-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VBlfiFhyHhwJMGponQce3oFLjep2AgUj7s1hR4Lv4KLHA5nRoN5fTcrFv2UVU/pt MmP2oKL0PyvI878hE4hruw== 0000950131-96-000666.txt : 19960228 0000950131-96-000666.hdr.sgml : 19960228 ACCESSION NUMBER: 0000950131-96-000666 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 19951130 FILED AS OF DATE: 19960227 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: FULLER H B CO CENTRAL INDEX KEY: 0000039368 STANDARD INDUSTRIAL CLASSIFICATION: ADHESIVES & SEALANTS [2891] IRS NUMBER: 410268370 STATE OF INCORPORATION: MN FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-09225 FILM NUMBER: 96526032 BUSINESS ADDRESS: STREET 1: 2400 ENERGY PK DR CITY: ST PAUL STATE: MN ZIP: 55108 BUSINESS PHONE: 6126453401 10-K 1 FORM 10-K - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended November 30, 1995 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-K or any amendment to this Form 10-K. ____ Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 of 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- As of January 31, 1996, 14,008,156 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 $469,276,000. DOCUMENTS INCORPORATED BY REFERENCE Parts I, II and IV incorporate information by reference from the H. B. Fuller Company 1995 Annual Report to Stockholders. Part III incorporates information by reference from the Registrant's Proxy Statement dated March 3, 1996. - -------------------------------------------------------------------------------- -1- H. B. FULLER COMPANY 1995 Form 10-K Annual Report Table of Contents
Page ---- PART I ------ Item 1. Business 3 Item 2. Properties 6 Item 3. Legal Proceedings 7 Item 4. Submission of Matters to a Vote of Security Holders 11 Executive Officers of the Registrant 12 PART II ------- Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters 13 Item 6. Selected Financial Data 13 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 13 Item 8. Financial Statements and Supplementary Data 13 Item 9. Change in and Disagreements with Accountants on Accounting and Financial Disclosure 13 PART III -------- Item 10. Directors and Executive Officers of the Registrant 13 Item 11. Executive Compensation 13 Item 12. Security Ownership of Certain Beneficial Owners and Management 13 Item 13. Certain Relationships and Related Transactions 13 PART IV ------- Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 14 Signatures 17
-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 42 countries in North America, Europe, Latin America and the Asia/Pacific region. The Company's largest worldwide business category is adhesives, sealants and coatings, which generated more than 85 percent of 1995 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 14, "Business Segment Information", on page 46 of the Company's 1995 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 ------------------ 1995 1994 1993 ---- ---- ---- Adhesives, sealants and coatings 87% 86% 84% Paints 7 7 8 Sanitation chemicals 3 3 3 Other 3 4 5 ---- ---- ---- 100% 100% 100% ==== ==== ====
-3- International Operations - ------------------------ The international business of H. B. Fuller is conducted primarily by subsidiaries manufacturing in countries outside of North America. Wherever feasible, H. B. Fuller's practice has been to establish manufacturing units outside of North America 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 North America and elsewhere in the world. The Company's operations overseas face varying degrees of economic and political risk. At year-end 1995, the Company had plants in 31 countries outside the United States and satellite sales offices in another ten countries and license agreements used to maintain a worldwide manufacturing network. In the opinion of management, there are several countries where the Company has operating facilities which have political risks higher than in North America. 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 and industrial adhesives. In Central America, it is a major factor in the industrial adhesives market and, along with several other large paint manufacturing firms, in the residential paint market. In Europe, the Company is a large manufacturer of adhesives and specialty waxes and competes in certain areas of this market with several large companies. The principal competitive factors in the sale of adhesives, paints, coatings and sealants are product performance, customer and technical service, quality, and price. Customers - --------- Of the Company's $1,243,818,000 total sales to unaffiliated customers in 1995, $692,099,000 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, 1995, 1994 or 1993. -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 1995, 1994 and 1993 aggregated $26,541,000, $23,624,000, and $21,826,000, 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, 1995, of which approximately 2,400 persons were employed in the United States. Item 2. Properties - ---------- The principal manufacturing plants and other properties are located in 32 countries: U.S. Locations -------------- California Michigan Los Angeles (1 owned, 1 leased) Grand Rapids Roseville Warren (1 owned, 1 leased) Tulare Minnesota Florida Minneapolis and St. Paul Gainesville (7 owned, 1 leased) Pompano Beach New Jersey - Edison Georgia (1 owned, 1 leased) Conyers* New York - Geneva Covington North Carolina Forest Park Greensboro Tucker Charlotte* Illinois Ohio Palatine Cincinnati* Tinley Park Dayton Indiana - Elkhart Oregon - Portland Kansas - Kansas City Tennessee - Memphis* Kentucky - Paducah Texas Maryland - Baltimore Dallas Massachusetts Fort Worth Marlboro* Houston Wilmington Washington - Vancouver *Leased properties -6- Other Locations ---------------
Argentina - Buenos Aires Honduras Australia San Pedro Sula (2 owned) Melbourne Tegucigalpa Sydney* Italy - Borgolavezzaro Austria - Wels Japan - Hamamatsu Brazil - Sao Paulo Mexico - Mexico City* Canada Netherlands - Amerongen St. Andre est New Zealand - Auckland (2 owned) Montreal Nicaragua - Managua Toronto People's Republic of Chile - Santiago China - Guangzhou* Colombia - Itagui* Peru - Lima Costa Rica - San Jose (6 owned) Philippines - Manila* Dominican Republic - Santo Domingo Puerto Rico - Bayamon Ecuador - Guayaquil (2 owned) Republic of Panama - Panama City El Salvador - San Salvador (1 owned, 1 leased) (2 owned, 1 leased) Federal Republic of Germany Spain - Alicante Luneburg Switzerland - Basel* Munich* Taiwan - Taipei Nienburg* United Kingdom France - Le Trait Birmingham* Guatemala - Guatemala City (2 leased) Derbyshire* Venezuela - Caracas
*Leased properties The Company's principal executive offices and central research facilities are Company owned and located in the St. Paul, Minnesota metropolitan area. The Company has facilities for the manufacture of various products with total floor space of approximately 1,683,000 square feet, including 183,000 square feet of leased space. In addition, the Company has approximately 2,105,000 square feet of warehouse, including 371,000 square feet of leased space. Offices and other facilities total 1,784,000 square feet, including 446,000 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. -7- 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. 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. GLOUCESTER ENVIRONMENTAL MANAGEMENT SERVICES, INC., GLOUCESTER TOWNSHIP., ------------------------------------------------------------------------- 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. WAUCONDA SAND & GRAVEL, WAUCONDA, ILLINOIS. ------------------------------------------ The Company and other PRPs signed a consent decree with the EPA that provides for payment of remedial work at this Site. The Company has paid assessments of approximately $440,000. The Company believes that any future costs will be minimal, and will not materially affect its business or financial condition. BAY DRUMS, TAMPA, FLORIDA. ------------------------- The Company has been identified as a PRP at this Site. The Company has joined a PRP Group which has retained an outside waste accountant for allocating cleanup costs amongst the PRPs. The Company is allocated 175 drums or .673% of the Group's total. Based on this allocation, the Company's estimated share is approximately $47,188. While the allocation may change due to the ability or willingness of additional PRPs to share in the cleanup costs, the Company believes that its final cost will be minimal, and will not materially affect its business or financial condition. -8- 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. SOLVENTS RECOVERY SERVICES, SOUTHINGTON, CONNECTICUT. ---------------------------------------------------- The Company has been named a PRP (ranked 325 out of 885) as a result of allegedly generating 12,240 gallons of hazardous waste disposed of through Solvents Recovery Service. The Company at issue was acquired from the Terrell Corp. in July, 1986. The EPA offered a de minimis settlement to PRPs who have been allocated less than 10,000 gallons at the Site. The Company accepted the de minimis settlement and paid $61,635.89 for a full and final settlement of this Site. The EPA subsequently rejected the Company as a de minimis party. The Company has requested the EPA to clarify its status, and objected to the EPA's determination that the Company is not a de minimis party. Although the Company's allocation may change due to the ability or willingness of additional PRPs to share in the cleanup costs, the Company believes that its future costs will be minimal, and will not materially affect its business or financial condition. SUNRISE, WAYLAND, MICHIGAN. -------------------------- The Company has received a notice of demand for payment and response activities from the Michigan Department of Natural Resources ("DNR") requesting that the Company participate in the cleanup of the Sunrise Landfill. At this time, the DNR has estimated that clean-up may cost in excess of $17 million. The Company has joined a PRP Group, which has submitted a good faith proposal to the DNR for a Remedial Investigation and Feasibility Study, the cost of which is expected to range from $337,000 to $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 -9- viable PRPs, it is the Company's opinion that its allocation at this Site will not materially affect its business or financial condition. SCHNITZER IRON & METAL, ST. PAUL, MINNESOTA. ------------------------------------------- The Company recently received a Request for Information from the Minnesota Pollution Control Agency with respect to the Company's use of this Site. Records indicate that the Company disposed of a small amount of material at this Site on two occasions in the early-1980's. Because of the Company's limited use of this Site, it is the Company's opinion that any future costs at this Site will be minimal, and will not materially affect its business or financial condition. ARCHEM COMPANY, HOUSTON, TEXAS. ------------------------------ The Company has received notice from the Texas Water Commission that it is a PRP concerning remediation of the ArChem property in Houston, Texas. The Company acquired the property in June of 1976, and in 1978, the property was sold. The Commission's focus is on the companies that sent chemicals to the Site pursuant to tolling agreements or otherwise had specialty products manufactured by ArChem. The materials at issue were not generated by or attributable to the Company. Because of an indemnification agreement with a financially able indemnitor, and because the materials at issue were not generated by the Company, it is the Company's opinion that this Site will not have a material affect on the Company's business or financial condition. OTHER ENVIRONMENTAL MATTERS PREVIOUSLY DISCLOSED. - ------------------------------------------------ In 1994, the Minnesota Legislature enacted the Landfill Cleanup Act (the "Act") whereby potentially responsible parties ("PRP") that have expended funds for remediation at a Minnesota landfill may forego any future obligations for remediation and obtain reimbursement for remedial expenses incurred in exchange for a waiver of claims through participation in the Landfill Cleanup Program. The Company has applied for participation in this Program, through each Sites' respective PRP Group, for the following three Sites previously reported. 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. The Company, through the PRP Group at the Site, has applied for participation in Minnesota's Landfill Cleanup Program. The State has indicated that this Site qualifies for participation in the Program, and the Company expects that any further remediation and management of this Site has been assigned to the State. Accordingly, the Company has no further remediation liability at this Site. 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 cost. The Company, through the PRP Group at the Site, has applied for participation in Minnesota's Landfill Cleanup Program. The State has indicated that this Site qualifies for participation in the Program, and the Company expects that any further remediation and management of -10- this Site will be assigned to the State in the near future. Accordingly, the Company does not believe that it will incur any further costs at this Site. WASTE DISPOSAL ENGINEERING, ANDOVER, MINNESOTA. ---------------------------------------------- The Company and other PRPs signed a consent decree with the Environmental Protection Agency ("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, through the PRP Group at the Site, has applied for participation in Minnesota's Landfill Cleanup Program. The State has indicated that this Site qualifies for participation in the Program, and the Company expects that any further remediation and management of this Site has been assigned to the State. Accordingly, the Company has no further remediation liability at this Site. OTHER LEGAL PROCEEDINGS. - ----------------------- On August 30, 1995, the Company was named one of 94 defendants, including numerous other chemical companies, in a purported class action filed in Federal District Court for the District of Texas on behalf of approximately 114 plaintiffs that worked at the Army Depot in Corpus Christi, Texas. The plaintiffs seek $100 million in compensatory damages and $400 million in punitive damages for injuries allegedly resulting from exposure to various chemicals manufactured by the 94 defendants. On January 4, 1996, Ruth Linares Polanco filed a wrongful death action against the Company and two Central American subsidiaries in Federal District Court for the District of Minnesota. The plaintiff subsequently amended the complaint, dropping the two subsidiaries as defendants. The plaintiff alleges that her brother abused a solvent-based adhesive manufactured by the Company by inhaling fumes from the adhesive, and that the Company is substantially responsible for his death. The plaintiff seeks damages in excess of $50,000. The Company has filed a motion to dismiss the lawsuit on a number of legal grounds, including forum nonconveniens. The Company also has filed an answer to the plaintiff's complaint denying all liability. As with other types of litigation and proceedings to which the Company is a party, based upon currently available information, it is the Company's opinion that none of the matters will result in material liability to the Company. Item 4. Submission of Matters to a Vote of Security Holders - --------------------------------------------------- Not applicable. -11- Executive Officers of the Registrant - ------------------------------------ The executive officers of the Company as of November 30, 1995, their ages and current offices are set forth below:
Name Age Position Period Served - ---- --- -------- ------------- Anthony L. Andersen 59 Chair, Board of Directors Since 1992 Director Since 1966 Walter Kissling 64 President Since 1992 Chief Executive Officer Since 1995 Director Since 1968 John T. Ray, Jr. 58 Senior Vice President Since 1984 Richard C. Johnson 66 Senior Vice President Since 1992 Chief Administrative Officer Since 1992 Wolfgang Weber 56 Senior Vice President Since 1992 Jorge Walter Bolanos 51 Chief Financial Officer and Treasurer Since 1992 Senior Vice President Since 1995 Lars T. Carlson 57 Vice President Since 1986 Sarah R. Coffin 43 Vice President Since 1994 Antonio Lobo 52 Vice President Since 1989 Rolf Schubert 57 Vice President Since 1982 Director Since 1972 Jerald L. Scott 54 Vice President Since 1980 David J. Maki 54 Vice President Since 1990 Controller Since 1987 Richard C. Baker 43 Vice President Since 1993 Corporate Secretary Since 1995 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. -12- PART II Information for Items 5 through 8 of this report appear in the 1995 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 52 High and Low Market Value 52 Dividend Payments 52 Dividend Restrictions (Note 13) 44-45 Holders of Common Stock 53 Item 6. Selected Financial Data 1969 - 1995 in Review and Selected Financial Data 50-51 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Management's Analysis of Results of Operations and Financial Condition 29-32 Item 8. Financial Statements and Supplementary Data Consolidated Financial Statements 33-46 Quarterly Data (Unaudited)(Note 15) 47 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None
PART III Items 10, 11, 12 and 13. Directors and Executive Officers of the Registrant; Executive Compensation; Security Ownership of Certain Beneficial Owners and Management; and Certain Relationships and Related Transactions The information required by these Items other than the information set forth in Part I, "Executive Officers of the Registrant", is omitted because the Company will file within 120 days after the close of the Company's last fiscal year a definitive proxy statement pursuant to Regulation 14A, which information, other than the sections entitled "Compensation Committee Report on Executive Compensation" and "Shareholder Return Performance Presentation" contained therein, is herein incorporated by reference as if set out in full. -13- PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
Reference -------------------------------- Form 10-K Annual Report Annual Report to Stockholders Page Page ------------- --------------- (a)(1.) Index to Consolidated Financial Statements Incorporated by Reference to the 1995 Annual Report to Stockholders of H. B. Fuller Company: Consolidated Statements of Earnings for the Three Years Ended November 30, 1995 33 Consolidated Balance Sheets as of November 30, 1995 and 1994 34 Consolidated Statements of Stockholders' Equity for the Three Years Ended November 30, 1995 35 Consolidated Statements of Cash Flows for the Three Years Ended November 30, 1995 36 Notes to Consolidated Financial Statements 37-47 Report of Independent Accountants 49 (a)(2.) Index to Consolidated Financial Statement Schedules for the Three Years Ended November 30, 1995: Auditors' Report on Financial Statement Schedules 18 Schedule II Valuation and Qualifying Accounts 19
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. -14- (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 - as amended to date. 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. *10(a) H.B. Fuller Company 1992 Stock Incentive Plan - incorporated by reference to Exhibit 10(a) to the Registrant's Annual Report on Form 10-K for the year ended November 30, 1992. *10(b) H.B. Fuller Company Restricted Stock Plan - incorporated by reference to Exhibit 10(c) to the Registrant's Annual Report on Form 10-K for the year ended November 30, 1993. *10(c) H.B. Fuller Company Restricted Stock Unit Plan - incorporated by reference to Exhibit 10(d) to the Registrant's Annual Report on Form 10-K for the year ended November 30, 1993. *10(d) Director's Stock Plan - incorporated by reference to Exhibit 10(d) to the Registrant's Annual Report on Form 10-K for the year ended November 30, 1994. *10(e) H.B. Fuller Company 1987 Stock Incentive Plan - incorporated by reference to Exhibit 4(a) to the Registrant's Registration Statement on Form S-8 (Commission File No. 33-16082). *10(f) H.B. Fuller Company 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. *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. -15- (a)(3.) Exhibits (continued) *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 November 30, 1993. *10(k) Supplemental Agreement to Managing Director Agreement with Wolfgang Weber and Supplement Agreement. *10(l) 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(m) 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(n) Deferred Compensation Agreement with Walter Kissling - incorporated by reference to Exhibit 10(m) to the Registrant's Annual Report on Form 10-K405 for the year ended November 30, 1994. *10(o) Retirement Plan for Directors of H.B. Fuller Company - incorporated by reference to Exhibit 10(n) to the Registrant's Annual Report on Form 10-K405 for the year ended November 30, 1994. *10(p) Performance Units Plan as of January 17, 1995. *Asterisked items are management contracts or compensatory plans or arrangements required to be filed as an exhibit pursuant to Item 14(a) of this Form 10-K. 11 Statement re: Computation of Net Earnings Per Common Share 13 Pages 29-53 of the 1995 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, 1995. -16- 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, 1996 By /s/ Walter Kissling ------------------------------- WALTER KISSLING President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated: Signature Title --------- ----- /s/ Walter Kissling President and - ----------------------------- Chief Executive Officer and Director WALTER KISSLING (Principal Executive Officer) /s/ Jorge Walter Bolanos Senior Vice President, - ----------------------------- Chief Financial Officer and Treasurer JORGE WALTER BOLANOS (Principal Financial Officer) /s/ David J. Maki Vice President and Controller - ----------------------------- (Principal Accounting Officer) DAVID J. MAKI *ANTHONY L. ANDERSEN Chair, Board of Directors and Director *NORBERT R. BERG Director *EDWARD L. BRONSTIEN, JR. Director *ROBERT J. CARLSON Director *FREEMAN A. FORD Director *GAIL D. FOSLER Director *REATHA CLARK KING Director *JOHN J. MAURIEL, JR. Director *ROLF SCHUBERT Vice President and Director *LORNE C. WEBSTER Director By: /s/ Richard C. Baker Dated: February 23, 1996 -------------------------- RICHARD C. BAKER Attorney in Fact *Power of Attorney filed with this report as Exhibit 24 hereto. -17- Price Waterhouse LLP 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, of 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, 1995 and 1994, and the results of their operations and their cash flows for each of the three years in the period ended November 30, 1995, 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 1 and 6 to the consolidated financial statements, the Company adopted the provisions of Statement of Financial Accounting Standards (SFAS) No. 112, "Employers' Accounting for Postemployment Benefits," in 1995 and the provisions of SFAS No. 109, "Accounting for Income Taxes," and No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," in 1993. /s/ Price Waterhouse LLP Price Waterhouse LLP Minneapolis, Minnesota January 9, 1996 Schedule II ----------- H.B. Fuller Company and Consolidated Subsidiaries Valuation and Qualifying Accounts Years Ended November 30, 1995, 1994, and 1993 (Dollars in thousands)
Allowance for doubtful receivables ------------------------------------------ 1995 1994 1993 ------ ------ ------ Balance at beginning of period $6,221 $5,519 $5,451 Additions(deductions): Charged to costs and expenses 1,954 1,391 1,740 Accounts charged off during year (2,073) (1,091) (1,409) Accounts of acquired businesses - 288 57 Effect of currency exchange rate changes on beginning of year balance 154 114 (320) ------ ------ ------ Balance at end of period $6,256 $6,221 $5,519 ====== ====== ======
-19- EX-3.B 2 BYLAWS Exhibit 3(b) ------------ BYLAWS OF H.B. FULLER COMPANY (AS AMENDED THROUGH DECEMBER 3, 1994) ARTICLE I - SHARES SECTION 1. CERTIFICATES. The forms of certificates for shares shall conform to Section 302A.417 of the Minnesota Business Corporation Act, as amended from time to time (the "MBCA"), and shall be approved by the Board of Directors. Each certificate shall be manually signed by the Chief Executive Officer, the President or an Executive Vice President, a Senior Vice President or a Vice President and by the Secretary or an Assistant Secretary (except that where any such certificate is manually signed by a transfer agent or a registrar (or by both), the signatures of any such officers may be facsimile, engraved or printed). All certificates of each class and each series shall be consecutively numbered. No certificate shall be issued for any share until such share is fully paid. SECTION 2. TRANSFER AGENT AND REGISTRAR. The Board of Directors may appoint one or more transfer agents and registrars to countersign and register certificates for shares. SECTION 3. TRANSFERS OF STOCK. Subject to Section 302A.429 of the MBCA, upon surrender to the Corporation or the transfer agent of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the Corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. SECTION 4. LOSS OF CERTIFICATES. Except as otherwise provided by Section 302A.419 of the MBCA, any shareholder claiming a certificate for shares to be lost, stolen, or destroyed shall make an affidavit of that fact in such form as the appropriate officers of the Corporation shall require and shall give the Corporation a bond of indemnity in form, in an amount, and with one or more sureties satisfactory to the appropriate officers of the Corporation, to indemnify the Corporation against any claim which may be made against it on account of the reissue of such certificate, whereupon a new certificate may be issued in the same tenor and for the same number of shares as the one alleged to have been lost, stolen or destroyed. SECTION 5. RECORD DATE. (a) For the purpose of determining the shareholders entitled to notice of and to vote at any meeting of shareholders or to receive payment of any dividend, or for any other proper purpose, the Board of Directors shall fix a record date which shall not be more than sixty days preceding the date on which the particular action requiring such determination of shareholders is to be taken. (b) The record date fixed for the determination of the shareholders entitled to notice of and to vote at a shareholders' meeting shall continue to be the record date for all adjournments thereof. ARTICLE II - SHAREHOLDERS SECTION 1. PLACE OF MEETINGS. All meetings of the shareholders shall be held at the principal executive office of the Corporation or at any other place within or without the State of Minnesota designated by the Board of Directors. SECTION 2. ANNUAL MEETINGS. An annual meeting of shareholders shall be held on the third Thursday in April each year at such time of the day as the Board of Directors shall determine. If the third Thursday in April in any year should be a legal holiday, then the meeting shall be held on the next succeeding business day. At such meeting, directors shall be elected to succeed those whose terms are expiring and to fill any other vacancies, reports of the affairs of the Corporation shall be considered, and other business may be transacted. SECTION 3. SPECIAL MEETINGS. A special meeting of the shareholders may be called for any purpose or purposes at any time in accordance with the provisions of Section 302A.433 of the MBCA. SECTION 4. NOTICE OF MEETINGS. Written notice given in the manner provided in Section 302A.011, Subd. 17, of the MBCA stating the place, date, and time of the meeting and, in case of a special meeting, the purpose or purposes for which the meeting is called, shall be given not less than ten nor more than sixty days before the date of the meeting, either personally or by mail, by or at the direction of the President, the Secretary, or the other officer calling the meeting, to each shareholder of record entitled to vote at such meeting. SECTION 5. QUORUM; ADJOURNED MEETINGS. The presence in person or by proxy of the holders of a majority of the voting power of the shares entitled to vote at any meeting shall constitute a quorum for the transaction of business. A meeting may be adjourned from time to time, whether or not a quorum is present. If any meeting is adjourned, no further notice as to such adjourned meeting need be given other than by announcement at the time of adjournment of the date, time and place of the adjourned meeting. At adjourned meetings at which a quorum is present, any business may be transacted which might have been transacted at the meeting as originally noticed. If a quorum is present when a meeting is convened, the shareholders present may continue to transact business until adjournment notwithstanding the withdrawal of enough shareholders originally present to leave less than a quorum. SECTION 6. VOTING. Every shareholder entitled to vote at a meeting of shareholders shall be entitled at such meeting to one vote for each share of capital stock of the Corporation which is entitled to be voted unless the terms of the shares provide for no votes or a different number of votes per share. SECTION 7. PROXIES. Every shareholder entitled to vote at a meeting of shareholders shall be entitled to be represented at such meeting and to vote thereat by proxy or proxies appointed by a writing signed by such shareholder. No appointment of a proxy shall be valid after the expiration of eleven months after it is made, unless the writing specifies the length of time it is to continue in force. To be valid, all proxies must meet the requirements of, and shall be governed by Section 302A.449 of the MBCA. SECTION 8. INSPECTORS OF ELECTION. In advance of any meeting of shareholders the Board of Directors may appoint inspectors of election to act at such meeting or any adjournment thereof. If inspectors of election are not so appointed, the chair of any such meeting may, and on the request of any shareholder or shareholder's proxy shall, make such appointment at the meeting. SECTION 9. CONDUCT OF MEETINGS. The chair for each meeting of shareholders shall be the first of the following persons who is able to attend and chair the meeting: (i) the Chair of the Board, (ii) the Vice Chair of the Board, (iii) the Chief Executive Officer, (iv) the President or (v) any director or elected officer of the Corporation selected by the Chair. ARTICLE III - DIRECTORS SECTION 1. NUMBER. In addition to any director who may be elected by the holders of any one or more series of Preferred Stock voting separately as such (the "Series Directors"), the Board of Directors shall consist of a number of directors, which number shall be fixed from time to time exclusively by the Board of Directors pursuant to a resolution adopted by the affirmative vote of a majority of the entire Board of Directors, but the number of directors shall in no event be more than fifteen (excluding any Series Directors). -2- SECTION 2. TERM OF OFFICE VACANCIES AND REMOVAL. (a) The directors to be elected by the holders of the shares of Common Stock and of any other shares of capital stock entitled to vote as a single class with the shares of Common Stock shall be divided into three classes designated Class I, Class II and Class III. The term of one class of directors shall expire each year. Each class shall consist, as nearly as may be possible, of one-third of the total number of directors fixed pursuant to Section 1 of this Article III. At each Annual Meeting of Shareholders, the directors elected to succeed those directors whose terms expire shall be elected for a term expiring three years after the date of their election and until their successors are duly elected and qualified. (b) If the number of directors is changed, any increase or decrease shall be apportioned among the three classes so as to maintain the number of directors in each class as nearly equal as possible, and any additional director of any class elected to fill a vacancy resulting from an increase in such class shall hold office for a term that shall coincide with the remaining term of that class but in no case shall a decrease in the number of directors shorten the term of any incumbent director. Subject to the rights of the holders of any class or series of the then outstanding capital stock of the Corporation entitled to vote generally in the election of directors (other than Series Directors), newly created directorships resulting from any increase in the authorized number of directors or any vacancies in any class resulting from death, resignation, retirement, disqualification, removal from office or other cause may be filled only by a majority vote of the directors (other than Series Directors) then in office, although less than a quorum. Directors so elected shall hold office for a term expiring at the time at which the term of office of the class to which they have been elected expires and until their successors are duly elected and qualified. (c) Any directors, or the entire Board of Directors, may be removed from office at any time for good cause by the affirmative vote of the holders of at least two-thirds of the combined voting power of the shares of the classes or series of capital stock of the Corporation present and voting as a single class. A director named by the Board of Directors to fill a vacancy may be removed from office at any time, with our without cause, by the affirmative vote of a majority of the remaining directors if the shareholders have not elected directors in the interim between the time of the appointment to fill such vacancy and the time of removal. In the event that any one or more directors or the entire Board is removed at a shareholder's meeting, a new director or new directors shall be elected at the same meeting. (d) Notwithstanding the provisions of Article VI of these Bylaws, any amendment, alteration, change or repeal of Sections 1 and/or 2 of Article III of these Bylaws shall require the affirmative vote of the holders of two-thirds of the shares present and voting as a single class. SECTION 3. NOMINATION OF DIRECTORS. Only persons nominated in accordance with the following procedures shall be eligible for election by shareholders as directors. Nominations of persons for election as directors at a meeting of shareholders called for the purpose of electing directors may be made (a) by or at the direction of the Board of Directors or (b) by any shareholder in the manner herein provided. For a nomination to be properly made by a shareholder, the shareholder must give written notice to the Corporate Governance Committee of the Board of Directors so as to be received at the principal executive offices of the Corporation not later than (i) with respect to an annual meeting of shareholders, not later than the date determined in accordance with the proxy rules promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, that proposals of shareholders intended to be presented at such meeting must be received in order to be included in the Corporation's proxy statement and proxy for such meeting and (ii) with respect to a special meeting of shareholders for the election of directors, the close of business on the seventh day following the date on which the notice of such meeting is first given to shareholders. Each such notice shall set forth (A) the name and address of the shareholder who intends to make the nomination and of the person or persons to be nominated, (B) a representation that the shareholder is a holder of record of stock of the Corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice, (C) a description of all arrangements or understandings between the shareholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or -3- nominations are to be made by the shareholder, (D) such other information regarding each nominee proposed to such shareholder as would have been required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission had each nominee been nominated, or intended to be nominated, by the Board, and (E) the consent of each nominee to serve as a director of the Corporation if so elected. SECTION 4. MEETINGS. The Board of Directors may provide by resolution the date, time and place, either within or without the State of Minnesota, for the holding of meetings of the Board of Directors without other notice than such resolution. Other meetings of the Board of Directors may be called by the Chair of the Board, the Vice Chair of the Board, the Chief Executive Officer (if a director) or any two other directors. The person or persons authorized to call meetings of the Board of Directors may fix any place, either within or without the State of Minnesota, as the place for holding any meeting of the Board of Directors called by them. In the absence of such designation, all called meetings of the Board of Directors shall be held at the principal executive office of the Corporation. The Board of Directors shall choose from among the directors a Chair of the Board and may from time to time choose a Vice Chair of the Board. The chair for each meeting of the Board of Directors shall be the first of the following persons who is able to attend and chair such meeting: (i) the Chair of the Board, (ii) the Vice Chair of the Board, if any, (iii) the Chief Executive Officer (if a director), (iv) the President (if a director), or (v) any director selected by the Chair. Notice of any called meeting of the Board of Directors shall be given by the person or persons calling the meeting (or by the Secretary or an Assistant Secretary at the request of such person or persons) either by mail to each director at the director's business address at least two days prior to such meeting or by telegram, telecopy, facsimile, telephone, or in person at least 24 hours prior to such meeting to the business address of each director, or in the event such notice is given on a Saturday, Sunday or holiday to the residence address of each director. If the day or date, time and place of a meeting of the Board of Directors has been announced at a previous meeting of the Board of Directors, no notice is required. Notice of an adjourned meeting of the Board of Directors need not be given other than by announcement at the meeting at which adjournment is taken. Neither the business to be transacted at, nor the purpose of, any regular or called meeting of the Board of Directors needs to be specified in the notice of such meeting. Notice of any meeting of the Board of Directors may be waived by any director either before, at, or after such meeting orally or in a writing signed by such director. A director, by his or her attendance at any meeting of the Board of Directors, shall be deemed to have waived notice of such meeting, except where the director objects at the beginning of the meeting to the transaction of business because the meeting is not lawfully called or convened and does not participate thereafter in the meeting. The members of the Board of Directors, the Executive Committee or any other committee created by the Board of Directors may participate in a meeting of the Board of Directors or such Committee by any means of communication through which the directors may simultaneously hear each other during the meeting and such participation in a meeting shall constitute presence in person at such meeting. Any action which may be taken at a meeting of the Board of Directors, the Executive Committee or any other committee of the Board of Directors may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the directors or committee members then holding office. SECTION 5. QUORUM; REQUIRED VOTE. A majority of the directors then holding office shall constitute a quorum for the transaction of business by the Board of Directors. The Board of Directors shall take action by the affirmative vote of the greater of (a) majority of the directors present at a duly held meeting at the time the action -4- is taken, or (b) a majority of the minimum number of directors that would constitute a quorum for the transaction of business at the meeting. A majority of the members of any committee appointed by the Board of Directors and then holding office shall constitute an quorum for the transaction of business by such committee. Any committee shall take action by the affirmative vote of the greater of (a) majority of the members present at a duly held meeting at the time the action is taken, (b) a majority of the minimum number of members that would constitute a quorum for the transaction of business at the meeting, or (c) such higher requirement as may be established by the Board of Directors. Notwithstanding the foregoing, where other sections of these Bylaws or the Articles of Incorporation of the Corporation require a larger proportion or number than is set forth in this Section 5 of Article III, the affirmative vote of such larger proportion or number shall be required for the Board of Directors or a committee of the Board of Directors to take action. SECTION 6. EXECUTIVE COMMITTEE. By the affirmative action of at least three fourths of the directors then holding office, the Board of Directors by resolution may create an Executive Committee of three or more directors and may delegate to such committee such of its powers and authority in the management of the business and affairs of the Corporation as it may by resolution provide, except the power to declare dividends and to adopt, amend or repeal the Bylaws. SECTION 7. OTHER COMMITTEES. The Board of Directors by resolution may create, in addition to an Executive Committee, ad hoc and standing committees, and may delegate to such Committees such of its powers as it may choose, including without limitation the power to perform such inquiries, investigations or analyses as may be required from time to time, and to report the results of any of their findings and their recommendations to the Board of Directors for such action as the Board of Directors deems to be appropriate. SECTION 8. COMPENSATION. The directors, by resolution of the Board of Directors, may be paid fees and provided benefits and may be reimbursed for expenses incurred by them on behalf of the Corporation, which fees, benefits and expenses shall be paid at such times and upon such conditions as may be determined by the Board of Directors; provided, however, that the shareholders at any meeting called for the purpose may revoke or rescind any such action by the Board of Directors, but may not revoke or rescind any action of the Board of Directors (i) authorizing reimbursement to directors for expenses incurred by them on behalf of the Corporation or (ii) establishing vested or contractual compensation or benefit arrangements for directors. Nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity as an officer, agent, employee, or otherwise, and receiving compensation therefor. SECTION 9. EMERITUS DIRECTORS. The Board of Directors may from time to time appoint a former director to the honorary position of "Director Emeritus" or, in the case of a former Chair of the Board (whether or not then also a director), "Chair Emeritus." A former director holding an honorary position may be invited to attend meetings or portions of meetings of the Board of Directors, but shall have no voting or other rights of a director and shall not be entitled to the compensation payable to directors. ARTICLE IV - OFFICERS SECTION 1. ELECTED OFFICERS. The officers of the Corporation to be elected by the Board of Directors shall be a Chief Executive Officer, a President, a Chief Financial Officer, one or more Executive or Senior Vice Presidents, one or more Vice Presidents, a Treasurer, a General Counsel, a Controller, a Secretary and one or more assistant officers. Any combination of such offices may be held by the same person. Elected officers shall hold office at the pleasure of the Board and shall perform the duties referred to in the Bylaws, those determined by the Board of Directors and those assigned by the Chief Executive Officer. The Chair of the Board and the Vice Chair of the Board are not and shall not be deemed to be officers of the Corporation solely by virtue of having such titles. SECTION 2. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer shall have general planning, administrative and oversight responsibility for the Corporation and shall have general charge of and control over -5- the Corporation, subject to the orders and directions of the Board of Directors. The Chief Executive Officer shall also perform such other duties as the Board of Directors may from time to time prescribe or as are required by Section 302A.305, Subd. 2, of the MBCA. SECTION 3. PRESIDENT. The President shall be the chief operating officer of the corporation and shall perform all responsibilities related to the ongoing management of the Corporation. SECTION 4. CHIEF FINANCIAL OFFICER. The Chief Financial Officer shall be responsible for all financial operations of the Corporation, including without limitation raising funds, safeguarding assets, accounting and reporting, financial planning, financial organizational administration and maintenance of internal controls as are prudent and required by law. The Chief Financial Officer shall also perform such other duties as are required by Section 302A.305, Subd. 3, of the MBCA. SECTION 5. EXECUTIVE AND SENIOR VICE PRESIDENTS; VICE PRESIDENTS. Each Executive and Senior Vice President and each Vice President shall perform such duties as shall be determined by the Board of Directors or assigned by the Chief Executive Officer. SECTION 6. TREASURER. The Treasurer shall have the care and custody of the funds and valuable documents of the Corporation and shall have oversight and administrative responsibility for raising and borrowing funds and establishing banking and similar relationships. SECTION 7. GENERAL COUNSEL. The General Counsel shall be the chief legal officer of the Corporation and shall be responsible for the administration and general direction of all matters that may involve or require legal review or analysis, including threatened and actual legal proceedings. SECTION 8. CONTROLLER. The Controller shall be responsible for keeping complete and accurate records of the business, assets, liabilities and transactions of the Corporation and for the preparation of such financial statements as may be required by law or are needed for internal management purposes. SECTION 9. SECRETARY. The Secretary shall keep a record of the proceedings of the meetings of the shareholders and the Board of Directors. The Secretary shall give notice as required of meetings of the shareholders and the Board of Directors; provided, however, notice given by another shall not be ineffective merely because it was not given by the Secretary. The Secretary shall also perform such duties as are determined by the Board of Directors or by the Chief Executive Officer. SECTION 10. ASSISTANT OFFICERS. Each Assistant Officer shall perform such duties as are determined by the Board of Directors and by the officer to whom the Assistant Officer reports. SECTION 11. APPOINTED OFFICERS. The Chief Executive Officer may from time to time appoint vice presidents and any other officers deemed appropriate. These officers shall hold office at the pleasure of the Chief Executive Officer and shall perform such duties as are determined by the Chief Executive Officer. SECTION 12. COMPENSATION. Compensation of all elected officers referred to in Section 1 and all appointed officers referred to in Section 11 shall be fixed by the Board of Directors or a Committee of the Board of Directors and may be changed from time to time (subject to contract rights) by the Board or such Committee. SECTION 13. EXECUTION OF CORPORATE CONTRACTS. Except as otherwise provided by the Board of Directors or the Executive Committee, all contracts of the Corporation shall be executed on its behalf by the Chief Executive Officer, the President, the Chief Financial Officer, the Controller, an Executive or Senior Vice President, a Vice President or such other person or persons as one of these officers may from time to time authorize so to do. Notes given and drafts accepted by the Corporation shall be valid only when signed by the Chief Executive Officer, the President, the Chief Financial Officer, the Controller, an Executive or Senior Vice President, a Vice President, the -6- Treasurer or such other person as one of these officers may from time to time authorize so to do. Checks, drafts, and other evidences of indebtedness to the Corporation shall, for the purpose of deposit, discount and collection, be endorsed by these same officers or their delegees. Funds of the Corporation deposited in banks and other depositories to the credit of the Corporation shall be drawn from such bank and depositories by checks, drafts or orders for payment of money signed by any one or more of the Chief Executive Officer, the President, the Chief Financial Officer, the Controller, an Executive or Senior Vice President, a Vice President, the Treasurer or such other person or persons as any two of these officers may authorize. Whenever the Board of Directors or the Executive Committee shall provide that any contract be executed or any other act be done in any other manner and by any other officer than as specified in these Bylaws, such method of execution or action shall be as equally effective to bind the Corporation as if specified herein. ARTICLE V - INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES The Corporation shall indemnify such persons (and shall advance expenses of such persons), for such expenses and liabilities, in such manner, under such circumstances, and to such extent as required or permitted by the Minnesota Business Corporation Act, section 302A.521, as now enacted or hereafter amended. ARTICLE VI - AMENDMENTS These Bylaws may be amended or repealed as provided in Section 302A.181 of the MBCA; provided, however, that Sections 1 and 2 of Article III shall only be amended or repealed as provided in Section 2(d) of Article III. -7- EX-4.C 3 SPECIMEN STOCK CERTIFICATE Exhibit 4(c) COMMON STOCK [LOGO] COMMON STOCK NUMBER SHARES HB INCORPORATED UNDER THE LAWS OF THE STATE OF MINNESOTA H.B. FULLER COMPANY CUSIP 359694 10 6 See reverse for certain definitions This certifies that is the owner of Shares of COMMON STOCK OF THE PAR VALUE OF $1.00 EACH OF H.B. FULLER COMPANY transferable only on the books of the Company by the holder hereof, in person or by duly authorized attorney, upon surrender of this certificate properly endorsed. The shares of the Company of all classes are subject to certain rights, preferences and restrictions, and the Company will furnish, without charge to each stockholder who so requests, a full statement of the designations, relative rights, voting power, preferences and restrictions granted to, or imposed on upon, said shares. This certificate is not valid unless countersigned by the Transfer Agent and Registrar. IN WITNESS WHEREOF, H.B. FULLER COMPANY has caused this certificate to be signed by its duly authorized officers and its corporate seal to be hereunto affixed. Dated: /s/ Lee R. Mitau /s/ Walter Kissling - ---------------- ----------------------- SECRETARY CHIEF EXECUTIVE OFFICER H.B. FULLER COMPANY SEAL COUNTERSIGNED AND REGISTERED: NORWEST BANK MINNESOTA, N.A. (MINNEAPOLIS, MINNESOTA) TRANSFER AGENT AND REGISTRAR BY AUTHORIZED SIGNATURE H.B. Fuller Company THE COMPANY WILL FURNISH TO ANY SHAREHOLDER, UPON REQUEST AND WITHOUT CHARGE, A FULL STATEMENT OF THE DESIGNATIONS, PREFERENCES, LIMITATIONS AND RELATIVE RIGHTS OF THE SHARES OF EACH CLASS OR SERIES AUTHORIZED TO BE ISSUED BY THE COMPANY, SO FAR AS THEY HAVE BEEN DETERMINED, AND THE AUTHORITY OF THE BOARD OF DIRECTORS OF THE COMPANY TO DETERMINE THE RELATIVE RIGHTS AND PREFERENCES OF SUBSEQUENT CLASSES OR SERIES. The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations. TEN COM - as tenants in common UNIF TRANSFER MIN ACT - ....... .... .......Custodian.... ....... (Cust) (Minor) TEN ENT - as tenants by the entireties under Uniform Transfer to Minors JT TEN - as joint tenants with right of survivorship Act................... and not as tenants in common (State)
Additional abbreviations may also be used though not in the above list. For value received _____ hereby sell, assign and transfer unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE - -------------------------------------- - -------------------------------------- - ------------------------------------------------------------------------------- PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - --------------------------------------------------------------------- Shares of the capital stock represented by the within Certificate, and do hereby irrevocably constitute and appoint ---------------------------------- Attorney so transfer the said stock on the books of the within-named Corporation with full power of substitution in the premises. Dated NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER. THIS CERTIFICATE ALSO EVIDENCES AND ENTITLES THE HOLDER HEREOF TO CERTAIN RIGHTS AS SET FORTH IN THE AMENDED AND RESTATED SHAREHOLDER RIGHTS AGREEMENT DATED AS OF OCTOBER 19, 1989 BETWEEN H.B. FULLER COMPANY AND NORWEST BANK MINNESOTA, N.A. (THE "RIGHTS AGREEMENT"), THE TERMS OF WHICH ARE HEREBY INCORPORATED BY REFERENCE AND A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICES OF H.B. FULLER COMPANY. UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS AGREEMENT, SUCH RIGHTS MAY BE REDEEMED, MAY EXPIRE OR MAY BE EVIDENCED BY SEPARATE CERTIFICATES AND WILL NO LONGER BE EVIDENCED BY THIS CERTIFICATE. H.B. FULLER COMPANY WILL MAIL TO THE HOLDER OF THIS CERTIFICATE A COPY OF THE RIGHTS AGREEMENT WITHOUT CHARGE PROMPTLY AFTER RECEIPT OF A WRITTEN REQUEST THEREFOR. UNDER CERTAIN CIRCUMSTANCES, RIGHTS ISSUED TO, OR HELD BY, ACQUIRING PERSONS, ADVERSE PERSONS OR AFFILIATES OR ASSOCIATES THEREOF (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID. EX-10.K 4 MANAGING DIRECTOR AGREEMENT Exhibit 10(k) MANAGING DIRECTOR SUPPLEMENTAL AGREEMENT between H.B. Fuller GmbH An der Roten Bleiche 2-3 D-21335, Luneburg - - hereinafter called the "Company" - represented by its shareholder H.B. Fuller Company which is represented by Mr. Walter Kissling and Mr. Wolfgang Weber Ernst-Braune-Strasse 33 D-21339 Luneburg - - hereinafter called the "Managing Director" - 1. This Supplemental Agreement modifies that certain Managing Director Agreement (the "Agreement") dated March 23, 1990, and the Supplemental Agreement dated October 3, 1993. 2. Mr. Weber remains a director of the H.B. Fuller GmbH. 3. The extended expatriate assignment of Mr. Weber to St. Paul, Minnesota, ends on December 31, 1995. Mr. Weber remains Sr. Vice President Technology and Worldwide Systems and will be based in Luneburg/Germany. 4. The responsibilities of Area Manager of H.B. Fuller GmbH as set forth in section 1.2 of the "Agreement" will be substituted by the responsibilities described in the paragraphs 5 - 8 of this Supplemental Agreement. 5. As Sr. Vice President Technology and Worldwide Systems (TWS) Mr. Weber is responsible for establishing and implementing worldwide manufacturing policies, procedures and programs with an emphasis on optimizing worldwide manufacturing through adequate direction, policies, procedures and programs. His focus is on new manufacturing technology and long-range planning for manufacturing functions, plant consolidations/expansions and appropriate site selection as well as evaluation of acquisitions specific to the quality of manufacturing assets and production processes. 6. As Sr. Vice President Technology and Worldwide Systems (TWS) Mr. Weber is also responsible for all aspects of worldwide quality programs (ISO 9000), developing innovative programs to focus employees on improving quality in a TQM direction. 7. As Sr. Vice President Technology and Worldwide Systems (TWS) Mr. Weber is also responsible for marketing, purchasing as it relates to the strategy for the top ten suppliers and the top product lines, and establishing, directing and implementing policies and procedures that control Fuller's long-term procurement and cost advantage of raw material. 8. As Sr. Vice President Technology and Worldwide Systems (TWS) Mr. Weber is also a member of the CTC thus actively engaged in Technology transfer sourcing and prioritization. 9. Mr. Weber reports to the Sr. Vice President Operations. 10. Mr. Weber's "Agreement" will remain in force besides the exceptions stated in this Supplemental Agreement. Date: - ------------------------ ---------------------- H.B. Fuller GmbH Wolfgang Weber 2 EX-10.P 5 PERFORMANCE UNIT PLAN Exhibit 10(p) ------------- H.B. FULLER COMPANY 1995 PERFORMANCE UNIT PLAN (December 1, 1994 through November 30, 1997) Section 1. General. This Plan is adopted pursuant to the H.B. Fuller Company 1992 Stock Incentive Plan (the "Stock Incentive Plan") and is subject to its terms. This Plan shall be known as the "H.B. Fuller Company Performance Unit Plan" and is hereinafter referred to as the "Performance Unit Plan." Section 2. Definitions. As used in this Performance Unit Plan, the following terms shall have the meanings set forth below: "Affiliate" shall mean (i) any entity that, directly or indirectly through one or more intermediaries, is controlled by the Company and (ii) any entity in which the Company has a significant equity interest, as determined by the Committee. "Award" shall mean any right granted under this Performance Unit Plan. "Award Agreement" shall mean any written agreement contract or other instrument or document evidencing any Award granted under the Performance Unit Plan. "Change in Control" shall mean: (a) a change in control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Exchange Act, whether or not the Company is then subject to such reporting requirement; (b) the public announcement (which, for purposes of this definition, shall include, without limitation, a report filed pursuant to Section 13(d) of the Exchange Act) by the Company or any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) that such person has become the "beneficial owner" (as defined in Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of securities of the Company representing 15% or more of the combined voting power of the Company's then outstanding securities; (c) the Continuing Directors cease to constitute a majority of the Company's Board of Directors; (d) the shareholders of the Company approve (A) any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation or pursuant to which shares of Company stock would be converted into cash, securities or other property, other than a merger of the Company in which shareholders immediately prior to the merger have the same proportionate ownership of stock of the surviving corporation immediately after the merger; (B) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of the Company; or (C) any plan of liquidation or dissolution of the Company; or (e) the majority of the Continuing Directors determine in their sole and absolute discretion that there has been a change in control of the Company; provided, however, that within ten business days following the date of the Change in Control, a majority of the Continuing Directors, if any, determines that there shall be no acceleration of vesting with respect to such Change in Control, then the acceleration provisions will not apply. "Continuing Director" shall mean any person who is a member of the Board of Directors of the Company, while such person is a member of the Board of Directors, who is not an Acquiring Person (as defined below) or an Affiliate or Associate (as defined below) of an Acquiring Person, or a representative of an Acquiring Person or any such Affiliate or Associate, and who (A) was a member of the Board of Directors on the date of this Agreement as first written above or (B) subsequently becomes a member of the Board of Directors, if such person's initial nomination for election or initial election to the Board of Directors is recommended or approved by a majority of the Continuing Directors. For purposes of this subparagraph (e), "Acquiring Person" shall mean any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) who or which, together with all Affiliates and Associates of such person, is the "beneficial owner" (as defined in Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of securities of the Company representing 15% or more of the combined voting power of the Company's then outstanding securities, but shall not include the Company, any subsidiary of the Company or any employee benefit plan of the Company or of any subsidiary of the Company or any entity holding shares of the Common Stock organized, appointed or established for, or pursuant to the terms of, any such plan, Elmer L. Andersen, alone or together with any of his Affiliates, or Anthony L. Andersen, alone or together with any of his Affiliates; and "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 promulgated under the Exchange Act. "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time, and any regulations promulgated thereunder. "Committee" shall mean a committee of the Board of Directors of the Company designated by such Board to administer this Performance Unit Plan and comprised of not less than such number of directors as shall be required to permit this Performance Unit Plan to satisfy the requirements of Rule 16b-3. Each member of the Committee shall be a "disinterested person" within the meaning of Rule 16b-3. 2 "Eligible Person" shall mean any employee or officer of the Company or any Affiliate who the Committee determines to be an Eligible Person. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. "Fair Market Value" shall mean, with respect to any property (including, without limitation, any Shares or other securities), the fair market value of such property determined by such methods or procedures as shall be established from time to time by the Committee. Notwithstanding the foregoing, for purposes of this Performance Unit Plan, the Fair Market Value of Shares on a given date shall be (i) the last sale price of the Shares as reported on the NASDAQ National Market System on such date, if the Shares are then quoted on the NASDAQ National Market System or (ii) the closing price of the Shares on such date on a national securities exchange, if the Shares are then being traded on a national securities exchange. "Participant" shall mean an Eligible Person designated to be granted a Performance Award under this Performance Unit Plan. "Performance Unit" shall mean any unit granted under this Performance Unit Plan evidencing the right to receive Restricted Stock or Restricted Stock Units at some future date. "Person" shall mean any individual, corporation, partnership, association or trust. "Restricted Stock" shall mean any Share into which a Performance Unit is convertible under the Performance Unit Plan. "Restricted Stock Unit" shall mean a unit evidencing the right to receive one Share (subject to adjustment pursuant to Section 4.3 hereof) at some future date. "Rule 16b-3" shall mean Rule 16b-3 promulgated by the Securities and Exchange Commission under the Exchange Act or any successor rule or regulation. "Shares" shall mean shares of Common Stock, $1.00 par value, of the Company or such other securities or property as may become subject to Awards pursuant to an adjustment made under Section 4.3 of this Performance Unit Plan. 3 Section 3. Administration. Section 3.1. Power and Authority of the Committee. This Performance Unit Plan shall be administered by the Committee. Subject to the terms of this Performance Unit Plan and applicable law, the Committee shall have full power and authority to: (i) designate Participants; (ii) determine the number of Performance Units to be granted to each Participant under this Performance Unit Plan; (iii) determine the number of Shares with respect to which payments, rights or other matters are to be calculated in connection with each Award; (iv) determine the terms and conditions of any Award or Award Agreement; (v) amend the terms and conditions of any Award or Award Agreement and accelerate the lapse of restrictions relating to Restricted Stock; (vi) determine whether, to what extent and under what circumstances Awards may be canceled, forfeited or suspended; (vii) interpret and administer this Performance Unit Plan and any instrument or agreement relating to, or Award made under, this Performance Unit Plan; (viii) establish, amend, suspend or waive such rules and regulations and appoint such agents as it shall deem appropriate for the proper administration of this Performance Unit Plan; and (ix) make any other determination and take any other action that the Committee deems necessary or desirable for the administration of this Performance Unit Plan. Unless otherwise expressly provided in this Performance Unit Plan, all designations, determinations, interpretations and other decisions under or with respect to this Performance Unit Plan or any Award shall be within the sole discretion of the Committee, may be made at any time and shall be final, conclusive and binding upon any Participant, any holder or beneficiary of any Award and any employee of the Company or any Affiliate. Section 3.2. Meetings of the Committee. The Committee shall select one of its members as its chairman and shall hold its meetings at such times and places as the Committee may determine. A majority of the Committee's members shall constitute a quorum. All determinations of the Committee shall be made by not less than a majority of its members. Any decision or determination reduced to writing and signed by all of the members of the Committee shall be fully effective as if it had been made by a majority vote at a meeting duly called and held. The Committee may appoint a secretary and may make such rules and regulations for the conduct of its business as it shall deem advisable. Section 3.3. Delegation. The Committee may delegate to one or more officers of the Company or any Affiliate or a committee of such officers the authority, subject to such terms and limitations as the Committee shall determine, to grant Awards to Eligible Persons who are not officers or directors of the Company or Affiliate for purposes of Section 16 of the Exchange Act. Only the Committee is permitted to grant Awards to Eligible Persons who are officers or directors of the Company for purposes of Section 16 of the Exchange Act. Section 4. Shares Available for Awards. Section 4.1. Shares Available. Subject to adjustment as provided in Section 4(c), the number of Shares with respect to which Awards may be granted under this Performance Unit Plan shall not exceed the maximum number of Shares available for issuance under the Stock Incentive Plan less the number of Shares available for issuance under any other plan adopted 4 pursuant to the Stock Incentive Plan. Shares issued pursuant to the Performance Unit Plan may be either from the authorized but unissued shares of the Company's Common Stock or from shares of Common Stock reacquired by the Company, including shares purchased in the open market. If any shares of Restricted Stock or any Restricted Stock Units to which an Award relates are forfeited, or if an Award otherwise terminates without delivery of any Shares, then the number of Shares counted against the aggregate number of Shares available under this Performance Unit Plan with respect to such Award, to the extent of any such forfeiture or termination, shall again be available for granting Awards under the Performance Unit Plan. Section 4.2. Accounting for Awards. For purposes of this Section 4, the number of Shares to which such Award relates shall be counted on the date of grant of such Award against the aggregate number of Shares available for granting Awards under this Performance Unit Plan. Section 4.3. Adjustments. In the event that the Committee shall determine that any dividend or other distribution (whether in the form of cash, Shares, other securities or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange of Shares or other securities of the Company, issuance of warrants or other rights to purchase Shares or other securities of the Company or other similar corporate transaction or event affects the Shares such that an adjustment is determined by the Committee to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under this Performance Unit Plan, then the Committee shall, in such manner as it may deem equitable, adjust any or all of the number and type of Shares (or other securities or other property) which thereafter may be made the subject of Awards and the number and type of Shares (or other securities or other property) subject to outstanding Awards. Section 5. Eligibility. Any Eligible Person, including any Eligible Person who is an officer or director of the Company or any Affiliate, shall be eligible to be designated a Participant. Section 6. Performance Units. The Committee is hereby authorized to grant Performance Units to Participants subject to the terms of this Performance Unit Plan and any applicable Award Agreement. A Performance Unit granted under this Performance Unit Plan (a) shall be denominated in cash and payable in Restricted Stock or Restricted Stock Units, as applicable, and (b) shall confer on the holder thereof the right to receive a payment, in whole but not in part, upon the achievement of the performance goals set forth in Schedule I hereto during the performance three-year period ending November 30, 1997 as set forth in such schedule or the Award Agreement (the "Performance Period"). Subject to the terms of this Performance Unit Plan and any applicable Award Agreement, the number of any Performance Units granted and the value of any Performance Unit shall be determined by the Committee. 5 Section 6.1. Number of Performance Units. Performance Units may be granted in the sole discretion of the Committee to the Participant for any fiscal year (a "Performance Year") in the Performance Period. Following any such grant the Participant will be notified of the number of Performance Units, if any, granted to the Participant by the Committee. The Participant may or may not receive a grant in any given Performance Year during the Performance Period. Section 6.2. Payment of Performance Units. If Performance Units are granted to the Participant for a Performance Period, such Performance Units will be credited to the Participant during such Performance Period; however, such Performance Units shall be paid only at the end of the Performance Period upon the attainment of the cumulative Performance Objectives for the Performance Period established by the Committee. The Performance Objectives for the Performance Year ending November 30, 1995 are set forth in Schedule I hereto. Prior to the beginning of each successive Performance Year during the Performance Period, the Committee shall establish Performance Objectives for each such successive Performance Year during the Performance Period. The value of each Performance Unit shall be based on cumulative Performance Objectives established by the Committee for the entire Performance Period and shall have the value set forth in the matrix contained in the Schedule I hereto. Section 6.3. Payment of Performance Units. Performance Units shall be credited to a Participant annually following the end of the Company's fiscal year; however, Performance Units shall be paid only upon the attainment of the performance goals set forth in Schedule I hereto. Section 6.4. Restrictions. Performance Units shall be subject to such restrictions as the Committee may impose, which restrictions may lapse separately or in combination at such time or times, in such installments or otherwise as the Committee may deem appropriate. Section 6.5. Forfeiture Prior to Conversion to Restricted Stock or Restricted Stock Units. Except as otherwise determined by the Committee, upon termination of employment during the Performance Period, all Performance Units credited to the terminating Participant at such time which have not yet been converted to Restricted Stock or Restricted Stock Units, as applicable, shall be forfeited. Section 6.6. Limits on Transfer of Awards. No Award and no right under any such Award shall be transferable by a Participant otherwise than by will or by the laws of descent and distribution; provided, however, that, if so determined by the Committee, a Participant may, in the manner established by the Committee, designate a beneficiary or beneficiaries to exercise the rights of the Participant and receive any property distributable with respect to any Award upon the death of the Participant. Each right under any Award shall be exercisable during the Participant's lifetime only by the Participant or, if permissible under applicable law, by the Participant's guardian or legal representative. No Award or right under any such Award may be pledged, alienated, attached or otherwise encumbered, and any purported pledge, alienation, 6 attachment or encumbrance thereof shall be void and unenforceable against the Company or any Affiliate. Section 7. Conversion of Performance Units to Restricted Stock or Restricted Stock Units. As of the last day of the Performance Period, the Participant's Performance Units will be converted to the largest number of whole shares of Restricted Stock or Restricted Sock Units as specified in the Award Agreement that equals the aggregate value of Performance Units earned during such Performance Period divided by the Fair Market Value of the Shares as of such day. No fractional Shares shall be issued or converted pursuant to this Performance Unit Plan or any Award, and the Committee shall determine whether cash shall be paid in lieu of any fractional Shares or whether such fractional Shares or any rights thereto shall be canceled, terminated or otherwise eliminated. Section 7.1. Forfeiture After Conversion to Restricted Stock or Restricted Stock Units. Except as provided in Section 7.5 hereof or as otherwise determined by the Committee, all Restricted Stock or Restricted Stock Units, as applicable, shall be forfeited and reacquired by the Company and all rights of the Participant in such Restricted Stock or Restricted Stock Units, as applicable, thereto shall terminate unless the Participant remains in the continuous employment of the Company or any Affiliate for a period (the "Restricted Period"), of three years from the date of the conversion of the Performance Units to Restricted Stock or Restricted Stock Units, as applicable; provided, however, that the Committee may, when it finds that a waiver would be in the best interest of the Company, waive in whole or in part any or all remaining restrictions with respect to Restricted Stock or Restricted Stock Units, as applicable. Shares of Restricted Stock or Shares representing the equivalent of whole Restricted Stock Units that are no longer subject to restrictions shall be delivered to the holder thereof promptly after the applicable Restricted Period lapses or is waived. Section 7.2. Stock Certificates Representing Restricted Stock. At the time that the Participant's Performance Units are converted to Restricted Stock, such Restricted Stock shall be issued and held by the Company or held in nominee name by the stock transfer agent or brokerage service selected by the Company to provide such services for the Performance Unit Plan. No stock certificates evidencing such shares of Restricted Stock shall be issued to the Participant prior to the lapse or waiver of restrictions applicable to such Restricted Stock. Neither this Section 7(b) nor any action taken pursuant to nor in accordance with this Section 7(b) shall be construed to create a trust of any kind. At the end of the Restricted Period, certificates for the shares of Restricted Stock issued upon the conversion of Performance Units awarded to the Participant shall be delivered to the Participant within 30 days following the end of the Restricted Period subject only to such restrictive legend, if any, as may be required under the then applicable securities laws. Section 7.3. Conversion of Restricted Stock Units. On the first business day subsequent to the termination of the Restricted Period, each Restricted Stock Unit shall, automatically and 7 without further action of the Company, be converted to one Share (subject to adjustment pursuant to Section 4(c) hereof) and the Participant shall thereupon become a record holder of each such Share for all purposes. No fractional Shares shall be issued or delivered pursuant to this Restricted Stock Unit Plan or any Award, and the Committee shall determine whether cash shall be paid in lieu of any fractional Shares or whether such fractional Shares or any rights thereto shall be canceled, terminated or otherwise eliminated. Section 7.4. Special Provisions Upon a Change in Control. Notwithstanding any other provision in this Performance Unit Plan to the contrary, the Restricted Period pertaining to any Restricted Stock or Restricted Stock Units issued upon the conversion of Performance Units awarded under this Performance Unit Plan will immediately lapse upon the occurrence of a Change in Control. Section 7.5. Termination of Employment by Reason of Death, Disability or Retirement. In the event that a Participant shall cease to be employed by the Company or its subsidiaries due to death, permanent disability, normal retirement at age 65 or older, or early retirement with the consent of the Compensation Committee of the Board of Directors, the Restricted Period with respect to the Restricted Stock or Restricted Stock Unit, as applicable, held by such Participant shall be deemed to have ended on the date of such termination of employment. Section 7.6. Prohibition on Transfer of Restricted Stock. Shares of Restricted Stock or Restricted Stock Units may not be sold, assigned, transferred, pledged, hypothecated or otherwise disposed of during the Restricted Period. Section 7.7. Leave of Absence. The Committee may make such provision as it deems equitable respecting the continuance of the restrictions contained herein on any Restricted Stock held by a Participant during an approved leave of absence. Section 8. Rights as a Shareholder. Section 8.1. Voting Rights. Upon the issuance of Restricted Stock upon conversion of Performance Units awarded to a Participant, such Participant shall be entitled to voting rights with respect to such Shares of Restricted Stock. At no time prior to the conversion of Restricted Stock Units into Shares shall a participant be entitled to voting rights with respect to such Shares or the Restricted Stock Units. Section 8.2. Dividends on Restricted Stock. As a condition to receiving an Award under the Performance Unit Plan, each Participant shall be required to elect in writing to defer the receipt of dividends paid on shares of Restricted Stock issued upon conversion of Performance Units awarded to such Participant. All cash dividends otherwise payable on and with respect to Restricted Stock shall be reinvested in additional shares of Restricted Stock at the Fair Market Value of the Shares. All Restricted Stock issued pursuant to this Section 7(g)(ii) shall be held in nominee name by the stock transfer agent or brokerage service selected by the Company to provide such services for the Plan. A report showing the number of shares of Restricted Stock so purchased with reinvested dividends shall be sent to the Participant within 30 8 days following the applicable dividend payment date. No stock certificates evidencing such Restricted Stock shall be issued to the Participant prior to the lapse or waiver of restrictions applicable to the shares of Restricted Stock with respect to which the reinvested dividends were paid. Shares of Restricted Stock resulting from the reinvestment of dividends shall be forfeited in the event that the shares of Restricted Stock with respect to which the reinvested dividends were paid are forfeited. Stock certificates registered in the name of the Participant shall be delivered to the Participant within 30 days after such restrictions lapse or are waived. Only whole Shares shall be issued to the Participant following the lapse or waiver of such restrictions; the value of any fractional Shares shall be paid in cash at the time such Shares are issued to the Participant. Section 8.3. Dividend Equivalents. As long as a Participant holds outstanding Restricted Stock Units, the Company shall credit to such Participant, on each date that the Company pays a cash dividend to holders of Shares generally, a number of Restricted Stock Units equal to the total number of whole Restricted Stock Units previously credited to such Participant multiplied by the cash dividend per Share paid on such date to such holders, divided by the Fair Market Value of a Share on such date. Any fractional Restricted Stock Units resulting from such calculation shall be carried over and added to any additional Restricted Stock Units as may be credited to the Participant in connection with similar calculations in the future. A report showing the number of Shares so credited shall be sent to the Participant periodically, as determined by the Committee. Restricted Stock Units credited pursuant to this Section 8.3 will be forfeited if and when the Restricted Stock Units to which such dividend equivalents were paid are forfeited. Section 9. Payment of Cash Value of Award. The Committee, in its sole discretion, may elect to cause a Participant to be paid the cash value of Performance Units, Restricted Stock or Restricted Stock Units held by such Participant prior to the expiration of the applicable Performance Period or Restricted Period and terminate such Participant's rights with respect to such Performance Units or Restricted Stock. Section 10. Securities Matters. No shares of Restricted Stock shall be issued hereunder prior to such time as counsel to the Company shall have determined that the issuance and delivery of such Restricted Stock will not violate any federal or state securities or other laws. The Participant may be required by the Company, as a condition to the Award granted hereunder, to agree in writing that all Restricted Stock to be acquired pursuant to this Performance Unit Plan shall be held for his or her own account without a view to any further distribution thereof, that the certificates for such shares of Restricted Stock shall bear an appropriate legend to that effect, and that such shares of Restricted Stock will not be transferred or disposed of except in compliance with applicable federal and state laws. The Company may, in its sole discretion, defer the effectiveness of any Award or the conversion of Performance Units to Restricted Stock 9 hereunder in order to allow the issuance of Restricted Stock pursuant thereto to be made pursuant to registration or an exemption from registration or other methods for compliance available under federal or state securities laws. The Company shall be under no obligation to effect the registration pursuant to the Securities Act of 1933 of any Restricted Stock to be issued hereunder or to effect similar compliance under any state laws. If Shares are traded on a securities exchange, the Company shall not be required to deliver to the Participant certificates representing any shares of Restricted Stock unless and until such shares of Restricted Stock have been admitted for trading on such securities exchange. The Company shall inform the Participant in writing of its decision to defer the effectiveness of any award of Restricted Stock hereunder. Section 11. Amendment and Termination; Adjustments. Except to the extent prohibited by applicable law and unless otherwise expressly provided in an Award Agreement, the Stock Incentive Plan or in this Performance Unit Plan: Section 11.1. Amendments to Performance Unit Plan. The Committee may amend, alter, suspend, discontinue or terminate this Performance Unit Plan; provided, however, that, notwithstanding any other provision of this Performance Unit Plan or any Award Agreement, without the approval of the shareholders of the Company, no such amendment, alteration, suspension, discontinuation or termination shall be made that, absent such approval, (i) would cause Rule 16b-3 to become unavailable with respect to this Performance Unit Plan, and/or (ii) would violate the rules or regulations of the National Association of Securities Dealers, Inc. or any securities exchange that are applicable to the Company. Section 11.2. Amendments to Awards. The Committee may waive any conditions of or rights of the Company under any outstanding Award, prospectively or retroactively. The Committee may not amend, alter, suspend, discontinue or terminate any outstanding Award, prospectively or retroactively, without the consent of the Participant or holder or beneficiary thereof, except as otherwise herein provided. Section 11.3. Correction of Defects, Omissions and Inconsistencies. The Committee may correct any defect, supply any omission or reconcile any inconsistency in this Performance Unit Plan or any Award in the manner and to the extent it shall deem desirable to carry this Performance Unit Plan into effect. Section 12. General Provisions. Section 12.1. Income Tax Withholding. In order to comply with all applicable income, social, payroll or other tax laws or regulations, the Company may take such action as it deems appropriate to ensure that all applicable income, social, payroll or other taxes, which are the sole and absolute responsibility of a Participant, are withheld or collected from such Participant. Section 12.2. No Rights to Awards. No Eligible Person, Participant or other Person shall have any claim to be granted any Award under this Performance Unit Plan, and there is no 10 obligation for uniformity of treatment of Eligible Persons, Participants or holders or beneficiaries of Awards under this Performance Unit Plan. The terms and conditions of Awards need not be the same with respect to different Participants. Section 12.3. No Cash Consideration for Awards. Awards shall be granted for no cash consideration. Section 12.4. Awards May Be Granted Separately or Together. Awards may, in the discretion of the Committee, be granted either alone or in addition to, in tandem with or in substitution for any award granted under any plan of the Company or any Affiliate other than this Performance Unit Plan. Awards granted in addition to or in tandem with awards granted under any such other plan of the Company or any Affiliate may be granted either at the same time as or at a different time from the grant of such other Awards or awards. Section 12.5. Award Agreements. No Participant will have rights under an Award granted to such Participant unless and until an Award Agreement shall have been duly executed on behalf of the Company. Section 12.6. No Limit on Other Compensation Arrangements. Nothing contained in this Performance Unit Plan shall prevent the Company or any Affiliate from adopting or continuing in effect other or additional compensation arrangements, and such arrangements may be either generally applicable or applicable only in specific cases. Section 12.7. No Right to Employment. The grant of an Award shall not be construed as giving a Participant the right to be retained in the employ of the Company or any Affiliate. In addition, the Company or an Affiliate may at any time dismiss a Participant from employment, free from any liability or any claim under this Performance Unit Plan, unless otherwise expressly provided in this Performance Unit Plan or in any Award Agreement. Section 12.8. Governing Law. The internal law, and not the law of conflicts, of the State of Minnesota will govern all questions concerning the validity, construction and effect of this Performance Unit Plan and any rules and regulations relating to this Performance Unit Plan. Section 12.9. Severability. If any provision of this Performance Unit Plan or any Award is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction or would disqualify this Performance Unit Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended without, in the determination of the Committee, materially altering the purpose or intent of this Performance Unit Plan or the Award, such provision shall be stricken as to such jurisdiction or Award, and the remainder of this Performance Unit Plan or any such Award shall remain in full force and effect. 11 Section 12.10. No Trust or Fund Created. Neither this Performance Unit Plan nor any Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company or any Affiliate and a Participant or any other Person. To the extent that any Person acquires a right to receive payments from the Company or any Affiliate pursuant to an Award, such right shall be no greater than the right of any unsecured general creditor of the Company or any Affiliate. Section 12.11. Headings. Headings are given to the Sections and subsections of this Performance Unit Plan solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the construction or interpretation of this Performance Unit Plan or any provision thereof. Section 12.12. Effective Date of Performance Unit Plan. This Performance Unit Plan shall be effective as of the later of the date of its adoption by the Committee or the date of the approval of the Stock Incentive Plan by the shareholders of the Company. 12 EX-11 6 EPS CALCULATION
H.B. Fuller Company and Consolidated Subsidiaries Exhibit 11 Computation of Net Earnings Per Common Share Years Ended November 30, 1995, 1994, and 1993 (Dollars in thousands, except share amounts) 1995 1994 1993 ---------- ---------- ---------- Primary - ------- Earnings: Earnings before accounting change $31,195 $30,863 $21,701 Dividends on preferred stock (15) (15) (15) ---------- ---------- ---------- Earnings before acctg. chg. applicable to common stock 31,180 30,848 21,686 Cumulative effect of accounting change (2,532) (11,717) ---------- ---------- ---------- Earnings applicable to common stock $28,648 $30,848 $9,969 ========== ========== ========== Shares: Weighted average number of common shares outstanding 13,967,716 13,926,957 13,883,904 Common share equivalents of stock options outstanding (determined by the treasury stock method using average quarterly prices) 91,000 109,377 134,048 ---------- ---------- ---------- Weighted average shares outstanding and common stock equivalent shares 14,058,716 14,036,334 14,017,952 ========== ========== ========== Primary earnings per common share: Earnings before accounting change per share $2.22 $2.20 $1.55 Cumulative effect of accounting change per share (0.18) (0.84) ---------- ---------- ---------- Net earnings per common share $2.04 $2.20 $0.71 ========== ========== ========== 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 13,967,716 13,926,957 13,883,904 Common share equivalents of stock options outstanding (determined by the treasury stock method using higher of quarter end or average quarterly prices) 90,701 109,936 134,834 ---------- ---------- ---------- Weighted average shares outstanding and common stock equivalent shares 14,058,417 14,036,893 14,018,738 ========== ========== ========== Earnings per common share assuming full dilution: Earnings before accounting change per share $2.22 $2.20 $1.55 Cumulative effect of accounting change per share (0.18) (0.84) ---------- ---------- ---------- Net earnings per common share $2.04 $2.20 $0.71 ========== ========== ==========
EX-13 7 ANNUAL REPORT 1995 H.B. Fuller Company Annual Report 29 Management's Analysis of Results of Operations and Financial Condition (Dollars in thousands) The following discussion includes comments and data relating to the Company's financial condition and results of operations for the three fiscal years ended November 30, 1995. 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: 1995 Compared to 1994 Worldwide sales for 1995 were a record $1,243,818, an increase of $146,451 or 13.3 percent over 1994 sales of $1,097,367. Net earnings for 1995 were $28,663, a decrease of $2,200 or 7.1 percent from 1994 earnings of $30,863. 1995 net earnings were adversely affected by an accounting change charge of $2,532 relating to the Company's adoption of the Financial Accounting Standards Board Statement No. 112. Sales changes by geographic area were as follows:
Area Increase - ------------------------------------ North America $ 54,467 9% Latin America 23,393 15% Europe 52,455 23% Asia/Pacific 16,136 23% -------- Total $146,451 13%
In North America, the 9 percent increase in sales is composed of a 5 percentage point increase due to pricing and 4 percentage points related to an acquisition in the United States (in 1994). North American operating earnings increased 11.5 percent compared to 1994. Within North America, the Adhesives, Sealants and Coatings (ASC) Group produced an 11 percent sales increase over 1994 with 5 percentage points of the increase a result of expanded sales within core industrial markets and strong sales by the ASC structural group, especially in the engineered systems and window markets. Sales to the automotive markets were down significantly from 1994 sales, excluding the impact of the 1994 automotive acquisition which accounted for the remaining 6 percentage points of ASC sales growth. ASC Group operating earnings had a strong increase over 1994 supported by price increases to cover raw material increases and lower operating expenses resulting from continuing cost containment programs. The North American Specialty Group, as a whole, experienced a 3 percent sales increase and slight operating earnings decrease due primarily to low volume increases in 1995. The Industrial Coatings Division completed construction of a new plant in early 1995. TEC Incorporated, Industrial Coatings Division and Monarch Division all had slight increases in sales when compared to 1994 due to a reduced demand in 1995 in some of the industries they sell to. Foster Products Corporation had strong sales and Linear Products Incorporated a moderate increase in sales when compared to 1994. Sales by the Company's Latin American operations increased 15 percent in 1995 compared to the prior year with the increase equally generated by pricing and by volume and product mix changes. The sales growth particularly occurred in 1995 in Argentina, Brazil, Bolivia, Chile, Colombia, Ecuador, Peru and Venezuela. The paint divisions in Costa Rica, El Salvador, Guatemala and Nicaragua also contributed significant sales growth. The restructuring of the paint divisions announced in late 1993 was completed in 1995. Paint manufacture in Costa Rica was consolidated into one plant in late 1994. In 1995, paint manufacture in Panama was also consolidated into one plant. The paint plant in El Salvador was closed, with plans to service sales to this country from a plant in Honduras. With the restructuring complete, the Company should be better positioned to anticipate and respond to the increased competitive pressures stemming from the lowering of trade restrictions in the region. Operating earnings for Latin America decreased 6.3 percent compared to 1994 due to increasing raw material costs and competitive pressure. Sales in Europe increased 23 percent in 1995 compared to 1994, with the weakening of the U.S. dollar positively affecting the increase by 13 percentage points. The 10 percentage point increase in local currency sales included 3 percentage points from increased volume and change in Sales to Unaffiliated Customers [CHART APPEARS HERE] SALES TO UNAFFILIATED CUSTOMERS 56% North America 23% Europe 14% Latin America 7% Asia/Pacific 1995 H.B. Fuller Company Annual Report OPERATING EARNINGS 60% North America 24% Latin America 18% Europe -2% Asia/Pacific product mix, 2 percentage points from an acquisition in the United Kingdom (in 1994) and 5 percentage points from increased pricing. Operating earnings increased 20.1 percent in 1995 compared to the prior year. All of the improvement in operating earnings occurred in the first three quarters of the year. In the fourth quarter, a weakening German economy caused volume declines and an unfavorable impact on operating earnings compared to 1994. Sales in Asia/Pacific increased 23 percent in 1995 over 1994, with an acquisition in New Zealand (in 1994) producing 4 percentage points of the gain. The weakening of the U.S. dollar accounted for 10 percentage points of the sales increase. A weak Japanese economy and expenditures to support the ongoing expansion of operations in this region contributed to a $1,497 decline in operating earnings compared to last year. 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 1995, 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 31.6 percent in 1995 from 32.2 percent in 1994. Pricing pressures in a weak European economy (particularly Germany), initial gross margins on 1994 acquisitions which were lower than the Company's overall gross margins, and a low volume increase, contributed to the gross margin percentage reduction. During most of 1995, the Company experienced rapidly increasing material costs. In North America, the Company was able to offset these material cost increases, for the most part, with price increases to maintain gross margin, as a percent of sales. Pricing efforts to offset raw material increases were less successful in other geographic areas, particularly Europe. The Company expects raw material costs to stabilize in 1996. Consolidated selling, administrative and other expenses for the Company were up 12.2 percent from 1994, and as a percent of sales, decreased from 26.2 percent in 1994 to 25.9 percent in 1995. Interest expense was $18,132 in 1995, up $6,385 or 54.4 percent from prior year. Total Company borrowing at year-end 1995 was above that at year-end 1994, primarily as a result of borrowing to fund 1994 acquisitions and to fund increased capital expenditures. Capitalized interest costs associated with major property and equipment projects increased from $1,179 in 1994 to $2,634 in 1995. Other income/expense, net, decreased from $3,188 expense in 1994 to $1,203 expense in 1995, primarily as a result of decreased currency losses and a gain on the sale of a product line in 1995. (See Notes 1 and 2 to the Consolidated Financial Statements.) Income taxes totaled $19,148 in 1995, a 3.2 percent decrease from $19,782 in 1994. The effective tax rate decreased from 38.8 percent in 1994 to 38.0 percent in 1995. The reduction is primarily due to reduced losses or turnarounds in earnings of non-U.S. loss operations. Results of Operations: 1994 Compared to 1993 Worldwide sales for 1994 were $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%
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). 30 1995 H.B. Fuller Company Annual Report 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 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 Incorporated 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. 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 and 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 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 point 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. 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 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 acquisi- 31 1995 H.B. Fuller Company Annual Report CAPITALIZATION RATIO 1995 35.7% 1994 32.1% 1993 19.5% 1992 17.3% 1991 24.7% 1990 30.9% 1989 35.1% 1988 35.5% 1987 17.0% 1986 21.5% tions. 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 totaled $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. Liquidity and Capital Resources The Company generated $78,813 in funds from operations in 1995 compared to $50,789 in 1994 and $46,903 in 1993. The increase in 1995 resulted primarily from increased depreciation and amortization and a smaller growth in inventory levels and in accounts receivable balances. Major other uses of cash during 1995 were capital expenditures, funding of postretirement benefits, purchase of a business and payment of dividends. Cash was $9,061 at November 30, 1995, compared to $9,830 at November 30, 1994. The $9,061 cash balance is considered adequate to meet Company needs in light of its unused portion of the lines of credit at November 30, 1995. Working capital was $142,056 at November 30, 1995, compared to $129,665 at November 30, 1994. The current ratio at year-end 1995 was 1.6, equal to the ratio at year-end 1994. The number of days sales in trade accounts receivable was 51 at November 30, 1995, equal to 51 at November 30, 1994. The average days sales in inventory on hand was 65 at the end of 1995, compared to 68 at the end of 1994. The restructuring reserve of $6,001 established at November 30, 1993 had a zero balance at November 30, 1995. The Company completed the restructuring in 1995 at a cost slightly in excess of the original reserve. 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 35.7 percent at November 30, 1995, compared to 32.1 percent at November 30, 1994. At year-end 1995, the Company had short-term and long-term lines of credit of $373,251 of which $160,000 was committed. The unused portion of these lines of credit was $279,242. Capital expenditures for property, plant and equipment of $90,664 in 1995 were primarily for completion of construction of a manufacturing plant in Honduras, to complete construction of a manufacturing plant in Minnesota, to begin construction of a research and development facility in Minnesota, for an information systems project, to begin construction of a manufacturing plant in the Philippines, 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 1995 capital projects are estimated to be approximately $32,000 in 1996. The Company plans to decrease its capital expenditures in 1996 from 1995 levels. Over the recent past, approximately 50 percent of the Company'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 the Company'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 the Company'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 receivable/payable and intercompany loans. 32 1995 H.B. Fuller Company Annual Report Consolidated Statements of Earnings H.B. Fuller Company and Subsidiaries (Dollars in thousands, except share amounts)
YEAR ENDED NOVEMBER 30 1995 1994 1993 - --------------------------------------------------------------------------------------------------- Net sales $1,243,818 $1,097,367 $975,287 Cost of sales 851,291 743,843 658,046 - --------------------------------------------------------------------------------------------------- Gross profit 392,527 353,524 317,241 Selling, administrative and other expenses 322,762 287,571 257,770 Restructuring costs -- -- 6,001 - --------------------------------------------------------------------------------------------------- Operating earnings 69,765 65,953 53,470 Interest expense (18,132) (11,747) (10,459) Other income (expense), net (1,203) (3,188) (2,158) - --------------------------------------------------------------------------------------------------- Earnings before income taxes, minority interests and accounting changes 50,430 51,018 40,853 Income taxes (19,148) (19,782) (19,191) Net earnings of consolidated subsidiaries applicable to minority interests (87) (373) 39 - --------------------------------------------------------------------------------------------------- Earnings before cumulative effect of accounting changes 31,195 30,863 21,701 Cumulative effect of accounting changes (2,532) -- (11,717) - --------------------------------------------------------------------------------------------------- Net earnings $28,663 $30,863 $9,984 - --------------------------------------------------------------------------------------------------- Earnings (loss) per common share: Earnings before accounting changes $2.22 $2.20 $1.55 Accounting changes (0.18) -- (0.84) - --------------------------------------------------------------------------------------------------- Net earnings $2.04 $2.20 $0.71 - --------------------------------------------------------------------------------------------------- Average number of common and common equivalent shares outstanding 14,059 14,036 14,018 - --------------------------------------------------------------------------------------------------- See accompanying Notes to Consolidated Financial Statements.
RETURN ON NET SALES 1995* 2.5% 1994 2.8% 1993* 2.2% 1992 3.8% 1991 3.2% 1990 2.7% 1989 2.1% 1988 3.1% 1987 4.3% 1986 3.6% * Excludes cumulative effect of change in accounting principles. 33 1995 H.B. Fuller Company Annual Report RETURN ON AVERAGE ASSETS 1995* 4.0% 1994 4.7% 1993* 3.9% 1992 6.7% 1991 5.5% 1990 4.5% 1889 3.5% 1988 5.5% 1987 8.3% 1986 6.9% * Excludes cumulative effect of change in accounting principles. Consolidated Balance Sheets H.B. Fuller Company and Subsidiaries (Dollars in thousands)
NOVEMBER 30 1995 1994 - ------------------------------------------------------------------------------------ Assets Current Assets: Cash $ 9,061 $ 9,830 Trade receivables, less allowance for doubtful accounts of $6,256 in 1995 and $6,221 in 1994 178,565 166,602 Other receivables 7,975 9,797 Inventories 159,024 152,651 Other current assets 33,016 22,523 - ------------------------------------------------------------------------------------ Total current assets 387,641 361,403 Net property, plant and equipment 355,123 295,090 Deposits and miscellaneous assets 31,094 27,605 Other intangibles, less accumulated amortization of $16,076 in 1995 and $14,214 in 1994 16,761 18,097 Excess of cost over net assets acquired, less accumulated amortization of $10,095 in 1995 and $7,545 in 1994 38,310 40,422 - ------------------------------------------------------------------------------------ Total assets $828,929 $742,617 - ------------------------------------------------------------------------------------ Liabilities and Stockholders' Equity Current Liabilities: Notes payable $ 53,749 $ 53,125 Current installments of long-term debt 5,722 6,430 Accounts payable - trade 117,446 105,825 Accrued payroll and employee benefits 28,276 31,389 Other accrued expenses 31,228 26,691 Income taxes 9,164 8,278 - ------------------------------------------------------------------------------------ Total current liabilities 245,585 231,738 Long-term debt, excluding current installments 166,459 130,009 Deferred income taxes 3,889 7,278 Accrued pensions 85,689 70,403 Other liabilities 22,222 22,231 Minority interests in consolidated subsidiaries 5,671 6,153 Stockholders' Equity: Series A preferred stock 306 306 Common stock 14,007 13,935 Additional paid-in capital 20,771 18,907 Retained earnings 256,489 236,572 Foreign currency translation adjustment 11,319 7,532 Unearned compensation - restricted stock (3,478) (2,447) - ------------------------------------------------------------------------------------ Total stockholders' equity 299,414 274,805 - ------------------------------------------------------------------------------------ Total liabilities and stockholders' equity $828,929 $742,617 - ------------------------------------------------------------------------------------
See accompanying Notes to Consolidated Financial Statements. 34 1995 H.B. Fuller Company Annual Report Consolidated Statements of Stockholders' Equity H.B. Fuller Company and Subsidiaries (Dollars in thousands, except share amounts)
YEARS ENDED NOVEMBER 30, 1995, 1994 AND 1993 Unearned Foreign Compen- Additional Currency sation Preferred Common Paid-in Retained Translation Restricted Stock Stock Capital Earnings Adjustment Stock - ------------------------------------------------------------------------------------------------------------------ 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) Stock options exercised -- 33 444 -- -- -- Restricted stock issued, net -- 39 1,328 -- -- (1,346) Amortization of unearned compensation -- -- -- -- -- 315 Tax benefit from exercise of stock options -- -- 92 -- -- -- Net earnings -- 1995 -- -- -- 28,663 -- -- Dividends paid: Preferred: $0.33 per share -- -- -- (15) -- -- Common: $0.625 per share -- -- -- (8,731) -- -- Change in foreign currency translation -- -- -- -- 3,787 -- - ------------------------------------------------------------------------------------------------------------------ Balances at November 30, 1995 $306 $14,007 $20,771 $256,489 $11,319 $(3,478) - ------------------------------------------------------------------------------------------------------------------
See accompanying Notes to Consolidated Financial Statements. RETURN ON AVERAGE EQUITY 1995* 10.9% 1994 11.5% 1993* 8.4% 1992 15.0% 1991 13.3% 1990 11.0% 1989 8.6% 1988 12.4% 1987 17.4% 1986 15.2% * Excludes cumulative effect of change in accounting principles. 35 1995 H.B. Fuller Company Annual Report WORKING CAPITAL (In millions) 1995 $142.056 1994 $129.665 1993 $119.905 1992 $130.817 1991 $108.779 1990 $96.097 1989 $95.645 1988 $104.071 1987 $86.598 1986 $74.232 Consolidated Statements of Cash Flows H.B. Fuller Company and Subsidiaries (Dollars in thousands)
YEAR ENDED NOVEMBER 30 1995 1994 1993 - ------------------------------------------------------------------------------------------------ Cash flows from operating activities: Net earnings $ 28,663 $ 30,863 $ 9,984 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 41,203 33,379 29,700 Pension costs 10,817 10,453 8,082 Accounting changes 2,532 -- 11,717 Other items 3,527 338 3,350 Change in current assets and liabilities (net of effect of acquisitions): (Increase) in accounts receivable (6,617) (18,206) (11,757) (Increase) in inventory (2,344) (15,172) (10,043) (Increase) in other current assets (1,672) (1,985) (434) Increase in accounts payable 8,646 7,010 6,296 (Decrease) increase in accrued expense (3,960) 4,564 (341) (Decrease) increase in income taxes payable (1,982) (455) 349 - ------------------------------------------------------------------------------------------------ Net cash provided by operating activities 78,813 50,789 46,903 Cash flows from investing activities: Purchased property, plant and equipment (90,664) (65,018) (41,842) Investment in affiliated companies -- 663 278 Purchased businesses, net of cash acquired (2,664) (76,327) (11,547) - ------------------------------------------------------------------------------------------------ Net cash used in investing activities (93,328) (140,682) (53,111) Cash flows from financing activities: Increase in long-term debt 79,954 74,976 9,174 Payments of long-term debt (46,421) (4,204) (1,734) (Decrease) increase in notes payable (maturities -- 90 days or less) (584) 23,410 2,413 Repurchase common stock -- (1,508) (1,502) Dividends paid (8,746) (8,021) (7,514) Fund postretirement benefits (6,682) -- (5,990) Other (4,047) (2,835) 833 - ------------------------------------------------------------------------------------------------ Net cash provided (used) by financing activities 13,474 81,818 (4,320) Effect of exchange rate changes 272 528 (1,165) - ------------------------------------------------------------------------------------------------ Net change in cash (769) (7,547) (11,693) Cash at beginning of year 9,830 17,377 29,070 - ------------------------------------------------------------------------------------------------ Cash at end of year $ 9,061 $ 9,830 $ 17,377 - ------------------------------------------------------------------------------------------------ Supplemental disclosure of cash flow information: Cash paid for interest $ 18,506 $ 12,628 $ 11,389 Cash paid for income taxes $ 30,083 $ 26,291 $ 22,702 Noncash investing and financing activities: Assets acquired by incurring notes payable $ 750 $ 8,008 --
See accompanying Notes to Consolidated Financial Statements. 36 1995 H.B. Fuller Company Annual Report Notes to Consolidated Financial Statements H.B. Fuller Company and Subsidiaries (In thousands, except share amounts) 1/ Summary of Significant Accounting Policies The following information is presented to explain the accounting policies used to prepare H.B. Fuller Company's Consolidated Financial Statements. Principles of Consolidation: The Consolidated Financial Statements include the accounts of the Company and all subsidiaries. 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:
1995 1994 1993 - --------------------------------------------------------------- Currency translation gains, net $ 638 $ 4,450 $ 3,937 Flow-through effect of inventory valuation, net (1,233) (3,729) (3,896) - --------------------------------------------------------------- (595) 721 41 Currency exchange (losses), net (2,199) (7,629) (7,590) - --------------------------------------------------------------- Total $(2,794) $(6,908) $(7,549) - ---------------------------------------------------------------
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:
1995 1994 - ------------------------------------------------------------------------------- Raw materials $ 78,180 $ 78,007 Finished goods 92,629 85,032 LIFO reserve (11,785) (10,388) - ------------------------------------------------------------------------------- Total $ 159,024 $ 152,651 - ------------------------------------------------------------------------------- Property, Plant and Equipment: The major classes are: 1995 1994 - ------------------------------------------------------------------------------- Land $ 52,161 $ 48,795 Buildings and improvements 171,439 144,307 Machinery and equipment 318,437 275,296 Construction in progress 66,224 45,495 - ------------------------------------------------------------------------------- Total, at cost 608,261 513,893 Accumulated depreciation (253,138) (218,803) - ------------------------------------------------------------------------------- Net property, plant and equipment $ 355,123 $ 295,090 - -------------------------------------------------------------------------------
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 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 CAPITAL EXPENDITURES, GROSS (In millions) 1995 $90.664 1994 $65.018 1993 $41.842 1992 $34.461 1991 $29.955 1990 $31.468 1989 $40.925 1988 $40.187 1987 $29.617 1986 $12.909 37 1995 H.B. Fuller Company Annual Report RETURN ON INVESTED CAPITAL (a) 1995* 8.5% 1994 9.4% 1993* 8.0% 1992 13.3% 1991 11.6% 1990 9.6% 1989 7.7% 1988 10.4% 1987 14.8% 1986 12.7% (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. 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:
1995 1994 1993 - ---------------------------------------------------------------------- Interest costs incurred $20,766 $12,926 $11,383 Capitalized interest costs (2,634) (1,179) (924) - ---------------------------------------------------------------------- Interest expense $18,132 $11,747 $10,459 - ----------------------------------------------------------------------
Non-U.S. Operations: Net earnings and equity of non-U.S. operations for the years ended November 30 are:
1995 1994 1993 - ---------------------------------------------------------------------- Net earnings $ 3,613 $ 7,161 $ 5,124 Equity $133,896 $128,220 $122,124 - ----------------------------------------------------------------------
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. 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/debt. Market value gains and losses are recognized, and the resulting credit or debit offsets foreign exchange gains or losses on those receivables/payables/debt. The carrying amounts and estimated fair values of the Company's significant other financial instruments at November 30 are as follows:
Carrying Fair Amount Value - -------------------------------------------------------------- 1995: Cash and short-term investments $9,061 $9,061 Notes payable $53,749 $53,749 Long-term debt $172,181 $184,944 1994: Cash and short-term investments $9,830 $9,830 Notes payable $53,125 $53,125 Long-term debt $136,439 $138,215
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 1995 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 basis 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. 38 1995 H.B. Fuller Company Annual Report 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. Postemployment Benefits: The Company provides postemployment benefits to inactive and former employees, employee's beneficiaries and covered dependents after employment, but prior to retirement. The cost of providing these benefits was previously recognized as a charge to income in the year the benefits were provided. In November of 1992, FASB issued SFAS No. 112 requiring accrual accounting for these costs during the years the employee renders the necessary service. The Company adopted this Standard in Fiscal Year 1995, the required effective date. The cumulative effect of adopting this Standard as of December 1, 1994 resulted in a charge of $2,532 ($0.18 per share) to 1995 earnings, net of $793 of income taxes. Earnings Per Common Share: Earnings per common share are determined by dividing earnings by the weighted-average number of common shares, including common share equivalents, outstanding during each year. Earnings used in the calculation are reduced by the dividends paid to the preferred stockholder. Purchase of Company Common Stock: The Minnesota Business Corporation Act and the Company's Articles of Incorporation require that repurchased stock is included in the authorized shares of the Company, but is not included in shares outstanding. The excess of cost over par value is charged proportionally to Additional Paid-In Capital and to Retained Earnings. 2/ Other Income (Expense), Net Other income (expense), net in 1995 included a $1,196 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 1995 the Company purchased certain assets of a business for $2,664. In 1994 the Company purchased three businesses and certain assets of another business for $76,327 in cash. 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 $26,541, $23,624 and $21,826 in 1995, 1994 and 1993, 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 operating 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 1995 earnings reflected approximately $1,000 savings. The restructuring was completed in Fiscal 1995 at a cost slightly in excess of the original restructuring reserve. The restructuring reserve balance as of November 30, 1995 was zero. RESEARCH AND DEVELOPMENT EXPENSES (In millions) 1995 $26.541 1994 $23.624 1993 $21.826 1992 $20.377 1991 $17.200 1990 $16.091 1989 $15.505 1988 $14.411 1987 $12.269 1986 $10.606 39 1995 H.B. Fuller Company Annual Report 6/ Income Taxes Earnings before income taxes, minority interests and cumulative effect of accounting changes for the years ended November 30 are as follows:
1995 1994 1993 - ----------------------------------------------------------------- United States (U.S.) $40,468 $36,525 $33,987 Outside U.S. 9,962 14,493 6,866 - ----------------------------------------------------------------- Total $50,430 $51,018 $40,853 - -----------------------------------------------------------------
The components of the provision for income taxes excluding cumulative effect of accounting changes are:
1995 1994 1993 - ----------------------------------------------------------------- Current: U.S. federal $13,020 $13,379 $12,192 State 1,750 1,842 1,753 Outside U.S. 10,845 7,024 5,575 - ----------------------------------------------------------------- 25,615 22,245 19,520 - ----------------------------------------------------------------- Deferred: U.S. federal 724 (1,746) (2,102) State 83 (199) (225) Outside U.S. (7,274) (518) 1,998 - ----------------------------------------------------------------- (6,467) (2,463) (329) - ----------------------------------------------------------------- Total $19,148 $19,782 $19,191 - -----------------------------------------------------------------
The difference between the statutory U.S. federal income tax rate and the Company's effective income tax rate is explained below:
1995 1994 1993 - ------------------------------------------------------------------ Statutory U.S. federal income tax rate 35.0% 35.0% 34.9% State income taxes 2.3 2.0 2.4 U.S. federal income taxes on dividends received from non-U.S. subsidiaries, before foreign tax credits 7.3 1.0 3.3 Foreign tax credits (4.8) (0.7) (4.8) Non-U.S. taxes (2.3) 1.5 10.1 Other 0.5 -- 1.1 - ------------------------------------------------------------------ Total 38.0% 38.8% 47.0% - ------------------------------------------------------------------
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. Deferred income tax balances at November 30 were:
1995 1994 - --------------------------------------------------------------------- Deferred tax assets $ 57,378 $ 45,067 Valuation allowance (5,229) (7,634) - --------------------------------------------------------------------- Deferred tax assets net of valuation allowance 52,149 37,433 Deferred tax liabilities (40,495) (32,643) - --------------------------------------------------------------------- Net deferred tax assets $ 11,654 $ 4,790 - ---------------------------------------------------------------------
Deferred income tax balances at November 30 were related to:
1995 1994 - --------------------------------------------------------------------- Depreciation $(23,825) $(21,949) Pension 14,845 11,031 Deferred compensation 4,786 3,365 Postretirement medical benefits 4,588 4,803 Postemployment benefits 793 -- Tax loss carryforwards 12,267 8,118 Inventory 1,022 557 Restructuring reserve -- 1,496 Provisions for expenses 1,752 5,358 Difference between assigned value and tax basis of acquisition (1,656) (1,424) Currency gains/losses 1,510 1,087 Other 801 (18) - --------------------------------------------------------------------- 16,883 12,424 Valuation allowance (5,229) (7,634) - --------------------------------------------------------------------- Net deferred tax assets $ 11,654 $ 4,790 - ---------------------------------------------------------------------
U.S. income taxes have not been provided on approximately $70,084 of undistributed earnings of non-U.S. subsidiaries. The Company plans to reinvest these undistributed earnings. If any portion were to be distributed, the related U.S. tax liability would be reduced by foreign income taxes paid on those earnings plus any available foreign tax credit carryforwards. Determination of the unrecognized deferred tax liability related to these undistributed earnings is not practicable. While non-U.S. operations of the Company have been profitable overall, cumulative losses of $28,999 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 $10,063 can be carried forward indefinitely, while the remaining $18,936 must be used during the 1996- 2002 period. 40 1995 H.B. Fuller Company Annual Report 7/ Notes Payable The primary component of notes payable relates to the Company's short-term lines of credit with banks totaling $51,176. The amount of unused available borrowings under these lines at November 30, 1995 was $133,286. The weighted average interest rate on short-term borrowings was 9.1% and 11.1% in 1995 and 1994, respectively. 8/ Long-Term Debt Long-term debt, including obligations under capital leases, is summarized as follows:
1995 1994 - -------------------------------------------------------------------------------------------------- Revolving credit agreements (a) $ 33,217 $ 64,800 10.1% Senior Note, due 12/19/95 10,000 10,000 10.32% Senior Note, due 12/19/98 25,000 25,000 8.49% Senior Note Series A, due 12/19/01 26,000 -- 8.54% Senior Note Series B, due 3/31/02 5,000 -- 8.58% Senior Note Series C, due 2/3/05 22,000 -- 8.73% Senior Note Series D, due 4/28/10 12,000 -- Industrial and commercial development bonds: TENR plus 1/4 of 1%, secured by a letter of credit, due 12/1/04 4,100 4,100 7.75%, due 11/1/16 3,000 3,000 7.06%--7.9% other notes, due at various dates through 1998 5,056 3,336 8.23%--10.5% New Zealand dollar notes, due 4/99 7,112 2,569 8.17%--8.5% Australian dollar notes, due 1/96 747 3,718 10.94% Italian lira notes, due 11/01 2,648 2,735 33% lempira note, payments due through 2000 678 623 32% colones note, payments due through 1997 806 -- 26% Dominican peso note, payments due through 1997 594 -- 2%--4.2% yen notes, due at various dates through 2015 5,152 7,551 5%--36% other notes less than $500 each, due at various dates through 2002 5,564 5,464 Obligations under capital leases 3,507 3,543 - -------------------------------------------------------------------------------------------------- 172,181 136,439 Current installments (5,722) (6,430) - -------------------------------------------------------------------------------------------------- Total $166,459 $130,009 - --------------------------------------------------------------------------------------------------
(a) The Company has revolving credit agreements with a group of major banks which provide committed lines of credit of $160,000 through August 31, 2002. At the Company's option, interest is payable at floating rates based on the prime interest rate, the London Interbank Offered Rate plus 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 $80,000 and at 1/8% per annum on the second $80,000. 41 1995 H.B. Fuller Company Annual Report 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, 1995 the Company exceeded minimum requirements for all financial covenants. At November 30, 1995, $1,110 of long-term debt (excluding obligations under capital leases) was collateralized by real property and equipment with a net book value of approximately $2,884. Aggregate maturities of long-term debt, including obligations under capital leases, amount to $5,722, $8,847, $2,981, $33,885 and $1,073 during the five fiscal years 1996 through 2000. 9/ Lease Commitments Assets under capital leases are summarized as follows:
1995 1994 - --------------------------------------------------------- Land $ 6,348 $ 5,819 Buildings and improvements 10,463 8,288 Machinery and equipment 262 341 - --------------------------------------------------------- 17,073 14,448 Accumulated amortization (4,225) (2,362) - --------------------------------------------------------- Net assets under capital leases $12,848 $12,086 - ---------------------------------------------------------
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, 1995:
Capital Operating - --------------------------------------------------- Fiscal year: 1996 $ 715 $ 8,360 1997 659 7,067 1998 608 5,597 1999 589 3,920 2000 570 3,205 Later years 1,180 4,820 - --------------------------------------------------- Total minimum lease payments $4,321 $32,969 ------- Amount representing interest (814) - ---------------------------------------- Present value of minimum lease payments $3,507 - ----------------------------------------
Rental expense for all operating leases charged against earnings amounted to $14,051, $11,853 and $10,030 in 1995, 1994 and 1993, respectively. 10/ Contingencies Legal: The Company and its subsidiaries are parties to various lawsuits and governmental proceedings. For further information on certain legal proceedings, see Item 3 of the 1995 10-K. In particular, the Company is currently deemed a potentially responsible party (PRP) or defendant, generally in conjunction with numerous other parties, in a number of government enforcement and private actions associated with hazardous waste sites. As a PRP or defendant, the Company may be required to pay a share of the costs of investigation and cleanup of these sites. In some cases the Company may have rights of indemnification from other parties. The Company's liability in the future for such claims is difficult to predict because of the uncertainty as to the cost of the investigation and cleanup of the sites, the Company's responsibility for such hazardous waste and the number or financial condition of other PRPs or defendants. As is the case with other types of litigation and proceedings to which the Company is a party, based upon currently available information, it is the Company's opinion that none of these matters will result in material liability to the Company. Off Balance Sheet Financing: At November 30, 1995, the aggregate contract value of instruments used to buy U.S. dollars in exchange for foreign currency (primarily 8,752 Dutch guilders and 2,575 Canadian dollars) was $6,548. The aggregate contract value of instruments used to sell pound sterling in exchange for Dutch guilders was approximately $5,389. The contracts mature between January 22, 1996 and November 20, 2000. 11/ Retirement Plans The Company has a noncontributory defined benefit plan covering all U.S. employees. Benefits for the plan are based primarily on years of service and employees' average compensation during their final five consecutive years of service. The Company's funding policy is consistent with the funding requirements of federal law and regulations. Plan assets consist principally of listed equity securities and an Immediate Participation Guarantee contract with an insurance company. Certain non-U.S. consolidated subsidiaries provide pension benefits for their employees consistent with local practices and regulations. Most of these plans are noncontributory, unfunded, defined benefit plans covering substantially all employees upon completion of a specified period of service. Benefits for the plans are generally based on years of service and annual compensation. The plans are mostly unfunded book reserved plans. Related pension obligations are provided through accrued pension costs. 42 1995 H.B. Fuller Company Annual Report Pension cost consists of the following:
U.S. Plan Non-U.S. Plans ------------------------------------- ------------------------------------- 1995 1994 1993 1995 1994 1993 - ----------------------------------------------------------------------------------------- ------------------------------------- Service cost-benefits earned during the period $4,190 $4,755 $3,755 $2,052 $1,961 $1,909 Interest cost on projected benefit obligation 9,287 8,413 7,219 3,778 3,306 3,101 Return on plan assets -- actual (33,954) (1,055) (9,228) (406) (317) (413) -- deferred 24,668 (7,551) 1,478 93 29 131 Amortization of transition (asset) liability (27) (27) (27) 94 80 81 All other cost components 409 768 404 85 104 125 - ----------------------------------------------------------------------------------------- ------------------------------------- Net pension cost $4,573 $5,303 $3,601 $5,696 $5,163 $4,934 - ----------------------------------------------------------------------------------------- -------------------------------------
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 --------------------- ---------------------- ---------------------- 1995 1994 1995 1994 1995 1994 - ------------------------------------------------------------------------------------ ---------------------- ---------------------- Actuarial present value of benefit obligations: -- vested benefits $(99,677) $(70,258) $(3,152) $(2,784) $(42,573) $(36,320) -- non-vested benefits (4,403) (3,279) (15) (13) (567) (466) - ------------------------------------------------------------------------------------ ---------------------- ---------------------- Accumulated benefit obligation (ABO) (104,080) (73,537) (3,167) (2,797) (43,140) (36,786) Effect of projected future compensation increases (36,267) (32,073) (422) (372) (8,859) (7,859) - ------------------------------------------------------------------------------------ ---------------------- ---------------------- Projected benefit obligation (140,347) (105,610) (3,589) (3,169) (51,999) (44,645) Plan assets at fair value 132,977 101,004 4,422 3,773 -- -- - ------------------------------------------------------------------------------------ ---------------------- ---------------------- Plan assets in excess of (less than) projected benefit obligation (7,370) (4,606) 833 604 (51,999) (44,645) Unrecognized prior service cost 6,770 7,835 128 410 307 467 Unrecognized transition (asset) liability (233) (261) (140) (162) 1,847 1,802 Unrecognized net (gain) loss (28,269) (25,858) 320 155 (2,517) (97) - ------------------------------------------------------------------------------------ ---------------------- ---------------------- (Accrued) prepaid pension costs $(29,102) $(22,890) $1,141 $1,007 $(52,362) $(42,473) - ------------------------------------------------------------------------------------ ---------------------- ----------------------
Assumptions used:
U.S. Plan Non-U.S. Plans ------------------------------- ----------------------------------- 1995 1994 1993 1995 1994 1993 - ------------------------------------------------------------------------------------- ----------------------------------- Weighted average discount rate 7.25%(1) 8.75%(1) 7.5%(1) 7.0-8.0% 7.0-8.0% 7.0-7.5% 8.75%(2) 7.5%(2) 8.5%(2) Rate of increase in compensation levels 4.5%(1) 5.5%(1) 5.0%(1) 5.0-6.0% 5.0-6.0% 4.5-6.0% 5.5%(2) 5.0%(2) 5.5%(2) Expected long-term rate of return on plan assets 10.0% 10.0% 10.0% 8.0% 8.0% 9.0% - ------------------------------------------------------------------------------------- -----------------------------------
(1) November 30, 1995, 1994 and 1993 assumptions used for funded status of U.S. plan. (2) December 1, 1994, 1993 and 1992 assumptions used for U.S. plan pension cost. The impact of a one percent increase in the discount rate is an approximate $1,400 decrease in annual pension cost. The charge to earnings relating to all plans was $12,627, $11,983 and $10,440 in 1995, 1994 and 1993, respectively. 43 1995 H.B. Fuller Company Annual Report 12/ Other Postretirement Benefits The Company and certain of its consolidated subsidiaries provides health care and life insurance benefits for eligible retired employees and their eligible dependents. These benefits are provided through various insurance companies and health care providers. The obligation for these benefits was determined by application of the terms of health and life insurance plans, together with relevant actuarial assumptions and health-care cost trend rates, as of December 1, 1994, projected at annual rates ranging from 10.0 percent in 1995 graded down to 4.9 percent for the year 2002 and after. The benefit obligation discount rate at that time was 8.75 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, 1995, by $3,491 and the aggregate of service and interest cost components of net periodic postretirement benefit costs by $741. The funded status of the plan was determined based on actuarial assumptions and health-care trend rates, as of November 30, 1995, projected at annual rates ranging from 9.1 percent in 1995 graded down to 4.9 percent for the year 2002 and after. The benefit obligation discount rate at that time was 7.25 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 8.5 percent. The funded status of the plan at November 30, is as follows:
1995 1994 - -------------------------------------------------------------------------------- Actuarial present value of postretirement benefit obligation: Current $(13,022) $(7,436) Active employees fully eligible for benefits (10,236) (7,050) Other active employees (15,295) (8,941) - -------------------------------------------------------------------------------- Accumulated postretirement benefit obligation (38,553) (23,427) Fair value of plan assets 22,991 11,925 Unrecognized net (gain) loss 7,633 (115) - -------------------------------------------------------------------------------- (Accrued) unfunded postretirement benefit obligation $ (7,929) $(11,617) - -------------------------------------------------------------------------------- Benefit obligation discount rate 7.25% 8.75%
The components of net periodic postretirement benefit cost are as follows:
1995 1994 1993 - ------------------------------------------------------------------------------- Service cost-benefits earned during the period $1,820 $1,696 $1,473 Interest cost on projected benefit obligation 2,623 1,951 1,730 Return on assets -- actual (5,265) (71) 120 -- deferred 3,889 (942) (752) All other components 182 17 -- - ------------------------------------------------------------------------------- Net periodic postretirement benefit cost $3,249 $2,651 $2,571 - -------------------------------------------------------------------------------
13/ 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, 1995 and 1994. 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 14,006,719 and 13,934,608 shares issued at November 30, 1995 and 1994, 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 is designated by the Company's Board, pursuant to the terms of the plan, as potentially adverse (an "adverse person"). Rights held by an acquiring person or an adverse person are void. Elmer L. Andersen and Anthony L. Andersen and certain family members are 44 1995 H.B. Fuller Company Annual Report 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' Stock Plan: The Directors' Stock Plan reserves 75,000 shares of common stock for allocation as payment of retainer fees. Directors, who are not employees, can choose to receive all or a portion of payment of their retainer and meeting fees in shares of Company common stock when they leave the Board rather than cash payments each year. At November 30, 1995, 49,169 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 39,800, 37,346 and 36,075 restricted shares of the Company's common stock were granted to certain employees in 1995, 1994 and 1993, respectively. The market value of shares awarded $1,403, $1,419 and $1,263 has been recorded as unearned compensation -- restricted stock in 1995, 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 $315, $180 and $42 in 1995, 1994 and 1993, respectively. A total of 29,650, 34,400 and 33,325 restricted share units of the Company's common stock were allocated to certain employees in 1995, 1994 and 1993, respectively. The market value of units allocated of $1,045, $1,307 and $1,166 in 1995, 1994 and 1993, respectively, is being charged to expense over the ten- year vesting period. At November 30, 1995, 698,854 shares remained available for future grants or allocations. Other Stock Option Plans: Options outstanding at November 30, 1995 are 223,412 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, 1995, no shares remained available for grants under these plans. Information on stock options is shown in the following table:
Option Shares - -------------------------------------------------------------------------- Outstanding Exercisable Price Range - -------------------------------------------------------------------------- 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 Exercised (33,321) (33,321) 14.33 Cancelled (3,300) (3,300) 14.33 - -------------------------------------------------------------------------- Balances at November 30, 1995 230,162 230,162 $14.33--16.33 - --------------------------------------------------------------------------
45 1995 H.B. Fuller Company Annual Report TRADE SALES BY CLASS OF PRODUCT 87% Adhesives, Sealants and Coatings 7% Paints 3% Sanitation Chemicals 3% Other 14/ Business Segment Information The Company is a manufacturer of specialty chemical products, which includes the formulation, compounding and marketing of adhesives, sealants, coatings, paints, 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 has 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: 1995 1994 1993 - ------------------------------------------------------------------------ North America $692,099 $637,632 $551,219 Europe 284,049 231,594 214,498 Latin America 182,009 158,616 153,694 Asia/Pacific 85,661 69,525 55,876 - ------------------------------------------------------------------------ Total trade sales $1,243,818 $1,097,367 $975,287 - ------------------------------------------------------------------------ Intercompany sales: 1995 1994 1993 - ------------------------------------------------------------------------ North America $16,014 $14,341 $12,905 Europe 1,448 1,468 1,132 Latin America 7,270 7,570 5,316 Asia/Pacific 163 1 -- Eliminations (24,895) (23,380) (19,353) - ------------------------------------------------------------------------ Total intercompany sales -- -- -- - ------------------------------------------------------------------------
Net sales: 1995 1994 1993 - ------------------------------------------------------------------------ North America $708,113 $651,973 $564,124 Europe 285,497 233,062 215,630 Latin America 189,279 166,186 159,010 Asia/Pacific 85,824 69,526 55,876 Eliminations (24,895) (23,380) (19,353) - ------------------------------------------------------------------------ Total net sales $1,243,818 $1,097,367 $975,287 - ------------------------------------------------------------------------ Earnings: 1995 1994 1993 - ------------------------------------------------------------------------ North America $41,908 $37,587 $29,063 Europe 12,567 10,464 11,187 Latin America 16,516 17,631 12,504 Asia/Pacific (1,226) 271 716 - ------------------------------------------------------------------------ Operating earnings 69,765 65,953 53,470 Interest expense (18,132) (11,747) (10,459) Other (expense)income (1,203) (3,188) (2,158) - ------------------------------------------------------------------------ Earnings before income taxes, minority interest and accounting changes $50,430 $51,018 $40,853 - ------------------------------------------------------------------------ Identifiable assets: 1995 1994 1993 - ------------------------------------------------------------------------ North America $460,895 $440,025 $320,883 Europe 191,194 155,290 128,551 Latin America 139,005 123,139 111,132 Asia/Pacific 70,985 64,679 39,256 Eliminations (37,296) (41,736) (44,191) General corporate assets 4,146 1,220 8,890 - ------------------------------------------------------------------------ Total assets $828,929 $742,617 $564,521 - ------------------------------------------------------------------------
Certain prior years' amounts have been reclassified to conform to the 1995 presentation. 46 1995 H.B. Fuller Company Annual Report
15/Quarterly Data (unaudited) 1995 1994 ------------------------------------------------- ----------------------------------------------- 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr.* 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr. - ------------------------------------------------------------------------------ ----------------------------------------------- Net sales $295,649 $322,434 $312,590 $313,145 $242,499 $272,377 $286,791 $295,700 Gross profit 93,379 103,768 99,329 96,051 76,971 90,191 92,302 94,060 Operating earnings 15,094 21,980 19,629 13,062 10,129 20,066 18,796 16,962 Earnings before cumulative effect of accounting changes 6,033 10,069 8,762 6,331 4,036 9,301 8,930 8,596 Cumulative effect of accounting changes (2,532) -- -- -- -- -- -- -- - ------------------------------------------------------------------------------ ----------------------------------------------- Net earnings $ 3,501 $ 10,069 $ 8,762 $ 6,331 $ 4,036 $ 9,301 $ 8,930 $ 8,596 - ------------------------------------------------------------------------------ ----------------------------------------------- Earnings (loss) per common share: Earnings before cumulative effect of accounting changes $ 0.43 $ 0.72 $ 0.62 $ 0.45 $ 0.29 $ 0.66 $ 0.64 $ 0.61 Cumulative effect of accounting changes (0.18) -- -- -- -- -- -- -- - ------------------------------------------------------------------------------ ----------------------------------------------- Net earnings $ 0.25 $ 0.72 $ 0.62 $ 0.45 $ 0.29 $ 0.66 $ 0.64 $ 0.61 - ------------------------------------------------------------------------------ -----------------------------------------------
*Effective tax rate for fourth quarter was 29.3% versus 39.8% in the third quarter due to the geographical mix of earnings and the impact of determining the valuation reserve on deferred tax assets. The fourth quarter effective tax rate for 1994 was 33.5%. 47 1995 H.B. Fuller Company Annual Report 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 Senior Vice President, Chief Financial Officer and Treasurer /s/ Walter Kissling Walter Kissling President and Chief Executive Officer 48 1995 H.B. Fuller Company Annual Report 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, 1995 and 1994, and the results of their operations and their cash flows for each of the three years in the period ended November 30, 1995, 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 1 and 6 to the consolidated financial statements, the Company adopted the provisions of Statement of Financial Accounting Standards (SFAS) No. 112, "Employers' Accounting for Postemployment Benefits" in 1995 and the provisions of SFAS No. 109, "Accounting for Income Taxes" and No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" in 1993. /s/ Price Waterhouse LLP Price Waterhouse LLP Minneapolis, Minnesota January 9, 1996 49
1995 H.B. Fuller Company Annual Report 1969-1995 In Review and Selected Financial Data H.B. Fuller Company and Subsidiaries Annual Growth Rate 1-yr 5-yr 10-yr 1994- 1990- 1985- (Dollars in thousands, 1995 1995 1995 except per share amounts) 1995 1994 1993 1992 1991 1990 1989 1988 - ---------------------------------------------------------------------------------------------------------------------------------- Income Statement Data: 13.3% 9.4% 10.5% Net sales $1,243,818 1,097,367 975,287 942,438 861,024 792,230 753,374 684,034 5.8 6.1 8.5 Operating earnings $ 69,765 65,953 53,470 71,406 59,846 51,911 46,009 46,430 Earnings from 1.1 8.1 8.9 continuing operations $ 31,195 30,863 21,701 35,622 27,687 21,145 15,671 21,081 (7.1) 6.3 6.8 Net earnings $ 28,663 30,863 9,984 35,622 27,687 21,145 15,671 21,081 24.7 11.5 14.2 Depreciation $ 35,134 28,177 24,934 24,865 21,787 20,376 16,571 14,469 54.4 5.3 9.0 Interest expense $ 18,132 11,747 10,459 12,537 14,788 14,028 13,237 8,477 (3.2) 4.7 7.2 Income taxes $ 19,148 19,782 19,191 24,716 19,173 15,234 13,936 14,361 Balance Sheet Data: 11.6% 11.1% 12.6% Total assets $ 828,929 742,617 564,521 561,204 508,911 489,634 455,172 434,293 9.6 8.1 7.4 Working capital $ 142,056 129,665 119,905 130,817 108,779 96,097 95,645 104,071 Current ratio 1.6 1.6 1.7 1.8 1.7 1.7 1.8 1.9 Net property, 20.3 11.9 13.8 plant and equipment $ 355,123 295,090 232,547 223,153 207,378 202,341 186,631 161,605 Long-term debt, excluding 28.0 13.5 14.2 current installments $ 166,459 130,009 60,261 53,457 71,814 88,240 100,974 98,473 9.0 8.7 10.2 Stockholders' equity $ 299,414 274,805 249,396 255,040 219,050 197,191 186,515 178,871 Stockholder Data: Earnings from continuing operations: 0.9% 7.7% 8.7% Per common share $ 2.22 2.20 1.55 2.55 2.00 1.53 1.09 1.46 Percent of net sales 2.5 2.8 2.2 3.8 3.2 2.7 2.1 3.1 Net earnings: (7.3) 5.9 6.7 Per common share $ 2.04 2.20 0.71 2.55 2.00 1.53 1.09 1.46 Percent of net sales 2.3 2.8 1.0 3.8 3.2 2.7 2.1 3.1 Dividends paid: 8.7 9.3 11.5 Per common share $ 0.625 0.575 0.54 0.46 0.41 0.40 0.38 0.35 Stockholders' equity: 8.4 8.0 10.1 Per common share $ 21.35 19.70 17.92 18.43 15.96 14.56 13.27 12.56 Return on average stockholders' equity 10.0 11.5 4.0 15.0 13.3 11.0 8.6 12.4 Common stock price: (5.9) 15.7 13.5 High $ 39.75 42.25 42.75 53.25 38.33 19.17 22.83 25.83 (4.3) 15.1 13.0 Low $ 27.75 29.00 31.25 32.58 18.83 13.75 13.83 16.00 Average common shares outstanding 0.2 0.4 0.1 (in thousands) 14,059 14,036 14,018 13,989 13,854 13,798 14,358 14,387 - 2.7 3.8 Number of employees 6,400 6,400 6,000 5,800 5,600 5,600 5,500 5,200
50
1995 H.B. Fuller Company Annual Report 1987 1986 1985 1984 1983 1982 1981 1980 1979 1978 1977 1976 1975 1974 - ------------------------------------------------------------------------------------------------------------------------------- 597,061 528,483 457,937 447,984 414,210 321,502 318,793 288,653 251,558 219,962 192,848 167,892 129,426 121,839 47,748 39,483 30,733 32,179 32,452 24,940 30,531 23,958 20,739 18,681 15,504 13,571 9,060 12,745 25,812 18,922 13,335 13,033 13,624 9,188 13,327 8,538 7,433 7,122 6,181 5,382 3,785 5,323 25,812 18,922 14,909 11,895 13,832 9,493 13,587 8,921 7,527 7,122 6,181 5,382 3,785 5,323 13,197 10,566 9,318 7,898 6,786 5,014 4,592 4,507 3,986 3,319 2,897 2,383 2,000 1,705 5,479 6,208 7,627 8,894 6,546 5,482 5,106 6,012 4,106 3,161 2,524 2,369 1,900 2,098 16,320 14,107 9,525 9,944 10,108 8,151 12,069 7,954 7,807 7,355 6,584 5,322 3,290 5,023 329,636 291,180 253,571 236,489 225,154 206,752 157,417 146,674 139,190 116,222 100,847 90,670 78,643 70,830 86,598 74,232 69,477 68,072 59,848 48,969 42,370 41,229 32,696 32,575 32,135 29,194 28,410 20,244 1.9 1.9 2.0 2.1 2.0 1.8 1.9 1.9 1.7 1.9 2.1 2.1 2.5 1.9 126,905 108,989 97,173 87,357 80,427 73,077 46,938 47,245 42,193 35,478 30,154 28,110 24,446 20,739 33,015 37,211 44,207 51,381 51,755 44,083 23,072 26,049 23,375 22,235 20,977 21,247 21,368 12,537 161,355 135,479 113,417 99,908 92,212 81,645 75,842 64,951 57,867 50,698 45,016 40,075 35,666 32,787 1.79 1.33 0.96 0.93 0.98 0.67 0.97 0.63 0.55 0.53 0.46 0.40 0.28 0.40 4.3 3.6 2.9 2.9 3.3 2.9 4.2 3.0 3.0 3.2 3.2 3.2 2.9 4.4 1.79 1.33 1.07 0.86 0.99 0.69 0.99 0.66 0.56 0.53 0.46 0.40 0.28 0.40 4.3 3.6 3.3 2.7 3.3 3.0 4.3 3.1 3.0 3.2 3.2 3.2 2.9 4.4 0.27 0.23 0.21 0.20 0.18 0.17 0.15 0.13 0.12 0.11 0.09 0.07 0.07 0.06 11.35 9.62 8.19 7.23 6.67 5.90 5.48 4.83 4.31 3.74 3.35 2.97 2.65 2.43 17.4 15.2 14.0 12.4 15.9 12.1 19.3 14.5 13.7 15.0 14.5 14.2 11.1 17.4 32.33 20.67 11.25 13.63 13.25 8.50 8.71 4.46 4.29 4.75 3.54 3.04 2.29 1.87 16.17 10.25 8.17 7.83 7.63 4.75 3.92 2.92 3.25 2.79 2.46 1.75 1.00 1.04 14,379 14,196 13,880 13,881 13,908 13,785 13,704 13,479 13,473 13,473 13,362 13,362 13,362 13,362 4,600 4,500 4,400 4,300 4,100 4,000 3,300 3,400 3,400 3,300 3,000 2,800 2,600 2,300 1973 1972 1971 1970 1969 - ---------------------------------------------- 91,572 78,257 60,167 53,024 47,248 8,657 7,394 5,088 5,273 4,726 3,274 3,112 2,247 2,347 2,018 3,274 3,112 2,247 2,347 2,018 1,518 1,464 1,147 851 789 1,370 1,173 687 515 434 3,470 3,080 1,960 2,322 1,978 61,021 51,194 40,210 33,294 27,352 17,087 14,599 12,795 9,542 10,262 2.0 2.1 2.3 2.0 2.5 18,676 16,498 12,578 10,037 7,822 13,108 10,336 6,033 3,194 3,178 28,259 25,603 23,083 17,848 15,543 0.24 0.23 0.18 0.19 0.18 3.6 4.0 3.7 4.4 4.3 0.24 0.23 0.18 0.19 0.18 3.6 4.0 3.7 4.4 4.3 0.05 0.05 0.05 0.04 0.03 2.09 1.91 1.72 1.47 1.29 12.2 12.8 11.0 14.1 15.3 4.33 3.71 4.71 4.00 3.97 1.08 1.33 3.21 2.53 2.55 13,371 13,419 12,390 12,048 11,175 2,100 1,800 1,700 1,600 1,500
51 1995 H.B. Fuller Company Annual Report Investor Information H.B. Fuller Company and Subsidiaries [GRAPHS APPEAR HERE] MARKET PRICE Highs Lows Q1F95 $35.50 $27.75 Q2F95 $39.75 $32.50 Q3F95 $39.25 $32.00 Q4F95 $36.00 $30.00 Q1F94 $40.00 $33.00 Q2F94 $42.25 $34.25 Q3F94 $40.00 $35.75 Q4F94 $37.25 $29.00 DIVIDENDS Q1F95 $0.145 Q2F95 $ 0.16 Q3F95 $ 0.16 Q4F95 $ 0.16 Q1F94 $0.140 Q2F94 $0.145 Q3F94 $0.145 Q4F94 $0.145 *H.B. Fuller Company common stock is traded on the over-the-counter market. NASDAQ symbol: FULL Annual Meeting The annual meeting of shareholders will be held on Thursday, April 18, 1996 at 3:00 p.m. at Ruberto's restaurant and banquet center, 1132 East Country Road E, Vadnais Heights, Minnesota. All shareholders are cordially invited to attend. Available Publications The company's annual report is distributed regularly to stockholders. In addition, other publications are available upon request. They include: . Automatic Dividend Reinvestment Brochure . Community Affairs Annual Report . Corporate Profile . Environmental Brochure . Form 10-K as filed with the Securities Exchange Commission . The Story of H.B. Fuller Company 1887-1987 . Quarterly Earnings Releases Corporate Headquarters H.B. Fuller Company, 2400 Energy Park Drive, St. Paul, Minnesota 55108-1591, (612) 645-3401. 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 77 percent of our shareholders of record currently are participants. 52 1995 H.B. Fuller Company Annual Report Form 10-K Report H.B. Fuller Company's Form 10-K annual report for the year ended November 30, 1995, filed with Securities and Exchange Commission, Washington DC, is available upon request at no charge. Exhibits to the Form 10-K are available at a charge sufficient to cover postage and handling. This material may be obtained by writing to: Corporate Secretary, H.B. Fuller Company, 1200 West County Road E, Arden Hills, Minnesota 55112-3792. 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, 1995. . Cantor, Fitzgerald & Co. . Everen Securities, Inc. . Herzog, Heine, Geduld, Inc. . Lehman Brothers Inc. . Mayer & Schweitzer Inc. . Merrill Lynch, Pierce, Fenner . Sherwood Securities Corp. . Smith Barney, Inc. . Troster Singer Corp. Number of Common Shareholders As of November 30, 1995, there were approximately 5,390 common shareholders of record. Transfer Agent and Registrar Norwest Bank Minnesota, N.A., 161 North Exchange, South St. Paul, Minnesota 55075, 1-800-468-9716 or (612) 450-4064 (in Minnesota). Shareholder Composition November 1995 [CHART APPEARS HERE] 52.3% Domestic Institutions 26.5% Individuals 13.6% Employee Plans 7.0% Directors & Officers 0.6% Foreign Institutions H.B. Fuller Company Now offers Investor Information at the touch of a finger. When you want to receive shareholder material through the mail or if you'd like to be added to our mailing list, call our Shareholder Services Line at 1-800-214-2523. FAX ON DEMAND Call 1-800-758-5804 . Pin #336719 for a fax of the year's earnings releases, as well as faxes on up-to-date information on the company. Coming in May of 1996 H.B. Fuller will be on the Internet. Watch for more details. 53 EX-21 8 SUBSIDIARIES Exhibit 21 ---------- H.B. FULLER COMPANY AND CONSOLIDATED SUBSIDIARIES AS OF NOVEMBER 30, 1995 (US) AS OF SEPTEMBER 30, 1995 (NON-US)
PERCENTAGE JURISDICTION OF OF VOTING SUBSIDIARY ORGANIZATION SECURITIES - ---------------------------------------------- --------------- ----------- H.B. Fuller Company United States Branches: Indonesia, Korea H.B. Fuller Company Puerto Rico, Inc. United States 100.0 H.B. Fuller International Inc. United States 100.0 Branches: Hong Kong, Singapore ChemEquity, Inc. 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 Linear Products, Inc. United States 100.0 Branches: Netherlands H.B. Fuller Licensing & Financing Inc. United States 100.0 Aireline, Inc. United States 100.0 Note a Kativo Chemical Industries, S.A. Panama 89.0 (See listing of subsidiaries on the following pages.) Pinturas Centroamericanas Costa Rica S.A. Costa Rica 100.0 Mundo de Colores Pintica, S.A. Costa Rica 100.0 Note a Pinturas Ecuatorianas, S.A. Ecuador 100.0 Distribuidora Americana, S.A. Ecuador 100.0 Note a Glidden 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 Empresa de Admin y Distribution de Panama, S.A. Panama 100.0 Note a 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 (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
Page 1 of 5 Exhibit 21 ---------- H.B. FULLER COMPANY AND CONSOLIDATED SUBSIDIARIES AS OF NOVEMBER 30, 1995 (US) AS OF SEPTEMBER 30, 1995 (NON-US)
PERCENTAGE JURISDICTION OF OF VOTING SUBSIDIARY ORGANIZATION SECURITIES - ---------------------------------------------- --------------- ----------- H.B. Fuller Holdings Limited U.K. 100.0 H.B. Fuller U.K. Limited U.K. 100.0 H.B. Fuller Coatings Limited U.K. 100.0 H.B. Fuller Linear Products Limited U.K. 100.0 H.B. Fuller Canada, Inc. Canada 100.0 H.B. Fuller Mexico, S.A. Mexico 100.0 H.B. Fuller Company Australia Pty. Ltd. Australia 100.0 H.B. Fuller (China) Adhesives Ltd. China 95.0 H.B. Fuller India Private Limited India 100.0 Note a H.B. Fuller Japan Company, Ltd. Japan 100.0 H.B. Fuller Korea Co., Ltd. Korea 100.0 H.B.F. Adhesives (Malaysia) Sdn. Bhd. Malaysia 100.0 H.B. Fuller Company (N.Z.) Ltd. New Zealand 99.9 H.B. Fuller Holdings (NZ) Ltd. New Zealand 99.9 H.B. Fuller Powder Coatings (NZ) Ltd. New Zealand 100.0 H.B. Fuller Powder Coatings Pty. Ltd. Australia 100.0 H.B. Fuller (Philippines), Inc. Philippines 80.0 H.B. Fuller-Realty (Philippines) Company Philippines 40.0 H.B. Fuller Taiwan Company Ltd. Taiwan 100.0 H.B. Fuller (Thailand) Co., Ltd. Thailand 100.0 Multi-Clean Products Pty. Ltd. Australia 100.0 Note a Multi-Clean (Lebanon) S.A.R.L. Lebanon 100.0 Note a H.B. Fuller Lebanon S.A.R.L. Lebanon 100.0 Note a
- ---------------------------------------- Notes: - ------ a Inactive Entity 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. H.B. Fuller SICAM S.p.A. merged into H.B. Fuller Italia s.r.l. Page 2 of 5 Exhibit 21 ---------- KATIVO CHEMICAL INDUSTRIES, S.A. AND CONSOLIDATED SUBSIDIARIES AS OF SEPTEMBER 30, 1995
PERCENTAGE JURISDICTION OF OF VOTING SUBSIDIARY OWNER OF VOTING SECURITIES ORGANIZATION SECURITIES - --------------------------------------- -------------------------------- ---------------- ------------- Chemical Supply, S.A. Chemical Supply Corporation Argentina 100.00 Note a 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 Note a - -------------------------------------------------------------------------------------------------------------- H.B. Fuller Bolivia, Ltda. Kativo Chemical Industries, S.A. Bolivia 50.00 Chemical Supply Corporation 50.00 - -------------------------------------------------------------------------------------------------------------- H.B. Fuller Brasil, Ltda. Kativo Chemical Industries, S.A. Brazil 100.000 Kativo de Panama, S.A. 0.000 H.B. Fuller Brasil - Sul, Ltda. H.B. Fuller Brasil, Ltda. Brazil 16.75 Note a 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 Analko, S.A. Kativo Chemical Industries, S.A. Costa Rica 100.00 Note a 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 Note a - -------------------------------------------------------------------------------------------------------------- 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 Note a Chemical Supply Corporation 20.00 - -------------------------------------------------------------------------------------------------------------- Norchem, Ltda. Kativo Chemical Industries, S.A. Grand Cayman 100.00 Note a - -------------------------------------------------------------------------------------------------------------- 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 Note a Kativo de Guatemala, S.A. Minority 0.00 Kiosko de Pinturas, S.A. Kativo de Guatemala, S.A. Guatemala 100.00 Note a 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 Note a Chemical Supply Corporation 20.00 Punto de Viniles, S.A. Sinteticos de Guatemala, S.A. Guatemala 100.00 Note a Alfombras Canon de Guatemala, S.A. Sinteticos de Guatemala, S.A. Guatemala 100.00 Note a - --------------------------------------------------------------------------------------------------------------
Note a -- Inactive Entity Page 3 of 5 Exhibit 21 ---------- KATIVO CHEMICAL INDUSTRIES, S.A. AND CONSOLIDATED SUBSIDIARIES AS OF SEPTEMBER 30, 1995
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 Note a 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 Note a 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 Note a 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 Note a 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 Note a 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 Note a 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 Note a 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 Note a 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 - --------------------------------------------------------------------------------------------------------
Note a - Inactive Entity Page 4 of 5 Exhibit 21 ---------- KATIVO CHEMICAL INDUSTRIES, S.A. AND CONSOLIDATED SUBSIDIARIES AS OF SEPTEMBER 30, 1995
PERCENTAGE JURISDICTION OF OF VOTING SUBSIDIARY OWNER OF VOTING SECURITIES ORGANIZATION SECURITIES - ------------------------------------- -------------------------------- ---------------- ------------- Industrias Kativo de Nicaragua, S.A. Kativo Chemical Industries, S.A. Nicaragua 99.99 Minority 0.01 Distribuidora Industrial y Comerci Sinteticos, S.A. Nicaragua 86.00 Note a 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 Note a Fuller Istmena, S.A. Kativo de Panama, S.A. Panama 100.00 Procesamientos Contables, S.A. Kativo de Panama, S.A. Panama 100.00 Note a Alquileres Industriales, S.A. Kativo de Panama, S.A. Panama 100.00 Note a Alfombras Canon, S.A. Kativo de Panama, S.A. Panama 100.00 Note a 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 Note a Sistema Integrados, S.A. H.B. Fuller Panama, S.A. Panama 100.00 - ------------------------------------------------------------------------------------------------------------ Chemical Supply Peruana, S.A. Chemical Supply Corporation Peru 99.999 Minority 0.001 H.B. Fuller Peru, S.A. Chemical Supply Peruana, S.A. Peru 50.00 Kativo Chemical Industries, S.A. 50.00 - ------------------------------------------------------------------------------------------------------------ H.B. Fuller Uruguay, S.A. H.B. Fuller Argentina, S.A. Uruguay 100.00 - ------------------------------------------------------------------------------------------------------------ H.B. Fuller Venezuela, S.A. Kativo Chemical Industries, S.A. Venezuela 100.00 - ------------------------------------------------------------------------------------------------------------
Note a -- Inactive Entity Page 5 of 5 EX-23 9 CONSENT OF PRICE WATERHOUSE Exhibit 23 ---------- CONSENT OF INDEPENDENT ACCOUNTANTS ---------------------------------- We hereby consent to the incorporation by reference in the Prospectus constituting part of the Registration Statements on Form S-3 (Registration Nos. 33-53169 and 33-53387) and to the incorporation by reference in the Registration Statements on Form S-8 (Registration Nos. 33-50786, 33-16082, 1-9225, 2-73650 and 2-89810) of H.B. Fuller Company of our report dated January 9, 1996 appearing in the 1995 Annual Report to Stockholders of H.B. Fuller Company which is incorporated in this Annual Report on Form 10-K. We also consent to the incorporation by reference of our report on the Financial Statement Schedules, which appears in this Form 10-K. /s/ Price Waterhouse LLP Price Waterhouse LLP Minneapolis, Minnesota February 19, 1996 EX-24 10 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, 1995, 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 8th day of December, 1995. /s/ /s/ - -------------------------- --------------------------- ANTHONY L. ANDERSEN REATHA CLARK KING Chairman of the Board Director /s/ /s/ - -------------------------- --------------------------- NORBERT R. BERG WALTER KISSLING Director President and Chief Executive Officer and Director /s/ /s/ - -------------------------- --------------------------- EDWARD L. BRONSTIEN, JR. JOHN J. MAURIEL, JR. Director Director /s/ /s/ - -------------------------- --------------------------- ROBERT J. CARLSON ROLF SCHUBERT Director Vice President of Corporate Research and Development and Director /s/ /s/ - -------------------------- --------------------------- FREEMAN A. FORD LORNE C. WEBSTER Director Director /s/ /s/ - -------------------------- --------------------------- GAIL D. FOSLER Director EX-27 11 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from Balance Sheet, Income Statement and is qualified in its entirety by reference to such financial statements. 1,000 YEAR NOV-30-1995 DEC-01-1994 NOV-30-1995 9,061 0 184,821 6,256 159,024 387,641 608,261 253,138 828,929 245,585 166,459 14,007 0 306 285,101 828,929 1,243,818 1,243,818 851,291 1,174,053 1,203 1,906 18,132 50,430 19,148 31,195 0 0 2,532 28,663 2.04 2.04
EX-99 12 FORM 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, 1995 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, 1995 and 1994 F-2 - F-3 Statements of Income and Changes in Plan Equity for the years ended October 31, 1995, 1994, and 1993 F-4 - F-6 Notes to Financial Statements F-7 - F-9 (b) Exhibits: Consent of Independent Accountants E-1 [LETTERHEAD AND LOGO OF PRICE WATERHOUSE LLP] 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, 1995 and 1994, 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, 1995 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. /s/ Price Waterhouse LLP Price Waterhouse LLP Minneapolis, Minnesota February 9, 1996 F-1 H.B. FULLER COMPANY THRIFT PLAN Statement of Financial Condition October 31, 1995
Company Money Common Market Index ASSETS Stock Fund Fund Fund - ------ ------------ --------- ------------- Investments at Fair Value: Securities of Participating Employer - Common Stock of H.B. Fuller Company (1,724,174 shares; cost $41,339,033) $54,316,023 Securities of unaffiliated issuers - Norwest Index Stock Fund Norwest Bank (544,573 units; cost $12,228,760) $15,068,344 Norwest Growth Balanced Fund Norwest Bank (401,627 units; cost $7,352,998) Norwest Small Company Growth Fund Norwest Bank (31,166 units; cost $966,470) Norwest Short-Term Investment Fund (7,404,064 units; cost $7,404,064) 276,786 $7,129,101 (1,859) ----------- ---------- ----------- Total Investments 54,592,809 7,129,101 15,066,485 Other Assets 272,052 34,788 ----------- ---------- ----------- Total Assets $54,864,861 $7,163,889 $15,066,485 =========== ========== =========== PLAN EQUITY Plan Equity $54,864,861 $7,163,889 $15,066,485 ----------- ---------- ----------- Total Plan Equity $54,864,861 $7,163,889 $15,066,485 =========== ========== ===========
Small Balanced Company ASSETS Fund Growth Fund Total - ------ ------------- ----------- ------------ Investments at Fair Value: Securities of Participating Employer - Common Stock of H.B. Fuller Company (1,724,174 shares; cost $41,339,033) $54,316,023 Securities of unaffiliated issuers - Norwest Index Stock Fund Norwest Bank (544,573 units; cost $12,228,760) 15,068,344 Norwest Growth Balanced Fund Norwest Bank (401,627 units; cost $7,352,998) $8,534,563 8,534,563 Norwest Small Company Growth Fund Norwest Bank (31,166 units; cost $966,470) $934,678 934,678 Norwest Short-Term Investment Fund (7,404,064 units; cost $7,404,064) 36 0 7,404,064 ---------- -------- ----------- Total Investments 8,534,599 934,678 86,257,672 Other Assets 306,840 ---------- -------- ----------- Total Assets $8,534,599 $934,678 $86,564,512 ========== ======== =========== PLAN EQUITY Plan Equity $8,534,599 $934,678 $86,564,512 ---------- -------- ----------- Total Plan Equity $8,534,599 $934,678 $86,564,512 ========== ======== ===========
See accompanying Notes to Financial Statements. F-2 H.B. FULLER COMPANY THRIFT PLAN Statement of Financial Condition October 31, 1994
Company Money Common Market Index Balanced ASSETS Stock 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-3
H.B. FULLER COMPANY THRIFT PLAN Statement of Income and Changes in Plan Equity Year Ended October 31, 1995 Company Money Small Common Market Index Balanced Company Stock Fund Fund Fund Fund Growth Fund Total ---------- ---------- ----------- ---------- ----------- ----------- Investment Income: Dividends $1,069,565 $ 1,069,565 Interest 15,079 $ 368,897 383,976 ---------- ---------- ----------- Total Investment Income 1,084,644 368,897 1,453,541 Realized Gain/(Loss) on the Sale and Distribution of Investments 793,493 $ 822,603 $ 468,276 $ (639) 2,083,733 Unrealized Appreciation/(Depreciation) of Investments (3,631,797) 2,068,592 819,656 (31,792) (775,341) ---------- ---------- ----------- ---------- -------- ----------- Total Fund Income (1,753,660) 368,897 2,891,195 1,287,932 (32,431) 2,761,933 ---------- ---------- ----------- ---------- -------- ----------- Contributions: By employees 3,321,868 566,232 1,446,917 800,948 21,773 6,157,738 By participating employer, net of forfeitures of $25,366 2,683,804 2,683,804 Employee rollover 88,781 32,933 77,148 122,419 13,027 334,308 ---------- ---------- ----------- ---------- -------- ----------- Total Contributions 6,094,453 599,165 1,524,065 923,367 34,800 9,175,850 ---------- ---------- ----------- ---------- -------- ----------- Cash Transferred between Funds (2,657,740) 1,266,951 349,770 108,710 932,309 0 ---------- ---------- ----------- ---------- -------- ----------- Total Increase in Plan Equity 1,683,053 2,235,013 4,765,030 2,320,009 934,678 11,937,783 Decreases in Plan Equity Attributed to Withdrawals (2,074,740) (880,280) (596,367) (383,152) 0 (3,934,539) ---------- ---------- ----------- ---------- -------- ----------- Net increase/(decrease) in Plan Equity (391,687) 1,354,733 4,168,663 1,936,857 934,678 8,003,244 Plan Equity at Beginning of Period 55,256,548 5,809,156 10,897,822 6,597,742 0 78,561,268 ----------- ---------- ----------- ---------- -------- ----------- Plan Equity at End of Period $54,864,861 $7,163,889 $15,066,485 $8,534,599 $934,678 $86,564,512 =========== ========== =========== ========== ======== ===========
See accompanying Notes to Financial Statements. F-4 H.B. FULLER COMPANY THRIFT PLAN Statement of Income and Changes in Plan Equity Year Ended October 31, 1994
Company Money Common Market Index Balanced Stock 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 Gain on the Sale and Distribution of Investments 370,907 $ 73,932 $ 90,123 534,962 Unrealized Appreciation of Investments 908,229 362,284 82,183 1,352,696 ---------- ---------- ----------- ---------- ----------- Total Fund Income 2,190,223 222,069 436,216 172,306 3,020,814 ---------- ---------- ----------- ---------- ----------- 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 1,468,812 12,440,448 Decreases in Plan Equity Attributed to Withdrawals (2,201,480) (427,175) (518,803) (664,557) (3,812,015) ---------- ---------- ----------- ---------- ----------- 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-5 H.B. FULLER COMPANY THRIFT PLAN Statement of Income and Changes in Plan Equity Year Ended October 31, 1993
Company Money Common Market Index Balanced Stock 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 2,548,739 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-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 on the accrual basis of accounting 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. H.B. Fuller Company (the Employer) pays or reimburses participants for 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 1995, a participant could 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), Small Company Growth Fund 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: 10/31/95 10/31/94 -------- -------- Company Common Stock Fund 2,007 1,953 Money Market Fund 696 679 Index Fund 1,077 1,003 Balanced Fund 659 601 Small Company Growth Fund 102 --
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 F-7 Exhibit 99 ---------- H.B. FULLER COMPANY THRIFT PLAN NOTES TO FINANCIAL STATEMENTS contribution to their accounts. Amounts forfeited are used to reduce subsequent Company contributions. 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. Payment occurs no later than the earlier of (a) the sixtieth day following the close of the Plan year during which there occurs the later of the date the participant terminates employment, and the participant's normal retirement date; and (b) April 1 of the calendar year following the calendar year during which the participant attains age 70-1/2. 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. 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. 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 SMALL COMMON COMPANY STOCK BALANCED GROWTH FUND INDEX FUND FUND FUND TOTAL ------------ ----------- ----------- ---------- ------------ 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 Change during the year ended October 31, 1995 (3,631,797) 2,068,592 819,656 $(31,792) (775,341) ----------- ---------- ---------- -------- ----------- Unrealized appreciation at October 31, 1995 $12,976,990 $2,839,584 $1,181,565 $(31,792) $16,966,347 =========== ========== ========== ======== ===========
F-8 Exhibit 99 ---------- H.B. FULLER COMPANY THRIFT PLAN NOTES TO FINANCIAL STATEMENTS (4) Realized Gains -------------- During the years ended October 31, 1995, 1994, and 1993, realized gains resulting from the sale and distribution of investments were as follows:
SMALL COMPANY COMMON COMPANY STOCK BALANCED GROWTH FUND INDEX FUND FUND FUND TOTAL -------------- ----------- ----------- ---------- ------------ 1995: Aggregate proceeds $8,671,760 $12,608,657 $7,902,058 $13,726 $29,196,201 Aggregate average cost 7,878,267 11,786,054 7,433,782 14,365 27,112,468 ---------- ----------- ---------- ------- ----------- Realized gain $ 793,493 $ 822,603 $ 468,276 $ (639) $ 2,083,733 ========== =========== ========== ======= =========== 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 ========== =========== ========== ===========
(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. The Plan has been revised to meet the requirements for qualification under the 1986 revisions to the Internal Revenue code. The Company submitted the Plan to the IRS for approval during the year and received a favorable determination letter on November 14, 1995. F-9 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 9, 1996 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, 1995. /s/ Price Waterhouse LLP Price Waterhouse LLP Minneapolis, Minnesota February 19, 1996 -----END PRIVACY-ENHANCED MESSAGE-----