<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED FEBRUARY 28, 1998
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ..................to.....................
Commission File No. 0-3488
H.B. FULLER COMPANY
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C>
MINNESOTA 41-0268370
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
</TABLE>
1200 WILLOW LAKE BOULEVARD, VADNAIS HEIGHTS, MINNESOTA 55110
(Address of principal executive offices) (Zip Code)
(612) 236-5900
(Registrant's telephone number, including area code)
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 $1.00 per share
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
The number of shares outstanding of the Registrant's Common Stock, par value
$1.00 per share, was 13,899,621 as of March 31, 1998.
-1-
<PAGE>
<TABLE>
<CAPTION>
H.B. FULLER COMPANY AND CONSOLIDATED SUBSIDIARIES
Consolidated Condensed Statements of Earnings
(Unaudited)
(In Thousands Except Per Share Amounts)
Thirteen Weeks Ended
---------------------------------
February 28, March 1, %
1998 1997 Change
--------------- --------------- -----------
<S> <C> <C> <C>
Net sales $ 310,656 $ 304,091 2.2%
Cost of sales (213,022) (209,363) 1.7%
--------------- ---------------
Gross profit 97,634 94,728 3.1%
Selling, administrative and other expenses (82,197) (79,395) 3.5%
--------------- ---------------
Operating earnings 15,437 15,333 0.7%
Interest expense (5,209) (4,980) 4.6%
Other income (expense), net (829) (480) 72.7%
--------------- ---------------
Earnings before income taxes and minority interests 9,399 9,873 (4.8)%
Income taxes (3,835) (4,028) (4.8)%
Net earnings of consolidated subsidiaries
applicable to minority interests 80 (24) *
Earnings from equity investments 310 - *
--------------- ---------------
Net earnings 5,954 5,821 2.3%
Dividends on preferred stock (4) (4)
--------------- ---------------
Net earnings applicable to common stock $5,950 $5,817 2.3%
=============== ===============
Average number of common and common
equivalent shares outstanding:
Basic 13,675 13,940 (1.9)%
=============== ===============
Diluted 13,812 14,080 (1.9)%
=============== ===============
Net earnings per common share:
Basic $0.44 $0.42 4.8%
=============== ===============
Diluted $0.43 $0.41 4.9%
=============== ===============
Cash dividend per common share $0.185 $0.165 12.1%
=============== ===============
</TABLE>
* Change of 100% or more.
-2-
<PAGE>
<TABLE>
<CAPTION>
H.B. FULLER COMPANY AND CONSOLIDATED SUBSIDIARIES
Consolidated Condensed Balance Sheets
(In Thousands)
(Unaudited)
February 28, November 29,
1998 1997
----------------- -----------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $3,546 $2,710
Trade receivables 209,330 211,469
Allowance for doubtful accounts (5,731) (5,879)
Inventories 168,610 150,685
Other current assets 53,096 50,171
----------------- -----------------
Total current assets 428,851 409,156
Property, plant and equipment, net of
accumulated depreciation of $314,892
in 1998 and $299,356 in 1997 407,906 398,561
Deposits and miscellaneous assets 64,387 62,196
Other intangibles 19,126 13,830
Excess cost 46,485 33,903
----------------- -----------------
Total assets $966,755 $917,646
================= =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $71,542 $39,675
Current installments of long-term debt 3,732 2,551
Accounts payable 118,788 121,883
Accrued expenses 52,612 68,952
Income taxes payable 3,396 4,488
----------------- -----------------
Total current liabilities 250,070 237,549
Long-term debt,
excluding current installments 264,720 229,996
Accrued pension cost 77,433 76,694
Deferred income taxes and other liabilities 18,867 18,477
Minority interest 15,561 15,816
Stockholders' equity:
Preferred stock 306 306
Common stock 13,886 13,841
Additional paid-in capital 27,466 25,009
Retained earnings 308,364 304,975
Foreign currency translation adjustment (2,383) 366
Unearned compensation (7,535) (5,383)
----------------- -----------------
Total stockholders' equity 340,104 339,114
----------------- -----------------
Total liabilities and
stockholders' equity $966,755 $917,646
================= =================
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements.
-3-
<PAGE>
<TABLE>
<CAPTION>
H.B. FULLER COMPANY AND CONSOLIDATED SUBSIDIARIES
Consolidated Condensed Statement of Cash Flows
(Unaudited)
(In Thousands)
Thirteen Weeks Ended
--------------------------------------
February 28, March 1,
1998 1997
----------------- -----------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 5,954 $ 5,821
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 11,070 11,203
Pension costs 2,238 2,764
Deferred income tax 2,997 (624)
Other items (4,468) (1,473)
Change in current assets and liabilities:
Accounts receivable 5,202 (685)
Inventory (12,198) (3,067)
Prepaid assets (4,612) (5,101)
Accounts payable (7,459) (4,825)
Accrued expense (12,295) (4,330)
Income taxes payable (1,841) 1,420
----------------- -----------------
Net cash (used)provided by operating activities (15,412) 1,103
Cash flows from investing activities:
Purchased property, plant and equipment (12,922) (12,395)
Purchased business, net of cash acquired (35,139) -
----------------- -----------------
Net cash used in investing activities (48,061) (12,395)
Cash flows from financing activities:
Increase in long-term debt 50,338 16,977
Current installments and payments of long-term debt (14,861) (4,715)
Notes payable 32,883 1,722
Dividends paid (2,564) (2,328)
Other (1,417) (916)
----------------- -----------------
Net cash provided by financing activities 64,379 10,740
Effect of exchange rate changes on cash (70) (116)
----------------- -----------------
Net change in cash and cash equivalents 836 (668)
Cash and cash equivalents at beginning of year 2,710 3,515
----------------- -----------------
Cash and cash equivalents at end of period $ 3,546 $ 2,847
================= =================
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest expense (net of amount capitalized) $ 9,218 $ 7,689
Income taxes $ 2,730 $ 3,182
</TABLE>
For purposes of this statement, the Company considers all highly liquid debt
instruments purchased with a maturity of three months or less to be cash
equivalents.
-4-
<PAGE>
H.B. FULLER COMPANY AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
(Amounts in Thousands)
(Unaudited)
1. In the opinion of the Company, the accompanying unaudited Consolidated
Condensed Financial Statements include all adjustments necessary to
present fairly the financial position as of February 28, 1998 and
November 29, 1997, the results of its operations for the thirteen
weeks ended February 28, 1998 and March 1, 1997 and its cash flows for
the thirteen weeks ended February 28, 1998 and March 1, 1997. All
adjustments were of a normal recurring nature.
2. The results of operations for the thirteen week period ended February
28, 1998 are not necessarily indicative of the results to be expected
for the full year.
3. The composition of inventories is presented below:
<TABLE>
<CAPTION>
FEBRUARY 28, 1998 NOVEMBER 29, 1997
------------------ ------------------
<S> <C> <C>
Raw materials $ 75,214 $ 71,234
Finished goods 104,636 90,634
LIFO reserve (11,240) (11,183)
-------- --------
$168,610 $150,685
======== ========
</TABLE>
4. In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, "Earnings Per Share" (SFAS No. 128). SFAS No. 128
is effective for financial statements for periods ending after
December 15, 1997. Under SFAS No. 128, the previous presentation of
earnings per share is replaced with dual presentation of basic
earnings per share and diluted earnings per share. Basic earnings per
share includes no dilution and is computed by dividing net earnings
available to common shareholders by the weighted average number of
common shares outstanding for the period. Diluted earnings per share
reflects the potential dilution of stock options and restricted stock
grants that could share in the earnings. The Company adopted SFAS No.
128 for the quarter ended February 28, 1998 and has restated last year
net earnings per share data presented to conform to the provisions of
this statement. The difference between basic and diluted earnings per
share data as presented is due to the dilutive impact of stock options
and restricted stock grants whose exercise price or grant price was
below the average common stock price for the respective period
presented.
5. The Company enters into foreign exchange forward contracts as a hedge
against firm commitment foreign currency intercompany accounts
receivable/payable/debt. Market value gains and losses are recognized,
and the resulting credit or debit offsets foreign exchange gains or
losses on those receivables/payables/debt. At February 28, 1998, the
aggregate contract value of instruments used to sell 4,521 pound
sterling, 5,400 deutsche marks, 2,975 French francs, and $4,262 to buy
foreign currency (primarily 27,740 Dutch guilders) was $13,800. The
contracts mature between May 27, 1998 and November 20, 2000.
-5-
<PAGE>
6. The carrying amounts and estimated fair values of the Company's
significant other financial instruments at February 28, 1998, are as
follows:
<TABLE>
<CAPTION>
CARRYING FAIR
AMOUNT VALUE
-------- --------
<S> <C> <C>
Cash and short-term investments $ 3,546 $ 3,546
Notes payable 71,542 71,542
Long-term debt 268,452 278,245
</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.
-6-
<PAGE>
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
- ---------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- ---------------------------------------------
(Dollars in Thousands)
The following discussion includes comments and data relating to the Company's
financial condition and results of operations during the periods included in the
accompanying Consolidated Condensed Financial Statements.
Results of Operations
- ---------------------
Net sales for the first quarter of 1998 increased $6,565 or 2.2% when compared
to the same quarter in 1997.
A comparison of sales increases by operating area is as follows:
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
FEBRUARY 28, 1998 AND
OPERATING AREA MARCH 1, 1997
-------------- -------------
<S> <C> <C>
North America $ 8,851 5%
Latin America 1,699 3%
Europe (3,982) (6%)
Asia/Pacific (3) --
-------
Total $ 6,565 2%
=======
</TABLE>
In North America, the 5% first quarter sales increase was composed of 4
percentage points relating to increased volume and changes in product mix, 2
percentage points resulting from a second quarter 1997 joint venture, and a
negative one percentage point from pricing and currency. The Adhesives,
Sealants and Coatings Group had a one percentage point decrease in sales, which
was primarily the result of negative pricing and currency. Bad weather on the
east and west coasts of the United States and in Canada contributed to the flat
sales volume for first quarter 1998 compared to 1997. Additionally, sales
incentives in the fourth quarter of 1997 had some impact on first quarter 1998
sales as did slower demand in some market segments, primarily in the
paper/converting market. In the Specialty Group, sales increased 10%. The
primary growth in sales occurred in Industrial Coatings Division where
significant growth occurred and in Foster Products where sales were up
substantially partially due to a weak 1997 first quarter to compare against. The
Automotive Group increased sales 30% for the quarter. However, 20 percentage
points of the increase came from the sales contribution of the joint venture
partner EMS-Chemie. Volume increases of 12 percentage points were partially
offset by 2 percentage points lower unit pricing during the quarter. North
American operating earnings grew at a rate of 24.6% increasing from $8,368 to
$10,428. The fiscal 1998 first quarter includes a $2,328 favorable earnings
impact compared to the same period last year, due to refinements in inventory
accounting in North America. With the design of new information systems, the
company has refined its inventory accounting method to spread fixed
manufacturing costs evenly over total annual production. While this refinement
has no affect on annual earnings comparisons, there is a quarterly impact due to
differences in production volume. The first quarter has the largest impact
because of the seasonally low production volume in the quarter.
-7-
<PAGE>
Latin American first quarter 1998 sales increased 3% from 1997. The increase in
sales is composed of 5 percentage points relating to increased volume and
changes in product mix partially offset by a 2 percentage point decrease in
pricing. Latin American operating earnings decreased 15% when compared to 1997,
from $5,064 to $4,306. Operating earnings were below prior year due to bad
weather in the region, pricing pressures, and slower economies in several
countries, mainly Brazil and Argentina, two major markets.
In Europe, the 6% first quarter 1998 sales decrease was composed of 8 percentage
points resulting from unfavorable foreign currency translations due to the
strengthening of the U.S. dollar, a negative 3 percentage points due to pricing
and a positive 5 percentage points due to increased volume and changes in
product mix. Operating earnings decreased from $2,049 in first quarter 1997 to
$1,348 in 1998. Lower operating expenses during the quarter were not enough to
offset the lower gross margins caused by the negative impact of raw material
shortages, primarily for products sold to the nonwoven market, and competitive
pricing pressures.
Asia/Pacific sales approximated the sales of the same period last year. The
strengthening of the U.S. dollar, compared to local currencies, caused a 15
percentage point decrease. Local currency sales increased 9 percentage points
due to increased volume and changes in product mix and 6 percentage points as a
result of a fourth quarter 1997 acquisition. Operating results decreased from
($148) in 1997 to ($645) in 1998, primarily due to negative economic conditions
in the region, caused by the continuing currency crisis.
Cost of sales for the first quarter increased 1.7% ($3,659) over the same
quarter in 1997. Consolidated gross margins, as a percent of sales, increased
from 31.15% in 1997 to 31.43% in 1998. Gross margins were positively impacted by
the $2,328 North American refinement in inventory reporting. Overall, raw
materials costs were stable when compared to first quarter 1997. However, some
of our formulas are based on Styrene, Isoprene, Styrene or SIS block co-
polymers. Currently there is a shortage of SIS in the marketplace, which is
expected to impact the Company the balance of the year. Strong demand and tight
supply of Isoprene monomer, the feedstock for SIS, has caused the shortage. As a
result prices are increasing in all geographic areas. Price increases to our
customers are also being implemented where appropriate. Automotive gross margins
as a percent of sales decreased as a result of the second quarter 1997 joint
venture and due to pricing pressures within the industry. Our management
continues in the process of rationalizing and merging the operations of the two
automotive companies.
Selling, administrative, and other expenses for the quarter were up 3.5%
($2,802) when compared to the prior year. This category of expense, as a
percent of sales, increased from 26.11% in 1997 to 26.46% in 1998. Low volume
sales growth in the quarter was the reason for the increase in this category of
expense, as a percent of sales.
Interest expense of $5,209 increased $229 from the expense of the first quarter
of 1997. This was mainly the result of higher overall debt levels to fund
acquisitions, repurchase Company stock and for funding of benefit plans.
Income taxes for the first quarter of 1998 decreased $193 (4.8%) when compared
to the first quarter of 1997 as a result of decreased earnings. The first
quarter of 1998 reflects the 40.8% annual effective tax rate of 1997.
Net earnings increased from $5,821 in the first quarter of 1997 to $5,954 in
the first quarter of 1998. Basic earnings per share increased from $0.42 to
$0.44.
-8-
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The cash flows as presented in this section have been calculated by comparison
of the Consolidated Condensed Balance Sheets at February 28, 1998 and November
29, 1997 and March 1, 1997 and November 30, 1996.
During the first quarter of 1998, the Company used $15,412 of cash to finance
operations as compared to generating $1,103 of cash in the first quarter of
1997. Compared to last year, operating working capital increased as a result of
increased inventory and reduced accrued expense, primarily due to profit-sharing
paid in first quarter 1998.
Working capital was $178,781 at February 28, 1998 compared to $171,607 at
November 29, 1997. The current ratio at February 28, 1998 was 1.7, equal to the
ratio at November 29, 1997. The number of days sales in trade accounts
receivable was 59 days at February 28, 1998 compared to 56 days sales at March
1, 1997. The average days sales in inventory on hand was at 63 days compared to
62 days sales at March 1, 1997. The primary reason for the reduction in accrued
expenses is the payment of year-end 1997 salary accruals in the first quarter of
1998.
The Company's long-term debt to total capitalization ratio was 43.8% at February
28, 1998 compared to 40.4% at November 29, 1997. The primary reason for the
increase in this ratio was the funding of a European first quarter acquisition.
Capital expenditures for property, plant and equipment of $12,922 in first
quarter 1998 were primarily for continued construction of a manufacturing
facility in Georgia, the investment in Information Technology, for general
improvements in manufacturing productivity and operating efficiency and for
environmental projects. Environmental capital expenditures, less than 10% of
total expenditures, are not a material portion of overall Company expenditures.
SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS
Certain statements in this document are forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. These
statements are subject to various risks and uncertainties, including but not
limited to the following: the Asian economic crisis and other political and
economic conditions; product demand and industry capacity; competitive products
and pricing; manufacturing efficiencies; new product development; product mix;
availability and price of raw materials and critical manufacturing equipment;
new plant startups; accounts receivable collection; the Company's relationships
with its major customers and suppliers; changes in tax laws and tariffs; patent
rights that could provide significant advantage to a competitor; foreign
exchange rate fluctuations (particularly with respect to the German mark and the
Japanese yen); the regulatory and trade environment; the year 2000 computer
issue; and other risks as indicated from time to time in the Company's filings
with the Securities and Exchange Commission. All forward-looking information
represents management's best judgment as of this date based on information
currently available that in the future may prove to have been inaccurate.
-9-
<PAGE>
PART II. OTHER INFORMATION
ITEM 6.
EXHIBITS AND REPORTS ON FORM 8-K
- --------------------------------
(a) Exhibits to Part I
27 Financial Data Schedule
99(a) Report on Form 11-K of H.B. Fuller Company Thrift Plan
99(b) Report on Form 11-K of EFTEC Savings Plan
(b) Reports on Form 8-K. No reports on Form 8-K were filed for the thirteen
weeks ended February 28, 1998.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
H. B. FULLER COMPANY
Dated: April 13, 1998 /S/ Jorge Walter Bolanos
------------------------
Jorge Walter Bolanos
Senior Vice President,
Treasurer and
Chief Financial Officer
Dated: April 13, 1998 /S/ David J. Maki
-----------------------
David J. Maki
Vice President
and Controller
-10-
<PAGE>
EXHIBIT INDEX
EXHIBIT NUMBER
27 Financial Data Schedule
99(a) Report on Form 11-K of H.B. Fuller Company Thrift Plan
99(b) Report on Form 11-K of EFTEC Savings Plan
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BALANCE
SHEET, INCOME STATEMENT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-28-1998
<PERIOD-START> NOV-29-1997
<PERIOD-END> FEB-28-1998
<CASH> 3,546
<SECURITIES> 0
<RECEIVABLES> 209,330
<ALLOWANCES> 5,731
<INVENTORY> 168,610
<CURRENT-ASSETS> 428,851
<PP&E> 722,798
<DEPRECIATION> 314,892
<TOTAL-ASSETS> 966,755
<CURRENT-LIABILITIES> 250,070
<BONDS> 264,720
13,886
0
<COMMON> 306
<OTHER-SE> 325,912
<TOTAL-LIABILITY-AND-EQUITY> 966,755
<SALES> 310,656
<TOTAL-REVENUES> 310,656
<CGS> 213,022
<TOTAL-COSTS> 82,197
<OTHER-EXPENSES> 829
<LOSS-PROVISION> 281
<INTEREST-EXPENSE> 5,209
<INCOME-PRETAX> 9,399
<INCOME-TAX> 3,835
<INCOME-CONTINUING> 5,954
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,954
<EPS-PRIMARY> 0.44
<EPS-DILUTED> 0.43
</TABLE>
<PAGE>
Exhibit 99 (a)
FORM 11-K
FOR ANNUAL REPORTS OF EMPLOYEE STOCK PURCHASE, SAVINGS
AND SIMILAR PLANS PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1997
___________________________________________________
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _____________________ to ______________________
Commission file number 0-3488
------
H.B. FULLER COMPANY THRIFT PLAN
H.B. FULLER COMPANY
1200 WILLOW LAKE BOULEVARD, P.O. BOX 64683
ST. PAUL, MINNESOTA 55164-0683
<PAGE>
<TABLE>
<CAPTION>
Financial Statements and Exhibits
- ---------------------------------
(a) Financial Statements: Page Number(s)
--------------
<S> <C>
Report of Independent Accountants F-1
Statements of Net Assets Available for Benefits
as of December 31, 1997 and F-2 -- F-3
December 31, 1996
Statements of Changes in Net Assets Available for
Benefits for the year ended December 31, 1997,
the two months ended December 31, 1996, and F-4 -- F-6
the year ended October 31, 1996
Notes to Financial Statements F-7 -- F-9
Additional Information
Schedule 1 - Schedule of Investments Held F-10
Schedule 2 - Schedule of Reportable Transactions F-11
Signature Page F-12
(b) Exhibits:
Consent of Independent Accountants E-1
</TABLE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Participants and Administrator
of the H.B. Fuller Company Thrift Plan
In our opinion, the accompanying statements of net assets available for benefits
and related statements of changes in net assets available for benefits presents
fairly, in all material respects, the net assets available for benefits of the
H.B. Fuller Company Thrift Plan at December 31, 1997 and December 31, 1996, and
the changes in net assets available for benefits for each of the years ended
December 31, 1997 and October 31, 1996 and the two months ended December 31,
1996, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the plan's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The additional information included in
schedules 1 and 2 is presented for purposes of additional analysis and is not a
required part of the basic financial statements but is additional information
required by ERISA. The Fund Information in the statement of net assets
available for benefits and the statements of changes in net assets available for
benefits is presented for purposes of additional analysis rather than to present
the net assets available for plan benefits and changes in net assets available
for benefits of each fund. Schedules 1 and 2 and the Fund Information has been
subjected to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, are fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
Price Waterhouse LLP
Minneapolis, Minnesota
March 17, 1998
F-1
<PAGE>
<TABLE>
<CAPTION>
H.B. FULLER COMPANY THRIFT PLAN
Statement of Net Assets Available for Benefits, With Fund Information
December 31, 1997
Fund Information
--------------------------------------------------------------------
Company Money Small
Common Market Index Balanced Company
ASSETS Stock Fund Fund Fund Fund Growth Fund Total
---------- --------- ------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Investments at Fair Value:
Securities of Participating Employer -
Common Stock of H. B. Fuller Company
(1,594,083 shares; cost $42,097,042) $78,907,090 $ 78,907,090
Securities of unaffiliated issuers -
Norwest Index Stock Fund
Norwest Bank (656,799 units;
cost $19,142,159) $26,948,480 26,948,480
Norwest Growth Balanced Fund
Norwest Bank (476,355 units;
cost $10,669,094) $12,256,619 12,256,619
Norwest Small Company Growth Fund
Norwest Bank (194,438 units;
cost $6,360,926) $6,305,637 6,305,637
Norwest Short-Term Investment
Fund (10,249,279 units;
cost $10,249,279) 368,678 $ 9,956,463 (37,327) 58 (38,593) 10,249,279
----------- ----------- ----------- ----------- --------- ------------
Total Investments 79,275,768 9,956,463 26,911,153 12,256,677 6,267,044 134,667,105
Other Assets 1,754 48,362 50,116
Accrued Liabilities (123,219) (123,219)
----------- ----------- ----------- ----------- ---------- ------------
Total Net Assets $79,154,303 $10,004,825 $26,911,153 $12,256,677 $6,267,044 $134,594,002
=========== =========== =========== =========== ========== ============
PLAN EQUITY
Plan Equity 79,154,303 10,004,825 26,911,153 12,256,677 6,267,044 134,594,002
----------- ----------- ----------- ----------- ---------- ------------
Total Plan Equity $79,154,303 $10,004,825 $26,911,153 $12,256,677 $6,267,044 $134,594,002
=========== =========== =========== =========== ========== ============
</TABLE>
See accompanying Notes to Financial Statements.
F-2
<PAGE>
<TABLE>
<CAPTION>
H.B. FULLER COMPANY THRIFT PLAN
Statement of Net Assets Available for Benefits, With Fund Information
December 31, 1996
Fund Information
------------------------------------------------------------------
Company Money Small
Common Market Index Balanced Company
ASSETS Stock Fund Fund Fund Fund Growth Fund Total
- ------ ----------- ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Investments at Fair Value:
Securities of Participating Employer -
Common Stock of H. B. Fuller Company
(1,710,381 shares; cost $42,457,790) $80,387,900 $ 80,387,900
Securities of unaffiliated issuers -
Norwest Index Stock Fund
Norwest Bank (601,755 units;
cost $14,875,591) $20,580,027 20,580,027
Norwest Growth Balanced Fund
Norwest Bank (459,294 units;
cost $9,089,003) $10,485,681 10,485,681
Norwest Small Company Growth Fund
Norwest Bank (150,661 units;
cost $4,630,254) $4,515,304 4,515,304
Norwest Short-Term Investment
Fund (9,121,105 units;
cost $9,121,105) 156,266 $ 8,971,952 5,055 (2,739) (9,429) 9,121,105
----------- ----------- ----------- ----------- ----------- ------------
Total Investments 80,544,166 8,971,952 20,585,082 10,482,942 4,505,875 125,090,017
Other Assets 1,075 40,800 41,875
----------- ----------- ----------- ----------- ----------- ------------
Total Assets $80,545,241 $ 9,012,752 $20,585,082 $10,482,942 $ 4,505,875 $125,131,892
=========== =========== =========== =========== =========== ============
PLAN EQUITY
Plan Equity 80,545,241 9,012,752 20,585,082 10,482,942 4,505,875 125,131,892
----------- ----------- ----------- ----------- ----------- ------------
Total Plan Equity $80,545,241 $ 9,012,752 $20,585,082 $10,482,942 $4,505,875 $125,131,892
=========== =========== =========== =========== =========== ============
</TABLE>
See accompanying Notes to Financial Statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
H.B. FULLER COMPANY THRIFT PLAN
Statement of Changes in Net Assets Available for Benefits, With Fund Information
Year Ended December 31, 1997
Fund Information
------------------------------------------------------------------
Company Money Small
Common Market Index Balanced Company
Stock Fund Fund Fund Fund Growth Fund Total
----------- ----------- ----------- ----------- ------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
Investment Income:
Dividends $ 1,173,266 $ 415,283 $ 280,861 $ 1,869,410
Interest 12,237 $ 557,586 569,823
----------- ----------- ----------- ----------- ----------------
Total Investment Income 1,185,503 557,586 415,283 280,861 2,439,233
Realized Gain on the Sale and
Distribution of Investments 5,762,623 4,073,109 1,683,902 $ 902,731 12,422,365
Change in Unrealized Appreciation /
(Depreciation) of Investments (1,120,062) 2,101,885 190,847 59,661 1,232,331
----------- ----------- ----------- ----------- ---------- ----------------
Total Fund Income 5,828,064 557,586 6,590,277 2,155,610 962,392 16,093,929
----------- ----------- ----------- ----------- ---------- ----------------
Contributions:
By employees 2,412,796 471,898 1,852,912 923,992 767,585 6,429,183
By participating employer, net
of forfeitures of $123,219 2,484,237 2,484,237
Employee rollover 24,758 16,649 68,648 18,292 29,081 157,428
----------- ----------- ----------- ----------- ---------- ----------------
Total Contributions 4,921,791 488,547 1,921,560 942,284 796,666 9,070,848
----------- ----------- ----------- ----------- ---------- ----------------
Cash Transferred between Funds (3,085,533) 1,564,894 779,085 362,848 378,706 --
----------- ----------- ----------- ----------- ---------- ----------------
Total Increase in Plan Equity 7,664,322 2,611,027 9,290,922 3,460,742 2,137,764 25,164,777
Decreases in Plan Equity Attributed
to Withdrawals (9,055,260) (1,618,954) (2,964,851) (1,687,007) (376,595) (15,702,667)
----------- ----------- ----------- ----------- ---------- ----------------
Net increase/(decrease) in Plan Equity (1,390,938) 992,073 6,326,071 1,773,735 1,761,169 9,462,110
Plan Equity at Beginning of Period 80,545,241 9,012,752 20,585,082 10,482,942 4,505,875 125,131,892
----------- ----------- ----------- ----------- ---------- ----------------
Plan Equity at End of Period $79,154,303 $10,004,825 $26,911,153 $12,256,677 $6,267,044 $ 134,594,002
=========== =========== =========== =========== ========== ================
</TABLE>
See accompanying Notes to Financial Statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
H.B. FULLER COMPANY THRIFT PLAN
Statement of Changes in Net Assets Available for Benefits, With Fund Information
Two Months Ended December 31, 1996
Fund Information
------------------------------------------------------------------
Company Money Small
Common Market Index Balanced Company
Stock Fund Fund Fund Fund Growth Fund Total
----------- ---------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Investment Income:
Dividends $ 285,005 $ 271,843 $ 556,848
Interest $ 2,056 $ 76,244 78,300
----------- ---------- ----------- ----------- ------------
Total Investment Income 2,056 76,244 285,005 271,843 635,148
Realized Gain on the Sale and
Distribution of Investments 654,595 514,636 447,455 $ 496,371 2,113,057
Change in Unrealized Appreciation /
(Depreciation) of Investments 8,392,205 239,840 (353,679) (236,559) 8,041,807
----------- ---------- ----------- ----------- ---------- ------------
Total Fund Income 9,048,856 76,244 1,039,481 365,619 259,812 10,790,012
----------- ---------- ----------- ----------- ---------- ------------
Contributions:
By employees 432,312 74,239 294,008 148,976 110,860 1,060,395
By participating employer 363,989 363,989
Employee rollover 3,098 1,354 7,494 9 -- 11,955
----------- ---------- ----------- ----------- ---------- ------------
Total Contributions 799,399 75,593 301,502 148,985 110,860 1,436,339
----------- ---------- ----------- ----------- ---------- ------------
Cash Transferred between Funds (1,497,890) 1,276,072 (237,828) 316,366 143,280 --
----------- ---------- ----------- ----------- ---------- ------------
Total Increase in Plan Equity 8,350,365 1,427,909 1,103,155 830,970 513,952 12,226,351
Decreases in Plan Equity Attributed
to Withdrawals (582,745) (129,860) (313,958) (17,175) (51,095) (1,094,833)
----------- ---------- ----------- ----------- ---------- ------------
Net increase in Plan Equity 7,767,620 1,298,049 789,197 813,795 462,857 11,131,518
Plan Equity at Beginning of Period 72,777,621 7,714,703 19,795,885 9,669,147 4,043,018 114,000,374
----------- ---------- ----------- ----------- ---------- ------------
Plan Equity at End of Period $80,545,241 $9,012,752 $20,585,082 $10,482,942 $4,505,875 $125,131,892
=========== ========== =========== =========== ========== ============
</TABLE>
See accompanying Notes to Financial Statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
H.B. FULLER COMPANY THRIFT PLAN
Statement of Changes in Net Assets Available for Benefits, With Fund Information
Year Ended October 31, 1996
Fund Information
------------------------------------------------------------------
Company Money Small
Common Market Index Balanced Company
Stock Fund Fund Fund Fund Growth Fund Total
----------- ----------- ----------- ---------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Investment Income:
Dividends $ 1,141,463 $ 238,396 $ 205,629 $ 1,585,488
Interest 11,801 $ 378,183 389,984
----------- ----------- ----------- ---------- ------------
Total Investment Income 1,153,264 378,183 238,396 205,629 1,975,472
Realized Gain on the Sale and
Distribution of Investments 1,515,165 799,508 503,528 $ 166,739 2,984,940
Change in Unrealized Appreciation /
(Depreciation) of Investments 16,560,915 2,625,012 568,792 153,401 19,908,120
----------- ----------- ----------- ---------- ---------- ------------
Total Fund Income 19,229,344 378,183 3,662,916 1,277,949 320,140 24,868,532
----------- ----------- ----------- ---------- ---------- ------------
Contributions:
By employees 3,029,227 525,706 1,738,354 875,913 526,483 6,695,683
By participating employer, net
of forfeitures of $77,373 2,739,869 2,739,869
Employee rollover 23,738 155,098 52,661 33,802 37,314 302,613
----------- ----------- ----------- ---------- ---------- ------------
Total Contributions 5,792,834 680,804 1,791,015 909,715 563,797 9,738,165
----------- ----------- ----------- ---------- ---------- ------------
Cash Transferred between Funds (3,772,736) 860,403 852,842 (273,335) 2,332,826 --
----------- ----------- ----------- ---------- ---------- ------------
Total Increase in Plan Equity 21,249,442 1,919,390 6,306,773 1,914,329 3,216,763 34,606,697
Decreases in Plan Equity Attributed
to Withdrawals (3,336,682) (1,368,576) (1,577,373) (779,781) (108,423) (7,170,835)
----------- ----------- ----------- ---------- ---------- ------------
Net increase/(decrease) in Plan Equity 17,912,760 550,814 4,729,400 1,134,548 3,108,340 27,435,862
Plan Equity at Beginning of Period 54,864,861 7,163,889 15,066,485 8,534,599 934,678 86,564,512
----------- ----------- ----------- ---------- ---------- ------------
Plan Equity at End of Period $72,777,621 $ 7,714,703 $19,795,885 $9,669,147 $4,043,018 $114,000,374
=========== =========== =========== ========== ========== ============
</TABLE>
See accompanying Notes to Financial Statements.
F-6
<PAGE>
H.B. FULLER COMPANY THRIFT PLAN
Notes to Financial Statements
(1) Summary of Significant Accounting Policies
------------------------------------------
The accompanying financial statements are presented on the accrual basis of
accounting in accordance with generally accepted accounting principles.
The fair values of the H.B. Fuller Thrift Plan (the Plan) investments in common
stock of the participating employer are based on published quotations. The fair
values of investments in securities of unaffiliated issuers are based on fair
values supplied by the Trustee (Norwest Bank). Realized gains or losses reflect
all differences between sales proceeds and historical cost of units sold, on an
average cost basis. Securities transactions are recorded on the trade date.
H.B. Fuller Company (the Employer) pays or reimburses participants for all
administrative costs and investment fees.
(2) Change in Plan Year
-------------------
The Plan was amended effective December 31, 1996 to change the fiscal year of
the Plan from November/October to January/December. Plan results for the two-
month period, November - December 1996, are shown separately in the accompanying
financial statements.
(3) Summary Description of the Plan
-------------------------------
H.B. Fuller Company full-time employees are eligible to participate in the Plan
after six months of employment; part-time employees are eligible after twelve
months. To become a participant in the Plan, an employee must agree to make
contributions equal to 1% of pre-tax compensation up to a maximum of 9% of pre-
tax compensation for highly compensated participants and 15% for non-highly
compensated participants. In 1997, a participant could elect to contribute up
to a limit of $9,500.
The Company makes contributions to employees' accounts by matching 100% of an
employee's contributions, up to 3% of the employee's compensation. A
participant's contribution may be invested in any combination of the following
investment funds: Company Common Stock Fund, Money Market Fund, Index Fund (S&P
500), Small Company Growth Fund and Balanced Fund. A participant's investment
option for past and future contributions can be changed daily, by calling the
Trustee's on-line customer services.
<TABLE>
<CAPTION>
<S> <C> <C>
The number of participants in each fund was as follows: 12/31/97 12/31/96
-------- --------
Company Common Stock Fund 1,738 1,885
Money Market Fund 557 642
Index Fund 1,110 1,141
Balanced Fund 699 729
Small Company Growth Fund 522 456
</TABLE>
A participant's voluntary contribution percentage amount can be changed or
suspended once a month, by calling the Trustee's on-line service prior to month-
end. Suspensions must be made for a minimum of six months. Employer
contributions to the Plan cease during the suspension period.
F-7
<PAGE>
H.B. FULLER COMPANY THRIFT PLAN
Notes to Financial Statements
Participants' contributions are fully vested. Employer contributions become
fully vested after five years of service or upon age 65, permanent and total
disability or death. Participants who terminate employment with H.B. Fuller
Company forfeit the non-vested portion of the Company's contribution to their
accounts. Amounts forfeited are used to reduce subsequent Company contributions.
Benefits payable to a participant are based upon the fair market value of the
vested portion of the participant's account on the valuation date immediately
preceding the time for payment. Payment occurs no later than the earlier of (a)
the sixtieth day following the close of the Plan year during which there occurs
the later of the date the participant terminates employment, and the
participant's normal retirement date; and (b) April 1 of the calendar year
following the calendar year during which the participant attains age 70 1/2.
The amount of benefit paid will be 100% of the portion of the account
attributable to the participant's own contributions and, if the participant is
vested, the portion of the account attributable to the Company's matching
contributions. Distribution of a participant's account is made in a lump sum.
The investment in the Company Common Stock Fund can be withdrawn in the form of
stock at the option of Plan participants.
Although it has no intention to do so, H.B. Fuller Company may, at any time, by
action of its Board of Directors, terminate the Plan or discontinue
contributions. Upon termination or discontinuance of contributions, all
Employer contribution amounts in participant accounts will become fully vested.
(4) Unrealized Appreciation (Depreciation) of Investments
-----------------------------------------------------
The unrealized appreciation (depreciation) of investments was as follows:
<TABLE>
<CAPTION>
COMPANY SMALL CO
COMMON BALANCED GROWTH
STOCK FUND INDEX FUND FUND FUND TOTAL
-------------- --------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
Unrealized apprec/(deprec)
at October 31, 1995 $12,976,990 $2,839,584 $1,181,565 $ (31,792) $16,966,347
Change during the year
ended October 31, 1996 16,560,915 2,625,012 568,792 153,401 19,908,120
----------- ---------- ---------- --------- -----------
Unrealized appreciation at
October 31, 1996 29,537,905 5,464,596 1,750,357 121,609 36,874,467
Change during the
two-month period
ended Dec 31, 1996 8,392,205 239,840 (353,679) (236,559) 8,041,807
----------- ---------- ---------- --------- -----------
Unrealized apprec/(deprec)
at December 31, 1996 37,930,110 5,704,436 1,396,678 (114,950) 44,916,274
Change during the year
ended December 31, 1997 (1,120,062) 2,101,885 190,847 59,661 1,232,331
----------- ---------- ---------- --------- -----------
Unrealized apprec/(deprec)
at December 31, 1997 $36,810,048 $7,806,321 $1,587,525 $ (55,289) $46,148,605
=========== ========== ========== ========= ===========
</TABLE>
F-8
<PAGE>
H.B. FULLER COMPANY THRIFT PLAN
NOTES TO FINANCIAL STATEMENTS
(5) Realized Gains
--------------
Realized gains and (losses) on the sale and distribution of investments were as
follows:
<TABLE>
<CAPTION>
COMPANY SMALL CO
COMMON BALANCED GROWTH
STOCK FUND INDEX FUND FUND FUND Total
----------- ---------- ---------- ---------- -----------
1997:
<S> <C> <C> <C> <C> <C>
Aggregate proceeds $20,307,448 $7,600,204 $6,242,608 $3,330,412 $37,480,672
Aggregate average cost 14,544,825 3,527,095 4,558,706 2,427,681 25,058,307
----------- ---------- ---------- ---------- -----------
Realized gain $ 5,762,623 $4,073,109 $1,683,902 $ 902,731 $12,422,365
=========== ========== ========== ========== ===========
Nov - Dec, 1996:
Aggregate proceeds $ 2,918,971 $ 988,652 $ 637,617 $ 809,818 $ 5,355,058
Aggregate average cost 2,264,376 474,016 190,162 313,447 3,242,001
----------- ---------- ---------- ---------- -----------
Realized gain $ 654,595 $ 514,636 $ 447,455 $ 496,371 $ 2,113,057
=========== ========== ========== ========== ===========
1996:
Aggregate proceeds $12,340,177 $2,954,531 $2,391,111 $1,781,449 $19,467,268
Aggregate average cost 10,825,012 2,155,023 1,887,583 1,614,710 16,482,328
----------- ---------- ---------- ---------- -----------
Realized gain $ 1,515,165 $ 799,508 $ 503,528 $ 166,739 $ 2,984,940
=========== ========== ========== ========== ===========
</TABLE>
Realized gains in 1997 include $2,178,503 from the distribution of assets with a
market value of $5,884,367 to the EFTEC Savings Plan, a newly formed trust
administered by a joint venture of the Company.
(6) Income Taxes
------------
The Plan is qualified under Section 401(a) and 401(k) and is exempt from federal
income taxation under Section 501(a) of the Internal Revenue code of 1986, as
amended.
A participant is not subject to federal income taxes on the pre-tax
contribution, on the Company's matching contribution, or on the earnings of the
account until a withdrawal is made or distribution is received from the account.
During employment, a participant is entitled to make a withdrawal from the
account upon showing financial hardship.
The Plan has been revised to meet the requirements for qualification under the
1986 revisions to the Internal Revenue code. The Company submitted the Plan to
the IRS for approval during 1995 and received a favorable determination letter
on November 14, 1995.
F-9
<PAGE>
<TABLE>
<CAPTION>
Schedule 1
H.B. FULLER COMPANY THRIFT PLAN
Schedule of Investments Held
December 31, 1997
Identity of Issuer,
Borrower or Units/ Fair
Similar Party Description Shares Cost Value
- ------------------------ -------------------------------------- ---------------- -------------------- -------------------
<S> <C> <C> <C> <C>
Norwest Bank H.B. Fuller Common Stock Fund
Common Stock 1,594,083 $42,097,042 $78,907,090
Norwest Bank H.B. Fuller Common Stock Fund
Investment Fund 411,390 411,390 411,390
Norwest Bank H.B. Fuller Common Stock Fund
Cash - Non-Interest Bearing (42,712) (42,712) (42,712)
---------------- -------------------- -------------------
1,962,761 42,465,720 79,275,768
---------------- -------------------- -------------------
Norwest Bank Money Market Fund
Investment Fund 9,956,463 9,956,463 9,956,463
---------------- -------------------- -------------------
Norwest Bank Index Fund
Common Stock 656,799 19,142,159 26,948,480
Norwest Bank Index Fund
Cash - Non-Interest Bearing (37,327) (37,327) (37,327)
---------------- -------------------- -------------------
619,472 19,104,832 26,911,153
---------------- -------------------- -------------------
Norwest Bank Balanced Fund
Common Stock 476,355 10,669,094 12,256,619
Norwest Bank Balanced Fund
Cash - Non-Interest Bearing 58 58 58
---------------- -------------------- -------------------
476,413 10,669,152 12,256,677
---------------- -------------------- -------------------
Norwest Bank Small Company Growth Fund
Common Stock 194,438 6,360,926 6,305,637
Norwest Bank Small Company Growth Fund
Cash - Non-Interest Bearing (38,593) (38,593) (38,593)
---------------- -------------------- -------------------
155,845 6,322,333 6,267,044
---------------- -------------------- -------------------
Total Investments at End of Plan Year $88,518,500 $134,667,105
==================== ===================
</TABLE>
Note: The above data is based upon information which has been certified as
complete and accurate by Norwest Bank.
F-10
<PAGE>
<TABLE>
<CAPTION>
Schedule 2
----------
H.B. FULLER COMPANY THRIFT PLAN
Schedule of Reportable Transactions*
Year ended December 31, 1997
5% of series of transactions by security issue:
Number of Total dollar amount
------------------ ----------------------------------------- Net gain
Security issue Purchases Sales Purchases Sales or (loss)
------------------------------- --------- ----- ------------------ ------------------- -----------------
<S> <C> <C> <C> <C> <C>
H.B. Fuller Common Stock Fund,
Common Stock 121 37 $5,211,572 $7,379,664 $3,701,683
H.B. Fuller Common Stock Fund,
Investment Fund 105 130 $9,228,846 $8,973,721 $0
Money Market Fund,
Investment Fund 114 99 $9,002,811 $8,018,300 $0
Index Fund,
Common Stock 123 99 $7,760,573 $4,072,442 $1,462,164
Balanced Fund,
Common Stock 123 75 $6,204,538 $4,990,313 $949,464
Small Company Growth Fund,
Common Stock 126 65 $4,205,187 $2,441,880 $159,610
</TABLE>
*Transactions or series of transactions in excess of 5% of the current value of
the Plan's assets as of December 31, 1997, as defined in Section 2520.103-6 of
the Department of Labor Rules and Regulations for Reporting and Disclosure
under ERISA.
Note: The above data is based upon information which has been certified as
complete and accurate by Norwest Bank.
Parties in Interest: Norwest Bank - Trustee; H.B. Fuller Company -
Administrator.
F-11
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
H. B. FULLER COMPANY THRIFT PLAN
H.B. Fuller Company
Dated: April 13, 1998 By: /S/ Todd Mestad
---------------
Todd Mestad
Director of Benefits
F-12
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 2-73650) of H.B. Fuller Company of our report dated
March 17, 1998 appearing on page F-1 of this Form 11-K.
Price Waterhouse LLP
Minneapolis, Minnesota
April 8, 1998
E-1
<PAGE>
Exhibit 99(b)
FORM 11-K
FOR ANNUAL REPORTS OF EMPLOYEE STOCK PURCHASE, SAVINGS
AND SIMILAR PLANS PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1997
------------------------------------------------------
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [NO FEE REQUIRED]
For the transition period from ______________________ to _______________________
Commission file number 0-3488
------
EFTEC Savings Plan
H.B. FULLER COMPANY
1200 Willow Lake Boulevard, P.O. Box 64683
St. Paul, Minnesota 55164-0683
<PAGE>
Financial Statements and Exhibits
(a) Financial Statements: Page Number(s)
--------------
Report of Independent Accountants F-1
Statement of Net Assets Available for Benefits
as of December 31, 1997 F-2
Statement of Changes in Net Assets Available for
Benefits for the period ended December 31, 1997 F-3
Notes to Financial Statements F-4 - F-6
Additional Information
Schedule 1 - Schedule of Investments Held F-7
Schedule 2 - Schedule of Reportable Transactions F-8
Signature Page F-9
(b) Exhibits:
Consent of Independent Accountants E-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Participants and Administrator
of the EFTEC Savings Plan
In our opinion, the accompanying statements of net assets available for benefits
and related statements of changes in net assets available for benefits presents
fairly, in all material respects, the net assets available for benefits of the
EFTEC Savings Plan at December 31, 1997, and the changes in net assets available
for benefits for the period ended December 31, 1997, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the plan's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The additional information included in
schedules 1 and 2 is presented for purposes of additional analysis and is not a
required part of the basic financial statements but is additional information
required by ERISA. The Fund Information in the statement of net assets
available for benefits and the statements of changes in net assets available for
benefits is presented for purposes of additional analysis rather than to present
the net assets available for plan benefits and changes in net assets available
for benefits of each fund. Schedules 1 and 2 and the Fund Information has been
subjected to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, are fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
Price Waterhouse LLP
Minneapolis, Minnesota
March 17, 1998
F-1
<PAGE>
<TABLE>
<CAPTION>
EFTEC SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION
DECEMBER 31, 1997
FUND INFORMATION
-----------------------------------------------------------
H.B. FULLER MONEY SMALL
COMMON MARKET INDEX BALANCED COMPANY
ASSETS STOCK FUND FUND FUND FUND GROWTH FUND TOTAL
- ------ ---------- -------- ---------- -------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investments at Fair Value:
Securities of Affiliated Organization -
Common Stock of H. B. Fuller Company
(71,647 shares; cost $3,841,884) $3,546,527 $3,546,527
Securities of unaffiliated issuers -
Norwest Index Stock Fund
Norwest Bank (51,119 units;
cost $1,905,987) $2,097,399 2,097,399
Norwest Growth Balanced Fund
Norwest Bank (36,758 units;
cost $868,201) $945,792 945,792
Norwest Small Company Growth Fund
Norwest Bank (11,037 units;
cost $349,576) $ 357,935 357,935
Norwest Short-Term Investment
Fund (924,736 units;
cost $924,736) 171,105 $758,231 (878) (2,048) (1,674) 924,736
---------- -------- ---------- -------- -------- ----------
Total Investments 3,717,632 758,231 2,096,521 943,744 356,261 7,872,389
Accrued Contributions 191,612 191,612
Other Assets 791 10,548 11,339
---------- -------- ---------- -------- -------- ----------
Total Assets $3,718,423 $960,391 $2,096,521 $943,744 $356,261 $8,075,340
========== ======== ========== ======== ======== ==========
PLAN EQUITY
- -----------
Plan Equity 3,718,423 960,391 2,096,521 943,744 356,261 8,075,340
---------- -------- ---------- -------- -------- ----------
Total Plan Equity $3,718,423 $960,391 $2,096,521 $943,744 $356,261 $8,075,340
========== ======== ========== ======== ======== ==========
</TABLE>
See accompanying Notes to Financial Statements.
F-2
<PAGE>
<TABLE>
<CAPTION>
EFTEC SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION
INCEPTION TO DECEMBER 31, 1997
FUND INFORMATION
-----------------------------------------------------------
H.B. FULLER MONEY SMALL
COMMON MARKET INDEX BALANCED COMPANY
STOCK FUND FUND FUND FUND GROWTH FUND TOTAL
---------- -------- ---------- -------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
Income:
Dividends $ 25,954 $ 32,309 $ 21,579 $ 79,842
Interest 4,197 $ 23,837 28,034
---------- -------- ---------- -------- ----------
Total Investment Income 30,151 23,837 32,309 21,579 107,876
Realized Gain on the Sale and
Distribution of Investments 161 194,345 53,300 $ 49,614 297,420
Changes in Unrealized Appreciation /
(Depreciation) of Investments (295,357) 191,412 77,591 8,359 (17,995)
---------- -------- ---------- -------- -------- ----------
Total Fund Income (265,045) 23,837 418,066 152,470 57,973 387,301
---------- -------- ---------- -------- -------- ----------
Contributions:
By employees 134,471 122,505 147,666 61,399 40,365 506,406
By participating employer 55,739 107,173 49,363 19,626 14,078 245,979
Transfers from other plans 3,852,772 582,257 1,512,490 771,217 244,321 6,963,057
---------- -------- ---------- -------- -------- ----------
Total Contributions 4,042,982 811,935 1,709,519 852,242 298,764 7,715,442
---------- -------- ---------- -------- -------- ----------
Cash Transferred between Funds (48,978) 132,743 (27,674) (58,342) 2,251 --
---------- -------- ---------- -------- -------- ----------
Total Increase in Plan Equity 3,728,959 968,515 2,099,911 946,370 358,988 8,102,743
Decreases in Plan Equity Attributed to
Withdrawals (10,462) (7,542) (3,390) (2,626) (2,727) (26,747)
Administrative Expenses (74) (582) (656)
---------- -------- ---------- -------- -------- ----------
Net Increase in Plan Equity 3,718,423 960,391 2,096,521 943,744 356,261 8,075,340
Plan Equity at Beginning of Period -- -- -- -- -- --
---------- -------- ---------- -------- -------- ----------
Plan Equity at End of Period $3,718,423 $960,391 $2,096,521 $943,744 $356,261 $8,075,340
========== ======== ========== ======== ======== ==========
</TABLE>
See accompanying Notes to Financial Statements.
F-3
<PAGE>
EFTEC SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
(1) Summary of Significant Accounting Policies
------------------------------------------
The accompanying financial statements are presented on the accrual basis of
accounting in accordance with generally accepted accounting principles.
The fair values of the EFTEC Savings Plan (the Plan) investments in common stock
of H.B. Fuller Company are based on published quotations. The fair values of
investments in securities of unaffiliated issuers are based on fair values
supplied by the Trustee (Norwest Bank). Realized gains or losses reflect all
differences between sales proceeds and historical cost of units sold, on an
average cost basis. Securities transactions are recorded on the trade date.
EFTEC North America, L.L.C. (the Employer and the Company) pays for
administrative costs of the Plan. Investment management fees are allocated to
participant accounts.
(2) Summary Description of the Plan
-------------------------------
The Plan was established February 13, 1997 and became effective April 1, 1997.
The Plan merged assets from separate plans formerly sponsored by H.B. Fuller
Company and EMS-TOGO Corporation. Former plans included the H.B. Fuller Company
Thrift Plan, the H.B. Fuller Profit-Share Plus Plan and the EMS-TOGO Corporation
401(k) Investment Plan. Assets transferred from the respective plans were
$5,858,118, $464,119, and $640,820. The Plan receives pre-tax contributions
from participant payroll deductions with discretionary Employer matching and
discretionary Employer profit-sharing. The Plan is intended to qualify under
Internal Revenue Code section 401(a) and to satisfy the requirements of Code
sections 401(k) and 401(m).
As of December 31, 1997, there were 158 Plan participants.
Although it has no intention to do so, EFTEC may, at any time, by action of its
Board of Directors, terminate the Plan or discontinue contributions. Upon
termination or discontinuance of contributions, all participants' accounts will
become fully vested and nonforfeitable.
(a) Pre-Tax and Matching Contributions
All United States EFTEC employees, excluding members of collective bargaining
units whose contracts do not provide for participation, are eligible to make
pre-tax contributions to the Plan after six months of employment. Regular part-
time employees are eligible to participate after twelve months.
The Employer matches 100% of an employees pre-tax contribution, up to 3% of the
employee's compensation. To participate, an employee must agree to make
contributions equal to 1% of pre-tax compensation up to a maximum of 10% of pre-
tax compensation for highly compensated participants and 15% for non-highly
compensated participants. In 1997, a participant could elect to contribute up
to a limit of $9,500.
A participant's contribution, and the allowable employer match, may be invested
in any combination of the following investment funds: H.B. Fuller Common Stock
Fund, Money Market Fund, Index
F-4
<PAGE>
EFTEC SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
Fund (S & P 500), Balanced Fund, and Small Company Growth Fund. A participant's
investment option for past and future contributions can be changed daily, by
calling the Trustee's on-line customer services.
The number of participants in each fund at December 31, 1997:
<TABLE>
<CAPTION>
<S> <C>
Company Common Stock Fund 145
Money Market Fund 55
Index Fund 107
Balanced Fund 73
Small Company Growth Fund 48
</TABLE>
A participant's voluntary contribution percentage amount can be changed or
suspended once a month, by calling the Trustee's on-line service prior to month-
end. Suspensions must be made for a minimum of six months. Employer
contributions to the Plan cease during the suspension period.
Participants' contributions are fully vested. Employer contributions become
fully vested after five years of service, or upon age 65, disability, death or
permanent facility closure. Participants who terminate employment with EFTEC
forfeit the non-vested portion of the Company's contribution to their accounts.
Amounts forfeited are used to reduce subsequent Employer contributions.
Benefits payable to a participant are based upon the fair market value of the
vested portion of the participant's account on the valuation date immediately
preceding the time for payment. Vested benefits of less than $3,500 for
participants terminating employment before retirement will be distributed as
soon as administratively practical. Any distributions made to participants
before age 55, other than hardship withdrawals, may be subject to tax penalties.
Participants who terminate employment after attaining age 55, and have vested
pension benefits, may elect when to receive a distribution. All participants,
including active employees, may elect to receive distributions at age
59 1/2 and must take distributions after attaining age 70 1/2. The amount of
benefit paid will be 100% of the portion of the account attributable to the
participant's own contributions and, if the participant is vested, the portion
of the account attributable to the Company's matching contributions.
Distribution of a non-retiree participant's account is made in a lump sum.
Retired or disabled participants may elect quarterly installment distributions.
The investment in the H.B. Fuller Common Stock Fund can be withdrawn in the form
of stock at the option of Plan participants.
(b) Profit Share Plus Contributions
All United States EFTEC employees, excluding members of collective bargaining
units whose contracts do not provide for participation, are eligible to receive
an annual discretionary contribution based on the profitability of H.B. Fuller
Company. Full time employees are eligible to participate upon commencement of
their employment with the Company. Regular part-time employees are eligible to
participate after twelve months of continuous employment. A participant must be
employed by the Company or an affiliated organization on the last day of the
Company's fiscal year.
The Company's contribution to a participant's account for the year is determined
by H.B. Fuller Company's world-wide return on sales, the participant's pay
classification and performance rating. Contributions may range from 0 to 3.5%
of the participant's compensation. Participants have the same investment
options that are available for their pretax contributions.
F-5
<PAGE>
EFTEC SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
A participant has a fully vested and nonforfeitable interest in his or her
account after completing five years of continuous service for the Company, or
upon age 65, disability, or death. A participant whose employment terminates
prior to completion of five years of service has a 50% vested interest. The
non-vested portion of a terminated participant's account will be forfeited after
the participant has a break in service of five full years. The forfeited
account balance is used to reduce the Employer's contributions.
Distribution of a participant's account is made as described above for matching
contributions.
(3) Unrealized Appreciation/(Depreciation) of Investments
-----------------------------------------------------
The unrealized appreciation/(depreciation) of investments was as follows:
<TABLE>
<CAPTION>
H.B. FULLER SMALL CO
COMMON BALANCED GROWTH
STOCK FUND INDEX FUND FUND FUND TOTAL
----------- ----------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
Change during the period
ended December 31, 1997 $(295,357) $191,412 $77,591 $8,359 $(17,995)
--------- -------- ------- ------ --------
Unrealized
apprec/(deprec)
at December 31, 1997 $(295,357) $191,412 $77,591 $8,359 $(17,995)
========= ======== ======= ====== ========
</TABLE>
(4) Realized Gains
--------------
During the year ended December 31, 1997, realized gains resulting from the sale
and distribution of investments were as follows:
<TABLE>
<CAPTION>
H.B. FULLER SMALL CO
COMMON BALANCED GROWTH
STOCK FUND INDEX FUND FUND FUND TOTAL
---------- ----------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Aggregate proceeds $161 $264,826 $145,023 $101,213 $511,223
Aggregate average cost -- 70,481 91,723 51,599 213,803
---- -------- -------- -------- --------
Realized gain $161 $194,345 $ 53,300 $ 49,614 $297,420
==== ======== ======== ======== ========
</TABLE>
(5) Federal Income Taxes
--------------------
The Employer intends to request an initial determination letter from the
Internal Revenue Service in 1998 to establish the Plan's qualification under
Section 401(a) of the Internal Revenue Code. It is the opinion of the Employer
that the Plan meets the requirements for qualification under applicable
provisions of the Code and is, therefore, not subject to tax.
A participant is not subject to federal income taxes on the pre-tax
contribution, on the Company's matching contribution, or on the earnings of the
account until a withdrawal is made or distribution is received from the account.
During employment, a participant is entitled to make a withdrawal from the
account upon showing financial hardship.
F-6
<PAGE>
<TABLE>
<CAPTION>
Schedule 1
----------
EFTEC SAVINGS PLAN
Schedule of Investments Held
December 31, 1997
Identity of Issuer,
Borrower or Units/ Fair
Similar Party Description Shares Cost Value
- ------------------------ -------------------------------------- ---------------- -------------------- -------------------
<S> <C> <C> <C> <C>
Norwest Bank H.B. Fuller Common Stock Fund
Common Stock 71,647 $3,841,884 $3,546,527
Norwest Bank H.B. Fuller Common Stock Fund
Investment Fund 171,105 171,105 171,105
---------------- -------------------- -------------------
242,752 4,012,989 3,717,632
---------------- -------------------- -------------------
Norwest Bank Money Market Fund
Investment Fund 758,231 758,231 758,231
---------------- -------------------- -------------------
Norwest Bank Index Fund
Common Stock 51,119 1,905,988 2,097,399
Norwest Bank Index Fund
Cash - Non-Interest Bearing (878) (878) (878)
---------------- -------------------- -------------------
50,241 1,905,110 2,096,521
---------------- -------------------- -------------------
Norwest Bank Balanced Fund
Common Stock 36,758 868,201 945,792
Norwest Bank Balanced Fund
Cash - Non-Interest Bearing (2,048) (2,048) (2,048)
---------------- -------------------- -------------------
34,710 866,153 943,744
---------------- -------------------- -------------------
Norwest Bank Small Company Growth Fund
Common Stock 11,037 349,576 357,935
Norwest Bank Small Company Growth Fund
Cash - Non-Interest Bearing (1,674) (1,674) (1,674)
---------------- -------------------- -------------------
9,363 347,902 356,261
---------------- -------------------- -------------------
Total Investments at End of Plan Year $7,890,385 $7,872,389
==================== ===================
</TABLE>
Note: The above data is based upon information which has been certified as
complete and accurate by Norwest Bank.
F-7
<PAGE>
<TABLE>
<CAPTION>
Schedule 2
----------
EFTEC SAVINGS PLAN
Schedule of Reportable Transactions*
Year ended December 31, 1997
5% of series of transactions by security issue:
Number of Total dollar amount
------------------ ----------------------------------------- Net gain
Security issue Purchases Sales Purchases Sales or (loss)
- ------------------------------ --------- ----- ------------------ ------------------- -----------------
<S> <C> <C> <C> <C> <C>
H.B. Fuller Common Stock Fund,
Investment Fund 64 16 $317,778 $146,673 $ 0
Money Market Fund,
Investment Fund 60 7 $807,675 $ 49,445 $ 0
Index Fund,
Common Stock 61 7 $745,284 $ 91,308 $15,996
Balanced Fund,
Common Stock 56 7 $266,988 $ 74,800 $10,023
Small Company Growth Fund,
Common Stock 58 5 $226,162 $ 62,224 $10,241
</TABLE>
*Transactions or series of transactions in excess of 5% of the current value of
the Plan's assets as of December 31, 1997, as defined in Section 2520.103-6 of
the Department of Labor Rules and Regulations for Reporting and Disclosure
under ERISA.
Note: The above data is based upon information which has been certified as
complete and accurate by Norwest Bank.
Parties in Interest: Norwest Bank - Trustee; EFTEC - Administrator;
H.B. Fuller Company
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
EFTEC SAVINGS PLAN
EFTEC North America, L.L.C.
Dated: April 13, 1998 By: /S/ Todd Mestad
---------------
Todd Mestad
Director of Benefits
F-9
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 333-24703) of H.B. Fuller Company of our report dated
March 17, 1998 appearing on page F-1 of this Form 11-K.
Price Waterhouse LLP
Minneapolis, Minnesota
April 8, 1998
E-1
