<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
QUARTERLY REPORT
Under Section 13 or 15(d) of the Securities Exchange Act of 1934
FOR THE QUARTER ENDED MARCH 1, 1997
Commission File No. 0-3488
H. B. FULLER COMPANY
A Minnesota Corporation
IRS Employer Identification No. 41-0268370
1200 Willow Lake Boulevard, P.O. Box 64683,
St. Paul, Minnesota 55164-0683
Telephone - (612) 415-5900
Common Stock, $1.00 par value
14,094,900 shares outstanding
as of March 31, 1997
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No____
----
-1-
<PAGE>
H. B. FULLER COMPANY
FIRST QUARTER 1997 Form 10-Q
Quarterly Report
Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Condensed Statements of
Earnings - Thirteen weeks ended
March 1, 1997 and March 2, 1996
Consolidated Condensed Balance Sheets -
March 1, 1997 and November 30, 1996
Consolidated Condensed Statements of
Cash Flows - Thirteen weeks ended
March 1, 1997 and period ended March 2, 1996
Notes to Consolidated Condensed
Financial Statements
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
Signatures
-2-
<PAGE>
H.B. FULLER COMPANY AND CONSOLIDATED SUBSIDIARIES
Consolidated Condensed Statements of Earnings
(Unaudited)
(In Thousands Except Per Share Amounts)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
--------------------------------
MARCH 1, 1997 MARCH 2, 1996
------------- -------------
<S> <C> <C>
NET SALES $304,091 $303,571
-------- --------
Costs and expenses:
Cost of sales 209,363 211,510
Selling, administrative
and other expenses 79,395 82,034
Interest expense 4,980 5,256
Other (income) expense, net 480 290
-------- --------
294,218 299,090
-------- --------
Earnings before income taxes and
minority interests 9,873 4,481
Income taxes (4,028) (1,788)
Net earnings of consolidated subsidiaries
applicable to minority interests (24) (23)
-------- --------
Net earnings 5,821 2,670
Dividends on preferred stock (4) (4)
-------- --------
NET EARNINGS APPLICABLE TO COMMON STOCK $ 5,817 $ 2,666
======== ========
Average number of common and common
equivalent shares outstanding 14,190 14,088
======== ========
NET EARNINGS PER COMMON SHARE $0.41 $0.19
======== ========
Cash dividend per common share $0.17 $0.16
======== ========
</TABLE>
* See accompanying Notes to Consolidated Condensed Financial Statements.
<PAGE>
H.B. FULLER COMPANY AND CONSOLIDATED SUBSIDIARIES
Consolidated Condensed Balance Sheets
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
MARCH 1, 1997 NOVEMBER 30, 1996
------------- -----------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 2,847 $ 3,515
Trade receivables 195,986 199,786
Allowance for doubtful accounts (6,723) (7,043)
Inventories 150,961 151,212
Other current assets 43,239 40,728
-------- --------
TOTAL CURRENT ASSETS 386,310 388,198
Property, plant and equipment, net of
accumulated depreciation of $273,543
in 1997 and $272,991 in 1996 386,873 391,201
Other intangibles 14,768 15,383
Excess cost 34,981 36,036
Other assets 38,234 38,457
-------- --------
TOTAL ASSETS $861,166 $869,275
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable 48,854 47,920
Current installments of long-term debt 10,498 11,141
Accounts payable 108,499 118,181
Accrued expenses 52,225 61,210
Income taxes payable 12,034 8,129
-------- --------
TOTAL CURRENT LIABILITIES 232,110 246,581
Long-term debt,
excluding current installments 183,349 172,779
Deferred income taxes, accrued pension
cost, postretirement costs, other
liabilities and minority interests 111,517 115,175
STOCKHOLDERS' EQUITY:
Preferred stock 306 306
Common stock 14,090 14,066
Additional paid-in capital 23,116 22,493
Retained earnings 296,312 292,828
Foreign currency translation adjustment 4,278 9,097
Unearned compensation (3,912) (4,050)
-------- --------
TOTAL STOCKHOLDERS' EQUITY 334,190 334,740
-------- --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $861,166 $869,275
======== ========
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements.
-4-
<PAGE>
H.B. FULLER COMPANY AND CONSOLIDATED SUBSIDIARIES
Consolidated Condensed Statement of Cash Flows
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
Thirteen Weeks
Ended Period Ended *
March 1, 1997 March 2, 1996
--------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 5,821 $ 2,789
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 11,203 14,437
Pension costs 2,764 2,998
Deferred income tax (624) 1,248
Other items (1,473) 3,571
Change in current assets and liabilities:
Accounts receivable (685) (6,833)
Inventory (3,067) 6,091
Prepaid assets (5,101) (2,616)
Accounts payable (4,825) (8,126)
Accrued expense (4,330) (9,216)
Income taxes payable 1,420 (2,606)
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,103 1,737
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchased property, plant and equipment (12,395) (22,161)
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (12,395) (22,161)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in long-term debt 16,977 26,359
Current installments and payments of long-term debt (4,715) (13,544)
Notes payable 1,722 12,289
Dividends paid (2,328) (2,245)
Other (916) (654)
-------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 10,740 22,205
Effect of exchange rate changes on cash (116) (197)
-------- --------
NET CHANGE IN CASH AND CASH EQUIVALENTS (668) 1,584
Cash and cash equivalents at beginning of year 3,515 9,061
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,847 $ 10,645
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest expense (net of amount capitalized) $ 7,689 $ 5,748
Income taxes $ 3,182 $ 1,094
Noncash investing and financing activities:
Assets acquired by incurring long-term debt $ - $ 3,765
</TABLE>
For purposes of this statement, the Company considers all highly liquid debt
instruments purchased with a maturity of three months or less to be cash
equivalents.
* Includes the thirteen weeks ended March 1, 1996 for all entities and the two
month stub period for Non-U.S. entities.
-5-
<PAGE>
H.B. FULLER COMPANY AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
(Amounts in Thousands)
(Unaudited)
1. In the opinion of the Company, the accompanying unaudited Consolidated
Condensed Financial Statements include all adjustments necessary to
present fairly the financial position as of March 1, 1997 and November 30,
1996, the results of its operations for the thirteen weeks ended March 1,
1997 and March 2, 1996 and its cash flows for the thirteen weeks ended
March 1, 1997 and March 2, 1996. All adjustments were of a normal
recurring nature.
2. The results of operations for the thirteen week period ended March 1, 1997
are not necessarily indicative of the results to be expected for the full
year.
3. The composition of inventories is presented below:
March 1, 1997 November 30, 1996
------------- -----------------
Raw materials $ 68,952 $ 67,562
Finished goods 93,130 94,642
LIFO reserve (11,121) (10,992)
-------- --------
$150,961 $151,212
======== ========
4. Net earnings per common share is determined by dividing the net earnings
applicable to common stock by the weighted average number of common and
common equivalent shares outstanding (stock options).
5. The Company enters into foreign exchange forward contracts as a hedge
against firm commitment foreign currency intercompany accounts
receivable/payable/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. At March 1, 1997, the aggregate contract
value of instruments used to sell 4,823 pound sterling and $4,569 to buy
foreign currency (primarily 22,112 Dutch guilders) was $12,101. The
contracts mature between April 28, 1997 and November 20, 2000.
-6-
<PAGE>
6. The carrying amounts and estimated fair values of the Company's
significant other financial instruments at March 1, 1997, are as follows:
Carrying Fair
Amount Value
-------- --------
Cash and short-term investments $ 2,847 $ 2,847
Notes payable 48,854 48,854
Long-term debt 193,847 201,423
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.
-7-
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars in Thousands)
The following discussion includes comments and data relating to the Company's
financial condition and results of operations during the periods included in
the accompanying Consolidated Condensed Financial Statements.
Results of Operations
Net sales for the first quarter of 1997 increased $520 or 0.2% when compared
to the same quarter in 1996. Adjusting the 1996 sales for the $7,283 sales
of Monarch Division, which was divested in third quarter 1996, sales
increased $7,803, or 2.6%.
A comparison of sales increases by operating area is as follows:
Thirteen Weeks Ended
March 1, 1997 And
Operating Area March 2, 1996
--------------- -------------------
North America $ 5,137 3%
Latin America 300 1%
Europe (4,926) (7%)
Asia/Pacific 9 --
-------
Total $ 520 --
=======
In North America, the 3% first quarter sales increase was composed of 5
percentage points relating to increased volume and changes in product mix, 3
percentage points resulting from a second quarter 1996 acquisition, a
negative 4 percentage points from the third quarter 1996 divestiture of
Monarch Division, and a negative one percentage point from pricing. The
Adhesives, Sealants and Coatings Group had a 7% increase in sales with 4%
resulting from a second quarter 1996 acquisition. The growth occurred
primarily in the paper/converting and graphic arts markets of the industrial
adhesives group and in the engineered systems and window markets of the
structural adhesives group. A slow down in car production caused a decrease
in automotive sales compared to the prior period and a similar slowdown in
key sectors had a negative impact on our polymer sales. In the Specialty
Group, sales increased 9%, excluding the impact of the Monarch Division
divestiture. The primary growth in sales occurred in Industrial Coatings
Division and TEC Incorporated where significant growth occurred. Foster
Products sales were down substantially due to delays in export customer
projects. North American operating earnings grew at a rate of 44% increasing
from $5,547 to $8,001.
-8-
<PAGE>
Latin American first quarter 1997 sales increased 1% from 1996. The increase
in sales is composed of 2 percentage points relating to increased volume and
changes in product mix partially offset by a 1 percentage point decrease in
pricing. Latin American operating earnings increased 23% when compared to
1996, increasing from $4,164 to $5,120. Stable raw material costs and tight
cost controls were the primary causes for the improved earnings.
In Europe, the 7% first quarter 1997 sales decrease was composed of 7
percentage points resulting from unfavorable foreign currency translations
due to the strengthening of the U.S. dollar, a negative 5 percentage points
due to pricing, and a positive 5 percentage points due to increased volume
and changes in product mix. Operating earnings increased from $731 in first
quarter 1996 to $2,343 in 1997. Increased sales volumes, stable raw
materials and tight cost controls produced the increase in earnings.
Asia/Pacific sales approximated the sales of the same period last year. The
strengthening of the U.S. dollar, compared to local currencies, caused a 4
percentage point decrease. A positive 6 percentage point increase due to
increased volume and changes in product mix was partially offset by a
negative 2 percentage points in pricing. Operating earnings improved from
($415) in 1996 to ($131) in 1997.
Cost of sales for the first quarter decreased 1.0% ($2,147) over the same
quarter in 1996. Consolidated gross margins, as a percent of sales,
increased from 30.33% in 1996 to 31.15% in 1997. Gross margins, as a percent
of sales, increased in all geographic operating areas. Excluding Monarch
Division, which was divested in the third quarter of 1996, 1996 gross margin,
as a percent of sales, would have been 30.05%. Stable to reduced raw
materials costs compared to first quarter 1996, improved volumes, and cost
control measures were the reason for the improved gross margins. Some
suppliers, early in the second quarter of 1997, have announced price
increases of certain raw materials. The Company has already announced price
increases in North America effective April 30, 1997, and is planning to
increase prices in the rest of the world.
Selling, administrative, and other expenses for the quarter were down 3.2%
($2,639) when compared to the prior year. This category of expense, as a
percent of sales, improved from 27.0% in 1996 to 26.1% in 1997. This
expense, as a percent of sales, decreases from 27.0% to 26.6% for first
quarter 1996, when Monarch Division results are excluded. Cost control
measures implemented in 1996 and carried into 1997 is the primary reason for
the improvement in this category of expense.
Income taxes for the first quarter of 1997 increased $2,240 (125.3%) when
compared to the first quarter of 1996 primarily as a result of increased
earnings. The 1996 effective tax rate increased from 39.9% in the first
quarter to 40.8% for the year. The first quarter of 1997 reflects the 40.8%
annual effective tax rate of 1996.
Net earnings increased from $2,670 in the first quarter of 1996 to $5,821 in
the first quarter of 1997.
-9-
<PAGE>
Liquidity and Capital Resources
The cash flows as presented in this section have been calculated by
comparison of the Consolidated Condensed Balance Sheets at March 1, 1997 and
November 30, 1996 and March 2, 1996 and November 30, 1995.
During the first quarter of 1997, the Company generated $1,103 of cash to
finance operations as compared to $1,737 in the first quarter of 1996.
Working capital was $154,200 at March 1, 1997 compared to $141,617 at
November 30, 1996. The current ratio at March 1, 1997 was 1.7 compared to a
ratio of 1.6 at November 30, 1996. The number of days sales in trade
accounts receivable was 56 days at March 1, 1997 compared to 54 days sales
at March 2, 1996. The average days sales in inventory on hand was at 65 days
compared to 68 days sales at March 2, 1996. The primary reason for the
reduction in accrued expenses is the payment of year-end 1996 salary accruals
in the first quarter of 1997. The primary reason for the decrease in
accounts payable was the decrease in inventories.
The Company's long-term debt to total capitalization ratio was 35.4% at March
1, 1997 compared to 34.0% at November 30, 1996.
Capital expenditures for property, plant and equipment of $12,395 in first
quarter 1997 were primarily for continued construction of a manufacturing
facility in Georgia, the investment in Information Technology, for general
improvements in manufacturing productivity and operating efficiency and for
environmental projects. Environmental capital expenditures, less than 10% of
total expenditures, are not a material portion of overall Company
expenditures.
-10-
<PAGE>
H.B. FULLER COMPANY AND CONSOLIDATED SUBSIDIARIES
Increases(Decreases)
(Dollars in Thousands)
A summary of the period changes in the principal items included in the
Consolidated Condensed Statements of Earnings is presented below:
<TABLE>
<CAPTION>
Comparison of Thirteen
Weeks Ended March 1, 1997
and March 2, 1996
--------------------------
<S> <C> <C>
NET SALES $ 520 0.2%
Cost of sales 2,147 1.0%
Selling, administrative and other expenses 2,639 3.2%
Interest expense 276 5.3%
Other income (expense), net (190) (65.5%)
-------
Earnings before income taxes and
minority interests $ 5,392 *
Income taxes (2,240) *
Net earnings of consolidated subsidiaries
applicable to minority interests (1) (4.3%)
-------
NET EARNINGS $ 3,531 *
=======
</TABLE>
* Change of 100% or more.
-11-
<PAGE>
PART II. OTHER INFORMATION
Item 6.
Exhibits and reports on Form 8-K
(a) Exhibits to Part I
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 for the thirteen
weeks ended March 1, 1997.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
H. B. Fuller Company
Dated: April 14, 1997 /S/ Jorge Walter Bolanos
------------------------
Jorge Walter Bolanos
Senior Vice President,
Treasurer and
Chief Financial Officer
Dated: April 14, 1997 /S/ David J. Maki
-----------------------
David J. Maki
Vice President
and Controller
-12-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BALANCE
SHEET, INCOME STATEMENT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-29-1997
<PERIOD-START> DEC-01-1996
<PERIOD-END> MAR-01-1997
<CASH> 2,847
<SECURITIES> 0
<RECEIVABLES> 195,986
<ALLOWANCES> 6,723
<INVENTORY> 150,961
<CURRENT-ASSETS> 386,310
<PP&E> 660,416
<DEPRECIATION> 273,543
<TOTAL-ASSETS> 861,166
<CURRENT-LIABILITIES> 232,110
<BONDS> 183,349
0
306
<COMMON> 14,090
<OTHER-SE> 319,794
<TOTAL-LIABILITY-AND-EQUITY> 861,166
<SALES> 304,091
<TOTAL-REVENUES> 304,091
<CGS> 209,363
<TOTAL-COSTS> 79,395
<OTHER-EXPENSES> 480
<LOSS-PROVISION> 121
<INTEREST-EXPENSE> 4,980
<INCOME-PRETAX> 9,873
<INCOME-TAX> 4,028
<INCOME-CONTINUING> 5,821
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,821
<EPS-PRIMARY> 0.41
<EPS-DILUTED> 0.41
</TABLE>
<PAGE>
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, 1996,
and the two months ended December 31, 1996
H.B. Fuller Company Thrift Plan
H.B. FULLER COMPANY
1200 Willow Lake Boulevard, P.O. Box 64683
St. Paul, Minnesota 55164-0683
<PAGE>
Financial Statements and Exhibits
(a) Financial Statements: Page Number(s)
Report of Independent Accountants F-1
Statements of Financial Condition
as of December 31, 1996 and F-2 - F-4
October 31, 1996 and 1995
Statements of Income and Changes in Plan
Equity for the two months ended December 31,
1996, and the years ended October 31, 1996, F-5 - F-8
1995, and 1994
Notes to Financial Statements F-9 - F-11
(b) Exhibits:
Consent of Independent Accountants E-1
<PAGE>
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
December 31, 1996 and October 31, 1996 and 1995, and the results of its
operations and the change in its plan equity for the two months ended December
31, 1996 and each of the three years in the period ended October 31, 1996 in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Plan's management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Minneapolis, Minnesota
April 14, 1997
F-1
<PAGE>
H.B. FULLER COMPANY THRIFT PLAN
Statement of Financial Condition
December 31, 1996
<TABLE>
<CAPTION>
Company Money Small
Common Market Index Balanced Company
ASSETS Stock Fund Fund Fund Fund Growth Fund Total
- ------ ----------- ---------- ----------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Investments at Fair Value:
Securities of Participating Employer -
Common Stock of H. B. Fuller Company
(1,710,381 shares; cost $42,457,790) $80,387,900 $ 80,387,900
Securities of unaffiliated issuers -
Norwest Index Stock Fund
Norwest Bank (601,755 units;
cost $14,875,591) $20,580,027 20,580,027
Norwest Growth Balanced Fund
Norwest Bank (459,294 units;
cost $9,089,003) $10,485,681 10,485,681
Norwest Small Company Growth Fund
Norwest Bank (150,661 units;
cost $4,630,254) $4,515,304 4,515,304
Norwest Short-Term Investment
Fund (9,121,105 units;
cost $9,121,105) 156,266 $8,971,952 5,055 (2,739) (9,429) 9,121,105
----------- ---------- ----------- ----------- ---------- ------------
Total Investments 80,544,166 8,971,952 20,585,082 10,482,942 4,505,875 125,090,017
Other Assets 1,075 40,800 41,875
----------- ---------- ----------- ----------- ---------- ------------
Total Assets $80,545,241 $9,012,752 $20,585,082 $10,482,942 $4,505,875 $125,131,892
=========== ========== =========== =========== ========== ============
PLAN EQUITY
- -----------
Plan Equity $80,545,241 $9,012,752 $20,585,082 $10,482,942 $4,505,875 $125,131,892
----------- ---------- ----------- ----------- ---------- ------------
Total Plan Equity $80,545,241 $9,012,752 $20,585,082 $10,482,942 $4,505,875 $125,131,892
=========== ========== =========== =========== ========== ============
</TABLE>
See accompanying Notes to Financial Statements.
F-2
<PAGE>
H.B. FULLER COMPANY THRIFT PLAN
Statement of Financial Condition
October 31, 1996
<TABLE>
<CAPTION>
COMPANY MONEY SMALL
COMMON MARKET INDEX BALANCED COMPANY
ASSETS STOCK FUND FUND FUND FUND GROWTH FUND TOTAL
- ------ ----------- ----------- ----------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Investments at Fair Value:
Securities of Participating Employer -
Common Stock of H. B. Fuller Company
(1,731,735 shares; cost $42,762,044) $72,299,949 $ 72,299,949
Securities of unaffiliated issuers -
Norwest Index Stock Fund
Norwest Bank (591,981 units;
cost $14,331,255) $19,795,851 19,795,851
Norwest Growth Balanced Fund
Norwest Bank (410,849 units;
cost $7,908,707) $9,659,064 9,659,064
Norwest Small Company Growth Fund
Norwest Bank (127,451 units;
cost $3,922,409) $4,044,018 4,044,018
Norwest Short-Term Investment
Fund (7,880,965 units;
cost $7,880,965) 190,792 $ 7,681,056 34 10,083 (1,000) 7,880,965
----------- ----------- ----------- ---------- ---------- ------------
Total Investments 72,490,741 7,681,056 19,795,885 9,669,147 4,043,018 113,679,847
Other Assets 286,880 33,647 320,527
----------- ----------- ----------- ---------- ---------- ------------
Total Assets $72,777,621 $ 7,714,703 $19,795,885 $9,669,147 $4,043,018 $114,000,374
=========== =========== =========== ========== ========== ============
PLAN EQUITY
Plan Equity $72,777,621 $ 7,714,703 $19,795,885 $9,669,147 $4,043,018 $114,000,374
----------- ----------- ----------- ---------- ---------- ------------
Total Plan Equity $72,777,621 $ 7,714,703 $19,795,885 $9,669,147 $4,043,018 $114,000,374
=========== =========== =========== ========== ========== ============
</TABLE>
See accompanying Notes to Financial Statements.
F-3
<PAGE>
H.B. FULLER COMPANY THRIFT PLAN
Statement of Financial Condition
October 31, 1995
<TABLE>
<CAPTION>
Company Money Small
Common Market Index Balanced Company
ASSETS Stock Fund Fund Fund Fund Growth Fund Total
- ------ ----------- ---------- ----------- ---------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
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 $54,316,023
Securities of unaffiliated issuers -
Norwest Index Stock Fund
Norwest Bank (544,573 units;
cost $12,228,760) $15,068,344 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) 276,786 $7,129,101 (1,859) 36 0 7,404,064
----------- ---------- ----------- ---------- -------- -----------
Total Investments 54,592,809 7,129,101 15,066,485 8,534,599 934,678 86,257,672
Other Assets 272,052 34,788 306,840
----------- ---------- ----------- ---------- -------- -----------
Total Assets $54,864,861 $7,163,889 $15,066,485 $8,534,599 $934,678 $86,564,512
=========== ========== =========== ========== ======== ===========
PLAN EQUITY
- -----------
Plan Equity $54,864,861 $7,163,889 $15,066,485 $8,534,599 $934,678 $86,564,512
----------- ---------- ----------- ---------- -------- -----------
Total Plan Equity $54,864,861 $7,163,889 $15,066,485 $8,534,599 $934,678 $86,564,512
=========== ========== =========== ========== ======== ===========
</TABLE>
See accompanying Notes to Financial Statements.
F-4
<PAGE>
H.B. FULLER COMPANY THRIFT PLAN
Statement of Income and Changes in Plan Equity
Two-Month Period Ended December 31, 1996
<TABLE>
<CAPTION>
COMPANY MONEY SMALL
COMMON MARKET INDEX BALANCED COMPANY
STOCK FUND FUND FUND FUND GROWTH FUND TOTAL
----------- ---------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Investment Income:
Dividends $ 285,005 $ 271,843 $ 556,848
Interest $ 2,056 $ 76,244 78,300
----------- ---------- ----------- ----------- ------------
Total Investment Income 2,056 76,244 285,005 271,843 635,148
Realized Gain on the Sale and
Distribution of Investments 654,595 514,636 447,455 $ 496,371 2,113,057
Unrealized Appreciation / (Depreciation)
of Investments 8,392,205 239,840 (353,679) (236,559) 8,041,807
----------- ---------- ----------- ----------- ---------- ------------
Total Fund Income 9,048,856 76,244 1,039,481 365,619 259,812 10,790,012
----------- ---------- ----------- ----------- ---------- ------------
Contributions:
By employees 432,312 74,239 294,008 148,976 110,860 1,060,395
By participating employer 363,989 363,989
Employee rollover 3,098 1,354 7,494 9 - 11,955
----------- ---------- ----------- ----------- ---------- ------------
Total Contributions 799,399 75,593 301,502 148,985 110,860 1,436,339
----------- ---------- ----------- ----------- ---------- ------------
Cash Transferred between Funds (1,497,890) 1,276,072 (237,828) 316,366 143,280 -
----------- ---------- ----------- ----------- ---------- ------------
Total Increase in Plan Equity 8,350,365 1,427,909 1,103,155 830,970 513,952 12,226,351
Decreases in Plan Equity Attributed
to Withdrawals (582,745) (129,860) (313,958) (17,175) (51,095) (1,094,833)
----------- ---------- ----------- ----------- ---------- ------------
Net increase in Plan Equity 7,767,620 1,298,049 789,197 813,795 462,857 11,131,518
Plan Equity at Beginning of Period 72,777,621 7,714,703 19,795,885 9,669,147 4,043,018 114,000,374
----------- ---------- ----------- ----------- ---------- ------------
Plan Equity at End of Period $80,545,241 $9,012,752 $20,585,082 $10,482,942 $4,505,875 $125,131,892
=========== ========== =========== =========== ========== ============
</TABLE>
See accompanying Notes to Financial Statements.
F-5
<PAGE>
H.B. FULLER COMPANY THRIFT PLAN
Statement of Income and Changes in Plan Equity
Year Ended October 31, 1996
<TABLE>
<CAPTION>
COMPANY MONEY SMALL
COMMON MARKET INDEX BALANCED COMPANY
STOCK FUND FUND FUND FUND GROWTH FUND TOTAL
----------- ----------- ----------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Investment Income:
Dividends $ 1,141,463 $ 238,396 $ 205,629 $ 1,585,488
Interest 11,801 $ 378,183 389,984
----------- ----------- ----------- ---------- ------------
Total Investment Income 1,153,264 378,183 238,396 205,629 1,975,472
Realized Gain / (Loss) on the Sale
and Distribution of Investments 1,515,165 799,508 503,528 $ 166,739 2,984,940
Unrealized Appreciation / (Depreciation)
of Investments 16,560,915 2,625,012 568,792 153,401 19,908,120
----------- ----------- ----------- ---------- ---------- ------------
Total Fund Income 19,229,344 378,183 3,662,916 1,277,949 320,140 24,868,532
----------- ----------- ----------- ---------- ---------- ------------
Contributions:
By employees 3,029,227 525,706 1,738,354 875,913 526,483 6,695,683
By participating employer, net
of forfeitures of $77,373 2,739,869 2,739,869
Employee rollover 23,738 155,098 52,661 33,802 37,314 302,613
----------- ----------- ----------- ---------- ---------- ------------
Total Contributions 5,792,834 680,804 1,791,015 909,715 563,797 9,738,165
----------- ----------- ----------- ---------- ---------- ------------
Cash Transferred between Funds (3,772,736) 860,403 852,842 (273,335) 2,332,826 -
----------- ----------- ----------- ---------- ---------- ------------
Total Increase in Plan Equity 21,249,442 1,919,390 6,306,773 1,914,329 3,216,763 34,606,697
Decreases in Plan Equity Attributed
to Withdrawals (3,336,682) (1,368,576) (1,577,373) (779,781) (108,423) (7,170,835)
----------- ----------- ----------- ---------- ---------- ------------
Net increase/(decrease) in Plan Equity 17,912,760 550,814 4,729,400 1,134,548 3,108,340 27,435,862
Plan Equity at Beginning of Period 54,864,861 7,163,889 15,066,485 8,534,599 934,678 86,564,512
----------- ----------- ----------- ---------- ---------- ------------
Plan Equity at End of Period $72,777,621 $ 7,714,703 $19,795,885 $9,669,147 $4,043,018 $114,000,374
=========== =========== =========== ========== ========== ============
</TABLE>
See accompanying Notes to Financial Statements.
F-6
<PAGE>
H.B. FULLER COMPANY THRIFT PLAN
Statement of Income and Changes in Plan Equity
Year Ended October 31, 1995
<TABLE>
<CAPTION>
COMPANY MONEY SMALL
COMMON MARKET INDEX BALANCED COMPANY
STOCK FUND FUND FUND FUND GROWTH FUND TOTAL
----------- ---------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
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
=========== ========== =========== ========== ======== ===========
</TABLE>
See accompanying Notes to Financial Statements.
F-7
<PAGE>
H.B. FULLER COMPANY THRIFT PLAN
Statement of Income and Changes in Plan Equity
Year Ended October 31, 1994
<TABLE>
<CAPTION>
COMPANY MONEY
COMMON MARKET INDEX BALANCED
STOCK FUND FUND FUND FUND TOTAL
----------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
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 -
----------- ---------- ----------- ---------- -----------
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
=========== ========== =========== ========== ===========
</TABLE>
See accompanying Notes to Financial Statements.
F-8
<PAGE>
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) Change in Plan Year
The Plan was amended effective December 31, 1996 to change the fiscal year of
the Plan from November/October to January/December. Plan results for the two-
month period, November - December 1996, are shown separately in the accompanying
financial statements.
(3) 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 1996, a participant could elect to contribute up
to a limit of $9,500.
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.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
The number of participants in each fund was as follows: 12/31/96 10/31/96 10/31/95
-------- -------- --------
Company Common Stock Fund 1,885 1,904 2,007
Money Market Fund 642 640 696
Index Fund 1,141 1,135 1,077
Balanced Fund 729 721 659
Small Company Growth Fund 456 433 102
</TABLE>
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.
F-9
<PAGE>
H.B. FULLER COMPANY THRIFT PLAN
NOTES TO FINANCIAL STATEMENTS
Participants' contributions are fully vested. Employer contributions become
fully vested after five years of service or upon age 65, permanent and total
disability or death. Participants who terminate employment with H.B. Fuller
Company forfeit the non-vested portion of the Company's contribution to their
accounts. Amounts forfeited are used to reduce subsequent Company contributions.
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.
(4) Unrealized Appreciation (Depreciation) of Investments
The unrealized appreciation (depreciation) of investments was as follows:
<TABLE>
<CAPTION>
SMALL CO
COMPANY COMMON BALANCED GROWTH
STOCK FUND INDEX FUND FUND FUND TOTAL
--------------- ---------- -------- ------------ -------------
<S> <C> <C> <C> <C> <C>
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 apprec/(deprec)
at October 31, 1995 12,976,990 2,839,584 1,181,565 (31,792) 16,966,347
Change during the year
ended October 31, 1996 16,560,915 2,625,012 568,792 153,401 19,908,120
----------- ---------- ---------- --------- -----------
Unrealized appreciation at
October 31, 1996 29,537,905 5,464,596 1,750,357 121,609 36,874,467
Change during the two-mth
period ended Dec 31, 1996 8,392,205 239,840 (353,679) (236,559) 8,041,807
----------- ---------- ---------- --------- -----------
Unrealized apprec/(deprec)
at December 31, 1996 $37,930,110 $5,704,436 $1,396,678 $(114,950) $44,916,274
=========== ========== ========== ========= ===========
</TABLE>
F-10
<PAGE>
H.B. FULLER COMPANY THRIFT PLAN
NOTES TO FINANCIAL STATEMENTS
(5) Realized Gains
During the two-month period ended December 31, 1996, and fiscal years ended
October 31, 1996, 1995, and 1994, realized gains resulting from the sale and
distribution of investments were as follows:
<TABLE>
<CAPTION>
COMPANY SMALL CO
COMMON BALANCED GROWTH
STOCK FUND INDEX FUND FUND FUND TOTAL
--------------- ------------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Nov - Dec, 1996:
Aggregate proceeds $ 2,918,971 $ 988,652 $ 637,617 $ 809,818 $ 5,355,058
Aggregate average cost 2,264,376 474,016 190,162 313,447 3,242,001
--------------- ------------- ---------- ---------- -----------
Realized gain $ 654,595 $ 514,636 $ 447,455 $ 496,371 $ 2,113,057
=============== ============= ========== ========== ===========
1996:
Aggregate proceeds $ 12,340,177 $ 2,954,531 $2,391,111 $1,781,449 $19,467,268
Aggregate average cost 10,825,012 2,155,023 1,887,583 1,614,710 16,482,328
--------------- ------------- ---------- ---------- -----------
Realized gain $ 1,515,165 $ 799,508 $ 503,528 $ 166,739 $ 2,984,940
=============== ============= ========== ========== ===========
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
=============== ============= ========== ===========
</TABLE>
(6) 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 1995 and received a favorable determination letter
on November 14, 1995.
F-11
<PAGE>
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
April 14, 1997 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
two months ended December 31, 1996 and the year ended October 31, 1996.
Price Waterhouse LLP
Minneapolis, Minnesota
April 14, 1997
E-1
