensation in effect immediately preceding the Director's death. (b) Before Retirement If a Director who has completed 10 or more Years of Service dies while a member of the Board, the Director's Beneficiary will receive a lump sum death benefit equal to the sum of the following: (i) An amount equal to five times the Director's Compensation in effect immediately preceding the Director's death; plus (ii) An amount equal to the present value, determined as provided below, of a series of quarter-annual installments (A) equal to one-fourth of the Director's Compensation in effect immediately preceding the Director's death, (B) commencing on the first quarterly retainer fee payment date following the later of the date the deceased Director would have attained age 60 and the date of the Director's death and (C) payable for the number of years equal to the lesser of 10 or the number of the Director's Years of Service less 5. 2 (c) Before Commencement If a Director dies after Retirement but before benefits have commenced, the Director's Beneficiary will receive a lump sum death benefit equal to the present value, determined as provided below, of the retirement payments the Director would have received under this Plan if he or she had survived. (d) After Commencement If a Director dies after his or her benefits have commenced but before receiving all of the payments due under this Plan, the Director's Beneficiary will receive a lump sum death benefit equal to the present value, determined as provided below, of the remaining payments that would have been made to the Director if he or she had survived. (e) Present Value The present value of installment payments will be determined by discounting the payments at a rate equal to the prime rate of interest announced by Norwest Bank Minnesota or, if such bank ceases to operate, the national banking organization designated by the Administrator, in effect on the last banking business day of the month preceding the month in which the lump sum payment is made. (f) Time of Payment Any benefit payable to the Beneficiary of a deceased Director will be payable within sixty days following the date on which the Administrator has finally determined the identity of the Beneficiary. No interest will be payable on account of any delay in such payment. 6. BENEFICIARIES (a) Designation A Director may designate a Beneficiary and may, at any time, alter or revoke any prior designation without the consent of any Beneficiary or any other person. To be effective, any such designation, alteration or revocation must be in writing, in such form as the Administrator may prescribe and filed with the Administrator prior to the Director's death. If, at the time of a Director's death, no effective Beneficiary designation is on file with the Administrator or if the Beneficiary does not survive the Director, the Director's Beneficiary will be the person or persons in the first of the following classes in which there is a survivor. (i) The Director's spouse. (ii) The Director's natural and adopted children, in equal shares, except that if any child predeceases the Director leaving issue who survive the Director, such issue shall take by right of representation the share their parent would have taken if living. (iii) The personal representative of the Director's estate. (b) Time of Determination The Beneficiary of a Director will be determined as of the date of the Director's death. If the Beneficiary dies before all benefits due under the Plan have been paid, any remaining payments will be made to the personal representative of the Beneficiary's estate or to the personal representative's assignee. 3 (c) Administrator's Determination The Administrator's good faith determination of the identity of a deceased Director's Beneficiary will be conclusive, and any payment of benefits to the person determined by the Administrator to be the Beneficiary will fully discharge the Company's obligation under this Plan to the extent of such payment. 7. POST-RETIREMENT SERVICES So long as any benefit remains payable to a Director who has Retired, the Director will use his or her best efforts to be available to provide such consultation services to the Company as the Company may, from time to time, reasonably request. A Director's inability to provide such services will not affect his or her entitlement to benefits under the Plan. 8. PROVISIONS OF BENEFITS All benefits under the Plan will be provided from the general assets of the Company. No Director or Beneficiary will acquire any interest in any specific assets of the Company by reason of this Plan; provided that the Company may, in its discretion, maintain a trust from which all or part of the benefits will be paid and may grant Directors the right to recover benefits directly from such trust. Except as otherwise provided under the terms of such a trust, a Director to whom benefits are due under this Plan will be a general unsecured creditor of the Company. 9. AMENDMENT AND TERMINATION (a) Authority To Amend Subject to the provisions of clauses (b) and (c), the Board reserves the right to amend or terminate this Plan at any time, and any amendment may be retroactive. The termination and any amendment will be set forth in a written instrument certified by the Chief Executive Officer or President of the Company and by the Chair of the Compensation Committee of the Board. (b) Retroactive Effects No termination or amendment of the Plan may reduce the benefits of any Director who has Retired, or the Beneficiary of a Director who has died, before the adoption of the termination or amendment by the Board. For this purpose, a Director who resigns will be considered to have Retired as of the date specified in a written notice of resignation delivered to the Board or as of the date of such delivery, if later. The notice will be deemed to have been delivered as of the date it is personally delivered to the Chief Executive Officer or the President of the Company or the date, as shown by the postmark, on which it is mailed to either of them, postage prepaid and properly addressed to the Company's executive offices. (c) Preservation of Accruals A Director in office prior to the date an amendment or termination of the Plan is adopted (the "adoption date") will, if, at his or her Retirement, he or she has satisfied the conditions for a benefit that were in effect immediately prior to the adoption date, be entitled to a benefit that is not less than the product of (i) the benefit that would have been payable had the provisions of the Plan in effect immediately prior to the adoption date remained in effect, multiplied by (ii) a fraction, the numerator of which is the number of Years of Service the Director completed prior to the adoption date and the denominator of which is the lesser of 15 and the total number of Years of Service completed by the Director. The provisions of this clause will also apply to preserve the benefit payable to a Director's Beneficiary following his or her death. 10. ADMINISTRATION The Compensation Committee of the Board will be the Administrator of the Plan. The Administrator will have the discretionary power and authority to construe and interpret the Plan, 4 to determine a person's eligibility for benefits under the Plan and the amount of such benefits, and to adopt such rules and procedures as it deems advisable for the administration of the Plan. The Compensation Committee may delegate to any of its members or to any employee of the Company such of its administrative duties as it deems advisable, subject to revocation of such delegation at any time. The good faith determinations of the Administrator will be final, conclusive and binding upon the Company and upon each Director and Beneficiary. 11. FORFEITURE OF BENEFITS Notwithstanding any contrary provision of this Plan, if a Director Engages in a Competing Business prior to the third anniversary of his or her Retirement and continues to Engage in a Competing Business after the 30-day period beginning on the date he or she receives the Administrator's written request that he or she cease to do so, all benefits otherwise payable under this Plan to such Director or to his or her Beneficiary after the end of such 30-day period will be forfeited, and such Director will cease to be covered under the Plan. 12. MISCELLANEOUS (a) No Effect on Director's Term Neither the adoption and maintenance of this Plan nor any provision of the Plan will be deemed to give any Director the right to be retained as a Director or to limit a Director's right to terminate his or her directorship at any time. (b) No Assignment of Benefits No benefit under the Plan will be subject to alienation or assignment, except that benefits payable to the personal representative of a person's estate may be assigned in the course of the administration of the estate. (c) Addition to Other Benefits The retirement benefits under this Plan are in addition to all other awards, arrangements, contracts or benefits, if any, that any Director may have by virtue of service for the Company, unless and except to the extent that any such award, arrangement, contract or benefit otherwise provides. (d) Governing Law and Forum Except to the extent preempted by federal law, this Plan shall be construed, administered and enforced in accordance with the procedural and substantive laws of the State of Minnesota, without regard to conflicts of laws. Any action with respect to this Plan shall be brought in the jurisdiction in which the Company's executive offices are located. 5 EX-11 5 EPS CALCULATION Exhibit 11 ---------- H.B. Fuller Company and Consolidated Subsidiaries Computation of Net Earnings Per Common Share Years Ended November 30, 1994, 1993, and 1992 (Dollars in thousands, except share amounts)
1994 1993 1992 ---------- ---------- ---------- Primary Earnings: Earnings before accounting change $30,863 $21,701 $35,622 Dividends on preferred stock (15) (15) (15) ---------- ---------- ---------- Earnings before acctg. chg. applicable to common stock 30,848 21,686 35,607 Cumulative effect of accounting change (11,717) ---------- ---------- ---------- Earnings applicable to common stock $30,848 $9,969 $35,607 ========== ========== ========== Shares: Weighted average number of common shares outstanding 13,926,957 13,883,904 13,778,095 Common share equivalents of stock options outstanding (determined by the treasury stock method using average quarterly prices) 109,377 134,048 211,349 ---------- ---------- ---------- Weighted average shares outstanding and common stock equivalent shares 14,036,334 14,017,952 13,989,444 ========== ========== ========== Primary earnings per common share: Earnings before accounting change per share $2.20 $1.55 $2.55 Cumulative effect of accounting change per share (0.84) ---------- ---------- ---------- Net earnings per common share $2.20 $0.71 $2.55 ========== ========== ========== 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 than 3%. Assuming full dilution Earnings: Earnings are exactly the same as presented above under primary. Shares: Weighted average number of common shares outstanding 13,926,957 13,883,904 13,778,095 Common share equivalents of stock options outstanding (determined by the treasury stock method using higher of quarter end or average quarterly prices) 109,936 134,834 212,331 Weighted average shares outstanding and ---------- ---------- ---------- common stock equivalent shares 14,036,893 14,018,738 13,990,426 ========== ========== ========== Earnings per common share assuming full dilution: Earnings before accounting change per share $2.20 $1.55 $2.55 Cumulative effect of accounting change per share (0.84) ---------- ---------- ---------- Net earnings per common share $2.20 $0.71 $2.55 ========== ========== ==========
EX-13 6 ANNUAL REPORT EXHIBIT 13 MANAGEMENT'S ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (Dollars in thousands) 41 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, 1994. 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: 1994 COMPARED TO 1993 Worldwide sales for 1994 were a record $1,097,367, an increase of $122,080 or 12.5 percent over 1993 sales of $975,287. Net earnings for 1994 were $30,863, an increase of $20,879 or 209 percent from 1993 earnings of $9,984. 1993 net earnings were adversely affected by an accounting change charge of $11,717 relating to the Company's adoption of the Financial Accounting Standards Board Statements No. 106 and No. 109, a one-time $2,137 after-tax retroactive sales adjustment relating to H.B. Fuller Automotive Products, Inc. and by a $5,299 restructuring charge. Sales changes by geographic area were as follows:
Area Increase - ------------------------------ North America $ 86,413 16% Latin America 4,922 3% Europe 17,096 8% Asia/Pacific 13,649 24% -------- Total $122,080 13%
SALES TO UNAFFILIATED CUSTOMERS [PIE CHART APPEARS HERE] . 58% North America . 21% Europe . 15% Latin America . 6% Asia/Pacific OPERATING EARNINGS [PIE CHART APPEARS HERE] . 57% North America . 16% Europe . 27% Latin America 0% Asia/Pacific In North America, the 16 percent increase in sales is composed of a 10 percentage point increase in volume and change in product mix, and 6 percentage points related to acquisitions in Canada (in 1993) and the United States (in 1994). North American operating earnings increased 11.8 percent compared to 1993 (excluding the 1993 North America restructuring charge and the retroactive sales adjustment). Within North America, the Adhesives, Sealants and Coatings (ASC) Group produced a 17 percent sales increase over 1993 with 50 percent of the increase a result of expanded sales within core industrial markets and significantly increased sales by the ASC structural group, especially in the automotive, housing and window markets, all H.B. Fuller 1994 Annual Report 42 markets sensitive to interest rate fluctuations. The other 50 percent resulted from an acquisition in Canada in 1993 and an acquisition in the U.S. in 1994. ASC Group operating earnings had a strong increase (excluding the one-time Automotive Products retroactive sales adjustment) over 1993, supported by improved capacity utilization and lower operating expenses resulting from continuing cost containment programs. The North American Specialty Group, as a whole, experienced a 13 percent sales increase and moderate operating earnings increase (excluding the 1993 restructuring charge associated with this Group) in 1994 and reduced operating expenses, as a percent of sales. A changing sales mix within the Group is continuing to cause some margin erosion. The Industrial Coatings Division had a substantial increase in sales and earnings and in the second half of the year began construction of a new plant that should provide added production capacity in early 1995. TEC Incorporated had a strong increase in sales and earnings in 1994. Foster Products Corporation had reduced sales and earnings compared to the prior year due to the sale of the PVC pipe cover product line in May of 1994 (part of 1993 restructuring plan). Linear Products experienced moderate sales growth and some margin erosion due to increased competition and delays in new product acceptance in the marketplace. Monarch Division sales in 1994 approximated the sales of 1993 with a reduction in operating earnings due primarily to a continued consolidation and geographic shift in its customer base. RETURN ON NET SALES [GRAPH APPEARS HERE] 85 3.3% 86 3.6% 87 4.3% 88 3.1% 89 2.1% 90 2.7% 91 3.2% 92 3.8% 93* 2.2% 94 2.8% RETURN ON AVERAGE ASSETS [GRAPH APPEARS HERE] 85 6.1% 86 6.9% 87 8.3% 88 5.5% 89 3.5% 90 4.5% 91 5.5% 92 6.7% 93* 3.9% 94 4.7% * Excludes cumulative effect of change in accounting principles Sales by the Company's Latin American operations increased 3 percent in 1994 compared to the prior year. Businesses identified for restructuring during 1994, in the 1993 restructuring plan, were excluded from the 1994 sales. Adjusting 1993 sales figures to exclude those same businesses, Latin American sales would have increased 11 percent, primarily through increased volume and changes in product mix, particularly in Argentina, Chile, Colombia, El Salvador, Guatemala, Panama and Venezuela. The 1993 planned restructuring is well underway, plants in Brazil and Nicaragua have been closed, a plant in Mexico was sold, two specialty businesses in Costa Rica were closed. Paint manufacture in Costa Rica has been consolidated into one plant. Once the restructuring is complete, the Company should be in a better position to anticipate and respond to increased competitive pressures stemming from the lowering of trade H.B. Fuller 1994 Annual Report 43 restrictions in the region. Operating earnings for Latin America, as a whole, increased 6.7 percent compared to 1993 (excluding the 1993 Latin American restructuring charge associated with this Area). Sales in Europe increased 8 percent in 1994 compared to 1993, with the strengthening of the U.S. dollar adversely affecting the increase by 3 percentage points. The 11 percentage points increase in local currency sales included 4 percentage points from increased volume and change in product mix, 9 percentage points from acquisitions in the United Kingdom and Switzerland, and a negative 2 percentage points from reduced pricing. The weak economy, particularly in Germany, and the resulting strong competitive pressures, resulted in a decline of 13.2 percent in operating earnings in 1994 compared to the prior year (excluding the 1993 restructuring charge for the operation in Finland). Sales in Asia/Pacific increased 24 percent in 1994 over 1993, with acquisitions in the Philippines (in 1993) and New Zealand (in 1994) producing 15 percentage points of the gain. The weakening of the U.S. dollar accounted for 6 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 62 percent decline in operating earnings compared to last year. RETURN ON INVESTED CAPITAL (a) [GRAPH APPEARS HERE] 85 11.5% 86 12.7% 87 14.8% 88 10.4% 89 7.7% 90 9.6% 91 11.6% 92 13.3% 93* 8.0% 94 9.4% RETURN ON AVERAGE EQUITY [GRAPH APPEARS HERE] 85 14.0% 86 15.2% 87 17.4% 88 12.4% 89 8.6% 90 11.0% 91 13.3% 92 15.0% 93* 8.4% 94 11.5% (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. 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 1994, no single customer accounted for over 4 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 whole, as a percent of sales, decreased to 32.2 percent in 1994 from 32.5 percent in 1993. Pricing pressures in a weak European economy (particularly Germany) and initial gross margins on 1994 acquisitions which were lower than the overall Company's gross margins contributed to the gross margin percentage reduction. During the fourth quarter of Fiscal Year 1994, the Company, particularly in its ASC Group in North America, experienced rapidly increasing H.B. Fuller 1994 Annual Report 44 material costs. The Company was able to offset these material cost increases with price increases to maintain gross margin, as a percent of sales. The Company expects this increase in raw material costs to continue in the first half of Fiscal Year 1995 and will continue its efforts to match price increases with cost increases. Consolidated selling, administrative and other expenses for the Company were up 11.6 percent from 1993, and as a percent of sales, decreased from 26.4 percent in 1993 to 26.2 percent in 1994. Interest expense was $11,747 in 1994, up $1,288 or 12.3 percent from prior year. Total Company borrowing at year-end 1994 was above that at year-end 1993, primarily as a result of borrowing to fund 1994 acquisitions. Capitalized interest costs associated with major property and equipment projects increased from $924 in 1993 to $1,179 in 1994. Other income/expense, net, increased from $2,158 expense in 1993 to $3,188 expense in 1994, primarily as a result of increased amortization of excess of cost over net assets of businesses acquired in 1993 and 1994. (See Notes 1, 2 and 3 to the Consolidated Financial Statements.) Income taxes totalled $19,782 in 1994, a 3.1 percent increase from $19,191 in 1993. The effective tax rate decreased from 47.0 percent in 1993 to 38.8 percent in 1994, primarily because of the absence of offsetting tax benefits associated with the restructuring charges in 1993. Excluding the restructuring charges from 1993 would lower the 1993 effective tax rate to 41.9 percent. The balance of the reduction is primarily due to reduced losses or turnarounds in earnings of non-U.S. loss operations. WORKING CAPITAL (In millions) [GRAPH APPEARS HERE] 85 $69.477 86 $74.232 87 $86.598 88 $104.071 89 $95.645 90 $96.097 91 $108.779 92 $130.817 93 $119.905 94 $129.665 CAPITALIZATION RATIO [GRAPH APPEARS HERE] 85 28.0% 86 21.5% 87 17.0% 88 35.5% 89 35.1% 90 30.9% 91 24.7% 92 17.3% 93 19.5% 94 32.1% RESULTS OF OPERATIONS: 1993 COMPARED TO 1992 Worldwide sales for 1993 were $975,287, an increase of $32,849 or 3.5 percent, over 1992 sales of $942,438. Net earnings for 1993 were $9,984, a decrease of $25,638 or 72 percent, from 1992 earnings of $35,622. Net earnings were adversely affected by an accounting change charge of $11,717 relating to the Company's adoption of the Financial Accounting Standards Board Statements No. 106 and No. 109. (See Notes 1 and 6 to the Consolidated Financial Statements.) In the first quarter of 1993, a one-time $2,137 H.B. Fuller 1994 Annual Report 45 retroactive sales adjustment relating to H.B. Fuller Automotive Products, Inc., a company acquired in 1988, also adversely affected earnings. Net earnings also were negatively affected by $5,299 restructuring charge initiated in the fourth quarter. (See Note 5 to the Consolidated Financial Statements.) The restructuring charge arose from the planned closing of certain facilities and associated costs of consolidating their production into other facilities. This includes the closing or sale of plants in Brazil, Mexico and Nicaragua and two small specialty businesses in Central America and the consolidation of certain Central American paint operations. The planned restructuring of Linear Products Division's operations in Finland and the anticipated sale of a Foster Products Corporation product line also are included in the restructuring charge. Sales changes by geographic area were as follows:
Area Increase (Decrease) - --------------------------------------- North America $ 36,988 7% Latin America 12,657 9% Europe (20,516) (9%) Asia/Pacific 3,720 7% -------- Total $ 32,849 3%
CAPITAL EXPENDITURES, GROSS (In millions) [GRAPH APPEARS HERE] 85 $15.113 86 $12.909 87 $29.617 88 $40.187 89 $40.925 90 $31.468 91 $29.955 92 $34.461 93 $41.842 94 $65.018 RESEARCH AND DEVELOPMENT EXPENSES (In millions) [GRAPH APPEARS HERE] 85 $9.510 86 $10.606 87 $12.269 88 $14.411 89 $15.505 90 $16.091 91 $17.200 92 $20.377 93 $21.826 94 $23.624 In North America, the 7 percent increase in sales is composed of an 8 percentage point increase in volume and change in product mix, a 1 percentage point increase resulting from an acquisition in Canada, a 1 percentage point decrease from pricing and a 1 percentage point decrease relating to the one-time Automotive Products retroactive sales adjustment. North American operating earnings decreased 4 percent compared to 1992 (excluding the fourth quarter North American restructuring charge). The Adhesives, Sealants and Coatings (ASC) Group produced an 8 percent sales increase over 1992 as a result of expanded sales within core industrial markets and significantly increased sales by the Company's structural group, especially in the automotive, housing and window markets. A number of successful new product introductions helped to fuel the sales increases. ASC Group operating earnings improved significantly (excluding the one-time Automotive Products retroactive sales adjustment) over 1992, supported by improved capacity utilization and lower operating expenses resulting from cost containment programs. H.B. Fuller 1994 Annual Report 46 Although not material to the Group's overall results, its Fiber-Resin operation experienced continued weakness and operating losses, primarily as a result of the slowdown in the defense industry. The Group's adhesives operations in Canada, the U.S. and Mexico were integrated into a North American unit in 1993, a change that is contributing to the improved capacity utilization and helping to offset increasing margin pressures. The North American Specialty Group, as a whole, experienced a moderate sales increase and slight operating earnings increase (excluding the fourth quarter restructuring charge associated with this Group) in 1993 and reduced operating expenses as a percent of sales. A changing product mix is causing some margin erosion. The Industrial Coatings Division and TEC Incorporated increased sales and earnings despite difficult market conditions, and Industrial Coatings will be expanding production capacity in 1994. Sales growth by Linear Products Division was significantly slower in 1993 than in recent years and some margin erosion was experienced, due to increasing competition and delays in new product acceptance in the marketplace. Foster Products Corporation had reduced sales and earnings in 1993 due in large part to uncertainties in the asbestos abatement area and reduced commercial construction. Sale of the Foster PVC pipe cover product line is planned for 1994 (and is reflected in the restructuring charge discussed previously). Monarch Division showed a slight increase in sales for the year and reduced operating earnings compared to 1992 due primarily to consolidation and geographical shifts in its customer base. In early Fiscal 1994, the Company acquired the Evode Powder Coatings business with facilities in the United Kingdom and New Zealand, providing it with its first significant expansion of this product line outside North America. Sales by the Company's Latin American operations increased 9 percent in 1993 compared to prior years, primarily through increased volume and changes in product mix, particularly in Argentina, Brazil, Colombia and El Salvador. One percentage point of the sales gain was the result of consolidating a recent acquisition in Venezuela during the year. The restructuring of certain operations in Latin America is designed to help the Company anticipate and respond to increased competitive pressures stemming from the lowering of trade restrictions in the region. Economic slowdown and currency losses had a negative impact on gross margins and operating earnings for some of the Company's Latin American operations, particularly in Brazil where the Company experienced a $2,609 currency loss in 1993. Operating earnings for Latin America, as a whole, declined 13.1 percent compared to 1992 (excluding the fourth quarter restructuring charge for this Area). Sales in Europe declined 9 percent in 1993 compared to 1992, with the strengthening of the U.S. dollar accounting for 4 percentage points of the decrease. The remaining 5 percentage points of decline included 3 percentage points from reduced volume and change in product mix and 2 percentage points from reduced pricing. The weak economy of the region, and the resulting strong competitive pressures, resulted in a decline of 34.8 percent in operating earnings in 1993 compared to the prior year (excluding the fourth quarter restructuring charge for the operation in Finland). The Company consolidated production from its adhesives plant in Munich, Germany into other European facilities in 1993 and anticipates some positive impact through lower operating expenses and improved efficiency in 1994. A realignment of the Company's European adhesives sales operations, shifting from a geographic to an industry orientation, is intended to support future sales growth. Asia/Pacific sales increased 7 percent in 1993 over 1992, with an acquisition in the Philippines producing 1 percent of that gain. Expenditures to support the deliberate expansion of H.B. Fuller 1994 Annual Report 47 operations in the Asia/Pacific area contributed to a 70.9 percent decline in operating earnings, compared to last year. Consolidated gross margin for the Company, as a whole, as a percent of sales, decreased to 32.5 percent in 1993 from 33.7 percent in 1992. The one-time retroactive Automotive Products sales adjustment, increased competition stemming from reduced trade barriers in Latin America coupled with pricing pressures in a weak European economy contributed to the gross margin percentage reduction. Overall, the Company experienced stable raw material costs throughout 1993. In view of the large percentage of the Company's cost of goods sold represented by raw material costs and the highly competitive nature of the Company's business, significant increases in raw material pricing could have an adverse effect on the Company's results of operations. Conversely stable or declining raw material prices could significantly improve the Company's operating results. Consolidated selling, administrative and other expenses for the Company were up 4.7 percent from 1992, and as a percent of sales increased to 26.4 percent in 1993 from 26.1 percent in 1992. Low unit sales in Europe, inflationary pressures on operating expenses in some Latin American countries and continued investment in the Company's Asia/Pacific operations were factors that caused the percent of sales increase. Interest expense was $10,459 in 1993, down $2,078 or 16.6 percent from prior year. Total Company borrowing at year-end 1993 was above that at year-end 1992, with increases in all geographic areas except North America. Capitalized interest costs associated with construction of major property and equipment items increased from $52 in 1992 to $924 in 1993. Other income/expense, net, decreased from $2,078 income in 1992 to $2,158 expense in 1993, primarily as a result of increased foreign currency losses in Latin America, involuntary insurance gains related to facility fires in 1992 and a gain from the sale of a product line in 1992. (See Notes 1 and 2 to the Consolidated Financial Statements.) Income taxes totalled $19,191 in 1993, a 22.4 percent decrease from $24,716 in 1992. The effective tax rate increased to 47.0 percent in 1993 from 40.6 percent in 1992, primarily because of the absence of offsetting tax benefits associated with the restructuring charges discussed previously.(See Notes 5 and 6 to the Consolidated Financial Statements.) Although not material to the Company's effective tax rate, the recent U.S. tax legislation is expected to increase the Company's U.S. tax obligations slightly over the next few years. LIQUIDITY AND CAPITAL RESOURCES The Company generated $50,789 in funds from operations in 1994 compared to $46,903 in 1993 and $82,489 in 1992. The increase in 1994 resulted primarily from increased earnings and increased depreciation and amortization which were partially offset by increased inventory levels and accounts receivable balances. Major other uses of cash during 1994 were capital expenditures, purchase of businesses and payment of dividends. Cash was $9,830 at November 30, 1994, compared to $17,377 at November 30, 1993. The $9,830 cash balance is considered adequate to meet Company needs in light of its unused lines of credit at November 30, 1994. Working capital was $129,665 at November 30, 1994, compared to $119,905 at November 30, 1993. The current ratio at year-end 1994 was 1.6, compared to 1.7 at year-end 1993. The number of days sales in trade accounts receivable was 51 at November 30, 1994, compared to 48 H.B. Fuller 1994 Annual Report 48 at November 30, 1993. The average days sales in inventory on hand was 66 in 1994, compared to 67 in 1993. The restructuring reserve of $6,001 established at November 30, 1993 has a balance of $1,146 at November 30, 1994. The Company anticipates completion of the restructuring in Fiscal Year 1995 and believes the reserve will be adequate to cover these expenses. 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 32.1 percent at November 30, 1994, compared to 19.5 percent at November 30, 1993. At year-end 1994 the Company had short-term and long-term lines of credit of $341,352 of which $150,000 was committed. The unused portion of these lines of credit was $225,191. Subsequent to year-end, the Company completed agreements December 19, 1994 for the private placement of $65,000 of senior notes which will partially replace existing borrowing under the revolving lines of credit. A group of insurance companies will provide borrowings of $26,000 in seven-year senior notes due December 19, 2001 at 8.49%; borrowings of $5,000 in seven-year senior notes due March 31, 2002 at 8.54%; borrowings of $22,000 in ten-year senior notes due February 3, 2005 at 8.58%; and borrowings of $12,000 in fifteen-year senior notes due April 28, 2010 at 8.73%. The senior notes contain covenants which are no more restrictive than current debt agreements, with interest payable semi-annually. Capital expenditures for property, plant and equipment of $65,018 in 1994 were primarily for construction of a manufacturing plant in Honduras, expansion of the Company's plant in Japan, to begin construction of a manufacturing plant in Minnesota, 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 1994 capital projects are estimated to be approximately $29,000 in 1995. The Company plans to increase its capital expenditures in 1995 over 1994 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 yen, can have an impact on Fuller's results. (See Note 1 to Consolidated Financial Statements.) The Company uses forward foreign exchange contracts to reduce the fluctuations of license fees and, at times, dividends coming from Fuller's operations in Canada, Europe and Asia/Pacific. These forward contracts cover anticipated cash flows of not greater than 12 months. Additionally, the Company's operations in Canada and Europe use forward foreign exchange contracts to hedge foreign currency denominated accounts payable and intercompany loans. H.B. Fuller 1994 Annual Report CONSOLIDATED STATEMENTS OF EARNINGS H.B. FULLER COMPANY AND SUBSIDIARIES (Dollars in thousands, except share amounts) 49
YEAR ENDED NOVEMBER 30 1994 1993 1992 - ---------------------------------------------------------------------------------------- Net sales $1,097,367 $975,287 $942,438 Cost of sales 743,843 658,046 624,799 - ---------------------------------------------------------------------------------------- Gross profit 353,524 317,241 317,639 Selling, administrative and other expenses 287,571 257,770 246,233 Restructuring costs -- 6,001 -- - ---------------------------------------------------------------------------------------- Operating earnings 65,953 53,470 71,406 Interest expense (11,747) (10,459) (12,537) Other income (expense), net (3,188) (2,158) 2,078 - ---------------------------------------------------------------------------------------- Earnings before income taxes, minority interests and accounting changes 51,018 40,853 60,947 Income taxes (19,782) (19,191) (24,716) Net earnings of consolidated subsidiaries applicable to minority interests (373) 39 (609) - ---------------------------------------------------------------------------------------- Earnings before cumulative effect of accounting changes 30,863 21,701 35,622 Cumulative effect of accounting changes -- (11,717) -- - ---------------------------------------------------------------------------------------- Net earnings $ 30,863 $ 9,984 $ 35,622 - ---------------------------------------------------------------------------------------- Earnings (loss) per common share: Earnings before accounting changes $2.20 $ 1.55 $2.55 Accounting changes -- (0.84) -- - ---------------------------------------------------------------------------------------- Net earnings $2.20 $ 0.71 $2.55 - ---------------------------------------------------------------------------------------- Average number of common and common equivalent shares outstanding 14,036 14,018 13,989 - ---------------------------------------------------------------------------------------- Number of shares and per share amounts restated for 3-for-2 stock split effective June 1, 1992.
See accompanying Notes to Consolidated Financial Statements. H.B. Fuller 1994 Annual Report CONSOLIDATED BALANCE SHEETS H.B. FULLER COMPANY AND SUBSIDIARIES 50 (Dollars in thousands)
NOVEMBER 30 1994 1993 - ----------------------------------------------------------------------------------- ASSETS CURRENT ASSETS: Cash $ 9,830 $ 17,377 Trade receivables, less allowance for doubtful accounts of $6,221 in 1994 and $5,519 in 1993 166,602 132,228 Other receivables 9,797 7,098 Inventories 152,651 123,794 Other current assets 22,523 15,357 - ----------------------------------------------------------------------------------- Total current assets 361,403 295,854 Net property, plant and equipment 295,090 232,547 Investments in and advances to affiliates 689 690 Deposits and miscellaneous assets 26,916 14,813 Other intangibles, less accumulated amortization of $14,214 in 1994 and $10,982 in 1993 18,097 12,136 Excess of cost over net assets acquired, less accumulated amortization of $7,545 in 1994 and $5,719 in 1993 40,422 8,481 - ----------------------------------------------------------------------------------- Total assets $742,617 $564,521 - ----------------------------------------------------------------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Notes payable $ 53,125 $ 19,829 Current installments of long-term debt 6,430 2,117 Accounts payable - trade 105,825 88,439 Accrued payroll and employee benefits 31,389 24,997 Other accrued expenses 26,691 31,049 Income taxes 8,278 9,518 - ----------------------------------------------------------------------------------- Total current liabilities 231,738 175,949 Long-term debt, excluding current installments 130,009 60,261 Deferred income taxes 7,278 2,073 Accrued pensions, primarily non-U.S. 70,403 54,261 Other liabilities 22,231 17,398 Minority interests in consolidated subsidiaries 6,153 5,183 STOCKHOLDERS' EQUITY: Series A preferred stock 306 306 Common stock 13,935 13,898 Additional paid-in capital 18,907 16,908 Retained earnings 236,572 215,148 Foreign currency translation adjustment 7,532 4,357 Unearned compensation -- restricted stock (2,447) (1,221) - ----------------------------------------------------------------------------------- Total stockholders' equity 274,805 249,396 - ----------------------------------------------------------------------------------- Total liabilities and stockholders' equity $742,617 $564,521 - -----------------------------------------------------------------------------------
See accompanying Notes to Consolidated Financial Statements. H.B. Fuller 1994 Annual Report CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY H.B. FULLER COMPANY AND SUBSIDIARIES (Dollars in thousands, except share amounts) 51
YEARS ENDED NOVEMBER 30, 1994, 1993 AND 1992 Unearned Foreign Compen- Additional Currency sation Preferred Common Paid-in Retained Translation Restricted Stock Stock Capital Earnings Adjustment Stock - ------------------------------------------------------------------------------------------------------------------------------ Balances at November 30, 1991 $306 $ 9,138 $12,571 $189,686 $ 7,349 -- Stock options exercised -- 94 1,498 -- -- -- Retirement of common stock -- (5) (9) (195) -- -- Tax benefit from exercise of stock options -- -- 714 -- -- -- Net earnings -- 1992 -- -- -- 35,622 -- -- Common stock dividend -- 4,598 -- (4,598) -- -- Dividends paid: Preferred: $0.33 per share -- -- -- (15) -- -- Common: $0.46 per share -- -- -- (6,404) -- -- Change in foreign currency translation -- -- -- -- 4,690 -- - ------------------------------------------------------------------------------------------------------------------------------ Balances at November 30, 1992 306 13,825 14,774 214,096 12,039 -- Stock options exercised -- 76 809 -- -- -- Restricted stock issued, net -- 36 1,227 -- -- (1,263) Amortization of unearned compensation -- -- -- -- -- 42 Retirement of common stock -- (39) (44) (1,419) -- -- Tax benefit from exercise of stock options -- -- 142 -- -- -- Net earnings -- 1993 -- -- -- 9,984 -- -- Dividends paid: Preferred: $0.33 per share -- -- -- (15) -- -- Common: $0.54 per share -- -- -- (7,498) -- -- Change in foreign currency translation -- -- -- -- (7,682) -- - ------------------------------------------------------------------------------------------------------------------------------ Balances at November 30, 1993 306 13,898 16,908 215,148 4,357 (1,221) Stock options exercised -- 38 449 -- -- -- Restricted stock issued, net -- 38 1,368 -- -- (1,406) Amortization of unearned compensation -- -- -- -- -- 180 Retirement of common stock -- (39) (51) (1,418) -- -- Tax benefit from exercise of stock options -- -- 233 -- -- -- Net earnings -- 1994 -- -- -- 30,863 -- -- Dividends paid: Preferred: $0.33 per share -- -- -- (15) -- -- Common: $0.575 per share -- -- -- (8,006) -- -- Change in foreign currency translation -- -- -- -- 3,175 -- - ------------------------------------------------------------------------------------------------------------------------------ Balances at November 30, 1994 $306 $13,935 $18,907 $236,572 $ 7,532 $(2,447) ==============================================================================================================================
Per share amounts restated for 3-for-2 stock dividend effective June 1, 1992. See accompanying Notes to Consolidated Financial Statements. H.B. Fuller 1994 Annual Report CONSOLIDATED STATEMENTS OF CASH FLOWS H.B. FULLER COMPANY AND SUBSIDIARIES 52 (Dollars in thousands)
YEAR ENDED NOVEMBER 30 1994 1993 1992 - ----------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings $ 30,863 $ 9,984 $ 35,622 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 33,379 29,700 31,566 Pension costs 10,453 8,082 7,535 Accounting changes -- 11,717 -- Other items 338 3,350 3,318 Change in current assets and liabilities (net of effect of acquisitions): (Increase) in accounts receivable (18,206) (11,757) (6,654) (Increase) in inventory (15,172) (10,043) (4,957) (Increase) in other current assets (1,985) (434) (1,250) Increase in accounts payable 7,010 6,296 8,634 Increase (decrease) in accrued expense 4,564 (341) 5,985 (Decrease) increase in income taxes payable (455) 349 2,690 - ----------------------------------------------------------------------------------------------- Net cash provided by operating activities 50,789 46,903 82,489 CASH FLOWS FROM INVESTING ACTIVITIES: Purchased property, plant and equipment (65,018) (41,842) (34,461) Investment in affiliated companies 663 278 1,291 Purchased businesses, net of cash acquired (76,327) (11,547) -- - ----------------------------------------------------------------------------------------------- Net cash used in investing activities (140,682) (53,111) (33,170) CASH FLOWS FROM FINANCING ACTIVITIES: Increase in long-term debt 74,976 9,174 1,407 Payments of long-term debt (4,204) (1,734) (20,673) Increase (decrease) in notes payable (maturities -- 90 days or less) 23,410 2,413 (6,538) Repurchase common stock (1,508) (1,502) (209) Dividends paid (8,021) (7,514) (6,419) Other (2,835) (5,157) (4,508) - ----------------------------------------------------------------------------------------------- Net cash provided (used) by financing activities 81,818 (4,320) (36,940) Effect of exchange rate changes 528 (1,165) 1,494 - ----------------------------------------------------------------------------------------------- NET CHANGE IN CASH (7,547) (11,693) 13,873 Cash at beginning of year 17,377 29,070 15,197 - ----------------------------------------------------------------------------------------------- CASH AT END OF YEAR $ 9,830 $ 17,377 $ 29,070 - ----------------------------------------------------------------------------------------------- Supplemental disclosure of cash flow information: Cash paid for interest $ 12,628 $ 11,389 $ 12,774 Cash paid for income taxes $ 26,291 $ 22,702 $ 21,062 Noncash investing and financing activities: Assets acquired by incurring notes payable $ 8,008 -- --
See accompanying Notes to Consolidated Financial Statements. H.B. Fuller 1994 Annual Report NOTES TO CONSOLIDATED FINANCIAL STATEMENTS H.B. FULLER COMPANY AND SUBSIDIARIES (In thousands, except share amounts) 53 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. The fiscal year-end of substantially all non-U.S. subsidiaries is September 30th in order to effect more timely consolidated financial reporting. All significant intercompany items have been eliminated in consolidation. 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:
1994 1993 1992 - ------------------------------------------------------- Currency translation gains, net $ 4,450 3,937 3,929 Flow-through effect of inventory valuation, net (3,729) (3,896) (3,776) - ------------------------------------------------------- 721 41 153 Currency exchange (losses), net (7,629) (7,590) (6,034) - ------------------------------------------------------- Total $(6,908) (7,549) (5,881) - -------------------------------------------------------
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 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:
1994 1993 - ------------------------------------- Raw materials $ 78,007 64,119 Finished goods 85,032 68,945 LIFO reserve (10,388) (9,270) - ------------------------------------- Total $152,651 123,794 - -------------------------------------
H.B. Fuller 1994 Annual Report 54 PROPERTY, PLANT AND EQUIPMENT: The major classes are:
1994 1993 - --------------------------------------------- Land $ 48,795 38,456 Buildings and improvements 144,307 131,947 Machinery and equipment 275,296 222,741 Construction in progress 45,495 26,468 - --------------------------------------------- Total, at cost 513,893 419,612 Accumulated depreciation (218,803) (187,065) - --------------------------------------------- Net property, plant and equipment $ 295,090 232,547 - ---------------------------------------------
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. AMORTIZATION: Other intangible assets, primarily noncompete agreements and 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:
1994 1993 1992 - ------------------------------------------------------- Interest costs incurred $ 12,926 11,383 12,589 Capitalized interest costs (1,179) (924) (52) - ------------------------------------------------------- Interest expense $ 11,747 10,459 12,537 - -------------------------------------------------------
NON-U.S. OPERATIONS: Net earnings and equity of non-U.S. operations for the years ended November 30 are: 1994 1993 1992 - ----------------------------------------------- Net earnings $ 7,161 5,124 13,137 Equity $128,220 122,124 119,942 - ----------------------------------------------- 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 utilized interest rate swaps to effectively establish long-term fixed interest rates on variable rate debt. Interest rate swap agreements maturing in July 1995 effectively established fixed interest rates on $10,000 of debt. The average annual effective interest rate was approximately 10.8 percent. The differential to be paid or received is accrued as interest rates change and is recognized over the life of the agreements. In 1987 the Company entered into a currency swap in which it receives a fixed interest rate of 10.1 percent on the $10,000 Senior note and pays a fixed deutsche mark (DM) interest rate of 7.06 percent on DM 19,015. The swap is a hedge against the Company's investment in Germany and matures in December 1995. The hedge is carried at market value with changes in the value reflected in foreign currency translation adjustment in stockholders' equity. The Company enters into foreign exchange contracts as a hedge against firm commitment foreign currency intercompany receivables/payables. Market value gains and losses are recognized, and the resulting credit or debit offsets foreign exchange gains or losses on those receivables/payables. H.B. Fuller 1994 Annual Report 55 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 - --------------------------------------------- 1994: Cash and short-term investments $ 9,830 $ 9,830 Notes payable $ 53,125 $ 53,125 Long-term debt $136,439 $138,215 1993: Cash and short-term investments $ 17,377 $ 17,377 Notes payable $ 19,829 $ 19,829 Long-term debt $ 62,378 $ 68,684
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 1994 10-K. INCOME TAXES: The Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes", which requires a change from the deferred method to 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 bases of existing assets and liabilities. Under SFAS No. 109, the effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date. Under the deferred method, deferred taxes were recognized using the tax rate applicable to the year of the calculation and were not adjusted for subsequent changes in tax rates. In 1993 the Company elected to adopt this Standard early and to recognize this change in accounting for income taxes. OTHER POSTRETIREMENT BENEFITS: The Company provides medical benefits for eligible retired employees, employee's beneficiaries and covered dependents. The cost of providing these benefits was previously recognized as a charge to income in the year the benefits were paid. In December of 1990, the FASB issued SFAS No. 106 requiring accrual accounting for these costs during the years the employee renders the necessary service. In 1993 the Company elected to adopt this Standard early and to recognize this change in accounting on the immediate recognition basis. The cumulative effect of adopting this Standard as of December 1, 1992 resulted in a charge of $12,824 ($0.92 per share) to 1993 earnings, net of $7,860 of income taxes. 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 H.B. Fuller 1994 Annual Report 56 shares of the Company, but is not included in shares outstanding. The excess of cost over par value is charged proportionally to Additional Paid-In Capital and to Retained Earnings. 2 OTHER INCOME (EXPENSE), NET Other income (expense), net in 1992 included $1,091 accounting gain on property damaged by fires in Germany and California and $743 gain on the sale of a product line. All years include foreign currency losses. (See Note 1 to the Consolidated Financial Statements.) 3 ACQUISITIONS In 1994 the Company purchased three businesses and certain assets of another business for $76,327 in cash. In 1993 the Company purchased two businesses and certain assets of another business for $11,547 in cash. Assets acquired included other intangibles of $5,141 and $3,000 in 1994 and 1993, respectively and excess of cost over net assets acquired of $33,598 and $4,356 in 1994 and 1993, 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 RESEARCH AND DEVELOPMENT EXPENSES Research and development expenses charged against earnings were $23,624, $21,826 and $20,377 in 1994, 1993 and 1992, respectively. 5 PROVISION FOR RESTRUCTURED OPERATIONS The pretax restructuring charge of $6,001 recorded in the fourth quarter of Fiscal Year 1993 included approximately $4,000 in non-cash asset write-downs primarily attributed to the disposal of property, plant and equipment. The remaining $2,000 of cash expenditures included costs associated with the shutdowns of facilities, estimated operation losses during Fiscal 1994 of $481 and $1,061 for employee separation related to the elimination of approximately 240 positions. A significant portion of cash expenditure was incurred during Fiscal 1994, with approximately $400 to be expended in 1995. It is estimated that Fiscal Year 1994 earnings reflected approximately $500 savings, Fiscal 1995 should reflect $1,000 and years thereafter in excess of $1,000. As of November 30, 1994, the remaining pretax restructuring reserve balance was $1,146 and is currently estimated to be adequate to complete the restructuring. The restructuring charge arose from the planned closing, during primarily 1994 and 1995, of certain facilities and associated costs of consolidating their production into other facilities. This included the closing or sale of plants in Brazil, Mexico and Nicaragua and two small specialty businesses in Central America which were all completed in 1994. The plan also included consolidation of certain Central American paint operations. This part of the plan was partially completed in 1994, with the consolidation of paint manufacture in Costa Rica, and will be completed in 1995. The planned restructuring of Linear Products Division's operations in Finland (will be completed in 1995) and the sale of a Foster Products Corporation product line (accomplished in 1994), also were included in the restructuring charge. 6 INCOME TAXES Earnings before income taxes, minority interests and cumulative effect of accounting changes for the years ended November 30 are as follows:
1994 1993 1992 - ----------------------------------------------- United States (U.S.) $36,525 33,987 35,004 Outside U.S. 14,493 6,866 25,943 - ----------------------------------------------- Total $51,018 40,853 60,947 - -----------------------------------------------
H.B. Fuller 1994 Annual Report 57 The components of the provision for income taxes excluding cumulative effect of accounting changes are:
1994 1993 1992 - ------------------------------------------- Current: U.S. federal $13,379 12,192 11,789 State 1,842 1,753 1,500 Outside U.S. 7,024 5,575 11,867 - ------------------------------------------- 22,245 19,520 25,156 - ------------------------------------------- Deferred: U.S. federal (1,746) (2,102) (933) State (199) (225) (110) Outside U.S. (518) 1,998 603 - ------------------------------------------- (2,463) (329) (440) - ------------------------------------------- Total $19,782 19,191 24,716 - -------------------------------------------
The difference between the statutory U.S. federal income tax rate and the Company's effective income tax rate is explained below:
1994 1993 1992 - ------------------------------------------------ Statutory U.S. federal income tax rate 35.0% 34.9% 34.0% State income taxes 2.0 2.4 1.6 U.S. federal income taxes on dividends received from non-U.S. subsidiaries, before foreign tax credits 1.0 3.3 10.5 Foreign tax credits (0.7) (4.8) (12.2) Non-U.S. taxes 1.5 10.1 5.3 Other -- 1.1 1.4 - ------------------------------------------------ Total 38.8% 47.0% 40.6% - ------------------------------------------------
The Company adopted SFAS No. 109 as of the beginning of Fiscal Year 1993, as discussed in Note 1, Summary of Significant Accounting Policies. The cumulative effect on prior years of this change in accounting principle increased 1993 net earning by $1,107, or $0.08 per share in the first quarter of 1993. Information for the year 1992 was determined under the deferred method. Deferred income tax balances at November 30 were:
1994 1993 - --------------------------------------------------------------------------- Deferred tax assets $ 45,067 39,099 Valuation allowance (7,634) (7,284) - --------------------------------------------------------------------------- Deferred tax assets net of valuation allowance 37,433 31,815 Deferred tax liabilities (32,643) (26,445) - --------------------------------------------------------------------------- Net deferred tax assets $ 4,790 5,370 - --------------------------------------------------------------------------- Deferred income tax balances at November 30 were related to: 1994 1993 - --------------------------------------------------------------------------- Depreciation $(21,949) (18,469) Pension 11,031 8,655 Deferred compensation 3,365 3,066 Postretirement medical benefits 4,803 5,754 Tax loss carryforwards 8,118 7,130 Foreign tax credit carryforwards -- 300 Restructuring reserve 1,496 1,716 Provisions for expenses 5,358 3,726 Difference between assigned value and tax basis of acquisition (1,424) -- Currency gains/losses 1,087 761 Other 539 15 - --------------------------------------------------------------------------- 12,424 12,654 Valuation allowance (7,634) (7,284) - --------------------------------------------------------------------------- Net deferred tax assets $ 4,790 5,370 - ---------------------------------------------------------------------------
Under previous income tax accounting rules, deferred income taxes were provided for timing differences in the recognition of income and expense for tax and financial statement purposes. The principal components of the provision for deferred income taxes from continuing operations in 1992 were deferred tax provisions for various timing differences, primarily depreciation and employee compensation and benefit plan related items. U.S. income taxes have not been provided on approximately $74,992 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 H.B. Fuller 1994 Annual Report 58 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 H.B. Fuller Company have been profitable overall, cumulative losses of $29,428 are carried as net operating losses in 20 different countries. These losses can be carried forward to offset income tax liability on future income in those countries. Cumulative losses of $8,883 can be carried forward indefinitely, while the remaining $20,545 must be used during the 1995- 2001 period. In December of 1994, the Company settled a proposed Internal Revenue Service audit adjustment related primarily to acquisitions made during 1988. There was no material impact on the Company's financial statements. All IRS audits are now closed through 1989. 7 NOTES PAYABLE The primary component of notes payable relates to the Company's short-term lines of credit with banks totalling $45,843. The amount of unused available borrowings under these lines at November 30, 1994 was $122,163. At November 30, 1994 collateral for $2,479 notes payable, consisting primarily of property, plant and equipment, and inventories of certain foreign subsidiaries, amounted to approximately $3,512. H.B. Fuller 1994 Annual Report 59 8 LONG-TERM DEBT Long-term debt, including obligations under capital leases, is summarized as follows:
1994 1993 - ----------------------------------------------------------------------------------------------- Revolving credit agreements (a) $ 64,800 8,450 10.1% Senior Note, due 12/19/95 10,000 10,000 10.32% Senior Note, due 12/19/98 25,000 25,000 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 7.06%--8% other notes, due at various dates through 1998 3,336 1,312 8.23% New Zealand dollar note, due 4/99 2,569 -- 8.94% Australian dollar note, due 4/99 3,718 -- 10.94% Italian lira notes, due 11/01 2,735 -- 35% lempira note, payments due through 1999 623 -- 5--5.2% yen notes, due at various dates through 2015 7,551 2,381 5%--34% other notes less than $500 each, due at various dates through 2002 5,464 5,777 Obligations under capital leases 3,543 2,358 - ----------------------------------------------------------------------------------------------- 136,439 62,378 Current installments (6,430) (2,117) - ----------------------------------------------------------------------------------------------- Total $130,009 60,261 - -----------------------------------------------------------------------------------------------
(a) The Company has revolving credit agreements with a group of major banks which provide committed lines of credit of $150,000 through August 31, 2001. At the Company's option, interest is payable at floating rates based on the prime interest rate, the London Interbank Offered Rate plus 3/8 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 $75,000 and at 1/8% per annum on the second $75,000. 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, 1994 the Company exceeded minimum requirements for all financial covenants. At November 30, 1994, $422 of long-term debt (excluding obligations under capital leases) was collateralized by real property and equipment with a net book value of approximately $3,218. Aggregate maturities of long-term debt, including obligations under capital leases, amount to $6,430, $18,091, $3,594, $1,432 and $33,527 during the five fiscal years 1995 through 1999. H.B. Fuller 1994 Annual Report 60 9 LEASE COMMITMENTS Assets under capital leases are summarized as follows:
1994 1993 - --------------------------------------------------- Land $ 5,819 5,560 Buildings and improvements 8,288 6,936 Machinery and equipment 341 397 - --------------------------------------------------- 14,448 12,893 Accumulated amortization (2,362) (2,188) - --------------------------------------------------- Net assets under capital leases $12,086 10,705 - ---------------------------------------------------
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, 1994:
Capital Operating - --------------------------------------------------- Fiscal year: 1995 $ 720 $ 7,838 1996 674 5,914 1997 636 4,766 1998 586 3,821 1999 570 3,217 Later years 1,331 4,677 - --------------------------------------------------- Total minimum lease payments $4,517 $30,233 Amount representing interest (974) - --------------------------------------------------- Present value of minimum lease payments $3,543 - ---------------------------------------------------
Rental expense for all operating leases charged against earnings amounted to $11,853, $10,030 and $8,851 in 1994, 1993 and 1992, respectively. 10 CONTINGENCIES LEGAL: The Company and its subsidiaries are parties to various lawsuits and governmental proceedings. 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, 1994 the Company had foreign exchange contracts maturing between December 9, 1994 and November 20, 2000 to sell $16,386 in foreign currency (primarily 7,568 Canadian dollars, 8,848 Netherlands guilders and 6,017 deutsche marks). 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. H.B. Fuller 1994 Annual Report 61 Pension cost consists of the following:
U.S. Plan Non-U.S. Plans ------------------------------------ -------------------------- 1994 1993 1992 1994 1993 1992 - ---------------------------------------------------------------------------------------------------------------------- Service cost-benefits earned during the period $ 4,755 3,755 3,452 1,961 1,909 1,890 Interest cost on projected benefit obligation 8,413 7,219 6,296 3,306 3,101 2,995 Return on plan assets -- actual (1,055) (9,228) (14,746) (317) (413) (231) -- deferred (7,551) 1,478 7,818 29 131 (21) Amortization of transition (asset) liability (27) (27) (27) 80 81 81 All other cost components 768 404 211 104 125 126 - ---------------------------------------------------------------------------------------------------------------------- Net pension cost $ 5,303 3,601 3,004 5,163 4,934 4,840 - ----------------------------------------------------------------------------------------------------------------------
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 ------------------------ ------------------ ------------------ 1994 1993 1994 1993 1994 1993 - --------------------------------------------------------------------------------------------------------------------- Actuarial present value of benefit obligations: -- vested benefits $ (70,258) (71,181) (2,784) (2,376) (36,320) (32,184) -- non-vested benefits (3,279) (2,609) (13) (7) (466) (425) - --------------------------------------------------------------------------------------------------------------------- Accumulated benefit obligation (ABO) (73,537) (73,790) (2,797) (2,383) (36,786) (32,609) Effect of projected future compensation increases (32,073) (33,952) (372) (346) (7,859) (8,806) - --------------------------------------------------------------------------------------------------------------------- Projected benefit obligation (105,610) (107,742) (3,169) (2,729) (44,645) (41,415) Plan assets at fair value 101,004 103,502 3,773 3,633 -- -- - --------------------------------------------------------------------------------------------------------------------- Plan assets in excess of (less than) projected benefit obligation (4,606) (4,240) 604 904 (44,645) (41,415) Unrecognized prior service cost 7,835 5,728 410 191 467 490 Unrecognized transition (asset) liability (261) (288) (162) (192) 1,802 1,829 Unrecognized net (gain) loss (25,858) (14,429) 155 35 (97) 1,446 - --------------------------------------------------------------------------------------------------------------------- (Accrued) prepaid pension costs $ (22,890) (13,229) 1,007 938 (42,473) (37,650) - ---------------------------------------------------------------------------------------------------------------------
Assumptions used:
U.S. Plan Non-U.S. Plans - ------------------------------------------------------------------------------------- ----------------------------- 1994 1993 1992 1994 1993 1992 - -------------------------------------------------------------------------------------------------------------------- Weighted average discount rate 8.75%(1) 7.5%(1) 8.5% 7.0-8.0% 7.0-7.5% 7.5-8.5% 7.50%(2) 8.5%(2) Rate of increase in compensation levels 5.5%(1) 5.0%(1) 5.5% 5.0-6.0% 4.5-6.0% 4.5-6.5% 5.0%(2) 5.5%(2) Expected long-term rate of return on plan assets 10.0% 10.0% 10.0% 8.0% 9.0% 9.0% - --------------------------------------------------------------------------------------------------------------------
(1) November 30, 1994 and 1993 assumptions used for funded status of U.S. plan. (2) December 1, 1993 and 1992 assumptions used for U.S. plan pension cost. The charge to earnings relating to all plans was $11,983, $10,440 and $9,024 in 1994, 1993 and 1992, respectively. H.B. Fuller 1994 Annual Report 62 12 POSTEMPLOYMENT BENEFITS In November of 1992, the FASB issued SFAS No. 112 requiring accrual accounting for the expected cost of providing postemployment benefits to inactive and former employees, employee's beneficiaries and covered dependents after employment, but prior to retirement. The Company plans to adopt this standard in Fiscal Year 1995, the required effective date. The Company estimates, based on the current plan, an after-tax charge of $2,000-3,000 in the year of adoption. Ongoing annual expense is estimated to be immaterial. 13 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, 1993, projected at annual rates ranging from 12.5 percent in 1994 graded down to 5.5 percent for the year 2001 and after. The benefit obligation discount rate at that time was 7.5 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 November 30, 1994, by $3,430 and the aggregate of service and interest cost components of net periodic postretirement benefit costs by $674. The funded status of the plan was determined based on actuarial assumptions and health-care trend rates, as of November 30, 1994, projected at annual rates ranging from 11.5 percent in 1994 graded down to 5.5 percent for the year 2001 and after. The benefit obligation discount rate at that time was 8.75 percent. The Company has partially funded 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 8.0 percent. The Company has contributed $5,990 in 1993 to fund this benefit. The funded status of the plan at November 30, is as follows:
1994 1993 - ----------------------------------------------------- Actuarial present value of postretirement benefit obligation: Current $ (7,436) (7,614) Active employees fully eligible for benefits (7,050) (6,767) Other active employees (8,941) (7,763) - ----------------------------------------------------- Accumulated postretirement benefit obligation (23,427) (22,144) Fair value of plan assets 11,925 13,086 Unrecognized net (gain) loss (115) 81 - ----------------------------------------------------- (Accrued) unfunded postretirement benefit obligation $(11,617) (8,977) - ----------------------------------------------------- Benefit obligation discount rate 8.75% 7.5%
The components of net periodic postretirement benefit cost are as follows:
1994 1993 - ----------------------------------------------------- Service cost-benefits earned during the period $ 1,696 1,473 Interest cost on projected benefit obligation 1,951 1,730 Return on assets--actual (71) 120 --deferred (942) (752) All other components 17 -- - ----------------------------------------------------- Net periodic postretirement benefit cost $ 2,651 2,571 - -----------------------------------------------------
Total expense applicable to continuing operations for 1994 and 1993 was $2,651 and $2,571, under SFAS No. 106. Prior to 1993, the Company recognized expense in the year the benefits were paid ($904 in 1992). H.B. Fuller 1994 Annual Report 63 14 STOCKHOLDERS' EQUITY PREFERRED STOCK: There were 45,900 Series A preferred shares with a par value of $6.67 authorized and issued at November 30, 1994 and 1993. 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. 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. Common Stock: There were 40,000,000 par value $1.00 common shares authorized and 13,934,608 and 13,898,045 shares issued at November 30, 1994 and 1993, respectively. SHAREHOLDERS' RIGHTS PLAN: The Company has a shareholders' rights plan under which each holder of a share of common stock also has one right to purchase one share of common stock for $73.33. 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 $73.33 worth of common stock at one-half of its then market value. Upon certain "flip-over" events, each right entitles its holder to purchase $73.33 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 common stock. Another flip-in event is when a person or group designated by the Company's Board as potentially adverse (an "adverse person") acquires a stated percentage (less than 15 percent) of the Company's common stock. Rights held by an acquiring person or an adverse person are void. Elmer L. Andersen and Anthony L. Andersen and certain family members are excluded from the operation of the acquiring person and adverse person provisions. The Company may redeem the rights for one cent per share, but the redemption right expires shortly after a flip-in event. The rights expire on July 30, 1996. DIRECTORS' RETAINER STOCK PLAN: The Directors' Retainer 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 payment of their retainer fees in shares of Company common stock when they leave the Board rather than cash payments each year. At November 30, 1994, 53,939 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 37,346 and 36,075 restricted shares of the Company's common stock were granted to certain employees in 1994 and 1993, respectively. The market value of shares awarded $1,419 and $1,263 has been recorded as unearned compensation -- restricted stock in 1994 and 1993, 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 $180 and $42 in 1994 and 1993, respectively. A total of 34,000 and 34,875 restricted share units of the Company's common stock were allocated to certain employees in 1994 and 1993, respectively. The market value of units allocated of $1,292 and $1,007 in 1994 and 1993, respectively, is being H.B. Fuller 1994 Annual Report 64 treated as a common stock equivalent over the ten-year vesting period. At November 30, 1994, 760,486 shares remained available for future grants or allocations. OTHER STOCK OPTION PLANS: Options outstanding at November 30, 1994 are 260,033 shares under the Company's 1987 non-qualified plan and 6,750 shares granted under the Company's 1982 qualified plan. Options are exercisable over varying periods ending on October 10, 2000. At November 30, 1994, no shares remained available for grants under these plans. Information on stock options (restated for 3-for-2 stock split effective June 1, 1992) is shown in the following table:
Option Shares Outstanding Exercisable Price Range - -------------------------------------------------------------------------- Balances at November 30, 1991 505,172 248,751 $ 8.13--16.33 Became exercisable -- 255,173 9.63--16.33 Exercised (123,204) (123,204) 9.63--16.33 Cancelled (1,661) (413) 9.63--14.33 - -------------------------------------------------------------------------- Balances at November 30, 1992 380,307 380,307 8.13--16.33 Exercised (76,461) (76,461) 8.13--14.33 - -------------------------------------------------------------------------- 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 - --------------------------------------------------------------------------
H.B. Fuller 1994 Annual Report 65 15 BUSINESS SEGMENT INFORMATION The Company is a manufacturer of specialty chemical products, which includes the formulation, compounding and marketing of adhesives, sealants, coatings, paints, specialty waxes, sanitizing chemicals 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. Geographic segments were redefined in 1994. North America now includes Canada (previously reported in Other) and Mexico (previously reported in Latin America). Latin America now includes the Caribbean (previously reported in Other). Asia/Pacific was previously reported in Other. 1993 and 1992 have been restated to reflect the new grouping. A summary of Company operations by geographic areas for the years ended November 30 is as follows:
Sales to unaffiliated customers: 1994 1993 1992 - ----------------------------------------------------------------------- North America $ 637,632 551,219 514,231 Europe 231,594 214,498 235,014 Latin America 158,616 153,694 141,037 Asia/Pacific 69,525 55,876 52,156 - ----------------------------------------------------------------------- Total trade sales $1,097,367 975,287 942,438 - ----------------------------------------------------------------------- Intercompany sales: 1994 1993 1992 - ----------------------------------------------------------------------- North America $ 14,341 12,905 10,287 Europe 1,468 1,132 1,118 Latin America 7,570 5,316 6,123 Asia/Pacific 1 -- 9 Eliminations (23,380) (19,353) (17,537) - ----------------------------------------------------------------------- Total intercompany sales -- -- -- - ----------------------------------------------------------------------- Net sales: 1994 1993 1992 - ----------------------------------------------------------------------- North America $ 651,973 564,124 524,518 Europe 233,062 215,630 236,132 Latin America 166,186 159,010 147,160 Asia/Pacific 69,526 55,876 52,165 Eliminations (23,380) (19,353) (17,537) - ----------------------------------------------------------------------- Total net sales $1,097,367 975,287 942,438 - ----------------------------------------------------------------------- Earnings: 1994 1993 1992 - ----------------------------------------------------------------------- North America $ 37,587 29,063 31,415 Europe 10,464 11,187 18,499 Latin America 17,631 12,504 19,031 Asia/Pacific 271 716 2,461 - ----------------------------------------------------------------------- Operating earnings 65,953 53,470 71,406 Interest expense (11,747) (10,459) (12,537) Other (expense) income (3,188) (2,158) 2,078 - ----------------------------------------------------------------------- Earnings before income taxes, min. int., and acctg. chg. $ 51,018 40,853 60,947 - ----------------------------------------------------------------------- Identifiable assets: 1994 1993 1992 - ----------------------------------------------------------------------- North America $ 440,025 320,883 298,958 Europe 199,442 174,179 172,533 Latin America 171,485 162,858 153,539 Asia/Pacific 83,597 53,320 43,854 Eliminations (153,152) (155,609) (125,900) General corporate assets 531 8,200 16,581 Investment in affiliates 689 690 1,639 - ----------------------------------------------------------------------- Total assets $ 742,617 564,521 561,204 - -----------------------------------------------------------------------
H.B. Fuller 1994 Annual Report 66 QUARTERLY DATA (UNAUDITED)
1994 1993* ----------------------------------------------- ------------------------------------------- 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr. 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr. - -------------------------------------------------------------------------------------------------------------------------------- Net sales $242,499 272,377 286,791 295,700 228,054 247,275 252,202 247,756 Gross profit 76,971 90,191 92,302 94,060 71,076 83,497 82,445 80,223 Operating earnings 10,129 20,066 18,796 16,962 8,167 18,310 18,281 8,712 Earnings before cumulative effect of acctg. changes 4,036 9,301 8,930 8,596 2,728 8,743 8,654 1,576 Cumulative effect of acctg. changes -- -- -- -- (11,717) -- -- -- - -------------------------------------------------------------------------------------------------------------------------------- Net earnings (loss) $ 4,036 9,301 8,930 8,596 (8,989) 8,743 8,654 1,576 - -------------------------------------------------------------------------------------------------------------------------------- Earnings (loss) per common share: Earnings before cumulative effect of acctg. changes $ 0.29 0.66 0.64 0.61 0.20 0.62 0.62 0.11 Cumulative effect of acctg. changes -- -- -- -- (0.84) -- -- -- - -------------------------------------------------------------------------------------------------------------------------------- Net earnings (loss) $ 0.29 0.66 0.64 0.61 (0.64) 0.62 0.62 0.11 - --------------------------------------------------------------------------------------------------------------------------------
* Restructuring initiatives reduced fourth quarter net earnings by $5,299 or $0.38 per share. (See Note 5 to the Consolidated Financial Statements.) First quarter sales and gross profit were reduced by a one-time Automotive Products retroactive adjustment of $3,446, with an after-tax impact on earnings of $2,137 or $0.15 per share. H.B. Fuller 1994 Annual Report 67 MANAGEMENT'S REPORT 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 Vice President, Chief Financial Officer and Treasurer /s/ Walter Kissling Walter Kissling President and Chief Operating Officer /s/ Anthony L. Andersen Anthony L. Andersen Chair, Board of Directors and Chief Executive Officer REPORT OF INDEPENDENT ACCOUNTANTS 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, 1994 and 1993, and the results of their operations and their cash flows for each of the three years in the period ended November 30, 1994, 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 Notes 6 and 1 to the consolidated financial statements, the Company adopted the provisions of Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes" and the provisions of SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" in 1993. /s/ Price Waterhouse LLP Price Waterhouse LLP Minneapolis, Minnesota January 5, 1995 H.B. Fuller 1994 Annual Report 1969-1994 IN REVIEW AND SELECTED FINANCIAL DATA 68 H.B. FULLER COMPANY AND SUBSIDIARIES
Annual Growth Rate 1-yr 5-yr 10-yr 1993- 1989- 1984- (Dollars in thousands, 1994 1994 1994 except per share amounts) 1994 1993 1992 1991* 1990 1989 1988 - -------------------------------------------------------------------------------------------------------------------------- INCOME STATEMENT DATA: 12.5% 7.8% 9.4% Net sales $1,097,367 975,287 942,438 861,024 792,230 753,374 684,034 23.3 7.5 7.4 Operating earnings $ 65,953 53,470 71,406 59,846 51,911 46,009 46,430 Earnings from 42.2 14.5 9.0 continuing operations $ 30,863 21,701 35,622 27,687 21,145 15,671 21,081 209.1 14.5 10.0 Net earnings $ 30,863 9,984 35,622 27,687 21,145 15,671 21,081 13.0 11.2 13.6 Depreciation $ 28,177 24,934 24,865 21,787 20,376 16,571 14,469 12.3 (2.4) 2.8 Interest expense $ 11,747 10,459 12,537 14,788 14,028 13,237 8,477 3.1 7.3 7.1 Income taxes $ 19,782 19,191 24,716 19,173 15,234 13,936 14,361 BALANCE SHEET DATA: 31.5% 10.3% 12.1% Total assets $ 742,617 564,521 561,204 508,911 489,634 455,172 434,293 8.1 6.3 6.7 Working capital $ 129,665 119,905 130,817 108,779 96,097 95,645 104,071 Current ratio 1.6 1.7 1.8 1.7 1.7 1.8 1.9 Net property, 26.9 9.6 12.9 plant and equipment $ 295,090 232,547 223,153 207,378 202,341 186,631 161,605 Long-term debt, excluding 115.7 5.2 9.7 current installments $ 130,009 60,261 53,457 71,814 88,240 100,974 98,473 10.2 8.1 10.6 Stockholders' equity $ 274,805 249,396 255,040 219,050 197,191 186,515 178,871 STOCKHOLDER DATA: Earnings from continuing operations: 41.9% 15.1% 9.0% Per common share $ 2.20 1.55 2.55 2.00 1.53 1.09 1.46 Percent of net sales 2.8 2.2 3.8 3.2 2.7 2.1 3.1 Net earnings: 209.9 15.1 9.8 Per common share $ 2.20 0.71 2.55 2.00 1.53 1.09 1.46 Percent of net sales 2.8 1.0 3.8 3.2 2.7 2.1 3.1 Dividends paid: 6.5 8.6 11.1 Per common share $ 0.575 0.54 0.46 0.41 0.40 0.38 0.35 Stockholders' equity: 9.9 8.2 10.5 Per common share $ 19.70 17.92 18.43 15.96 14.56 13.27 12.56 Return on average stockholders' equity 11.5 4.0 15.0 13.3 11.0 8.6 12.4 Common stock price: (1.2) 13.1 12.0 High $ 42.25 42.75 53.25 38.33 19.17 22.83 25.83 (7.2) 16.0 14.0 Low $ 29.00 31.25 32.58 18.83 13.75 13.83 16.00 Average common shares outstanding 0.1 (0.5) 0.1 (in thousands) 14,036 14,018 13,989 13,854 13,798 14,358 14,387 6.7 3.1 4.1 Number of employees 6,400 6,000 5,800 5,600 5,600 5,500 5,200 (Dollars in thousands, except per share amounts) 1987 1986 1985 - --------------------------------------------------------------- INCOME STATEMENT DATA: Net sales 597,061 528,483 457,937 Operating earnings 47,748 39,483 30,733 Earnings from continuing operations 25,812 18,922 13,335 Net earnings 25,812 18,922 14,909 Depreciation 13,197 10,566 9,318 Interest expense 5,479 6,208 7,627 Income taxes 16,320 14,107 9,525 BALANCE SHEET DATA: Total assets 329,636 291,180 253,571 Working capital 86,598 74,232 69,477 Current ratio 1.9 1.9 2.0 Net property, plant and equipment 126,905 108,989 97,173 Long-term debt, excluding current installments 33,015 37,211 44,207 Stockholders' equity 161,355 135,479 113,417 STOCKHOLDER DATA: Earnings from continuing operations: Per common share 1.79 1.33 0.96 Percent of net sales 4.3 3.6 2.9 Net earnings: Per common share 1.79 1.33 1.07 Percent of net sales 4.3 3.6 3.3 Dividends paid: Per common share 0.27 0.23 0.21 Stockholders' equity Per common share 11.35 9.62 8.19 Return on average stockholders' equity 17.4 15.2 14.0 Common stock price: High 32.33 20.67 11.25 Low 16.17 10.25 8.17 Average common shares outstanding (in thousands) 14,379 14,196 13,880 Number of employees 4,600 4,500 4,400
*For all years prior to 1992, common share and per common share amounts have been restated for 3-for-2 common stock dividend effective June 1, 1992. H.B. Fuller 1994 Annual Report
1984 1983 1982 1981 1980 1979 1978 1977 - ----------------------------------------------------------------------------------------------------------------------------------- INCOME STATEMENT DATA: Net sales 447,984 414,210 321,502 318,793 288,653 251,558 219,962 192,848 Operating earnings 32,179 32,452 24,940 30,531 23,958 20,739 18,681 15,504 Earnings from continuing operations 13,033 13,624 9,188 13,327 8,538 7,433 7,122 6,181 Net earnings 11,895 13,832 9,493 13,587 8,921 7,527 7,122 6,181 Depreciation 7,898 6,786 5,014 4,592 4,507 3,986 3,319 2,897 Interest expense 8,894 6,546 5,482 5,106 6,012 4,106 3,161 2,524 Income taxes 9,944 10,108 8,151 12,069 7,954 7,807 7,355 6,584 BALANCE SHEET DATA: Total assets 236,489 225,154 206,752 157,417 146,674 139,190 116,222 100,847 Working capital 68,072 59,848 48,969 42,370 41,229 32,696 32,575 32,135 Current ratio 2.1 2.0 1.8 1.9 1.9 1.7 1.9 2.1 Net property, plant and equipment 87,357 80,427 73,077 46,938 47,245 42,193 35,478 30,154 Long-term debt, excluding current installments 51,381 51,755 44,083 23,072 26,049 23,375 22,235 20,977 Stockholders' equity 99,908 92,212 81,645 75,842 64,951 57,867 50,698 45,016 STOCKHOLDER DATA: Earnings from continuing operations: Per common share 0.93 0.98 0.67 0.97 0.63 0.55 0.53 0.46 Percent of net sales 2.9 3.3 2.9 4.2 3.0 3.0 3.2 3.2 Net earnings: Per common share 0.86 0.99 0.69 0.99 0.66 0.56 0.53 0.46 Percent of net sales 2.7 3.3 3.0 4.3 3.1 3.0 3.2 3.2 Dividends paid: Per common share 0.20 0.18 0.17 0.15 0.13 0.12 0.11 0.09 Stockholders' equity: Per common share 7.23 6.67 5.90 5.48 4.83 4.31 3.74 3.35 Return on average stockholders' equity 12.4 15.9 12.1 19.3 14.5 13.7 15.0 14.5 Common stock price: High 13.63 13.25 8.50 8.71 4.46 4.29 4.75 3.54 Low 7.83 7.63 4.75 3.92 2.92 3.25 2.79 2.46 Average common shares outstanding (in thousands) 13,881 13,908 13,785 13,704 13,479 13,473 13,473 13,362 Number of employees 4,300 4,100 4,000 3,300 3,400 3,400 3,300 3,000
1976 1975 1974 1973 1972 1971 1970 1969 - ----------------------------------------------------------------------------------------------------------------------------------- INCOME STATEMENT DATA: Net sales 167,892 129,426 121,839 91,572 78,257 60,167 53,024 47,248 Operating earnings 13,571 9,060 12,745 8,657 7,394 5,088 5,273 4,726 Earnings from continuing operations 5,382 3,785 5,323 3,274 3,112 2,247 2,347 2,018 Net earnings 5,382 3,785 5,323 3,274 3,112 2,247 2,347 2,018 Depreciation 2,383 2,000 1,705 1,518 1,464 1,147 851 789 Interest expense 2,369 1,900 2,098 1,370 1,173 687 515 434 Income taxes 5,322 3,290 5,023 3,470 3,080 1,960 2,322 1,978 BALANCE SHEET DATA: Total assets 90,670 78,643 70,830 61,021 51,194 40,210 33,294 27,352 Working capital 29,194 28,410 20,244 17,087 14,599 12,795 9,542 10,262 Current ratio 2.1 2.5 1.9 2.0 2.1 2.3 2.0 2.5 Net property, plant and equipment 28,110 24,446 20,739 18,676 16,498 12,578 10,037 7,822 Long-term debt, excluding current installments 21,247 21,368 12,537 13,108 10,336 6,033 3,194 3,178 Stockholders' equity 40,075 35,666 32,787 28,259 25,603 23,083 17,848 15,543 STOCKHOLDER DATA: Earnings from continuing operations: Per common share 0.40 0.28 0.40 0.24 0.23 0.18 0.19 0.18 Percent of net sales 3.2 2.9 4.4 3.6 4.0 3.7 4.4 4.3 Net earnings: Per common share 0.40 0.28 0.40 0.24 0.23 0.18 0.19 0.18 Percent of net sales 3.2 2.9 4.4 3.6 4.0 3.7 4.4 4.3 Dividends paid: Per common share 0.07 0.07 0.06 0.05 0.05 0.05 0.04 0.03 Stockholders' equity Per common share 2.97 2.65 2.43 2.09 1.91 1.72 1.47 1.29 Return on average stockholders' equity 14.2 11.1 17.4 12.2 12.8 11.0 14.1 15.3 Common stock price: High 3.04 2.29 1.87 4.33 3.71 4.71 4.00 3.97 Low 1.75 1.00 1.04 1.08 1.33 3.21 2.53 2.55 Average common shares outstanding (in thousands) 13,362 13,362 13,362 13,371 13,419 12,390 12,048 11,175 Number of employees 2,800 2,600 2,300 2,100 1,800 1,700 1,600 1,500
H.B. Fuller 1994 Annual Report INVESTOR INFORMATION 70 H.B. FULLER COMPANY AND SUBSIDIARIES
Market Price (Common Stock*) 1994 1993 - ---------------------------------------------------------------------------- High Low High Low - ---------------------------------------------------------------------------- First Quarter $40.00 $33.00 $42.50 $35.25 Second Quarter 42.25 34.25 42.75 36.50 Third Quarter 40.00 35.75 41.25 34.25 Fourth Quarter 37.25 29.00 38.75 31.25
*H.B. Fuller Company common stock is traded on the over-the-counter market. NASDAQ symbol: FULL - ----------------------------------------------------------------------------
DIVIDENDS Dividends Paid Per Common Share 1994 1993 - ----------------------------------------------------- First Quarter $0.14 $0.12 Second Quarter 0.145 0.14 Third Quarter 0.145 0.14 Fourth Quarter 0.145 0.14 - ----------------------------------------------------- Total $0.575 $0.54
Dividend Reinvestment Plan The dividend reinvestment plan provides a convenient way for shareholders to increase their holdings of H.B. Fuller Company common stock, with no fees or commissions charged. Approximately 75 percent of our shareholders currently are participants. Dividend Performance (Index) H.B. Fuller's dividend has increased 192.4 percent over the past 10 years, compared to the 71.3 percent increase in the S&P 500 dividend. Fuller has increased its dividend each year over this 10 year period at a compound rate of 11.6 percent compared to the S&P 500's increase of 5.5 percent per year. [GRAPH APPEARS HERE]
Measurement Period H.B. FULLER S&P (Fiscal Year Covered) COMPANY 500 INDEX - ------------------- ----------- --------- 1984 $1.00 $1.00 1985 1.07 1.03 1986 1.19 1.06 1987 1.37 1.13 1988 1.78 1.27 1989 1.95 1.47 1990 2.02 1.60 1991 2.08 1.56 1992 2.35 1.55 1993 2.75 1.58 1994 2.92 1.71
- ---------------------------------------------------------------------------- Annual Meeting The annual meeting of shareholders will be held on Thursday, April 20, 1995 at 3:00 p.m. at the H.B. Fuller Company, Industrial Coatings Division, 2900 Granada Lane, Oakdale, Minnesota 55128. All shareholders are cordially invited to attend. Available Publications The company's annual report and press releases are distributed regularly to stockholders. In addition, other publications are available upon request. They include: . Automatic Dividend Reinvestment Brochure . Community Affairs Annual Report . Environmental Brochure . Form 10-Q as filed with the Securities Exchange Commission . The Story of H.B. Fuller Company 1887-1987 These materials will be sent to any stockholder upon request in writing to: Investor Relations, H.B. Fuller Company, 2400 Energy Park Drive, St. Paul, Minnesota 55108-1591. Or call the H.B. Fuller Company Shareholder Services Line at 1-800-214-2523. Corporate Headquarters H.B. Fuller Company, 2400 Energy Park Drive, St. Paul, Minnesota 55108-1591, (612) 645-3401 H.B. Fuller 1994 Annual Report Form 10-K Report H.B. Fuller Company's Form 10-K annual report for the year ended November 30, 1994 filed with Securities and Exchange Commission, Washington D.C., 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, 1200 County Road E West, Arden Hills, Minnesota 55112-3792. H.B. Fuller Company on Future 500 Listing April 18, 1994 (Latest Ranking) [FORTUNE 500 RANKING CHART APPEARS HERE]
1992 1993 ----------------- ----------------- Rank Rank ---- ---- Sales 371 ($933.70) 368 ($975.30) Profits 240 ($35.60) 346 ($10.00) * Market Value 351 ($537.80) 376 ($521.70) Ten Year Annual Rate Earnings Per Share 58 (14%) 214 (3.3%) * Ten Year Annual Rate Total Return To Stockholders 97 (19.8%) 188 (12.4%)
*Reflects a net SFAS 106, 109 charge and a recurring charge. [_] 1992 [_] 1993 Independent Accountants Price Waterhouse LLP, Minneapolis, Minnesota Investor Contact Richard Edwards Director of Investor Relations (612) 481-3650 Market Makers The following firms made a market in H.B. Fuller Company as of November 30, 1994: . Cantor, Fitzgerald & Co. . Dain Bosworth, Inc. . Herzog, Heine, Geduld, Inc. . Kemper Securities Group, Inc. . Lehman Brothers Inc. . Mayer & Schweitzer Inc. . Merrill Lynch, Pierce, Fenner . Piper Jaffray Companies Inc. . Sherwood Securities Corp. . Smith Barney Shearson Inc. . Troster Singer Corp. Number of Common Shareholders As of November 30, 1994 there were approximately 5,340 common stockholders of record. Transfer Agent and Registrar Norwest Bank Minnesota, N.A., 161 North Exchange, South Saint Paul, Minnesota 55075, 1-800-468-9716 or (612) 450-4064 (in Minnesota). Shareholder Composition [PIE CHART APPEARS HERE] . 52.4% Domestic Instit. . 1.7% Foreign Instit. . 9.1% Directors & Officers . 12.2% Employee Plans . 24.6% Individuals H.B. Fuller 1994 Annual Report EX-21 7 SUBSIDIARIES Exhibit 21 ---------- H.B. FULLER COMPANY AND CONSOLIDATED SUBSIDIARIES AS OF NOVEMBER 30, 1994
PERCENTAGE JURISDICTION OF OF VOTING SUBSIDIARY ORGANIZATION SECURITIES ------------------------------------------------------ --------------- ---------- H.B. Fuller Company United States Branches: Indonesia, Korea, Netherlands (LPD) H.B. Fuller Company Puerto Rico, Inc. United States 100.0 H.B. Fuller International Inc. United States 100.0 Branches: Australia, Hong Kong, Singapore ChemEquity, Inc. United States 100.0 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 Products, Inc. United States 100.0 Lombard Acquisition Corporation United States 100.0 H.B. Fuller Automotive Technology Systems, Inc. United States 100.0 Foster Products Corporation United States 100.0 TEC Incorporated United States 100.0 H.B. Fuller Licensing & Financing Inc. United States 100.0 Aireline, Inc. United States 100.0 note a Kativo Chemical Industries, S.A. Panama 88.8 (See listing of subsidiaries on the following pages.) Pinturas Centroamericanas Costa Rica S.A. Costa Rica 80.0 Mundo de Colores Pintica, S.A. Costa Rica 100.0 Pinturas Ecuatorianas, S.A. Ecuador 100.0 Distribuidora Americana, S.A. Ecuador 100.0 Glidden Panama S.A. Panama 100.0 Glidden Avenida Nacional, S.A. Panama 100.0 Glidden Colon, S.A. Panama 100.0 Glidden Chitre, S.A. Panama 100.0 Glidden David, S.A. Panama 100.0 Glidden Bethania, S.A. Panama 100.0 Glidden El Dorado, S.A. Panama 100.0 Glidden Via Espana, S.A. Panama 100.0 Glidden Chorrera, S.A. Panama 100.0 Fabrica Pinturas Glidden, 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 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 SICAM S.p.A. Italy 100.0 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
Page 1 of 5 Exhibit 21 ---------- H.B. FULLER COMPANY AND CONSOLIDATED SUBSIDIARIES AS OF NOVEMBER 30, 1994
PERCENTAGE JURISDICTION OF OF VOTING SUBSIDIARY ORGANIZATION SECURITIES ---------------------------------------- --------------- ----------- H.B. Fuller Canada, Inc. Canada 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 9.2
---------------------------------------- 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 SEPTEMBER 30, 1994
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. #REF! 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 Kativo Comercial, 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 Acrilicos de Centroamerica, S.A. Kativo Chemical Industries, S.A. Costa Rica 100.00 Alfombras Canon, S.A. Kativo Chemical Industries, S.A. Costa Rica 100.00 Analko, S.A. Kativo Chemical Industries, S.A. Costa Rica 100.00 * Sinteticos, 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 Inversiones Kem Supply, S.A. H.B. Fuller Ecuador, S.A. Ecuador 100.00 * - -------------------------------------------------------------------------------------------------------------------- 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. Kativo Chemical Industries, S.A. Guatemala 80.40 Chemical Supply Corporation 19.60 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 SEPTEMBER 30, 1994
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 Decotintas 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 SEPTEMBER 30, 1994
PERCENTAGE JURISDICTION OF OF VOTING SUBSIDIARY OWNER OF VOTING SECURITIES ORGANIZATION SECURITIES -------------------------------------------- --------------------------------- --------------------- ---------------- H.B. Fuller Mexico, S.A. Kativo Chemical Industries, S.A. Mexico 100.000 Minority 0.000 - ------------------------------------------------------------------------------------------------------------------------ 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 Kativo Comercial, S.A. Kativo de Panama, 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 H.B. Fuller Comercial, S.A. H.B. Fuller Panama, 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 Poruana, 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 Venezuala, S.A. Kativo Chemical Industries, S.A. Venezuala 100.00 - ------------------------------------------------------------------------------------------------------------------------ * -- Inactive Entities
Page 5 of 5 EX-23 8 PRICE WATERHOUSE Exhibit 23 ---------- CONSENT OF INDEPENDENT ACCOUNTANTS ---------------------------------- We hereby consent to the incorporation by reference in the Prospectus constituting part of the Registration Statement on Form S-3 (Registration Nos. 33-53169 and 33-53387) and to the incorporation by reference in the Registration Statement 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 5, 1995 appearing in the 1994 Annual Report to Stockholders of H.B. Fuller Company which is incorporated in this Annual Report on Form 10-K405. We also consent to the incorporation by reference of our report on the Financial Statement Schedules, which appears in this Form 10-K405. Price Waterhouse LLP Minneapolis, Minnesota February 23, 1995 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, 1994, 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 4th day of December, 1994. /s/ Anthony L. Andersen /s/ Reatha Clark King - -------------------------------- --------------------------------- ANTHONY L. ANDERSEN REATHA CLARK KING Chairman of the Board and Director Chief Executive Officer and Director /s/ Norbert R. Berg /s/ Walter Kissling - -------------------------------- --------------------------------- NORBERT R. BERG WALTER KISSLING Director President and Chief Operating Officer and Director /s/ Edward L. Bronstien, Jr. /s/ John J. Mauriel, Jr. - -------------------------------- --------------------------------- EDWARD L. BRONSTIEN, JR. JOHN J. MAURIEL, JR. Director Director /s/ Rolf Schubert - -------------------------------- --------------------------------- ROBERT J. CARLSON ROLF SCHUBERT Director Vice President of Corporate Research and Development and Director /s/ Freeman A. Ford /s/ Lorne C. Webster - -------------------------------- --------------------------------- FREEMAN A. FORD LORNE C. WEBSTER Director Director /s/ Gail D. Fosler - -------------------------------- GAIL D. FOSLER Director EX-27 10 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED STATEMENTS OF EARNINGS CONSOLIDATED BALANCE SHEETS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS 1,000 YEAR NOV-30-1994 NOV-30-1994 9,830 0 172,823 6,221 152,651 361,403 513,893 218,803 742,617 231,738 130,009 13,935 0 306 260,564 742,617 1,097,367 1,097,367 743,843 1,031,414 3,188 1,390 11,747 51,018 19,782 30,863 0 0 0 30,863 2.20 2.20
EX-99 11 11-K Exhibit 99 ---------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 11-K ANNUAL REPORT Pursuant to Section 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended October 31, 1994 H.B. Fuller Company Thrift Plan H.B. FULLER COMPANY 2400 Energy Park Drive St. Paul, Minnesota 55108 - -------------------------------------------------------------------------------- Financial Statements and Exhibits - --------------------------------- (a) Financial Statements: Page No. -------- Report of Independent Accountants F-1 Statements of Financial Condition as of October 31, 1994 and 1993 F-2 - F-3 Statements of Income and Changes in Plan Equity for the years ended October 31, 1994, 1993, and 1992 F-4 - F-6 Notes to Financial Statements F-7 - F-10 (b) Exhibits: Consent of Independent Accountants E-1 REPORT OF INDEPENDENT ACCOUNTANTS --------------------------------- To the Participants and Administrator of the H.B. Fuller Company Thrift Plan In our opinion, the accompanying statements of financial condition and statements of income and changes in plan equity present fairly, in all material respects, the financial position of the H.B. Fuller Company Thrift Plan at October 31, 1994 and 1993, and the results of its operations and the changes in its plan equity for each of the three years in the period ended October 31, 1994 in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Plan'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. Price Waterhouse LLP Minneapolis, Minnesota February 3, 1995 F-1 Exhibit 99 ---------- H.B. FULLER COMPANY THRIFT PLAN Statement of Financial Condition October 31, 1994
Company Common Money Stock Market Index Balanced ASSETS Fund Fund Fund Fund Total ------ ---------- --------- ---------- --------- ---------- Investments at Fair Value: Securities of Participating Employer - Common Stock of H. B. Fuller Company (1,650,693 shares; cost $38,276,742) 54,885,529 54,885,529 Securities of unaffiliated issuers - Norwest Index Stock Fund Norwest Bank (490,860 units; cost $10,091,245) 10,862,237 10,862,237 Norwest Growth Balanced Fund Norwest Bank (363,932 units; cost $6,216,530) 6,578,439 6,578,439 Norwest Short-Term Investment Fund (5,970,922 units; cost $5,970,922) 130,069 5,785,965 35,585 19,303 5,970,922 ---------- --------- ---------- --------- ---------- Total Investments 55,015,598 5,785,965 10,897,822 6,597,742 78,297,127 Other Assets 240,950 23,191 264,141 ---------- --------- ---------- --------- ---------- Total Assets 55,256,548 5,809,156 10,897,822 6,597,742 78,561,268 ========== ========= ========== ========= ========== PLAN EQUITY ----------- Plan Equity 55,256,548 5,809,156 10,897,822 6,597,742 78,561,268 ---------- --------- ---------- --------- ---------- Total Plan Equity 55,256,548 5,809,156 10,897,822 6,597,742 78,561,268 ========== ========= ========== ========= ==========
See accompanying Notes to Financial Statements. F-2 Exhibit 99 ---------- H.B. FULLER COMPANY THRIFT PLAN Statement of Financial Condition October 31, 1993
Company Common Money Stock Market Index Balanced ASSETS Fund Fund Fund Fund Total ------ ---------- --------- ---------- --------- ---------- Investments at fair value: Securities of participating employer - common stock of H. B. Fuller Company (1,477,189 shares; cost $31,938,787) 47,639,345 47,639,345 Securities of unaffiliated issuers - Norwest Index Stock Fund Norwest Bank (487,614 units; cost $9,957,482) 10,366,190 10,366,190 Norwest Growth Balanced Fund Norwest Bank (326,694 units; cost $5,473,691) 5,753,416 5,753,416 Norwest Short-Term Investment Fund (5,950,671 units; cost $5,950,671) 150,455 5,675,595 84,550 40,071 5,950,671 ---------- --------- ---------- --------- ---------- Total Investments 47,789,800 5,675,595 10,450,740 5,793,487 69,709,622 Other Assets 206,374 16,839 223,213 ---------- --------- ---------- --------- ---------- Total Assets 47,996,174 5,692,434 10,450,740 5,793,487 69,932,835 ========== ========= ========== ========= ========== PLAN EQUITY ----------- Plan Equity 47,996,174 5,692,434 10,450,740 5,793,487 69,932,835 ---------- --------- ---------- --------- ---------- Total Plan Equity 47,996,174 5,692,434 10,450,740 5,793,487 69,932,835 ========== ========= ========== ========= ==========
See accompanying Notes to Financial Statements. F-3 Exhibit 99 ---------- H.B. FULLER COMPANY THRIFT PLAN Statement of Income and Changes in Plan Equity Year Ended October 31, 1994
Company Common Money Stock Market Index Balanced Fund Fund Fund Fund Total ---------- --------- ---------- --------- ---------- Investment Income: Dividends 899,525 899,525 Interest 11,562 222,069 233,631 ---------- --------- ---------- Total Investment Income 911,087 222,069 1,133,156 Realized Gains on the Sale and Distribution of Investments 370,907 73,932 90,123 534,962 Unrealized Appreciation of Investments 908,229 362,284 82,184 1,352,697 ---------- --------- ---------- --------- ---------- Total Fund Income 2,190,223 222,069 436,216 172,307 3,020,815 ---------- --------- ---------- --------- ---------- Contributions: By Employees 3,117,555 509,983 1,271,280 707,686 5,606,504 By Participating Employer, net of Forfeitures of $46,462 2,440,706 2,440,706 Employee Rollover 407,221 342,278 240,357 382,568 1,372,424 ---------- --------- ---------- --------- ---------- Total Contributions 5,965,482 852,261 1,511,637 1,090,254 9,419,634 ---------- --------- ---------- --------- ---------- Cash Transferred between Funds 1,306,149 (530,433) (981,968) 206,252 0 ---------- --------- ---------- --------- ---------- Total Increase in Plan Equity 9,461,854 543,897 965,885 1,468,813 12,440,449 Decreases in Plan Equity Attributed to Withdrawals (2,201,480) (427,175) (518,803) (664,558) (3,812,016) ---------- --------- ---------- --------- ---------- Net increase in Plan Equity 7,260,374 116,722 447,082 804,255 8,628,433 Plan Equity at Beginning of Period 47,996,174 5,692,434 10,450,740 5,793,487 69,932,835 ---------- --------- ---------- --------- ---------- Plan Equity at End of Period 55,256,548 5,809,156 10,897,822 6,597,742 78,561,268 ========== ========= ========== ========= ==========
See accompanying Notes to Financial Statements. F-4 Exhibit 99 ---------- H.B. FULLER COMPANY THRIFT PLAN Statement of Income and Changes in Plan Equity Year Ended October 31, 1993
Company Fixed In- General Common come/Money Equities/ Stock Market Index Balanced Fund Fund Fund Fund Total ---------- ---------- ---------- --------- ----------- Investment Income: Dividends 769,687 769,687 Interest 11,182 187,111 186,903 1,248 386,444 ---------- ---------- ---------- --------- ----------- Total Investment Income 780,869 187,111 186,903 1,248 1,156,131 Realized Gain on the Sale and Distribution of Investments 716,725 1,360,030 469,984 2,546,739 Unrealized Appreciation/ (Depreciation) of Investments (8,127,838) (443,834) 236,434 (8,335,238) Investment Expenses (2,391) (294) (457) (264) (3,406) ---------- ---------- ---------- --------- ----------- Total Fund Income (6,632,635) 186,817 1,102,642 707,402 (4,635,774) ---------- ---------- ---------- --------- ----------- Contributions: By Employees 2,882,740 561,646 1,073,774 535,250 5,053,410 By Participating Employer, net of Forfeitures of $54,358 2,283,400 2,283,400 Employee Rollover 25,891 6,712 33,226 8,196 74,025 ---------- ---------- ---------- --------- ----------- Total Contributions 5,192,031 568,358 1,107,000 543,446 7,410,835 ---------- ---------- ---------- --------- ----------- Cash Transferred between Funds 812,399 (1,153,917) 387,403 (45,885) (0) ---------- ---------- ---------- --------- ----------- Total Increase in Plan Equity (628,205) (398,742) 2,597,045 1,204,963 2,775,061 Decreases in Plan Equity Attributed to Withdrawals (1,339,248) (104,683) (412,254) (179,439) (2,035,624) ---------- ---------- ---------- --------- ----------- Net increase in Plan Equity (1,967,453) (503,425) 2,184,791 1,025,524 739,437 Plan Equity at Beginning of Period 49,963,627 6,195,859 8,265,949 4,767,963 69,193,398 ---------- ---------- ---------- --------- ----------- Plan Equity at End of Period 47,996,174 5,692,434 10,450,740 5,793,487 69,932,835 ========== ========== ========== ========= ===========
See accompanying Notes to Financial Statements. F-5 Exhibit 99 ---------- H.B. FULLER COMPANY THRIFT PLAN Statement of Income and Changes in Plan Equity Year Ended October 31, 1992
Company Common Fixed General Stock Income Equities Balanced Fund Fund Fund Fund Total ---------- --------- --------- --------- ---------- Investment Income: Dividends 615,946 232 616,178 Interest 10,361 302,450 235,228 4,632 552,671 ---------- --------- --------- --------- ---------- Total Investment Income 626,307 302,450 235,460 4,632 1,168,849 Realized Gain on the Sale and Distribution of Investments 5,950,454 132,573 6,083,027 Unrealized Appreciation/ (Depreciation) of Investments (6,608,819) 363,306 43,291 (6,202,222) Investment Expenses (7,052) (860) (902) (185) (8,999) ---------- --------- --------- --------- ---------- Total Fund Income (39,110) 301,590 730,437 47,738 1,040,655 ---------- --------- --------- --------- ---------- Contributions: By Employees 2,343,591 692,845 1,065,887 234,400 4,336,723 By Participating Employer, net of Forfeitures of $81,220 1,952,660 1,952,660 Employee Rollover 17,671 5,448 5,887 20,391 49,397 ---------- --------- --------- --------- ---------- Total Contributions 4,313,922 698,293 1,071,774 254,791 6,338,780 ---------- --------- --------- --------- ---------- Transferred between Funds (5,066,928) (429,619) 948,313 4,548,234 0 ---------- --------- --------- --------- ---------- Total Increase in Plan Equity (792,116) 570,264 2,750,524 4,850,763 7,379,435 Decreases in Plan Equity Attributed to Withdrawals (2,547,595) (771,623) (485,143) (82,800) (3,887,161) ---------- --------- --------- --------- ---------- Net Increase in Plan Equity (3,339,711) (201,359) 2,265,381 4,767,963 3,492,274 Plan Equity at Beginning of Period 53,303,338 6,397,218 6,000,568 65,701,124 ---------- --------- --------- --------- ---------- Plan Equity at End of Period 49,963,627 6,195,859 8,265,949 4,767,963 69,193,398 ========== ========= ========= ========= ==========
See accompanying Notes to Financial Statements. F-6 Exhibit 99 ---------- H. B. FULLER COMPANY THRIFT PLAN Notes to Financial Statements (1) Summary of Significant Accounting Policies ------------------------------------------ The accompanying financial statements are presented in accordance with generally accepted accounting principles. The fair values of the H.B. Fuller Thrift Plan (the Plan) investments in common stock of the participating employer are based on published quotations. The fair values of investments in securities of unaffiliated issuers are based on fair values supplied by the Trustee (Norwest Bank). Realized gains or losses reflect all differences between sales proceeds and historical cost of units sold, on an average cost basis. Securities transactions are recorded on the trade date. Benefits payable to a participant are based upon the fair market value of the vested portion of the participant's account on the valuation date immediately preceding the time for payment. Distribution of a participant's account is made in a lump sum. The investment in the Company Common Stock Fund can be withdrawn in the form of stock at the option of Plan participants. H. B. Fuller Company (the Employer) pays all administrative costs of the Plan. (2) Summary Description of the Plan ------------------------------- H.B. Fuller Company full-time employees are eligible to participate in the Plan after six months of employment; part-time employees are eligible after twelve months. To become a participant in the Plan, an employee must agree to make contributions equal to 1% of pre-tax compensation up to a maximum of 9% of pre- tax compensation for highly compensated participants and 15% for non-highly compensated participants. In 1994, a participant may elect to contribute up to a limit of $9,240. The Company makes contributions to employees' accounts by matching 100% of an employee's contributions, up to 3% of the employee's compensation. A participant's contribution may be invested in any combination of the following investment funds: Company Common Stock Fund, Money Market Fund, Index Fund (S&P 500) and Balanced Fund. A participant's investment option for past and future contributions can be changed daily, by calling the Trustee's on-line customer services. The number of participants in each fund was as follows: 10/31/94 10/31/93 -------- -------- Company Common Stock Fund 1,953 1,897 Fixed Income Fund 679 672 General Equities Fund 1,003 920 Balanced Fund 601 439 F-7 Exhibit 99 ---------- H. B. FULLER COMPANY THRIFT PLAN Notes to Financial Statements A participant's voluntary contribution percentage amount can be changed or suspended once a month, by calling the Trustee's on-line service prior to month- end. Suspensions must be made for a minimum of six months. Employer contributions to the Plan cease during the suspension period. Participants' contributions are fully vested. Employer contributions become fully vested after five years of service or upon age 65, permanent and total disability or death. Participants who terminate employment with H.B. Fuller Company forfeit the non-vested portion of the Company's contribution to their accounts. Amounts forfeited are used to reduce subsequent Company contributions. Although it has no intention to do so, H.B. Fuller Company may, at any time, by action of its Board of Directors, terminate the Plan or discontinue contributions. Upon termination or discontinuance of contributions, all Employer contribution amounts in participant accounts will become fully vested. (3) Unrealized Appreciation (Depreciation) of Investments ----------------------------------------------------- The unrealized appreciation (depreciation) of investments was as follows:
Company General Common Equities/ Money Balanced Stock Fund Market Fund Fund Total ----------- --------------- -------- ----------- Unrealized appreciation at $30,437,215 $ 489,236 $30,926,451 October 31, 1991 Change during the year ended October 31, 1992 (6,608,819) 363,306 $ 43,291 (6,202,222) ----------- --------- -------- ----------- Unrealized appreciation at October 31, 1992 23,828,396 852,542 43,291 24,724,229 Change during the year ended October 31, 1993 (8,127,838) (443,834) 236,434 (8,335,238) ----------- --------- -------- ----------- Unrealized appreciation at October 31, 1993 15,700,558 408,708 279,725 16,388,991 Change during the year ended October 31, 1994 908,229 362,284 82,184 1,352,697 ----------- --------- -------- ----------- Unrealized appreciation at October 31, 1994 $16,608,787 $ 770,992 $361,909 $17,741,688 =========== ========= ======== ===========
F-8 Exhibit 99 ---------- H. B. FULLER COMPANY THRIFT PLAN Notes to Financial Statements (4) Realized Gains -------------- During the years ended October 31, 1994, 1993 and 1992, realized gains resulting from the sale and distribution of investments were as follows:
Company General Common Equities/ Money Balanced Stock Fund Market Fund Fund Total ----------- --------------- --------- ----------- 1994: - ----- Aggregate proceeds $ 7,501,873 $ 1,714,495 $1,908,616 $11,124,984 Aggregate average cost 7,130,966 1,640,563 1,818,493 10,590,022 ----------- ----------- ---------- ----------- Realized gain $ 370,907 $ 73,932 $ 90,123 $ 534,962 =========== =========== ========== =========== 1993: - ----- Aggregate proceeds $ 8,463,717 $11,572,922 $1,969,845 $22,006,484 Aggregate average cost 7,746,992 10,212,892 1,499,861 19,459,745 ----------- ----------- ---------- ----------- Realized gain $ 716,725 $ 1,360,030 $ 469,984 $ 2,546,739 =========== =========== ========== =========== 1992: - ----- Aggregate proceeds $17,627,698 $ 6,421,383 $3,926,253 $27,975,334 Aggregate average cost 11,677,244 6,288,810 3,926,253 21,892,307 ----------- ----------- ---------- ----------- Realized gain $ 5,950,454 $ 132,573 $ 0 $ 6,083,027 =========== =========== ========== ===========
(5) Income Taxes ------------ The Plan is qualified under Section 401(a) and 401(k) and is exempt from federal income taxation under Section 501(a) of the Internal Revenue code of 1986, as amended. A participant is not subject to federal income taxes on the pre-tax contribution, on the Company's matching contribution, or on the earnings of the account until a withdrawal is made or distribution is received from the account. During employment, a participant is entitled to make a withdrawal from the account upon showing financial hardship. F-9 Exhibit 99 ---------- H.B. FULLER COMPANY THRIFT PLAN Notes to Financial Statements Payment in the amount of the fair market value of a participant's account occurs no later than the earlier of the participant's attaining age 70 1/2 or the latest of any of the following three events: (a) Termination of employment; (b) Attainment of age 65, or (c) The tenth anniversary of the date the employee became a participant in the Plan. The amount of benefit paid will be 100% of the portion of the account attributable to the participant's own contributions and, if the participant is vested, the portion of the account attributable to the Company's matching contributions. The Plan has been revised to meet the requirements for qualification under the 1986 revisions to the Internal Revenue code. The Company intends to resubmit the Plan to the IRS for approval. F-10 Exhibit 99 ---------- CONSENT OF INDEPENDENT ACCOUNTANTS ---------------------------------- We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 2-73650) of H.B. Fuller Company of our report dated February 3, 1995 appearing on page F-1 of the Annual Report of the H.B. Fuller Company Thrift Plan which is included in this Annual Report on Form 11-K for the year ended October 31, 1994. Price Waterhouse LLP Minneapolis, Minnesota February 23, 1995 -----END PRIVACY-ENHANCED MESSAGE-----