<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended February 27, 1999
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)
Minnesota 41-0268370
(State or other jurisdiction of
incorporation or organization) (I.R.S. Employer Identification No.)
1200 Willow Lake Boulevard, Vadnais Heights, Minnesota 55110-5101
(Address of principal executive offices) (Zip Code)
(651) 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 14,010,644 as of March 31, 1999.
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H.B. FULLER COMPANY AND CONSOLIDATED SUBSIDIARIES
Consolidated Condensed Statements of Earnings
(Unaudited)
(In thousands except per share amounts)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
-----------------------------------------
February 27, February 28, %
1999 1998 Change
------------ ------------ ------
<S> <C> <C> <C>
Net sales $ 327,210 $ 310,656 5.3%
Cost of sales (222,636) (213,022) 4.5%
--------- ---------
Gross profit 104,574 97,634 7.1%
Selling, administrative and other expenses (81,949) (82,197) -0.3%
Non-recurring items (2,109) - *
--------- ---------
Operating earnings 20,516 15,437 32.9%
Interest expense (6,867) (5,209) 31.8%
Other income (expense), net (1,004) (829) 21.1%
--------- ---------
Earnings before income taxes and minority interests 12,645 9,399 34.5%
Income taxes (5,481) (3,835) 42.9%
Net earnings of consolidated subsidiaries
applicable to minority interests (78) 80 *
Earnings from equity investments 513 310 65.5%
--------- ---------
Net earnings 7,599 5,954 27.6%
Dividends on preferred stock (4) (4)
--------- ---------
Net earnings applicable to common stock $ 7,595 $ 5,950 27.6%
========= =========
Average number of common and common
equivalent shares outstanding:
Basic 13,772 13,675 0.7%
========= =========
Diluted 13,852 13,812 0.3%
========= =========
Net earnings per common share:
Basic $ 0.55 $ 0.44 25.0%
========= =========
Diluted $ 0.55 $ 0.43 27.9%
========= =========
Cash dividend per common share $ 0.200 $ 0.185 8.1%
========= =========
</TABLE>
* Change of 100% or more.
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<PAGE>
H.B. FULLER COMPANY AND CONSOLIDATED SUBSIDIARIES
Consolidated Condensed Balance Sheets
(In thousands)
(Unaudited)
February 27, November 28,
1999 1998
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 5,792 $ 4,605
Trade receivables 230,113 247,952
Allowance for doubtful accounts (4,745) (5,073)
Inventories 160,869 158,606
Other current assets 54,716 51,810
----------- -----------
Total current assets 446,745 457,900
Property, plant and equipment, net of
accumulated depreciation of $346,096
in 1999 and $343,514 in 1998 415,281 414,467
Deposits and miscellaneous assets 71,896 70,673
Other intangibles 33,373 34,717
Excess cost 67,736 68,412
----------- -----------
Total assets $ 1,035,031 $ 1,046,169
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 52,734 $ 59,282
Current installments of long-term debt 6,676 4,428
Accounts payable 122,702 129,694
Accrued expenses 62,959 71,725
Accrued non-recurring charges 9,953 13,215
Income taxes payable 2,094 6,816
----------- -----------
Total current liabilities 257,118 285,160
Long-term debt,
excluding current installments 313,631 300,074
Accrued pension cost 79,966 83,500
Deferred income taxes and other liabilities 22,508 19,833
Minority interest 16,360 16,198
Stockholders' equity:
Preferred stock 306 306
Common stock 14,002 13,983
Additional paid-in capital 31,768 31,140
Retained earnings 314,052 309,275
Accumulated other comprehensive income (6,981) (5,306)
Unearned compensation (7,699) (7,994)
----------- -----------
Total stockholders' equity 345,448 341,404
----------- -----------
Total liabilities and stockholders' equity $ 1,035,031 $ 1,046,169
=========== ===========
See accompanying Notes to Consolidated Condensed Financial Statements.
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<PAGE>
H.B. FULLER COMPANY AND CONSOLIDATED SUBSIDIARIES
Consolidated Condensed Statement of Cash Flows
(Unaudited)
(In thousands)
Thirteen Weeks Ended
-------------------------
February 27, February 28,
1999 1998
------------ ------------
Cash flows from operating activities:
Net earnings $ 7,599 $ 5,954
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 12,536 11,070
Pension costs 1,901 2,238
Deferred income tax (973) 2,997
Non-recurring expenses (1,847) --
Gain on sale of businesses in the
restructuring plan (2,401) --
Other items (3,084) (4,468)
Change in current assets and liabilities:
Accounts receivable 11,059 5,202
Inventory (2,461) (12,198)
Prepaid assets (2,437) (4,612)
Accounts payable (4,617) (7,459)
Accrued expense (3,005) (12,295)
Accrued non-recurring charges (3,262) --
Income taxes payable 3,618 (1,841)
-------- --------
Net cash provided by(used by)
operating activities 12,626 (15,412)
Cash flows from investing activities:
Purchased property, plant and equipment (14,367) (12,922)
Purchased business, net of cash acquired (4,483) (35,139)
-------- --------
Net cash used in investing activities (18,850) (48,061)
Cash flows from financing activities:
Increase in long-term debt 56,130 50,338
Current installments and payments of
long-term debt (38,389) (14,861)
Notes payable (6,201) 32,883
Dividends paid (2,803) (2,564)
Other (1,276) (1,417)
-------- --------
Net cash provided by financing activities 7,461 64,379
Effect of exchange rate changes on cash (50) (70)
-------- --------
Net change in cash and cash equivalents 1,187 836
Cash and cash equivalents at beginning of year 4,605 2,710
-------- --------
Cash and cash equivalents at end of period $ 5,792 $ 3,546
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest expense (net of amount capitalized) $ 12,089 $ 9,218
Income taxes $ 1,777 $ 2,730
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.
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<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 27, 1999 and November 28,
1998, the results of its operations for the thirteen weeks ended February
27, 1999 and February 28, 1998 and its cash flows for the thirteen weeks
ended February 27, 1999 and February 28, 1998.
2. The results of operations for the thirteen week period ended February 27,
1999 are not necessarily indicative of the results to be expected for the
full year.
3. The composition of inventories is presented below:
February 27, 1999 November 28, 1998
----------------- -----------------
Raw materials $ 69,923 $ 73,126
Finished goods 101,349 95,862
LIFO reserve (10,403) (10,382)
--------- --------
$ 160,869 $158,606
========= ========
4. 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 or debt. Market value gains and losses are recognized, and the
resulting credit or debit offsets foreign exchange gains or losses on those
receivables, payables or debt. At February 27, 1999, the aggregate contract
value of instruments used to sell 4,219 pound sterling, 4,320 deutsche
marks, and $4,264 to buy foreign currency (primarily 25,437 Dutch guilders
and 2,800 deutsche marks) was $14,305. The contracts mature between March
23, 1999 and November 20, 2000.
6. The carrying amounts and estimated fair values of the Company's significant
other financial instruments at February 27, 1999, are as follows:
Carrying Fair
Amount Value
-------- --------
Cash and short-term investments $ 5,792 $ 5,792
Notes payable 52,734 52,734
Long-term debt 320,307 325,980
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.
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<PAGE>
7. During the first quarter, the Company acquired an adhesive product line in
Australia for $4,483 in cash. Assets acquired include the excess of cost
over net assets acquired of $1,629. The acquisition was accounted for as a
purchase and the accompanying Consolidated Financial Statements include the
results of this product line since the purchase date. The historical
results of operations on a pro forma basis are not presented as the effects
of the acquisition was not material.
8. As required, the Company adopted Financial Accounting Standard No. 130
"Reporting Comprehensive Income" during the first quarter. Other
comprehensive income:
Foreign currency translation adjustment ($ 1,675)
--------
Other comprehensive income ($ 1,675)
========
9. During the first quarter of 1999, the Company recorded the following
amounts in the income statement in connection with the restructuring plan
implemented in 1998 and discussed in the 1998 Form 10-K.
North Latin Asia/
America Europe America Pacific Total
------- ------ ------- ------- -------
Severance (net of
pension curtailment) $ 9 $2,931 $ 17 $ 20 $ 2,977
Impairment of
property, plant and
equipment -- -- -- 7 7
Contracts/leases -- 433 13 84 530
Consulting 243 191 20 -- 454
Other 174 201 133 34 542
---- ------ ---- ------- -------
Subtotal 426 3,756 183 145 4,510
Less: Gain on the
sale of property and
plant -- -- -- (2,401) (2,401)
---- ------ ---- ------- -------
Total $426 $3,756 $183 $(2,256) $ 2,109
==== ====== ==== ======= =======
Included in the $4,510 restructuring charge for the quarter are $6,357 of
cash costs, $7 non-cash related costs and a $1,854 pension curtailment
benefit.
North America charges relate to a manufacturing plant closing in the
quarter and reduced layers of management. Latin American charges relate to
two manufacturing plants closed in the quarter (three plants will be closed
during the balance of 1999). The European charges relate to announced plant
closures in three countries (one announced in the first quarter of 1999 and
all to be closed in the second quarter of 1999) and to severance cost
associated with the reduction in layers in management. In Asia/Pacific, the
costs are related to a manufacturing plant closure, sales offices and
warehouses closed, the group office relocation and layers of management
which are being reduced. These costs in Asia/Pacific were more than offset
by a gain on the sale of the property and plant of the closed plant.
There was a reduction of census of 227 employees in the first quarter of
1999 as a result of the restructuring plan. An additional 299 employees
have been notified of severance over the balance of 1999 with severance
costs accrued.
The following table is a detailed reconciliation of the restructuring
reserve balance from November 28, 1998 to February 27, 1999. The
reconciliation reflects the accruals recorded and payments applied during
the quarter.
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<PAGE>
Non-recurring charge reserve:
North Latin Asia/
America Europe America Pacific Total
------- ------ ------- ------- -------
Balance:
November 28, 1998 $1,992 $7,994 $3,141 $ 88 $13,215
Accruals in first qtr.,
1999:
Severance 1,058 3,736 17 20 4,831
Contracts/leases -- 433 13 84 530
Consulting 243 191 20 -- 454
Other 174 201 133 34 542
Payments in first
qtr., 1999:
Severance (703) (5,600) (2,082) (108) (8,493)
Contracts/leases -- (33) (13) (84) (130)
Consulting (243) (191) (20) -- (454)
Other (174) (201) (133) (34) (542)
------ ------- ------- ----- -------
Balance:
February 27, 1999 $2,347 $ 6,530 $ 1,076 $ -- $ 9,953
====== ======= ======= ===== =======
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<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 related 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 1999 increased $16,554 or 5.3 percent, when
compared to 1998. The sales increase was the result of 3.1 percentage points
from increased volume and product mix, a net increase of 3.1 percentage points
from acquisitions and divestitures, an increase of 0.6 percentage points
resulting from a weakening of the U.S. dollar and a negative 1.5 percentage
points from reduced pricing.
A comparison of sales increases by operating area is as follows:
Thirteen Weeks Ended
February 27, 1999
February 28, 1998
--------------------
Operating Area
- --------------
North America $3,059 2%
Latin America 895 2%
Europe 10,462 18%
Asia/Pacific 2,138 10%
-----
Total $16,554 5%
=======
Net earnings for the quarter increased from $5,954 in 1998 to $7,599 in 1999.
The earnings in 1999 were impacted by a $2,109 ($1,689 after tax) non-recurring
charge.
During the first quarter of 1999, the Company recorded the following amounts in
the income statement in connection with the restructuring plan implemented in
1998 and discussed in the 1998 Form 10-K.
North Latin Asia/
America Europe America Pacific Total
------- ------ ------- ------- -------
Severance (net of pension
curtailment) $ 9 $2,931 $ 17 $ 20 $ 2,977
Impairment of property,
plant and equipment -- -- -- 7 7
Contracts/leases -- 433 13 84 530
Consulting 243 191 20 -- 454
Other 174 201 133 34 542
---- ------ ---- ------- -------
Subtotal 426 3,756 183 145 4,510
Less: Gain on the sale of
property and plant -- -- -- (2,401) (2,401)
---- ------ ---- ------- -------
Total $426 $3,756 $183 $(2,256) $ 2,109
==== ====== ==== ======= =======
Included in the $4,510 restructuring charge for the quarter are $6,357 of cash
costs, $7 non-cash related costs and a $1,854 pension curtailment benefit.
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<PAGE>
North America charges relate to a manufacturing plant closing in the quarter and
reduced layers of management. Latin American charges relate to two manufacturing
plants closed in the quarter (three plants will be closed during the balance of
1999). The European charges relate to announced plant closures in three
countries (one announced in the first quarter of 1999 and all to be closed in
the second quarter of 1999) and to severance cost associated with the reduction
in layers in management. In Asia/Pacific, the costs are related to a
manufacturing plant closure, sales offices and warehouses closed, the group
office relocation and layers of management which are being reduced. These costs
in Asia/Pacific were more than offset by a gain on the sale of the property and
plant of the closed plant.
There was a reduction of census of 227 employees in the first quarter of 1999 as
a result of the restructuring plan. An additional 299 employees have been
notified of severance over the balance of 1999 with severance costs accrued.
The following table is a detailed reconciliation of the restructuring reserve
balance from November 28, 1998 to February 27, 1999. The reconciliation reflects
the accruals recorded and payments applied during the quarter.
Non-recurring charge reserve:
North Latin Asia/
America Europe America Pacific Total
------- ------ ------- ------- -------
Balance:
November 28, 1998 $ 1,992 $ 7,994 $ 3,141 $ 88 $13,215
Accruals in first qtr.,
1999:
Severance 1,058 3,736 17 20 4,831
Contracts/leases -- 433 13 84 530
Consulting 243 191 20 -- 454
Other 174 201 133 34 542
Payments in first qtr.,
1999:
Severance (703) (5,600) (2,082) (108) (8,493)
Contracts/leases -- (33) (13) (84) (130)
Consulting (243) (191) (20) -- (454)
Other (174) (201) (133) (34) (542)
-------- -------- ------- ----- -------
Balance:
February 27, 1999 $ 2,347 $ 6,530 $ 1,076 $ -- $ 9,953
======== ======== ======= ===== =======
In North America, the 2% first quarter sales increase was composed of 3
percentage points relating to increased volume and changes in product mix and a
negative one percentage point from pricing and currency. The Adhesives, Sealants
and Coatings Group had a one percentage point increase in sales with a 4
percentage point increase from volume and mix being partially offset by a
combined negative 3 percentage point decrease resulting from pricing, currency
and divestiture of the glue gun and stick business. Paper converting sales
continue to be depressed from the prior year due to reduced exports by the
Company's customers (primarily to Asia/Pacific area). In the Specialty Group,
sales increased 4% from the same period in the prior year. The primary growth in
sales occurred in TEC Specialty Products, Inc., where significant growth
occurred and Linear Products, Inc., with strong sales. Foster Products
Corporation had sales that approximated the sales of 1998 and Global Coatings
Division experienced a moderate decrease in sales from the prior year. The
Automotive Group had a 2% increase over prior year sales. North American
operating earnings, before the non-recurring charge, grew at a rate of 15.7%
increasing from $10,428 to $12,064.
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<PAGE>
Latin American first quarter 1999 sales increased 2% from 1998. The increase in
sales is composed of 6 percentage points relating to increased volume and
changes in product mix partially offset by a 4 percentage point decrease in
pricing. Latin American operating earnings, before the non-recurring charge,
increased when compared to 1998 from $4,306 to $4,412. The increase in operating
income was the result of reduced operating expenses from tight spending controls
and the restructuring efforts in the region. Gross profits were lower than the
previous year from the impact of both currency devaluations and recession in
various countries, particularly Brazil and Ecuador, and the continuing impact of
Hurricane Mitch in Central America.
In Europe, the 18% first quarter 1999 sales increase was primarily the result of
a combined impact of 18 percentage points resulting from first and second
quarter 1998 United Kingdom acquisitions and the divestiture of the wax business
in the fourth quarter of 1998. A negative 5 percentage point impact of decreased
volume and mix was offset by a positive 5 percentage point impact of the
weakening of the U.S. dollar and pricing. Operating income, before the
non-recurring charge, increased from $1,348 in 1998 to $4,770 in 1999. The
improvement was the result of the two acquisitions, improved gross margins,
operating expense control and restructuring.
Asia/Pacific sales increased 10% from the same period last year. The increase
was the result of a 15 percentage point increase in volume and mix and a one
percentage point increase from a weakening of the U.S. dollar. The increase was
offset by a negative 4 percentage points pricing and a combined negative 2
percentage point impact of a fourth quarter 1998 acquisition in New Zealand, a
first quarter 1999 acquisition in Australia and a second quarter 1998
divestiture in New Zealand. Operating results, before the non-recurring charge
(benefit), improved from an operating loss of ($645) in 1998 to operating income
of $1,379 in 1999. The improvement is primarily the result of the restructuring
efforts in the area.
Cost of sales for the first quarter increased 4.5% ($9,614) over the same
quarter in 1998. Consolidated gross profits, as a percent of sales, increased
from 31.43% in 1998 to 31.96% in 1999. The improvement in gross profit was a
result of lower raw material costs and the restructuring effort. Improvement in
gross profit was particularly strong in the European and Asia/Pacific areas.
Selling, administrative and other expenses for the quarter were down 0.3% ($248)
when compared to the prior year. This category of expense, as a percent of
sales, decreased from 26.46% in 1998 to 25.05% in 1999. The restructuring effort
and tight expense control were the reasons for this decrease in expense.
Interest expense of $6,867 increased $1,658 from the expense of the first
quarter of 1998. This was mainly the result of higher overall debt levels to
fund acquisitions.
Income taxes for the first quarter of 1999 increased $1,646 (42.9%) when
compared to the first quarter of 1998 primarily as a result of increased
earnings. The effective tax rate is expected to be reduced to 40.0 percent in
1999 compared to 40.8 percent in 1998, excluding the low tax benefit provided
for a portion of the non-recurring charges incurred in countries where no tax
benefit is available.
Liquidity and Capital Resources
The cash flows as presented in this section have been calculated by comparison
of the Consolidated Condensed Balance Sheet at February 27, 1999 and November
28, 1998 and February 28, 1998 and November 29, 1997.
During the first quarter of 1999, the Company generated $12,626 of cash to
finance operations as compared to a use of $15,412 of cash in the first quarter
of 1998. Compared to last year, operating working capital decreased as a result
of reduced inventory, reduced accounts receivable and less of a reduction in
accrued expense, primarily due to profit-sharing paid in the first quarter of
1998.
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<PAGE>
Working capital was $189,627 at February 27, 1999 compared to $172,740 at
November 28, 1998. The current ratio at February 27, 1999 was 1.7 compared to
1.6 at November 28, 1998. The number of days sales in trade accounts receivable
was 62 days at February 27, 1999 compared to 59 days sales at February 28, 1998.
The average days sales in inventory on hand was at 63 days equal to 63 days
sales at February 28, 1998.
The Company's long-term debt to total capitalization ratio was 47.6% at February
27, 1999 compared to 46.8% at November 28, 1998. The primary reason for the
increase in this ratio was the funding of a European second quarter 1998
acquisition.
Capital expenditures for property, plant and equipment of $14,367 in first
quarter 1999 were primarily for construction of manufacturing capacity in Europe
to support the restructuring effort, 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.
Impact of the Year 2000 Issue
The Company's Year 2000 Project Office (consisting of information technology
("IT") personnel) has established a three-phase program to address the Year 2000
Issue. The three phases consist of (a) an assessment phase, (b) an analysis and
resolution strategy phase and (c) a remediation and testing phase. The readiness
program focuses on the Company's IT as well as non-IT systems (which systems
contain embedded technology in manufacturing or process control equipment
containing microprocessors or similar circuitry).
The assessment phase, during which the Year 2000 Project Office attempted to
identify all hardware and software that affect the Company's operations, has
been completed with respect to most of the Company's operations. Based on the
results of the assessment phase, the Company has determined that its primary
hardware and operating system software used in North American operations is Year
2000 ready. In addition, the Company's internal laboratory, regulatory,
financial and enterprise resource planning systems for North America are
compliant. The Company's Year 2000 Project Office has determined that the
Company will need to update or replace certain other hardware and software so
that its computer systems will properly utilize dates after December 31, 1999.
Outside the United States, the Company is addressing readiness issues on a
region-by-region basis. The Company is in the analysis and resolution strategy
phase in certain locations and in the remediation and testing phase in other
locations. The Company has a timeline for completing all internal Year 2000
remediation projects. The Company currently anticipates the majority of these
projects will be completed prior to June 30, 1999. Remediation projects in
certain smaller international locations may not be completed until September,
1999.
The Company has also begun assessing Year 2000 readiness issues relating to
companies with which it has third-party outsourcing relationships on a global
basis, such as a financial institution administering employee benefit plans,
telecommunications providers and health care providers. The Company has
requested assurances from its significant suppliers that they are addressing the
Year 2000 Issue and that products purchased by the Company from such suppliers
will be functioning properly in the Year 2000. The Company will continue to
assess supplier readiness issues. In addition, the Company is communicating with
its major customers regarding the Company's Year 2000 readiness efforts.
However, it is impossible to fully assess the potential consequences in the
event service interruptions from suppliers occur or in the event that there are
disruptions in such infrastructure areas as utilities, communications,
transportation, banking and government.
In October of 1998, the Company formed a Year 2000 Task Force (consisting of
representatives from its financial, IT, legal and risk management departments
and from its key business units) to address internal and external Year 2000
Issues.
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<PAGE>
The Company incurred Year 2000 readiness costs of approximately $2,000 over a
two-year period ending November 28, 1998. The current total estimated costs to
complete Year 2000 readiness efforts in 1999 is $1,200 to $1,500. In recent
years, the Company has replaced certain of its financial and operating systems.
These systems have not required modifications to address the Year 2000 Issue,
and, as a result, the Company's Year 2000 costs have been relatively low.
Estimates of Year 2000 costs are based on numerous assumptions, and there can be
no assurance that the estimates are correct or that the actual costs will not be
greater than anticipated.
The Company's most reasonably likely worst case Year 2000 Issue scenario is a
potential inability to obtain raw materials from suppliers in a timely manner,
due either to a supplier's inability to manufacture the product or ship it. In
such event, the Company many experience a delay in its ability to manufacture
and deliver products when ordered by customers. The Company is currently
evaluating its alternatives to mitigate the effect of such a scenario, if it
occurs.
The Company is developing contingency plans to address other potential failures
or delays due to the Year 2000 Issue. The Company is in the process of
developing a plan for the "Y2K transition". This will be a comprehensive plan
for managing the actual transition over the last week of December, 1999 and the
first week of January, 2000.
Based on its assessments and current knowledge, the Company believes it will
not, as a result of the Year 2000 Issue, experience any material disruptions in
internal manufacturing processes, information processing or interfaces with
major customers, or with processing orders and billing. However, if certain
third-party providers, such as providers of electricity, water or telephone
service, experience difficulties resulting in disruption of service to the
Company, a shutdown of the Company's operations at individual facilities could
occur for the duration of the disruption. Assuming no major disruption in
service from utility companies or other critical third-party providers, the
Company believes that it will be able to manage its total Year 2000 transition
without any material effect on the Company's results of operations or financial
condition.
Safe Harbor Statement under the Private Securities Litigation Act of 1995
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 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 it 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; the conversion to the Euro currency by European Community member states;
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.
-12-
<PAGE>
PART II. OTHER INFORMATION
Item 6.
Exhibits and reports on Form 8-K
(a) Exhibits to Part I
27 Financial Data Schedule
Exhibits to Part II
10(a) Performance Unit Plan
10(b) Directors' Deferred Compensation Plan as Amended February 10, 1999
(b) Reports on Form 8-K. No reports on Form 8-K were filed for the thirteen
weeks ended February 27, 1999.
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 12, 1999 /s/ Jorge Walter Bolanos
------------------------------------
Jorge Walter Bolanos
Senior Vice President, Treasurer and
Chief Financial Officer
-13-
<PAGE>
EXHIBIT INDEX
Exhibit Number
10(a) Performance Unit Plan
10(b) Directors' Deferred Compensation Plan as Amended February 10, 1999
27 Financial Data Schedule
<PAGE>
Exhibit 10(a)
H.B. FULLER COMPANY
PERFORMANCE UNIT PLAN
Section 1. Purpose.
This Performance Unit Plan (the "Plan") is adopted by H.B. Fuller Company
(the "Company"). The purposes of the Plan are to provide incentives and rewards
to officers and employees of the Company or an affiliate of the Company who have
significant responsibility for the success and growth of the Company and to
assist the Company in attracting, motivating and retaining qualified officers
and employees on a competitive basis.
Section 2. Definitions.
As used in this 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 Agreement" shall mean any written agreement, contract or other
instrument or document evidencing any Performance Units granted under this Plan.
"Committee" shall mean the Compensation Committee of the Board of Directors
of the Company.
"Participant" shall mean any employee or officer of the Company or any
Affiliate whom the Committee determines should be granted Performance Units
under this Plan.
"Performance Objectives" shall mean individual or Company performance goals
as determined by the Committee for a Performance Period and as set forth in an
Award Agreement.
"Performance Period" shall mean a period of time designated by the
Committee for achievement of the Performance Objectives and as set forth in an
Award Agreement.
"Performance Unit" shall mean any unit granted under this Plan, denominated
in a U.S. dollar amount and evidencing the right to receive a cash payment or
payments at some future date or dates, as determined by the Committee, and as
set forth in an Award Agreement.
Section 3. Administration.
This Plan shall be administered by the Committee. Subject to the terms of
this Plan and applicable law, the Committee shall have full power and authority
to: (i) determine when Performance Units will be granted; (ii) select the
Participants; (iii) determine the number of Performance Units to be granted to
each Participant under this Plan; (iv) determine the terms and conditions of the
Performance Units and the Award Agreement; (v) determine whether the Performance
Objectives and other conditions to the payment of the Performance Units have
been met; (vi) determine whether payments of the Performance Units will be made
at the end of the Performance Period or deferred; (vii) determine whether
Performance Units or payment of Performance Units shall be reduced or
eliminated; (viii) amend or waive the terms and conditions of any Performance
Units or Award Agreement; (ix) determine whether, to what extent and under what
circumstances Performance Units may be canceled, forfeited or suspended; (x)
interpret and administer this Plan and any instrument or agreement relating to
this Plan; (xi) establish, amend, suspend or waive such rules and regulations
and appoint such agents as it shall deem appropriate for the proper
administration of this Plan; and (xii) make any other determination and take any
other action that the Committee deems necessary or desirable for the
administration of this Plan. Unless otherwise expressly provided in this Plan,
<PAGE>
all designations, determinations, interpretations and other decisions under or
with respect to this Plan or any Award Agreement 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 Agreement, and any employee of the Company or any Affiliate.
Section 4. Performance Units.
Section 4.1. Grants. The Committee is hereby authorized to grant
Performance Units to Participants subject to the terms of this Plan and any
applicable Award Agreement. A Performance Unit granted under this Plan (i)
shall be denominated in a U.S. dollar amount and payable in cash and (ii) shall
confer on the holder thereof the right to receive a payment or payments at some
future date or dates upon achievement of the Performance Objectives for a
Performance Period. The number and value of any Performance Units shall be
determined by the Committee. A Participant will have no rights with respect to
Performance Units granted to such Participant unless and until an Award
Agreement shall have been duly executed on behalf of the Company and by the
Participant.
Section 4.2. Performance Period. A person may be a Participant for more
than one Performance Period, each Performance Period having its own Performance
Objectives. Separate Performance Periods may overlap or run concurrently.
Section 4.3. Forfeiture Prior to Payment. Except as otherwise determined
by the Committee, upon termination of employment prior to completion of the
Performance Period, all Performance Units credited to the Participant for such
Performance Period shall be forfeited.
Section 5. Amendment and Termination; Adjustments.
Section 5.1. Amendment or Termination of the Plan. The Committee may
amend, alter, suspend, discontinue or terminate this Plan at any time and for
any reason, but no such action shall adversely affect the rights of a
Participant under an outstanding Award Agreement without the consent of the
Participant or holder or beneficiary thereof.
Section 5.2. Amendments to Award Agreements. The Committee may not amend,
alter, suspend, discontinue or terminate any outstanding Award Agreement, if
such action would adversely affect any rights with respect to an outstanding
Award Agreement, without the consent of the Participant or holder or beneficiary
thereof.
Section 6. General Provisions.
Section 6.1. Income Tax Withholding. In order to comply with all
applicable income, social security, payroll or other tax laws or other
regulations, the Company may take such action as it deems appropriate to ensure
that all applicable income, social security, payroll or other taxes are withheld
or collected from the Participants.
Section 6.2. Performance Units Not Transferable. Performance Units shall
not be transferable by a Participant other than by will or by the laws of
descent and distribution. Performance Units may not 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.
Section 6.3. No Rights to Performance Units. No Participant or other
person shall have any claim to be granted Performance Units under this Plan, and
there is no obligation for uniformity of treatment of Participants under this
Plan. Terms and conditions of Award Agreements need not be the same with
respect to different Participants or with respect to different Performance
Periods.
Section 6.4. No Cash Consideration for Awards. Performance Units are
granted for no cash consideration.
2
<PAGE>
Section 6.5. No Limit on Other Compensation Arrangements. Nothing
contained in this 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 6.6. No Right to Employment. The grant of Performance Units 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 Plan, unless otherwise expressly provided in this Plan or
in any Award Agreement.
Section 6.7. 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 Plan and any rules and regulations
relating to this Plan.
Section 6.8. Severability. If any provision of this Plan or any Award
Agreement is or becomes or is deemed to be invalid, illegal or unenforceable in
any jurisdiction 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 Plan or the
Award Agreement, such provision shall be stricken as to such jurisdiction or
Award Agreement, and the remainder of this Plan or any such Award Agreement
shall remain in full force and effect.
Section 6.9. No Trust or Fund Created. Neither this Plan nor any Award
Agreement shall create or be construed to create a trust or separate fund of any
kind or a fiduciary relationship between the Company or any Affiliate and a
Participant or any other person. To the extent that any person acquires a right
to receive payments from the Company or any Affiliate pursuant to an Award
Agreement, such right shall be no greater than the right of any unsecured
general creditor of the Company or any Affiliate.
Section 6.10. Headings. Headings are given to the Sections and
subsections of this 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 Plan or any provision thereof.
Section 6.11. Effective Date of Performance Unit Plan. This Plan shall be
effective as of the date of its adoption by the Committee.
3
<PAGE>
Exhibit 10(b)
H.B. FULLER COMPANY
DIRECTORS' DEFERRED COMPENSATION PLAN
As Amended February 10, 1999
Section 1. Establishment. H.B. Fuller Company hereby establishes the
H.B. FULLER COMPANY DIRECTORS' DEFERRED COMPENSATION PLAN" (formerly known as
the H.B. FULLER COMPANY DIRECTORS' STOCK PLAN) for Eligible Directors of
Company.
Section 2. Effective Date. This Plan was originally approved by the Board
of Directors on December 1, 1988. The Plan was approved by shareholders on
April 20, 1989. The Plan was most recently amended on February 10, 1999.
Section 3. Purpose. The purpose of the Plan is to provide Eligible
Directors with a means of expressing their commitment to the Company by
subjecting their deferred retainer fees and meeting fees to the stock market
performance of Company's Stock.
Section 4. Definitions.
(a) Bookkeeping Reserve Account. The term "Bookkeeping Reserve
Account" shall have the meaning given in Section 6 of the Plan.
(b) Company. The term "Company" shall mean H.B. Fuller Company, a
Minnesota corporation, and its successors and assigns.
(c) Election Agreement. The term "Election Agreement" shall mean each
and every "Election Agreement" executed by an Eligible Director and
delivered to Company hereunder, the form of which is attached to the Plan
as Exhibit A and is incorporated by reference herein.
(d) Eligible Director. The term "Eligible Director" shall mean any
present or future director of Company who is not an employee of Company or
any subsidiary of Company.
(e) Market Price. The term "Market Price" shall mean the average of
the highest and lowest prices per share of the Stock as reported on the day
of the required calculation or, if there were no Stock transactions on such
day, on the next preceding day on which there were Stock transactions.
(f) Meeting Fee. The term "Meeting Fee" shall mean any amounts that
would have been paid to an Eligible Director during a calendar year with
respect to attendance at a meeting of the Company's Board of Directors or a
committee thereof had deferral for such year not been timely elected. In no
event does the term "Meeting Fee," include any per diem amounts paid with
respect to Board or committee meeting attendance.
(g) Participating Director. The term "Participating Director" shall
mean an Eligible Director who has executed and delivered an Election
Agreement to Company.
(h) Payment Date. The term "Payment Date" shall mean the earliest to
occur of the following dates:
<PAGE>
(i) the later of the date of the Participating Director's
Retirement or the date (if any) specified in the Participating
Director's Election Agreement; or
(ii) the Participating Director's death; or
(iii) the Participating Director's total and permanent
disability; or
(iv) the date of a Potential Change in Control.
(i) Plan. The term "Plan", shall mean Company's Directors' Deferred
Compensation Plan as it may be amended from time to time.
(j) Potential Change in Control. The term "Potential Change in
Control" shall mean the earliest to occur of: (i) the close of business on
the date of public announcement by Company or any other person that a
person (other than Company, a subsidiary of Company or an employee benefit
plan of Company or such subsidiary) has become, after the effective date of
the Plan, the beneficial owner (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934) of 19% or more (or the lowest percentage,
if lower than 19%, set in any amendment to Company's Rights Agreement dated
as of July 17, 1986 with First Trust Company, Inc.) of the voting power of
all securities of Company then outstanding generally entitled to vote for
the election of directors of Company; or (ii) the close of business on the
date of the commencement of, or first public announcement of the intent to
commence, a tender or exchange offer by any person (other than Company, a
subsidiary of Company or an employee benefit plan of Company or such
subsidiary), if upon consummation thereof, such person would be the
beneficial owner of 30% or more (or the lowest percentage, if lower than
30%, set for such event in any amendment to the aforesaid Rights Agreement)
of the voting power of all securities of Company then outstanding generally
entitled to vote for the election of directors of Company; or (iii) the
date on which individuals who constitute Company's Board of Directors on
the effective date of the Plan (the "Incumbent Board") cease for any reason
to constitute at least a majority thereof, provided that any person
becoming a director subsequent to such effective date whose election, or
nomination for election by Company's shareholders, was approved by a vote
of at least three-quarter (3/4) of the directors comprising the Incumbent
Board (either by a specific vote or by approval of the proxy statement of
Company in which such person is named as a nominee for director, without
objection to such nomination) shall be, for purposes of this clause (iii)
considered as though such person were a member of the Incumbent Board.
(k) Retainer Fee. The term "Retainer Fee" shall mean any of the
following amounts with respect to a calendar year: (i) two-thirds of the
retainer fee amount that would be paid to a Participating Director in March
of the calendar year in question had deferral for such year not been timely
elected such two-thirds amount representing retainer fee amounts earned in
January and February of such year: (ii) the entire retainer fee amount that
would be paid to a Participating Director in June, September and December
of the calendar year in question had deferral for such year not been timely
elected; and (iii) one-third of the retainer fee amount that would be paid
to a Participating Director in March of the next calendar year had deferral
for the previous calendar year not been timely elected, such one-third
amount representing the retainer fee amount earned in December of such
previous calendar year.
2
<PAGE>
(l) Retirement. The term "Retirement" shall mean the voluntary or
involuntary resignation of a director, the removal of a director with or
without cause or the conclusion of a director's term of office where the
director is not reelected by shareholders of the Company to a succeeding
term.
(m) Stock. The term "Stock" shall mean the par value of $1.00 Common
Stock of Company.
Section 5. Directors' Elections. Each Eligible Director shall be given an
opportunity by Company on an annual basis to defer receipt of all or a
percentage of the Retainer Fee and Meeting Fees which such Eligible Director has
the opportunity to earn during the next succeeding calendar year through service
as a director of Company.
In order to Participate in the Plan for a particular calendar year, an
Eligible Director must elect in writing to participate and such election must be
effective before the beginning of the calendar year to which the election
relates. To make an effective election, a properly completed and executed
Election Agreement must be received by Company at the address specified on such
Election Agreement.
Section 6. Bookkeeping Reserve Account.
(a) Establishment of Account. Company shall establish and maintain a
Bookkeeping Reserve Account for each Participating Director. The
Bookkeeping Reserve Account shall reflect all entries required to be made
pursuant to the terms and conditions of the Participating Director's
Election Agreement. There shall be a separate accounting for each Election
Agreement made by each Participating Director.
(b) Credits to Account. Company shall credit to a Participating
Director's Bookkeeping Reserve Account a number (to four decimal places) of
units that is equal to 110% of the amount of the Participating Director's
Retainer Fee and Meeting Fees deferred pursuant to an Election Agreement as
periodically earned by Director divided by the Market Price on the day upon
which such amounts are earned. For this purpose, the amounts of a
Participating Director's Retainer Fee are deemed earned on March 1 (January
and February amounts), June 1 (March through May amounts), September 1
(June through August amounts), December 1 (September through November
amounts) and the next March 1 (December amount). Meeting Fees are deemed
earned when they would have otherwise been paid if a deferral had not been
elected.
Company shall credit to the Bookkeeping Reserve Account, on each day
that Company declares a cash dividend to holders of the Stock, that number
(to four decimal places) of units that is equal to the total number of
units in the Participating Director's Bookkeeping Reserve Account on the
declaration date for such dividend multiplied by the cash dividend per
share of Stock divided by the Market Price on the declaration date for such
dividend. The number of units credited to a Bookkeeping Reserve Account
shall be adjusted appropriately by Company in the event of any change in
Stock by reason of stock dividends, split-ups, recapitalizations,
combinations, exchanges of shares and other like capital changes, but no
adjustment shall be required by reason of any sales of shares of Stock by
Company at any price, whether below, at or above Market Price, and whether
by or pursuant to warrant, option, right, conversion right or privilege or
otherwise and a Participating Director shall have no rights as a holder of
Stock unless and until a certificate for shares of stock is issued by
Company.
3
<PAGE>
Section 7. Payment of Account Value.
(a) General. Company shall, with respect to each Bookkeeping Reserve
Account for each Participating Director, cause to be delivered to such
Participating Director (or any applicable alternate payee, as determined
under the Plan or the applicable Election Agreement) on or promptly after
the applicable Payment Date, the Payment Date value of such Bookkeeping
Reserve Account in the form of shares of Stock pursuant to the express
terms and conditions of the Plan and the applicable Election Agreement.
(b) Disability. If a Payment Date occurs by reason of a determination
by Company that the Participating Director has become totally and
permanently disabled, and if the disability is due to mental incapacity,
the shares of Stock deliverable under the Plan and the applicable Election
Agreement shall be issued in the name of and delivered to the Participating
Director's legally appointed personal representative. If no such
representative has been appointed, then delivery shall be in the name of
and to the Participating Director's spouse, or if the Participating
Director is then unmarried, then such shares of Stock shall be held until
the persons who would be entitled thereto if the Participating Director
were then to die intestate make proper claim of Company for such shares of
Stock.
(c) Death. If a Payment Date occurs because the Participating Director
shall die, the shares of Stock required to be delivered under the Plan and
the applicable Election Agreement shall be promptly issued in the name of
and delivered to the Participating Director's beneficiary (or
beneficiaries) as designated in the applicable Election Agreement, or, if
none are so designated, in the name of and to the legally appointed
personal representative of the Participating Director's estate. If no legal
proceedings for such appointment have been instituted within sixty days
after receipt by Company of notice of the Participating Director's death,
such delivery shall be in accordance with the last sentence of Section 7(b)
above.
Section 8. Administration. Directors of Company who are not Eligible
Directors shall be solely responsible for the administration of the Plan but may
delegate any portion of such responsibility that they determine to be
appropriate. To the extent consistent with the terms of the Plan, such directors
shall have the power to interpret any Plan provision, to prescribe, amend and
rescind rules and regulations relating to the Plan and make all other
determinations that it deems necessary or advisable to administer the Plan. Such
directors shall be called the Directors' Deferred Compensation Plan Committee.
Section 9. "Top Hat" Plan. The Plan is intended to be, for purposes of
Titles I and IV of the Employee Retirement Income Security Act of 1974, as
amended, an unfunded plan for the benefit of a selected group of non-employee
management persons.
Section 10. Other Benefits. Except to the extent specifically provided in
Company's Retirement Plan for Directors or any other plan or arrangement
maintained or sponsored by Company, the Plan benefits to Eligible Directors
(other than Retainer Fees and Meeting Fees) shall not be deemed to be
compensation for the purpose of computing benefits under such Retirement Plan
for Directors or other plan or arrangement.
Section 11. Status Of Account. Company shall have full and unrestricted
use of all property or amounts payable pursuant to the Plan, and title to and
beneficial ownership of any assets which
4
<PAGE>
Company may earmark to pay the amounts hereunder shall at all times remain in
Company and no Eligible Director shall have any property interest whatsoever in
any specific assets of Company. The Bookkeeping Reserve Account is not intended
to be a trust account or escrow account for the benefit of a Participating
Director or any other person or an asset segregation for the benefit of a
Participating Director or any other person. The sole right of a Participating
Director, or a Participating Director's heirs or personal representatives, is a
right as an unsecured general creditor of Company to claim any shares of Stock
to which the Participating Director becomes entitled pursuant to the terms and
conditions of the Participating Director's Election Agreement and the Plan.
Company shall provide each Participating Director with an annual report of his
or her Bookkeeping Reserve Account balance.
Section 12. Amendment or Termination. Company may, at any time and from
time to time, terminate the Plan or make such amendments as it deems advisable;
provided, however, that no such termination or amendment shall adversely affect
or impair the contract rights of a Participating Director with respect to an
effective Election Agreement unless such Participating Director shall consent in
writing to such termination or amendment; and provided further, that no such
amendment, without the approval of Company's shareholders, may materially
increase the benefits accruing to the Eligible Directors under the Plan,
increase the number of shares of Stock distributed under the Plan, or materially
modify the requirements as to eligibility under the Plan.
Section 13. Stock Subject to Plan. The maximum number of shares that shall
be reserved for issuance under the Plan shall be 75,000 shares, subject to
adjustment upon changes in the capitalization of Company as provided in Section
6 of the Plan.
Section 14. Non-Payment Deferral Arrangements. Company does not intend that
this Plan replace or supersede any presently existing retainer deferral
arrangements or preclude Company from implementing additional deferral
arrangements.
Section 15. Future Director Terms. Nothing in this Plan or in any Election
Agreement shall obligate a director to continue as such or to accept any
nomination for a future term as a director of Company or require Company to
nominate or cause the nomination of the director for a future term as a director
of Company.
Section 16. No Alienation. No shares of Stock deliverable under the Plan or
under an Election Agreement shall be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance or charge, other
than by will or the laws of descent and distribution.
Section 17. Withholding. Company is entitled to withhold and deduct from
any amounts due from Company to a Participating Director all legally required
amounts necessary to satisfy any federal, state or local withholding and
employment-related taxes arising directly or indirectly in connection with the
Plan or any Election Agreement, and Company may require the Participating
Director to remit promptly to Company the amount of such taxes before taking any
future actions with respect to the Participating Director's Bookkeeping Reserve
Account or Election Agreement.
5
<PAGE>
H.B. FULLER COMPANY DIRECTORS' DEFERRED COMPENSATION PLAN
EXHIBIT A
As Amended February 10, 1999
ELECTION AGREEMENT
This Election Agreement is by and between H.B. FULLER COMPANY ("Company"), a
Minnesota corporation, and the undersigned director of Company ("Director").
Company and Director, in consideration of the mutual promises stated herein,
agree as follows:
1. Definitions: Reference to Plan. All terms not specifically defined in this
Election Agreement shall have the meanings set forth in Company's Directors'
Deferred Compensation Plan ("Plan"), unless the context clearly requires
otherwise. This Election Agreement has been executed under, and is subject to
the terms of, the Plan. The terms of the Plan are hereby incorporated herein by
reference in their entirety. Director, by execution hereof, acknowledges having
received a copy of the Plan. This Election Agreement shall be interpreted to be
consistent with the Plan and any ambiguities herein shall be interpreted by
reference to the Plan. In the event that any provision hereof is inconsistent
with the terms of the Plan, then the terms of the Plan shall prevail.
2. Deferral Election.
Director hereby irrevocably elects to defer receipt of the
following percentage of the total Retainer Fees and/or Meeting
Fees for the calendar year 1999 pursuant to the terms of the
Plan and this Election Agreement:
__________% Both Retainer and Meeting Fees
__________% Retainer Fees Only
__________% Meeting Fees Only
Director hereby irrevocably elects the following optional
Payment Date (Director should initial only one; if no
selection is made, then Retirement will be deemed selected):
__________ Date of Retirement; or
__________ First Anniversary of Retirement; or
__________ Second Anniversary of Retirement; or
__________ Third Anniversary of Retirement; or
__________ Fourth Anniversary of Retirement; or
__________ Fifth Anniversary of Retirement; or
__________ Date of Death.
6
<PAGE>
3. Beneficiary Designation. (To be completed in all cases.)
The Director hereby designates the following beneficiary or beneficiaries:
_________________________________________________
_________________________________________________
4. Stock Certificate Issuance. Certificates for that number of shares of Stock
equal to the number of units in Director's Bookkeeping Reserve Account (less any
shares withheld by Company pursuant to the election in paragraph 2 above),
rounded up to the next highest full unit, shall be issued and delivered to the
Participating Director (or to certain other persons as provided in the Plan or
in this Election Agreement) by Company on the applicable Payment Date.
5. Binding Effect. This Election Agreement shall be binding upon and inure to
the benefit of Director and Director's heirs and personal representatives. It
shall also be binding upon Company and its successors and assigns.
6. Governing Law. This Election Agreement shall be interpreted and governed by
reference to the laws of the State of Minnesota.
7. No Amendments. This Election Agreement may not be amended or modified in any
respect, except that Director may change the beneficiary designation at any
time.
8. Entire Agreement. This Election Agreement (as the beneficiary designation may
be changed) constitutes the entire agreement of Company and Director on the
subject matter hereof.
IN WITNESS WHEREOF, Company and Director have signed this Election
Agreement on the dates stated below.
H.B. FULLER COMPANY DIRECTOR
By___________________________________
_____________________________________
(Signature)
Title________________________________
_____________________________________
(Print Name)
Date_________________________________ Date_________________________________
7
<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-27-1999
<PERIOD-START> NOV-29-1998
<PERIOD-END> FEB-27-1999
<CASH> 5,792
<SECURITIES> 0
<RECEIVABLES> 230,113
<ALLOWANCES> 4,745
<INVENTORY> 160,869
<CURRENT-ASSETS> 446,745
<PP&E> 761,377
<DEPRECIATION> 346,096
<TOTAL-ASSETS> 1,035,031
<CURRENT-LIABILITIES> 257,118
<BONDS> 313,631
0
306
<COMMON> 14,002
<OTHER-SE> 331,140
<TOTAL-LIABILITY-AND-EQUITY> 1,035,031
<SALES> 327,210
<TOTAL-REVENUES> 327,210
<CGS> 222,636
<TOTAL-COSTS> 84,058
<OTHER-EXPENSES> 1,004
<LOSS-PROVISION> 707
<INTEREST-EXPENSE> 6,867
<INCOME-PRETAX> 12,645
<INCOME-TAX> 5,481
<INCOME-CONTINUING> 7,599
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,599
<EPS-PRIMARY> 0.55
<EPS-DILUTED> 0.55
</TABLE>
