-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ht993IlokqEOs3t2ygAQqUDgnRuxJ/JyvdY1U3SVzO/tucrj8c6iDXWNt4q+8n8G 6uS3uWEkVWpGSP8zw7jpgg== 0000950131-95-002847.txt : 19951016 0000950131-95-002847.hdr.sgml : 19951016 ACCESSION NUMBER: 0000950131-95-002847 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950831 FILED AS OF DATE: 19951013 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: FULLER H B CO CENTRAL INDEX KEY: 0000039368 STANDARD INDUSTRIAL CLASSIFICATION: ADHESIVES & SEALANTS [2891] IRS NUMBER: 410268370 STATE OF INCORPORATION: MN FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09225 FILM NUMBER: 95580591 BUSINESS ADDRESS: STREET 1: 2400 ENERGY PK DR CITY: ST PAUL STATE: MN ZIP: 55108 BUSINESS PHONE: 6126453401 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q QUARTERLY REPORT Under Section 13 or 15(d) of the Securities Exchange Act of 1934 FOR THE QUARTER ENDED AUGUST 31, 1995 Commission File No. 0-3488 H. B. FULLER COMPANY A Minnesota Corporation IRS Employer Identification No. 41-0268370 2400 Energy Park Drive, St. Paul, Minnesota 55108 Telephone - (612) 645-3401 Common Stock, $1.00 par value 14,005,145 shares outstanding as of September 29, 1995 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- -1- H. B. FULLER COMPANY THIRD QUARTER 1995 Form 10-Q Quarterly Report Table of Contents PART I. FINANCIAL INFORMATION ------------------------------ Item 1. Financial Statements: Consolidated Condensed Statements of Earnings - Three months and nine months ended August 31, 1995 and 1994 Consolidated Condensed Balance Sheets - August 31, 1995 and November 30, 1994 Consolidated Condensed Statements of Cash Flows - Nine months ended August 31, 1995 and 1994 Notes to Consolidated Condensed Financial Statements Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations PART II. OTHER INFORMATION --------------------------- Item 4. Submission of Matters to a Vote of Security Holders Item 6. Exhibits and Reports on Form 8-K Signatures -2-
H.B. FULLER COMPANY AND CONSOLIDATED SUBSIDIARIES Consolidated Condensed Statements of Earnings (Unaudited) (In Thousands Except Per Share Amounts) Three Months Ended Nine Months Ended --------------------------------- --------------------------------- August 31, 1995 August 31, 1994 August 31, 1995 August 31, 1994 --------------- --------------- --------------- --------------- Net sales $312,590 $286,791 $930,674 $801,667 --------------- --------------- --------------- --------------- Costs and expenses: Cost of sales 213,261 194,489 634,198 542,203 Selling, administrative and other expenses 79,700 73,506 239,773 210,473 Interest expense 5,118 3,101 13,693 8,749 Other (income) expense, net 160 776 1,399 2,207 --------------- --------------- --------------- --------------- 298,239 271,872 889,063 763,632 --------------- --------------- --------------- --------------- Earnings before income taxes and minority interests 14,351 14,919 41,611 38,035 Income taxes (5,711) (6,007) (16,561) (15,427) Net earnings of consolidated subsidiaries applicable to minority interests 122 19 (186) (340) --------------- --------------- --------------- --------------- Earnings before accounting changes 8,762 8,931 24,864 22,268 Accounting changes (2,532) --------------- --------------- --------------- --------------- Net earnings 8,762 8,931 22,332 22,268 Dividends on preferred stock (4) (4) (12) (12) --------------- --------------- --------------- --------------- Net earnings applicable to common stock $8,758 $8,927 $22,320 $22,256 =============== =============== =============== =============== Average number of common and common equivalent shares outstanding 14,064 14,055 14,049 14,039 =============== =============== =============== =============== Per share earnings before accounting changes $0.62 $0.64 $1.77 $1.59 Per share accounting changes (0.18) --------------- --------------- --------------- --------------- Net earnings per common share $0.62 $0.64 $1.59 $1.59 =============== =============== =============== =============== Cash dividend per common share $0.16 $0.15 $0.47 $0.43 =============== =============== =============== ===============
See accompanying Notes to Consolidated Condensed Financial Statements. -3- H.B. FULLER AND CONSOLIDATED SUBSIDIARIES Consolidated Condensed Balance Sheets (Unaudited) (In Thousands)
August 31, 1995 November 30, 1994 --------------- ----------------- ASSETS Current assets: Cash and cash equivalents $ 4,347 $ 9,830 Trade receivables 187,074 172,823 Allowance for doubtful accounts (6,767) (6,221) Inventories 164,383 152,651 Other current assets 39,840 32,320 -------- -------- Total current assets 388,877 361,403 Property, plant and equipment, net of accumulated depreciation of $250,169 in 1995 and $218,803 in 1994 333,816 295,090 Other intangibles 15,816 18,097 Excess cost 39,032 40,422 Other assets 33,890 27,605 -------- -------- Total assets $811,431 $742,617 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable $ 58,754 $ 53,125 Current installments of long-term debt 4,866 6,430 Accounts payable 110,135 105,825 Accrued expenses 57,259 58,080 Income taxes payable 11,786 8,278 -------- -------- Total current liabilities 242,800 231,738 Long-term debt, excluding current installments 155,607 130,009 Deferred income taxes, accrued pension cost, postretirement costs, other liabilities and minority interests 115,925 106,065 Stockholders' equity: Preferred stock 306 306 Common stock 14,001 13,935 Additional paid-in capital 20,673 18,907 Retained earnings 253,200 236,572 Foreign currency translation adjustment 12,456 7,532 Unearned compensation (3,537) (2,447) -------- -------- Total stockholders' equity 297,099 274,805 -------- -------- Total liabilities and stockholders' equity $811,431 $742,617 ======== ========
See accompanying Notes to Consolidated Condensed Financial Statements. -4- H.B. FULLER COMPANY AND CONSOLIDATED SUBSIDIARIES Consolidated Condensed Statement of Cash Flows (Unaudited) (In Thousands)
Nine Months Ended ------------------------------------ August 31, 1995 August 31, 1994 --------------- --------------- Cash flows from operating activities: Net earnings $22,332 $22,268 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 30,776 23,318 Pension costs 7,681 7,948 Deferred income tax (1,226) (2,315) Accounting changes 2,532 Other items 3,476 2,898 Change in current assets and liabilities: Increase in accounts receivable (5,569) (14,887) Increase in inventory (8,242) (5,368) Increase in prepaid assets (5,060) (3,806) (Decrease) increase in accounts payable (725) 4,987 Decrease in accrued expense (2,675) (849) Increase in income taxes payable 359 164 ------- ------- Net cash provided by operating activities 43,659 34,358 Cash flows from investing activities: Purchased property, plant and equipment (57,247) (40,431) Purchased businesses, net of cash acquired (74,145) Investment in affiliated companies 375 ------- ------- Net cash used in investing activities (57,247) (114,201) Cash flows from financing activities: Increase in long-term debt 70,045 64,503 Current installments and payments of long-term debt (48,845) (6,278) Increase in notes payable 3,360 20,593 Repurchase common stock (1,449) Dividends paid (6,501) (5,997) Other (10,436) (7,176) ------- ------- Net cash provided by financing activities 7,623 64,196 Effect of exchange rate changes on cash 482 46 ------- ------- Net change in cash and cash equivalents (5,483) (15,601) Cash and cash equivalents at beginning of year 9,830 17,377 ------- ------- Cash and cash equivalents at end of period $4,347 $1,776 ======= ======= Supplemental disclosures of cash flow information: Cash paid during the year for: Interest expense (net of amount capitalized) $12,242 $11,652 Income taxes $19,355 $17,027
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. -5- 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 August 31, 1995 and November 30, 1994, the results of its operations for the three and nine month periods ended August 31, 1995 and 1994 and its cash flows for the nine month periods ended August 31, 1995 and 1994. All adjustments were of a normal recurring nature. 2. The results of operations for the nine month period ended August 31, 1995 are not necessarily indicative of the results to be expected for the full year. 3. The composition of inventories is presented below:
August 31, 1995 November 30, 1994 --------------- ----------------- Raw materials $ 82,706 $ 78,007 Finished goods 93,040 85,032 LIFO reserve (11,363) (10,388) -------- -------- $164,383 $152,651 ======== ========
4. Net earnings per common share is determined by dividing the net earnings applicable to common stock by the weighted average number of common and common equivalent shares outstanding (stock options). 5. The Company enters into foreign exchange forward contracts as a hedge against firm commitment foreign currency intercompany accounts receivable/payable/debt. Market value gains and losses are recognized, and the resulting credit or debit offsets foreign exchange gains or losses on those receivables/payables/debt. At August 31, 1995, the aggregate contract value of instruments used to buy U.S. dollars in exchange for foreign currency (primarily 8,752 Dutch guilders and 4,030 Canadian dollars) was $6,153. The aggregate contract value of instruments used to sell pound sterling in exchange for Dutch guilders was approximately $6,270. The contracts mature between September 25, 1995 and November 15, 2000. 6. In the first quarter of 1995, the Company adopted Statements of Financial Accounting Standards (FAS) No. 112, "Employer's Accounting for Postemployment Benefits". -6- 7. The carrying amounts and estimated fair values of the Company's significant other financial instruments at August 31, 1995, are as follows: (000's)
Carrying Fair Amount Value -------- -------- Cash and short-term investments $ 4,347 $ 4,347 Notes payable 58,754 58,754 Long-term debt 160,473 169,155
Fair values of short-term financial instruments approximate their carrying values due to their short maturity. The fair value of long-term debt is based on quoted market prices for the same or similar issues or on the current rates offered to the Company for debt of similar maturities. The estimates presented above on long-term financial instruments are not necessarily indicative of the amounts that would be realized in a current market exchange. -7- 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 1995 increased $25,799 or 9.0% when compared to the same quarter in 1994. Net sales for the first nine months of 1995 increased $129,007, or 16.1%, when compared to the first nine months of 1994. A comparison of sales increases by operating area is as follows:
Three Months Ended Nine Months Ended August 31, 1995 August 31, 1995 Operating Area August 31, 1994 August 31, 1994 -------------- --------------- ---------------- North America $ 4,076 2% $ 51,098 11% Latin America 4,642 13% 18,306 15% Europe 13,795 23% 45,696 27% Asia/Pacific 3,286 18% 13,907 28% ------- -------- Total $25,799 9% $129,007 16% ======= ========
In North America, the 2% third quarter sales increase was composed of 6 percentage points resulting from an increase in pricing and negative 4 percentage points relating to decreased volume and changes in product mix. The Adhesives, Sealants and Coatings Group had a 2% increase in sales with 8 percentage points resulting from an increase in pricing, partially offset by a negative 6 percentage point impact of volumes and product mix in the quarter. The growth occurred primarily in the graphic arts and polymer markets of the industrial adhesives group and in the woodworking and engineered systems markets of the structural adhesives group. Sales to the automotive and nonwoven markets were down significantly compared to the same quarter last year. In the Specialty Group, sales increased 2% primarily due to growth occurring in Linear Products Incorporated. The Monarch Division experienced a slight sales growth when compared to 1994. Sales of Foster Products Corporation, TEC Incorporated and the Industrial Coatings Division approximated the sales of 1994. North American operating earnings grew at a rate of 13% increasing from $12,250 to $13,813. -8- For the first nine months of 1995, North American sales increased 11% and was composed of one percentage point resulting from increased volume and changes in product mix, 5 percentage points resulting from sales of a business acquired late in the second quarter of 1994 and 5 percentage points resulting from an increase in pricing. The Adhesives, Sealants and Coatings Group had a 14% increase in 1995 sales, with 8 percentage points resulting from a late second quarter 1994 acquisition and the other 6 percentage points resulting from pricing increases. Growth occurred primarily in the paper/converting, graphic arts and polymer units of the industrial adhesives group and in engineered systems, woodworking and automotive markets of the structural adhesives group. The Specialty Group had a 4% sales growth with the primary growth occurring in Linear Products Incorporated and TEC Incorporated. North American operating earnings grew at a rate of 18% from $25,674 in 1994 to $30,371 for the first nine months of 1995. Latin American third quarter 1995 sales increased 13% over 1994. The increase in sales is composed of 14 percentage points relating to increased pricing and a negative one percentage point relating to volume and product mix. Latin American operating earnings were down 14% when compared to 1994, from $3,050 in 1994 to $2,623 in 1995. Competitive pressures in the paint market and inflationary pressures, particularly in South America, were the primary reasons for the decrease in operating earnings. This trend of operating earnings is expected to continue in the fourth quarter of 1995. In Europe, the 23% third quarter 1995 sales increase was composed of 16 percentage points resulting from favorable foreign currency translations due to the weakening of the U.S. dollar, 6 percentage points due to an increase in pricing and one percentage point due to an increase in volume and changes in product mix. Operating income was up 14% when compared to the same quarter in 1994, increasing from $3,135 to $3,564. Asia/Pacific sales were up 18% compared to the same period last year. The weakening of the U.S. dollar, compared to local currencies, caused 13 percentage points of the increase. Operating earnings decreased from $360 in 1994 to ($371) in 1995, primarily as a result of the continuing economic slowdown in Japan and ongoing expenditures to support expansion of operations in the Asia/Pacific region. For the first nine months of 1995, Latin American sales increased 15% over the same period in 1994 with 8 percentage points accounted for by increased volume and changes in product mix and 7 percentage points resulting from increased pricing. Operating earnings decreased slightly from $14,816 in 1994 to $14,349 in 1995. European sales were up 27% from 1994 sales with the weakening of the U.S. dollar causing a 15 percentage point increase. The 12 percentage point increase in local currency sales was composed of 5 percentage points resulting from increased volume and changes in product mix, 4 percentage points in increased pricing and 3 percentage points resulting from a late first quarter 1994 acquisition in the U.K. Operating earnings increased 55% from $8,056 in 1994 to $12,516 in 1995. However, raw material cost pressures in the fourth quarter of -9- 1995 are expected to produce fourth quarter 1995 operating earnings that will approximate the 1994 fourth quarter operating earnings. Asia/Pacific sales increased 28% with 13 percentage points from a weakened U.S. dollar and 6 percentage points due to a late first quarter 1994 acquisition in New Zealand. Continued expansion activities in Asia/Pacific and the economic slowdown in Japan caused operating earnings to decrease from $445 in 1994 to ($533) in 1995. A pretax restructuring charge of $6,001 ($5,299 after tax) was recorded in the fourth quarter of fiscal year 1993. As of August 31, 1995, the remaining pretax restructuring reserve was $781 and is currently estimated to be adequate to complete the restructuring. Cost of sales for the third quarter increased 9.7% ($18,772) over the same quarter in 1994. Consolidated gross margins, as a percent of sales, decreased from 32.18% in 1994 to 31.78% in 1995. Gross margins, as a percent of sales, decreased in all geographic regions when compared to 1994. The Company continued to experience rising raw material cost pressures in the quarter particularly in Europe and Latin America and these pressures are expected to continue in Europe and Latin America in the fourth quarter of 1995. In the third quarter, cost of goods sold was favorably impacted by a reversal of a $1,470 first and second quarter profit sharing accrual due to lower projected 1995 annual earnings. The impact of this reversal on third quarter gross margins, as a percent of sales, was a favorable 0.47% percentage points. Year-to-date, cost of sales was up 17.0% ($91,995) when compared to the same period in 1994. Consolidated gross margins, as a percent of sales, decreased from 32.37% in 1994 to 31.86% in 1995 with 1995 gross margins negatively affected 0.22 percentage points by the 1994 acquisitions. Selling, administrative, and other expenses for the quarter were up 8.4% ($6,194) when compared to the prior year. This category of expense, as a percent of sales, improved from 25.63% in 1994 to 25.50% in 1995 with the impact of a $1,796 reversal of a first and second quarter profit sharing accrual, due to lower 1995 projected earnings, causing the decrease. Year-to-date, selling, administrative and other expenses for 1995 increased 13.9% ($29,300) when compared to the prior year. This category of expense, as a percent of sales, improved from 26.25% in 1994 to 25.76% in 1995, with the 1994 acquisitions contributing 0.29 percentage points of the improvement. Interest expense for the first nine months of 1995 increased 56.5% ($4,944). The increase in interest expense was primarily the result of higher borrowing levels to fund first half 1994 acquisitions and to fund an increased level of capital spending. Income taxes for the first nine months of 1995 increased $1,134 (7.4%) when compared to the same period in 1994 primarily as a result of increased earnings. The effective tax rate decreased from 40.56% in 1994 to 39.80% in 1995. The final year-end rate is expected to be 1.03 percentage points higher than last year's 38.77% effective tax rate. Net earnings increased from $22,268 in the first nine months of 1994 to $22,332 in the first nine months of 1995. 1995 net earnings were reduced by a $2,532 accounting change charge. -10- 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 31, 1995 and November 30, 1994 and August 31, 1994 and November 30, 1993. During the first nine months of 1995, the Company generated $43,659 of cash from operations as compared to $34,358 in the first nine months of 1994. The increase in cash generated was the result of cash flow from net earnings which increased $2,596 (excluding the non-cash accounting change charge of $2,532) in 1995 and an increase of $8,858 of other non-cash adjustments to net income in 1995 compared to the same period in 1994, which more than offset a $2,153 increase in cash to fund operating working capital. Working capital was $146,077 at August 31, 1995 compared to $129,665 at November 30, 1994. The current ratio at August 31, 1995 was 1.6 equal to the November 30, 1994 ratio. The number of days sales in trade accounts receivable was 52 days at August 31, 1995 up one days sales from August 31, 1994. The average days sales in inventory on hand was at 68 days up one days sales from August 31, 1994. The primary reason for the reduction in accrued expenses is the payment of year-end 1994 salary accruals in the first quarter of 1995. The primary reason for the increase in accounts payable was the increase in inventories which were increased to support projected fourth quarter sales. The Company's long-term debt to total capitalization ratio was 34.4% at August 31, 1995 compared to 32.1% at November 30, 1994. Long-term debt increased to fund capital expenditures, to fund increased operating working capital and to prefund postretirement benefits ($6,182). Capital expenditures for property, plant and equipment of $57,247 in the first nine months of 1995 were primarily for continued construction of manufacturing plants in Honduras and Minnesota, for beginning the construction of a research and development facility in Minnesota, 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. -11- H.B. FULLER COMPANY AND CONSOLIDATED SUBSIDIARIES Increases (Decreases) (Dollars in Thousands) A summary of the period to period changes in the principal items included in the Consolidated Condensed Statements of Earnings is presented below:
Comparison of Comparison of Three Months Ended Nine Months Ended ------------------------ ------------------------ August 31, 1995 and 1994 August 31, 1995 and 1994 ------------------------ ------------------------ Net sales $25,799 9.0% $129,007 16.1% Cost of sales 18,772 9.7% 91,995 17.0% Selling, administrative and other expenses 6,194 8.4% 29,300 13.9% Interest expense 2,017 65.0% 4,944 56.5% Other income (expense), net 616 79.4% 808 36.6% ------- -------- Earnings before income taxes and minority interests (568) -3.8% 3,576 9.4% Income taxes (296) -4.9% 1,134 7.4% Net earnings of consolidated subsidiaries applicable to minority interests (103) * (154) -45.3% ------- -------- Earnings before accounting changes (169) -1.9% 2,596 11.7% Accounting changes (2,532) ------- -------- Net earnings $ (169) -1.9% $ 64 0.3% ======= ========
* Change of 100% or more. -12- PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders --------------------------------------------------- Nothing was submitted to a vote of security holders for the three months ended August 31, 1995. Item 6. Exhibits and reports on Form 8-K -------------------------------- (a) Exhibits to Part I 27 Financial Data Schedule (b) Reports on Form 8-K. No reports on Form 8-K were filed for the three months ended August 31, 1995. 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 13, 1995 /S/ Jorge Walter Bolanos ------------------------ Jorge Walter Bolanos Senior Vice President, Treasurer and Chief Financial Officer Dated: October 13, 1995 /S/ David J. Maki ----------------------- David J. Maki Vice President and Controller -13- EX-27 2 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from balance sheet, income statement and is qualified in its entirety by reference to such financial statements. 1,000 9-MOS NOV-30-1995 DEC-01-1994 AUG-31-1995 4,347 0 187,074 6,767 164,383 388,877 583,985 250,169 811,431 242,800 155,607 14,001 0 306 282,792 811,431 930,674 930,674 634,198 873,971 1,399 955 13,693 41,611 16,561 24,864 0 0 2,532 22,332 1.59 1.59
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