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