<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 August 28, 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 (I.R.S. Employer
incorporation or organization) Identification No.)
1200 Willow Lake Boulevard, St. Paul, Minnesota 55110-5101
(Address of principal executive officers) (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 14,036,986 as of September 30, 1999.
-1-
<PAGE>
H.B. FULLER COMPANY AND CONSOLIDATED SUBSIDIARIES
Consolidated Condensed Statements of Earnings
(Unaudited)
(In thousands except per share amounts)
<TABLE>
<CAPTION>
Thirteen Weeks Ended Thirty-Nine Weeks Ended
----------------------- -------------------------
August 28, August 29, August 28, August 29,
1999 1998 1999 1998
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Net sales $ 331,916 $ 333,518 $1,007,325 $ 986,144
Cost of sales (223,205) (230,424) (681,550) (676,722)
--------- --------- ---------- ---------
Gross profit 108,711 103,094 325,775 309,422
Selling, administrative and other expenses (78,437) (81,211) (242,193) (247,381)
Nonrecurring items (2,995) (24,003) (11,165) (24,003)
--------- --------- ---------- ---------
Operating earnings 27,279 (2,120) 72,417 38,038
Interest expense (6,541) (7,766) (19,995) (19,548)
Other income (expense), net (158) (739) (2,388) (1,529)
--------- --------- ---------- ---------
Earnings before income taxes and minority interests 20,580 (10,625) 50,034 16,961
Income taxes (8,773) (145) (21,594) (11,399)
Net earnings (losses) of consolidated subsidiaries
applicable to minority interests (51) 119 (396) 133
Earnings from equity investments 312 387 1,649 1,257
--------- --------- ---------- ---------
Net earnings 12,068 (10,264) 29,693 6,952
Dividends on preferred stock (4) (4) (12) (12)
--------- --------- ---------- ---------
Net earnings applicable to common stock $ 12,064 ($10,268) $ 29,681 $ 6,940
========= ========= ========== =========
Weighted average common shares outstanding:
Basic 13,822 13,749 13,797 13,710
========= ========= ========== =========
Diluted 14,015 13,749 13,945 13,848
========= ========= ========== =========
Net earnings (loss) per common share:
Basic $ 0.87 ($0.75) $ 2.15 $ 0.51
========= ========= ========== =========
Diluted $ 0.86 ($0.75) $ 2.13 $ 0.50
========= ========= ========== =========
Cash dividend per common share $ 0.205 $ 0.200 $ 0.610 $ 0.585
========= ========= ========== =========
</TABLE>
-2-
<PAGE>
H.B. FULLER COMPANY AND CONSOLIDATED SUBSIDIARIES
Consolidated Condensed Balance Sheets
(In thousands)
(Unaudited)
August 28, November 28,
1999 1998
---------- ------------
ASSETS
Current assets:
Cash and cash equivalents $ 5,560 $ 4,605
Trade receivables 235,618 247,952
Allowance for doubtful accounts (4,781) (5,073)
Inventories 152,518 158,606
Other current assets 52,662 51,810
----------- -----------
Total current assets 441,577 457,900
Property, plant and equipment, net of
accumulated depreciation of $353,213
in 1999 and $343,514 in 1998 415,395 414,467
Deposits and miscellaneous assets 77,286 70,673
Other intangibles 31,623 34,717
Excess cost 66,157 68,412
----------- -----------
Total assets $ 1,032,038 $ 1,046,169
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 54,234 $ 59,282
Current installments of long-term debt 8,218 4,428
Accounts payable 118,185 129,694
Accrued expenses 74,006 71,725
Accrued nonrecurring charges 5,673 13,215
Income taxes payable 5,554 6,816
----------- -----------
Total current liabilities 265,870 285,160
Long-term debt,
excluding current installments 281,485 300,074
Accrued pension cost 81,143 83,500
Deferred income taxes and other liabilities 21,621 19,833
Minority interest 16,884 16,198
Stockholders' equity:
Preferred stock 306 306
Common stock 14,037 13,983
Additional paid-in capital 33,136 31,140
Retained earnings 330,243 309,275
Accumulated other comprehensive income (6,170) (5,306)
Unearned compensation (6,517) (7,994)
----------- -----------
Total stockholders' equity 365,035 341,404
=========== ===========
Total liabilities and stockholders' equity $ 1,032,038 $ 1,046,169
=========== ===========
See accompanying Notes to Consolidated Condensed Financial Statements.
-3-
<PAGE>
H.B. FULLER COMPANY AND CONSOLIDATED SUBSIDIARIES
Consolidated Condensed Statement of Cash Flows
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Thirty-Nine Weeks Ended
--------------------------
August 28, August 29,
1999 1998
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 29,693 $ 6,952
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 37,769 35,246
Pension costs 5,015 4,434
Deferred income tax (331) 3,714
Nonrecurring expenses (1,054) 17,833
Gain on sale of businesses in the restructuring plan (2,449) --
Other items (6,362) (658)
Change in current assets and liabilities:
Accounts receivable 2,078 (360)
Inventory 5,246 (9,775)
Prepaid assets (1,490) (4,684)
Accounts payable (7,742) (19,659)
Accrued expense 11,039 (7,406)
Accrued nonrecurring charges (7,542) 7,179
Income taxes payable 8,895 (2,550)
-------- ---------
Net cash provided by operating activities 72,765 30,266
Cash flows from investing activities:
Purchased property, plant and equipment (43,157) (41,633)
Purchased business, net of cash acquired (4,483) (87,701)
Proceeds from sale of assets -- 9,019
-------- ---------
Net cash used in investing activities (47,640) (120,315)
Cash flows from financing activities:
Increase in long-term debt 51,651 208,309
Current installments and payments of long-term debt (60,703) (108,704)
Notes payable (9,251) 4,038
Dividends paid (8,559) (8,146)
Other 2,669 (3,453)
-------- ---------
Net cash (used)provided by financing activities (24,193) 92,044
Effect of exchange rate changes on cash 23 (411)
-------- ---------
Net change in cash and cash equivalents 955 1,584
Cash and cash equivalents at beginning of year 4,605 2,710
-------- ---------
Cash and cash equivalents at end of period $ 5,560 $ 4,294
======== =========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest expense (net of amount capitalized) $ 25,353 $ 21,007
Income taxes $ 7,623 $ 11,458
</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. The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q
and Article 10 of Regulation S-X. Accordingly, they do not include all of
the information necessary for a fair presentation of results of operations,
financial position, and cash flows in conformity with generally accepted
accounting principles. In the opinion of management, the consolidated
financial statements reflect all adjustments considered necessary for a
fair presentation of the Company's results for the periods presented.
Operating results for interim periods are not necessarily indicative of
results that may be expected for the fiscal year as a whole. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets, liabilities, revenues,
expenses, and related disclosures at the date of the financial statements
and during the reporting period. Actual results could differ from these
estimates. For further information, refer to the consolidated financial
statements and notes thereto included in the Company's Annual Report on
Form 10-K for the year ended November 28, 1998.
2. The composition of inventories is presented below:
August 28, 1999 November 28, 1998
--------------- -----------------
Raw materials $ 64,584 $ 73,126
Finished goods 97,902 95,862
LIFO reserve (9,968) (10,382)
-------- --------
$152,518 $158,606
======== ========
3. The difference between basic and diluted earnings per share data 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-
<PAGE>
4. As required, the company adopted Financial Accounting Standard No. 130
"Reporting Comprehensive Income" during the first quarter. Other
comprehensive income:
Quarter YTD
--------- --------
Beginning balance $(11,195) $(5,306)
Foreign currency translation adjustment 4,913 (976)
Translation loss taken through earnings 112 112
-------- -------
Ending balance $ (6,170) $(6,170)
======== =======
5. During the first nine months 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. The total amount
of the charge is now estimated to be from $39,000 to $43,000 (before tax)
with approximately $12,000 to $16,000 to be incurred in 1999.
North Latin Asia/
America Europe America Pacific Total
------- ------ ------- ------- -----
Severance (net of
pension curtailment) $1,741 $5,791 $ 426 $ 166 $ 8,124
Impairment of property,
plant and equipment -- 780 13 7 800
Contracts/leases -- 143 205 84 432
Consulting 183 381 199 3 766
Other 1,358 1,143 901 90 3,492
------ ------ ------ -------- -------
Subtotal 3,282 8,238 1,744 350 13,614
Less: Gain on the sale
of property and plant -- -- -- (2,449) (2,449)
------ ------ ------ -------- -------
Total $3,282 $8,238 $1,744 ($ 2,099) $11,165
====== ====== ====== ======== =======
Included in the $13,614 restructuring charge for the first nine months are
$14,668 of cash costs, $800 non-cash related costs and a $1,854 pension
curtailment benefit.
North America charges related to a manufacturing plant closing in the first
quarter, manufacturing and sales offices to be closed in the fourth quarter
and reduced layers of management. Latin America charges relate to two
manufacturing plants closed in the first quarter, two manufacturing plants
closed in the second quarter and one plant to be closed in the balance of
1999. The European charges related to plant closures in three countries (in
the second quarter of 1999), severance cost associated with the reduction
in layers in management and relocation of the area office. In Asia/Pacific,
the costs related to a manufacturing plant closure, sales offices and
warehouses closings, the area office relocation and reduced layers of
management. The costs in Asia/Pacific were more than offset by a gain on
the sale of the closed manufacturing plant.
There was a reduction in census of 535 employees in the first nine months
of 1999 as a result of the restructuring plan. An additional 46 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 August 28, 1999. The
reconciliation reflects the accruals recorded and payments applied during
the first nine months.
-6-
<PAGE>
Nonrecurring charge reserve:
<TABLE>
<CAPTION>
North Latin Asia/
America Europe America Pacific Total
------- ------ ------- ------- -----
<S> <C> <C> <C> <C> <C>
Balance: November 28, 1998 $ 1,992 $ 7,994 $ 3,141 $ 88 $ 13,215
Accruals in first nine months, 1999:
Severance 2,790 6,596 426 166 9,978
Contracts/leases -- 143 205 84 432
Consulting 183 381 199 -- 763
Other 1,358 851 914 100 3,223
Payments in first nine months, 1999:
Severance (2,970) (11,067) (3,168) (240) (17,445)
Contracts/leases -- (211) (39) (84) (334)
Consulting (183) (381) (151) -- (715)
Other (1,049) (880) (1,415) (100) (3,444)
------- -------- ------- ----- --------
Balance: August 28, 1999 $ 2,121 $ 3,426 $ 112 $ 14 $ 5,673
======= ======== ======= ===== ========
</TABLE>
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 third quarter of 1999 decreased $1,602 or 0.5 percent
from the third quarter of 1998. The 0.5 percent decrease contained the
following components: 1.2 percent increase in volume, 1.1 percent decrease
in pricing and changes in product mix, 0.4 percent net decrease from
acquisitions/divestitures and 0.2 percent decrease from the stronger U.S.
dollar. Through nine months of 1999, net sales increased $21,181 or 2.1
percent over the same period of 1998. Volume accounted for an increase of
1.9 percent, pricing and mix combined were a negative 0.7 percent,
acquisitions/divestitures had a positive 0.8 percent impact and
fluctuations in foreign currency against the U.S. dollar accounted for a
positive 0.1%.
Following is a comparison of sales variances by operating area:
13 Weeks Ended 39 Weeks Ended
Operating Area 8/28/99 vs 8/29/98 8/28/99 vs 8/29/98
-------------- ------------------ ------------------
North America $ 3,481 1.8% $10,409 1.8%
Latin America (3,855) (8.2%) (5,270) (3.6%)
Europe (4,757) (6.6%) 6,760 3.3%
Asia/Pacific 3,529 18.1% 9,282 15.0%
------ -------
Total ($1,602) (0.5%) $21,181 2.1%
======= =======
Net earnings in the third quarter were $12,068. This compares to a third
quarter, 1998 net loss of $10,264. The 1999 earnings include nonrecurring
charges of $2,995 ($2,339 after tax). The 1998 earnings include
nonrecurring charges of $24,003 ($18,689 after tax).
-7-
<PAGE>
Net earnings through nine months of 1999 were $29,693 compared to $6,952
for the first nine months of 1998. The year-to-date impact of the
nonrecurring charges was $11,165 ($8,279 after tax) in 1999 and $24,003
($18,689 after tax) in 1998.
During the first nine months 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. The total amount
of the charge is now estimated to be from $39,000 to $43,000 (before tax)
with approximately $12,000 to $16,000 to be incurred in 1999.
North Latin Asia/
America Europe America Pacific Total
------- ------ ------- ------- -----
Severance (net of
pension curtailment) $1,741 $5,791 $ 426 $ 166 $ 8,124
Impairment of property,
plant and equipment -- 780 13 7 800
Contracts/leases -- 143 205 84 432
Consulting 183 381 199 3 766
Other 1,358 1,143 901 90 3,492
------ ------ ------ ------- -------
Subtotal 3,282 8,238 1,744 350 13,614
Less: Gain on the sale
of property and plant -- -- -- (2,449) (2,449)
------ ------ ------ ------- -------
Total $3,282 $8,238 $1,744 ($2,099) $11,165
====== ====== ====== ======= =======
Included in the $13,614 restructuring charge for the first nine months are
$14,668 of cash costs, $800 non-cash related costs and a $1,854 pension
curtailment benefit.
North America charges related to a manufacturing plant closing in the first
quarter, manufacturing and sales offices to be closed in the fourth quarter
and reduced layers of management. Latin America charges relate to two
manufacturing plants closed in the first quarter, two manufacturing plants
closed in the second quarter and one plant to be closed in the balance of
1999. The European charges related to plant closures in three countries (in
the second quarter of 1999), severance cost associated with the reduction
in layers in management and relocation of the area office. In Asia/Pacific,
the costs related to a manufacturing plant closure, sales offices and
warehouses closings, the area office relocation and reduced layers of
management. The costs in Asia/Pacific were more than offset by a gain on
the sale of the closed manufacturing plant.
There was a reduction in census of 535 employees in the first nine months
of 1999 as a result of the restructuring plan. An additional 46 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 August 28, 1999. The
reconciliation reflects the accruals recorded and payments applied during
the first nine months.
-8-
<PAGE>
Nonrecurring charge reserve:
<TABLE>
<CAPTION>
North Latin Asia/
America Europe America Pacific Total
------- ------ ------- ------- -----
<S> <C> <C> <C> <C> <C>
Balance: November 28, 1998 $ 1,992 $ 7,994 $ 3,141 $ 88 $ 13,215
Accruals in first nine months, 1999:
Severance 2,790 6,596 426 166 9,978
Contracts/leases -- 143 205 84 432
Consulting 183 381 199 -- 763
Other 1,358 851 914 100 3,223
Payments in first nine months, 1999:
Severance (2,970) (11,067) (3,168) (240) (17,445)
Contracts/leases -- (211) (39) (84) (334)
Consulting (183) (381) (151) -- (715)
Other (1,049) (880) (1,415) (100) (3,444)
------- -------- ------- ----- --------
Balance: August 28, 1999 $ 2,121 $ 3,426 $ 112 $ 14 $ 5,673
======= ======== ======= ===== ========
</TABLE>
The North American net sales increase of 1.8 percent consisted of an
increase in volume of 3.8 percent, a decrease in pricing and mix of 1.7
percent and a 0.3 percent decrease due to the divestiture of the hot melt
stick and gun business in the fourth quarter of 1998. The Adhesives,
Sealants and Coatings Group had a sales decrease of 1.9 percent in the
third quarter. Volume increased 1.1 percent while pricing and changes in
product mix decreased 2.6 percent. The sale of the gun and stick business
had a negative 0.4 percent impact. In the Specialty Group, third quarter
sales increased 6.1 percent over last year. Strong growth from TEC
Specialty Products, Inc. was the primary driver. Foster Products
Corporation and Linear Products, Inc. both experienced moderate growth
while the Global Coatings Division experienced a slight decline in sales
from the third quarter, 1998. The Automotive Group experienced a sales
increase of 14.1 percent in the third quarter. Last year's sales were
depressed due to strikes in the Auto industry.
Through nine months, the North American increase in net sales was 1.8
percent. Volume was up 2.8 percent, while pricing and mix were down 0.5
percent. The sale of the stick and gun business had a 0.3 percent negative
impact on the nine month sales and currency fluctuations (primarily the
Canadian dollar), had a negative 0.2 percent impact. Sales in the
Adhesives, Sealants and Coatings Group approximated last year's sales as
volume increases of 1.4 percent were offset by decreases in pricing and
mix, currency and the business divestiture. The Specialty Group sales
through nine months increased 4.8 percent over last year, driven primarily
by the growth in TEC Specialty Products, Inc. The Automotive Group
experienced a sales increase of 4.2 percent for the first nine months.
Third quarter, 1999 operating earnings, before nonrecurring charges, in
North America were $20,334. This represents an increase of 50.3 percent
over third quarter, 1998. Favorable raw material costs, tight operating
expense control and savings from the restructuring plan all contributed to
the strong third quarter earnings. Through nine months, North American
operating earnings prior to nonrecurring charges, were $50,677. This
compared to $43,004 for the same period in 1998.
Third quarter net sales in Europe decreased 6.6 percent from the third
quarter, 1998 to $68,773. The stronger U.S. dollar, especially against the
deutsch mark, had a negative 3.6 percent impact on third quarter sales.
Sale of the Wax business in the fourth quarter, 1998 resulted in a 3.0
percent decrease in sales for the quarter. The decrease in volume of 2.5
percent was offset by a 2.5 percent gain in pricing and changes in product
mix. Operating earnings, prior to nonrecurring charges, increased 32.2
percent from third quarter, 1998 to $7,654. Savings from the restructuring
plan was the primary driver of the improved earnings.
-9-
<PAGE>
Through nine months, European net sales of $209,765 were 3.3 percent above
the same period of 1998. Two acquisitions in the United Kingdom in the
first half of 1998, net of the Wax business divestiture, resulted in a 3.6
percent sales increase. The year-to-date impact of foreign currency
fluctuations had a negative 0.3 percent impact. Similar to the results of
the third quarter, volume decreases through the first nine months of 2.1
percent were offset by increases in pricing and product mix. The operating
earnings, prior to the nonrecurring charge, increased 81.4 percent over the
first nine months of 1998, to $19,026.
In Latin America, third quarter sales declined 8.2 percent from last year
to $42,970. Volume was down 5.5 percent while pricing and mix contributed a
negative 2.7 percent. Weak economies in Argentina and Brazil were key
factors in the sales decrease. Operating earnings, prior to nonrecurring
charges, declined 13.3 percent to $2,235 as savings from the restructuring
plan were not enough to offset the decrease in sales.
Net sales through nine months in Latin America of $139,761 were 3.6 percent
below the same period of 1998. Pricing and product mix accounted for 2.4
percent while volume was down 1.2 percent. The operating earnings of
$10,919 were above last year's level by 11.3 percent.
The Asia/Pacific region showed a net sales increase over the third quarter,
1998 of 18.1 percent to $23,016. The strengthening of foreign currencies,
primarily the Japanese yen, against the U.S. dollar caused a 10.0 percent
increase in the third quarter sales. Two acquisitions, one in the fourth
quarter of 1998 and one in the first quarter of 1999, accounted for a 7.5
percent increase. Volume increased 5.9 percent in the quarter while pricing
and product mix resulted in a 5.3 percent decrease. Operating earnings of
$51 for the quarter was $62 higher than the 1998 operating loss of $9.
Through nine months of 1999, Asia/Pacific net sales of $71,128 were 15
percent above the first nine months of 1998. Increased volume added 13.3
percent to the nine month sales. The acquisitions mentioned above, net of a
divestiture in the second quarter of 1998 accounted for a 4.0 percent
increase. The foreign currency changes against the U.S. dollar had a 3.5
percent positive impact while pricing and changes in product mix decreased
5.8 percent. Operating earnings of $2,960 compares to an operating loss of
$1,131 for the first nine months of 1998.
The third quarter cost of sales for the consolidated company, decreased 3.1
percent. This resulted in a gross margin of 32.8 percent as compared to the
third quarter, 1998 gross margin of 30.9 percent. Lower raw material costs
and manufacturing savings resulting from the restructuring plan were the
major reasons for the margin improvement. Through nine months of 1999, the
gross margin was 32.3 percent, which compared to 31.4 percent for the same
period in 1998. The European operations have shown particularly strong
margins as a result of the restructuring efforts.
Selling, administrative and other expenses in the third quarter of $78,437
were 3.4 percent below last year. As a percentage of sales, the third
quarter, 1999 expenses were 23.6 percent, which compared to 24.3 percent
for the same period of 1998. Through nine months, these expenses were 2.1
percent below last year. The percentage of sales improved from 25.1 percent
in 1998 to 24.0 percent in 1999. Savings from the restructuring effort and
tight spending control were the primary reasons for both the quarter and
year-to-date improvement.
Interest expense of $6,541 in the third quarter was 15.8 percent lower than
the $7,766 posted in the third quarter, 1998. Improved cash flow from
operations resulted in lower debt levels which, in turn, has resulted in
lower interest expense. Through nine months of 1999 interest expense of
$19,995 was 2.3 percent higher than the same period of 1998.
Income tax expense of $8,773 in the third quarter, 1999 compared to expense
of $145 for the same period of 1998. The large variance was due to the
earnings before taxes and minority interest in 1999 were $20,580, and in
1998 were a loss of $10,625. The loss in 1998 was due to the nonrecurring
charges. Excluding the nonrecurring charge, the tax rate for 1999 is
expected to be 40.0 percent, compared to 40.8 percent in 1998.
-10-
<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 August 28, 1999
to November 28, 1998 and at August 29, 1998 to November 29, 1997.
Cash flow provided by operations for the first nine months of 1999 was
$72,765. This compares to $30,266 for the same period in 1998. Improved net
earnings and lower cash requirements to fund working capital were the key
reasons for the cash flow improvement.
Working capital was $175,707 at August 28,1999. This compares to $172,740
at November 28, 1998 and $202,411 at August 29, 1998. The current ratio of
1.7 at the end of the third quarter, 1999 compared to 1.9 at the same time
in 1998. The number of days sales in trade accounts receivable, net of
reserves for doubtful accounts, was 63 at August 28, 1999. At August 29,
1998 the number of days was 57. The average days sales in inventory was 62
at August 28, 1999 compared to 63 at August 29, 1998.
The total debt to total capitalization ratio was 48.5 percent at August 28,
1999. This compares to 51.6 percent at November 28, 1998.
Capital expenditures for property, plant and equipment, through the first
nine months of 1999, were $43,157. The expenditures were primarily for
construction of manufacturing capacity in Europe to support the
restructuring efforts, the investment in Information Technology and general
improvements in manufacturing productivity and operating efficiency.
Environmental capital expenditures were 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 operation,
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 Year 2000 ready.
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 currently anticipates these projects
will be completed by fiscal year-end.
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 assurance from its significant suppliers that they
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
-11-
<PAGE>
interruptions from suppliers occur or in the event that there are
disruptions in such infrastructure areas as utilities, communication,
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 the internal and
external Year 2000 Issues.
The company incurred Year 2000 readiness costs of approximately $2,000 over
the 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 modification 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 may 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 that 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
interfacing 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
effects 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: 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; change in
tax laws and tariffs; patent rights that could provide significant
advantage to a competitor; devaluations and other foreign exchange rate
fluctuations (particularly with respect to the German mark, the Japanese
yen, the Brazilian real and the Ecuadorian sucre); 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.
-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
3(b) Bylaws of H.B. Fuller Company, as amended through July 14, 1999.
10(a) Employment Agreement dated May 6, 1999, between H.B. Fuller Company
and Raymond A. Tucker.
(b) Reports on Form 8-K. No reports on Form 8-K were filed for the thirteen
weeks ended August 28, 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: October 11, 1999 /s/ Raymond A. Tucker
------------------------------------
Raymond A. Tucker
Chief Financial Officer
and Treasurer
-13-
<PAGE>
EXHIBIT INDEX
Exhibit Number
3(b) Bylaws of H.B. Fuller Company, as amended through July 14, 1999.
10(a) Employment Agreement dated May 6, 1999, between H.B. Fuller Company
and Raymond A. Tucker.
27 Financial Data Schedule.
<PAGE>
Exhibit 3(b)
BYLAWS
OF
H.B. FULLER COMPANY
(As amended through July 14, 1999)
ARTICLE I - SHARES
SECTION 1. CERTIFICATES. The forms of certificates for shares shall conform
to Section 302A.417 of the Minnesota Business Corporation Act, as amended from
time to time (the "MBCA"), and shall be approved by the Board of Directors. Each
certificate shall be manually signed by the Chief Executive Officer, the
President or an Executive Vice President, a Senior Vice President or a Vice
President and by the Secretary or an Assistant Secretary (except that where any
such certificate is manually signed by a transfer agent or a registrar (or by
both), the signatures of any such officers may be facsimile, engraved or
printed). All certificates of each class and each series shall be consecutively
numbered. No certificate shall be issued for any share until such share is fully
paid.
SECTION 2. TRANSFER AGENT AND REGISTRAR. The Board of Directors may appoint
one or more transfer agents and registrars to countersign and register
certificates for shares.
SECTION 3. TRANSFERS OF STOCK. Subject to Section 302A.429 of the MBCA,
upon surrender to the Corporation or the transfer agent of a certificate for
shares duly endorsed or accompanied by proper evidence of succession, assignment
or authority to transfer, it shall be the duty of the Corporation to issue a new
certificate to the person entitled thereto, cancel the old certificate and
record the transaction upon its books.
SECTION 4. LOSS OF CERTIFICATES. Except as otherwise provided by Section
302A.419 of the MBCA, any shareholder claiming a certificate for shares to be
lost, stolen, or destroyed shall make an affidavit of that fact in such form as
the appropriate officers of the Corporation shall require and shall give the
Corporation a bond of indemnity in form, in an amount, and with one or more
sureties satisfactory to the appropriate officers of the Corporation, to
indemnify the Corporation against any claim which may be made against it on
account of the reissue of such certificate, whereupon a new certificate may be
issued in the same tenor and for the same number of shares as the one alleged to
have been lost, stolen or destroyed.
SECTION 5. RECORD DATE.
(a) For the purpose of determining the shareholders entitled to notice of
and to vote at any meeting of shareholders or to receive payment of any
dividend, or for any other proper purpose, the Board of Directors shall fix a
record date which shall not be more than sixty days preceding the date on which
the particular action requiring such determination of shareholders is to be
taken.
(b) The record date fixed for the determination of the shareholders
entitled to notice of and to vote at a shareholders' meeting shall continue to
be the record date for all adjournments thereof.
ARTICLE II - SHAREHOLDERS
SECTION 1. PLACE OF MEETINGS. All meetings of the shareholders shall be
held at the principal executive office of the Corporation or at any other place
within or without the State of Minnesota designated by the Board of Directors.
-1-
<PAGE>
SECTION 2. ANNUAL MEETINGS. An annual meeting of shareholders shall be held
each year on such date and at such time of the day as the Board of Directors
shall determine. At such meeting, directors shall be elected to succeed those
whose terms are expiring and to fill any other vacancies, reports of the affairs
of the Corporation shall be considered, and other business may be transacted.
Only proposals to be brought before an annual meeting of shareholders by a
shareholder in accordance with the following procedures shall be considered at
such annual meeting. For a proposal to be properly brought by a shareholder at
an annual meeting, the shareholder must give written notice to the Chief
Executive Officer or Chief Financial Officer of the Company so as to be received
at the principal executive offices of the Corporation not later than the date
determined in accordance with the proxy rules promulgated by the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as amended, that
proposals of shareholders intended to be presented at such annual meeting must
be received in order to be included in the Corporation's proxy statement and
proxy for such annual meeting. Each such notice shall set forth (a) the name and
address of the shareholder who intends to make the proposal specified in such
notice, (b) a representation that the shareholder is a holder of record of stock
of the Corporation entitled to vote at the annual meeting and intends to appear
in person or by proxy at such annual meeting to make such proposal, (c) a brief
description of such proposal and the reasons for making the proposal at the
annual meeting, (d) a description of any material interest of the shareholder in
the matter proposed and (e) such other information that would be required to be
included in a Corporation proxy statement filed pursuant to the proxy rules of
the Securities and Exchange Commission with respect to the proposal and the
proponent thereof.
SECTION 3. SPECIAL MEETINGS. A special meeting of the shareholders may be
called for any purpose or purposes at any time in accordance with the provisions
of Section 302A.433 of the MBCA. The business transacted at a special meeting
shall be limited to the purposes stated in the notice of the meeting. For a
special meeting to be properly called by a shareholder, the shareholder must
give written notice of such shareholder's demand for a special meeting to the
Chief Executive Officer or Chief Financial Officer of the Company. Each such
notice shall set forth (a) the name and address of the shareholder demanding the
special meeting, (b) a representation that the shareholder is a holder of record
of stock of the Corporation entitled to vote at the special meeting and intends
to appear in person or by proxy at such special meeting to propose the business
to be considered at the special meeting, (c) a brief description of the business
to be considered at the special meeting and the reasons for conducting such
business at the special meeting, (d) a description of any material interest of
the shareholder in such business and (e) such other information that would be
required to be included in a Corporation proxy statement filed pursuant to the
proxy rules of the Securities and Exchange Commission with respect to the
matters to be considered at the special meeting and the shareholder making the
demand for such meeting.
SECTION 4. NOTICE OF MEETINGS. Written notice given in the manner provided
in Section 302A.011, Subd. 17, of the MBCA stating the place, date, and time of
the meeting and, in case of a special meeting, the purpose or purposes for which
the meeting is called, shall be given not less than ten nor more than sixty days
before the date of the meeting, either personally or by mail, by or at the
direction of the President, the Secretary, or the other officer calling the
meeting, to each shareholder of record entitled to vote at such meeting.
SECTION 5. QUORUM; ADJOURNED MEETINGS. The presence in person or by proxy
of the holders of a majority of the voting power of the shares entitled to vote
at any meeting shall constitute a quorum for the transaction of business. A
meeting may be adjourned from time to time, whether or not a quorum is present.
If any meeting is adjourned, no further notice as to such adjourned meeting need
be given other than by announcement at the time of adjournment of the date, time
and place of the adjourned meeting. At adjourned meetings at which a quorum is
present, any business may be transacted which might have been transacted at the
meeting as originally noticed. If a quorum is present when a meeting is
convened, the shareholders present may continue to transact business until
adjournment notwithstanding the withdrawal of enough shareholders originally
present to leave less than a quorum.
-2-
<PAGE>
SECTION 6. VOTING. Every shareholder entitled to vote at a meeting of
shareholders shall be entitled at such meeting to one vote for each share of
capital stock of the Corporation which is entitled to be voted unless the terms
of the shares provide for no votes or a different number of votes per share.
SECTION 7. PROXIES. Every shareholder entitled to vote at a meeting of
shareholders shall be entitled to be represented at such meeting and to vote
thereat by proxy or proxies appointed by a writing signed by such shareholder or
appointed by telephonic transmission or any other form of electronic
transmission as permitted by Section 302A.449 of the MBCA or any successor
provision thereof. The appointment of a proxy shall be valid for eleven months
after it is made, unless a longer period is expressly provided in the
appointment. To be valid, all proxies must meet the requirements of, and shall
be governed by, Section 302A.449 of the MBCA or any successor provision thereof.
SECTION 8. INSPECTORS OF ELECTION. In advance of any meeting of
shareholders the Board of Directors may appoint inspectors of election to act at
such meeting or any adjournment thereof. If inspectors of election are not so
appointed, the chair of any such meeting may, and on the request of any
shareholder or shareholder's proxy shall, make such appointment at the meeting.
SECTION 9. CONDUCT OF MEETINGS. The chair for each meeting of shareholders
shall be the first of the following persons who is able to attend and chair the
meeting: (i) the Chair of the Board, (ii) the Vice Chair of the Board, (iii) the
Chief Executive Officer, (iv) the President or (v) any director or elected
officer of the Corporation selected by the Chair.
ARTICLE III - DIRECTORS
SECTION 1. NUMBER. In addition to any director who may be elected by the
holders of any one or more series of Preferred Stock voting separately as such
(the "Series Directors"), the Board of Directors shall consist of a number of
directors, which number shall be fixed from time to time exclusively by the
Board of Directors pursuant to a resolution adopted by the affirmative vote of a
majority of the entire Board of Directors, but the number of directors shall in
no event be more than fifteen (excluding any Series Directors).
SECTION 2. TERM OF OFFICE VACANCIES AND REMOVAL.
(a) The directors to be elected by the holders of the shares of Common
Stock and of any other shares of capital stock entitled to vote as a single
class with the shares of Common Stock shall be divided into three classes
designated Class I, Class II and Class III. The term of one class of directors
shall expire each year. Each class shall consist, as nearly as may be possible,
of one-third of the total number of directors fixed pursuant to Section 1 of
this Article III. At each Annual Meeting of Shareholders, the directors elected
to succeed those directors whose terms expire shall be elected for a term
expiring three years after the date of their election and until their successors
are duly elected and qualified.
(b) If the number of directors is changed, any increase or decrease shall
be apportioned among the three classes so as to maintain the number of directors
in each class as nearly equal as possible, and any additional director of any
class elected to fill a vacancy resulting from an increase in such class shall
hold office for a term that shall coincide with the remaining term of that class
but in no case shall a decrease in the number of directors shorten the term of
any incumbent director. Subject to the rights of the holders of any class or
series of the then outstanding capital stock of the Corporation entitled to vote
generally in the election of directors (other than Series Directors), newly
created directorships resulting from any increase in the authorized number of
directors or any vacancies in any class resulting from death, resignation,
retirement, disqualification, removal from office or other cause may be filled
only by a majority vote of the directors (other than Series Directors) then in
office, although less than a quorum. Directors so elected shall hold office for
a term expiring at the time at which the term of office of the class to which
they have been elected expires and until their successors are duly elected and
qualified.
-3-
<PAGE>
(c) Any directors, or the entire Board of Directors, may be removed from
office at any time for good cause by the affirmative vote of the holders of at
least two-thirds of the combined voting power of the shares of the classes or
series of capital stock of the Corporation present and voting as a single class.
A director named by the Board of Directors to fill a vacancy may be removed from
office at any time, with or without cause, by the affirmative vote of a majority
of the remaining directors if the shareholders have not elected directors in the
interim between the time of the appointment to fill such vacancy and the time of
removal. In the event that any one or more directors or the entire Board is
removed at a shareholder's meeting, a new director or new directors shall be
elected at the same meeting.
(d) Notwithstanding the provisions of Article VI of these Bylaws, any
amendment, alteration, change or repeal of Sections 1 and/or 2 of Article III of
these Bylaws shall require the affirmative vote of the holders of two-thirds of
the shares present and voting as a single class.
SECTION 3. NOMINATION OF DIRECTORS. Only persons nominated in accordance
with the following procedures shall be eligible for election by shareholders as
directors. Nominations of persons for election as directors at a meeting of
shareholders called for the purpose of electing directors may be made (a) by or
at the direction of the Board of Directors or (b) by any shareholder in the
manner herein provided. For a nomination to be properly made by a shareholder,
the shareholder must give written notice to the Corporate Governance Committee
of the Board of Directors so as to be received at the principal executive
offices of the Corporation not later than (i) with respect to an annual meeting
of shareholders, not later than the date determined in accordance with the proxy
rules promulgated by the Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended, that proposals of shareholders intended to be
presented at such meeting must be received in order to be included in the
Corporation's proxy statement and proxy for such meeting and (ii) with respect
to a special meeting of shareholders for the election of directors, the close of
business on the seventh day following the date on which the notice of such
meeting is first given to shareholders. Each such notice shall set forth (A) the
name and address of the shareholder who intends to make the nomination and of
the person or persons to be nominated, (B) a representation that the shareholder
is a holder of record of stock of the Corporation entitled to vote at such
meeting and intends to appear in person or by proxy at the meeting to nominate
the person or persons specified in the notice, (C) a description of all
arrangements or understandings between the shareholder and each nominee and any
other person or persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by the shareholder, (D) such other
information regarding each nominee proposed to such shareholder as would have
been required to be included in a proxy statement filed pursuant to the proxy
rules of the Securities and Exchange Commission had each nominee been nominated,
or intended to be nominated, by the Board, and (E) the consent of each nominee
to serve as a director of the Corporation if so elected.
SECTION 4. MEETINGS. The Board of Directors may provide by resolution the
date, time and place, either within or without the State of Minnesota, for the
holding of meetings of the Board of Directors without other notice than such
resolution.
Other meetings of the Board of Directors may be called by the Chair of the
Board, the Vice Chair of the Board, the Chief Executive Officer (if a director)
or any two other directors. The person or persons authorized to call meetings of
the Board of Directors may fix any place, either within or without the State of
Minnesota, as the place for holding any meeting of the Board of Directors called
by them. In the absence of such designation, all called meetings of the Board of
Directors shall be held at the principal executive office of the Corporation.
The Board of Directors shall choose from among the directors a Chair of the
Board and may from time to time choose a Vice Chair of the Board.
The chair for each meeting of the Board of Directors shall be the first of
the following persons who is able to attend and chair such meeting: (i) the
Chair of the Board, (ii) the Vice Chair of the Board, if any, (iii) the Chief
Executive Officer (if a director), (iv) the President (if a director), or (v)
any director selected by the Chair.
-4-
<PAGE>
Notice of any called meeting of the Board of Directors shall be given by
the person or persons calling the meeting (or by the Secretary or an Assistant
Secretary at the request of such person or persons) either by mail to each
director at the director's business address at least two days prior to such
meeting or by telegram, telecopy, facsimile, telephone, or in person at least 24
hours prior to such meeting to the business address of each director, or in the
event such notice is given on a Saturday, Sunday or holiday to the residence
address of each director. If the day or date, time and place of a meeting of the
Board of Directors has been announced at a previous meeting of the Board of
Directors, no notice is required. Notice of an adjourned meeting of the Board of
Directors need not be given other than by announcement at the meeting at which
adjournment is taken.
Neither the business to be transacted at, nor the purpose of, any regular
or called meeting of the Board of Directors needs to be specified in the notice
of such meeting.
Notice of any meeting of the Board of Directors may be waived by any
director either before, at, or after such meeting orally or in a writing signed
by such director. A director, by his or her attendance at any meeting of the
Board of Directors, shall be deemed to have waived notice of such meeting,
except where the director objects at the beginning of the meeting to the
transaction of business because the meeting is not lawfully called or convened
and does not participate thereafter in the meeting.
The members of the Board of Directors, the Executive Committee or any other
committee created by the Board of Directors may participate in a meeting of the
Board of Directors or such Committee by any means of communication through which
the directors may simultaneously hear each other during the meeting and such
participation in a meeting shall constitute presence in person at such meeting.
Any action which may be taken at a meeting of the Board of Directors, the
Executive Committee or any other committee of the Board of Directors may be
taken without a meeting if a consent in writing, setting forth the action so
taken, shall be signed by all of the directors or committee members then holding
office.
SECTION 5. QUORUM; REQUIRED VOTE. A majority of the directors then holding
office shall constitute a quorum for the transaction of business by the Board of
Directors. The Board of Directors shall take action by the affirmative vote of
the greater of (a) majority of the directors present at a duly held meeting at
the time the action is taken, or (b) a majority of the minimum number of
directors that would constitute a quorum for the transaction of business at the
meeting. A majority of the members of any committee appointed by the Board of
Directors and then holding office shall constitute an quorum for the transaction
of business by such committee. Any committee shall take action by the
affirmative vote of the greater of (a) majority of the members present at a duly
held meeting at the time the action is taken, (b) a majority of the minimum
number of members that would constitute a quorum for the transaction of business
at the meeting, or (c) such higher requirement as may be established by the
Board of Directors. Notwithstanding the foregoing, where other sections of these
Bylaws or the Articles of Incorporation of the Corporation require a larger
proportion or number than is set forth in this Section 5 of Article III, the
affirmative vote of such larger proportion or number shall be required for the
Board of Directors or a committee of the Board of Directors to take action.
SECTION 6. EXECUTIVE COMMITTEE. By the affirmative action of at least three
fourths of the directors then holding office, the Board of Directors by
resolution may create an Executive Committee of three or more directors and may
delegate to such committee such of its powers and authority in the management of
the business and affairs of the Corporation as it may by resolution provide,
except the power to declare dividends and to adopt, amend or repeal the Bylaws.
SECTION 7. OTHER COMMITTEES. The Board of Directors by resolution may
create, in addition to an Executive Committee, ad hoc and standing committees,
and may delegate to such Committees such of its powers as it may choose,
including without limitation the power to perform such inquiries, investigations
or analyses as may be required from time to time, and to report the results of
any of their findings and their recommendations to the Board of Directors for
such action as the Board of Directors deems to be appropriate.
-5-
<PAGE>
SECTION 8. COMPENSATION. The directors, by resolution of the Board of
Directors, may be paid fees and provided benefits and may be reimbursed for
expenses incurred by them on behalf of the Corporation, which fees, benefits and
expenses shall be paid at such times and upon such conditions as may be
determined by the Board of Directors; provided, however, that the shareholders
at any meeting called for the purpose may revoke or rescind any such action by
the Board of Directors, but may not revoke or rescind any action of the Board of
Directors (i) authorizing reimbursement to directors for expenses incurred by
them on behalf of the Corporation or (ii) establishing vested or contractual
compensation or benefit arrangements for directors. Nothing herein contained
shall be construed to preclude any director from serving the Corporation in any
other capacity as an officer, agent, employee, or otherwise, and receiving
compensation therefor.
SECTION 9. EMERITUS DIRECTORS. The Board of Directors may from time to time
appoint a former director to the honorary position of "Director Emeritus" or, in
the case of a former Chair of the Board (whether or not then also a director),
"Chair Emeritus." A former director holding an honorary position may be invited
to attend meetings or portions of meetings of the Board of Directors, but shall
have no voting or other rights of a director and shall not be entitled to the
compensation payable to directors.
ARTICLE IV - OFFICERS
SECTION 1. ELECTED OFFICERS. The officers of the Corporation to be elected
by the Board of Directors shall be a Chief Executive Officer, a President, a
Chief Financial Officer, one or more Executive or Senior Vice Presidents, one or
more Vice Presidents, a Treasurer, a General Counsel, a Controller, a Secretary
and one or more assistant officers. Any combination of such offices may be held
by the same person. Elected officers shall hold office at the pleasure of the
Board and shall perform the duties referred to in the Bylaws, those determined
by the Board of Directors and those assigned by the Chief Executive Officer. The
Chair of the Board and the Vice Chair of the Board are not and shall not be
deemed to be officers of the Corporation solely by virtue of having such titles.
SECTION 2. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer shall have
general planning, administrative and oversight responsibility for the
Corporation and shall have general charge of and control over the Corporation,
subject to the orders and directions of the Board of Directors. The Chief
Executive Officer shall also perform such other duties as the Board of Directors
may from time to time prescribe or as are required by Section 302A.305, Subd. 2,
of the MBCA.
SECTION 3. PRESIDENT. The President shall be the chief operating officer of
the corporation and shall perform all responsibilities related to the ongoing
management of the Corporation.
SECTION 4. CHIEF FINANCIAL OFFICER. The Chief Financial Officer shall be
responsible for all financial operations of the Corporation, including without
limitation raising funds, safeguarding assets, accounting and reporting,
financial planning, financial organizational administration and maintenance of
internal controls as are prudent and required by law. The Chief Financial
Officer shall also perform such other duties as are required by Section
302A.305, Subd. 3, of the MBCA.
SECTION 5. EXECUTIVE AND SENIOR VICE PRESIDENTS; VICE PRESIDENTS. Each
Executive and Senior Vice President and each Vice President shall perform such
duties as shall be determined by the Board of Directors or assigned by the Chief
Executive Officer.
SECTION 6. TREASURER. The Treasurer shall have the care and custody of the
funds and valuable documents of the Corporation and shall have oversight and
administrative responsibility for raising and borrowing funds and establishing
banking and similar relationships.
SECTION 7. GENERAL COUNSEL. The General Counsel shall be the chief legal
officer of the Corporation and shall be responsible for the administration and
general direction of all matters that may involve or require legal review or
analysis, including threatened and actual legal proceedings.
-6-
<PAGE>
SECTION 8. CONTROLLER. The Controller shall be responsible for keeping
complete and accurate records of the business, assets, liabilities and
transactions of the Corporation and for the preparation of such financial
statements as may be required by law or are needed for internal management
purposes.
SECTION 9. SECRETARY. The Secretary shall keep a record of the proceedings
of the meetings of the shareholders and the Board of Directors. The Secretary
shall give notice as required of meetings of the shareholders and the Board of
Directors; provided, however, notice given by another shall not be ineffective
merely because it was not given by the Secretary. The Secretary shall also
perform such duties as are determined by the Board of Directors or by the Chief
Executive Officer.
SECTION 10. ASSISTANT OFFICERS. Each Assistant Officer shall perform such
duties as are determined by the Board of Directors and by the officer to whom
the Assistant Officer reports.
SECTION 11. APPOINTED OFFICERS. The Chief Executive Officer may from time
to time appoint vice presidents and any other officers deemed appropriate. These
officers shall hold office at the pleasure of the Chief Executive Officer and
shall perform such duties as are determined by the Chief Executive Officer.
SECTION 12. COMPENSATION. Compensation of all elected officers referred to
in Section 1 and all appointed officers referred to in Section 11 shall be fixed
by the Board of Directors or a Committee of the Board of Directors and may be
changed from time to time (subject to contract rights) by the Board or such
Committee.
SECTION 13. EXECUTION OF CORPORATE CONTRACTS. Except as otherwise provided
by the Board of Directors or the Executive Committee, all contracts of the
Corporation shall be executed on its behalf by the Chief Executive Officer, the
President, the Chief Financial Officer, the Controller, an Executive or Senior
Vice President, a Vice President or such other person or persons as one of these
officers may from time to time authorize so to do. Notes given and drafts
accepted by the Corporation shall be valid only when signed by the Chief
Executive Officer, the President, the Chief Financial Officer, the Controller,
an Executive or Senior Vice President, a Vice President, the Treasurer or such
other person as one of these officers may from time to time authorize so to do.
Checks, drafts, and other evidences of indebtedness to the Corporation shall,
for the purpose of deposit, discount and collection, be endorsed by these same
officers or their delegees. Funds of the Corporation deposited in banks and
other depositories to the credit of the Corporation shall be drawn from such
bank and depositories by checks, drafts or orders for payment of money signed by
any one or more of the Chief Executive Officer, the President, the Chief
Financial Officer, the Controller, an Executive or Senior Vice President, a Vice
President, the Treasurer or such other person or persons as any two of these
officers may authorize. Whenever the Board of Directors or the Executive
Committee shall provide that any contract be executed or any other act be done
in any other manner and by any other officer than as specified in these Bylaws,
such method of execution or action shall be as equally effective to bind the
Corporation as if specified herein.
ARTICLE V - INDEMNIFICATION OF DIRECTORS,
OFFICERS AND EMPLOYEES
The Corporation shall indemnify such persons (and shall advance expenses of
such persons), for such expenses and liabilities, in such manner, under such
circumstances, and to such extent as required or permitted by the Minnesota
Business Corporation Act, section 302A.521, as now enacted or hereafter amended.
ARTICLE VI - AMENDMENTS
These Bylaws may be amended or repealed as provided in Section 302A.181 of
the MBCA; provided, however, that Sections 1 and 2 of Article III shall only be
amended or repealed as provided in Section 2(d) of Article III.
-7-
<PAGE>
Exhibit 10(a)
EMPLOYMENT AGREEMENT
THIS AGREEMENT dated May 6, 1999 is between H.B. Fuller Company, a Minnesota
corporation ("Fuller") and Raymond A Tucker ("Executive").
The parties hereto agree as follows:
1. Employment and Term
Subject to the terms and conditions of this Agreement, Fuller agrees to
employ Executive and Executive accepts employment of Fuller commencing on
July 1, 1999 continuing thereafter until terminated by Fuller or Executive.
2. Duties
Executive's title will be Chief Financial Officer and Treasurer and you
will report directly to Fuller's CEO. At Executive's option, you may also
hold additional positions as offered by Fuller's CEO. Your exact duties and
responsibilities will be outlined to you by Fuller's CEO.
3. Compensation
a. Base Compensation. For your initial year of employment, your base
compensation will be $250,000.00, payable in substantially equal
semi-monthly installments subject to payroll deductions. Your base
compensation will be reviewed annually and may be adjusted annually by
Fuller's Compensation Committee, a committee authorized by Fuller's
Board of Directors.
b. Annual Incentive Plan. You are immediately eligible to participate in
the annual incentive plan with specific performance targets as agreed
to with the CEO and Compensation Committee. These targets, tied to a
combination of Fuller and individual performance, will provide you
with an annual bonus potential equal to a maximum of 75% of base
compensation for 1999.
Fuller guarantees a first year Special Payment of 37.5% of base
compensation, or $93,750 with payment being made as follows:
(1) $46,875 added to the "Transition Allowance" (covered below) and
(2) $46,875 to be paid in January, 2000 in conjunction with any
payments under the 1999 Annual Incentive Plan. The 1999 Annual
Incentive Plan payment, if any, will be reduced by this Special
Payment.
c. Long-Term Incentive Plan. You will be immediately eligible to
participate in the long-term incentive plan in accordance with its
current terms and conditions. Further, you will immediately receive a
stock option of 10,000 shares and 1,500 performance units. You will be
required to complete the necessary agreements that are part of these
plans. You will also be eligible to receive additional awards under
these plans as provided annually.
d. Relocation Package and Transition Allowance. You will be immediately
eligible to participate in Fuller's relocation policy with a
guaranteed purchase of your current home at fair market value.
Transition Allowance, under this plan, will be increased by $46,875
bringing the total amount payable under Transition Allowance to
$71,875.
e. Retirement Plans, Medical, Dental, Vision and Other Benefits. You will
become a participant under these plans as provided under the
applicable plan documents. Additionally, you will participate in the
Fuller car allowance program, executive physical, and tax and
financial planning benefits in accordance with current Fuller policy.
<PAGE>
f. Supplemental Executive Retirement Plan ("SERP"). You will be eligible
to participate in the SERP with an immediate granting of all years of
service with your prior employer for purposes of eligibility.
Additionally, the effect of your annual benefit from your previous
employer's pension plan is limited to $35,253, which represents 50% of
the gross benefit payable to you at retirement. All other offsets
provided under the plan will continue, including all of the applicable
early retirement factors.
g. Deferred Compensation. Fuller is currently investigating various
options allowing certain deferrals by executives. Fuller will work
with you to establish a reasonable plan for your use, if and when a
plan is adopted.
h. Change in Control. The current applicable provisions governing change
in control features apply to you, as provided under the applicable
plans.
4. Disclosure of Information
In your capacity as Chief Financial Officer of Fuller, you will received
confidential and proprietary information. You agree to hold this
information in confidence and not disclose such information to others
except as authorized by Fuller.
5. Other Agreement
Executive warrants that, to the best of his knowledge, the execution and
delivery of this Agreement or the performance of duties contemplated will
not violate the terms of any other agreement to which he is party or by
which he is bound.
6. Miscellaneous.
This Agreement shall be binding upon and inure to the benefit of Fuller,
its successors, and assigns and may not be assigned by Executive.
This Agreement contains the entire agreement of the parties and supersedes
all prior agreements relating to the subject matter hereof, and may only be
changed by a writing signed by the parties.
The Agreement shall be governed by and construed in accordance with the
laws of the State of Minnesota. Executive agrees that any disputes arising
out of or relating to this Agreement shall be brought, if at all, in and
before a court located in the State of Minnesota to the exclusion of the
courts of any other state.
Executive H.B. Fuller Company
/s/ Raymond A. Tucker By: /s/ James A. Metts
- -------------------------- ---------------------------
Raymond A. Tucker
Its: VP-Human Resources
---------------------------
<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> 9-MOS
<FISCAL-YEAR-END> NOV-27-1999
<PERIOD-START> NOV-29-1998
<PERIOD-END> AUG-28-1999
<CASH> 5,560
<SECURITIES> 0
<RECEIVABLES> 235,618
<ALLOWANCES> 4,781
<INVENTORY> 152,518
<CURRENT-ASSETS> 441,577
<PP&E> 768,608
<DEPRECIATION> 353,213
<TOTAL-ASSETS> 1,032,038
<CURRENT-LIABILITIES> 265,870
<BONDS> 281,485
0
306
<COMMON> 14,037
<OTHER-SE> 350,692
<TOTAL-LIABILITY-AND-EQUITY> 1,032,038
<SALES> 1,007,325
<TOTAL-REVENUES> 1,007,325
<CGS> 681,550
<TOTAL-COSTS> 253,358
<OTHER-EXPENSES> 2,388
<LOSS-PROVISION> 1,643
<INTEREST-EXPENSE> 19,995
<INCOME-PRETAX> 50,034
<INCOME-TAX> 21,594
<INCOME-CONTINUING> 29,693
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 29,693
<EPS-BASIC> 2.15
<EPS-DILUTED> 2.13
</TABLE>
