-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, gIpeHYyewkn+jbxob5ma9O25YxQVERf1XRKRj/BH0DKeaEnQOcQXtj702hUpabya NiMExYZYN2O29oLRaQ2+fw== 0000950131-95-000915.txt : 19950414 0000950131-95-000915.hdr.sgml : 19950414 ACCESSION NUMBER: 0000950131-95-000915 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950228 FILED AS OF DATE: 19950412 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: 95528275 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 FEBRUARY 28, 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 13,947,271 shares outstanding as of March 31, 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 FIRST QUARTER 1995 Form 10-Q Quarterly Report Table of Contents Page No. -------- PART I. FINANCIAL INFORMATION ------------------------------ Item 1. Financial Statements: Consolidated Condensed Statements of Earnings - Three months ended February 28, 1995 and February 28, 1994 3 Consolidated Condensed Balance Sheets - February 28, 1995 and November 30, 1994 4 Consolidated Condensed Statements of Cash Flows - Three months ended February 28, 1995 and February 28, 1994 5 Notes to Consolidated Condensed Financial Statements 6 - 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 - 11 PART II. OTHER INFORMATION --------------------------- Item 6. Exhibits and Reports on Form 8-K 12 Signatures 12 -2- H.B. FULLER COMPANY AND CONSOLIDATED SUBSIDIARIES Consolidated Condensed Statements of Earnings
Three Months Ended --------------------------- (Unaudited) February 28, February 28, (In Thousands Except Per Share Amounts) 1995 1994 --------------------------- NET SALES $295,649 $242,499 -------- -------- Costs and expenses: Cost of sales 202,270 165,528 Selling, administrative and other expenses 78,285 66,842 Interest expense 4,112 2,665 Other (income) expense, net 393 426 -------- -------- 285,060 235,461 -------- -------- Earnings before income taxes, minority interests and accounting changes 10,589 7,038 Income taxes (4,320) (2,783) Net earnings of consolidated subsidiaries applicable to minority interests (236) (219) -------- -------- Earnings before accounting changes 6,033 4,036 Accounting changes (2,532) -------- -------- NET EARNINGS 3,501 4,036 Dividends on preferred stock (4) (4) -------- -------- NET EARNINGS APPLICABLE TO COMMON STOCK $ 3,497 $ 4,032 ======== ======== Average number of common and common equivalent shares outstanding 14,031 14,027 ======== ======== Per share earnings before accounting changes $ 0.43 $ 0.29 Per share accounting changes (0.18) -------- -------- NET EARNINGS PER COMMON SHARE $ 0.25 $ 0.29 ======== ======== Cash dividend per common share $ 0.15 $ 0.14 ======== ========
See accompanying Notes to Consolidated Condensed Financial Statements. -3- H.B. FULLER COMPANY AND CONSOLIDATED SUBSIDIARIES Consolidated Condensed Balance Sheets
(Unaudited) February 28, November 30, (In Thousands) 1995 1994 ------------ ------------ ASSETS CURRENT ASSETS: Cash and cash equivalents $ 9,153 $ 9,830 Trade receivables 176,809 172,823 Allowance for doubtful accounts (6,039) (6,221) Inventories 160,947 152,651 Other current assets 40,814 32,320 -------- -------- TOTAL CURRENT ASSETS 381,684 361,403 Property, plant and equipment, net of accumulated depreciation of $225,850 in 1995 and $218,803 in 1994 302,840 295,090 Other intangibles 17,294 18,097 Excess cost 39,780 40,422 Other assets 29,961 27,605 -------- -------- TOTAL ASSETS $771,559 $742,617 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Notes payable $ 53,622 $ 53,125 Current installments of long-term debt 6,638 6,430 Accounts payable 108,616 105,825 Accrued expenses 48,906 58,080 Income taxes payable 8,956 8,278 -------- -------- TOTAL CURRENT LIABILITIES 226,738 231,738 Long-term debt, excluding current installments 165,068 130,009 Deferred income taxes, accrued pension cost, postretirement costs, other liabilities and minority interests 104,234 106,065 STOCKHOLDERS' EQUITY: Preferred stock 306 306 Common stock 13,948 13,935 Additional paid-in capital 19,049 18,907 Retained earnings 238,044 236,572 Foreign currency translation adjustment 6,537 7,532 Unearned compensation (2,365) (2,447) -------- -------- TOTAL STOCKHOLDERS' EQUITY 275,519 274,805 -------- -------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $771,559 $742,617 ======== ======== See accompanying Notes to Consolidated Condensed Financial Statements.
-4- H.B. FULLER COMPANY AND CONSOLIDATED SUBSIDIARIES Consolidated Condensed Statement of Cash Flows
Three Months Ended (Unaudited) February 28, February 28, (In Thousands) 1995 1994 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings $ 3,501 $ 4,036 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 9,235 7,379 Pension costs 2,685 2,972 Deferred income tax 1,855 (1,087) Accounting changes 2,532 Other items (1,040) (456) Change in current assets and liabilities: (Increase) in accounts receivable (7,009) (7,137) (Increase) in inventory (8,480) (3,912) (Increase) in prepaid assets (6,164) (3,703) Increase in accounts payable 3,391 1,474 (Decrease) in accrued expense (8,958) (7,197) (Decrease) in income taxes payable (1,793) (172) -------- -------- NET CASH PROVIDED BY OPERATING ACTIVITIES (10,245) (7,803) CASH FLOWS FROM INVESTING ACTIVITIES: Purchased property, plant and equipment (16,104) (10,692) Investment in affiliated companies (6) (27) Purchased businesses, net of cash acquired (22,299) -------- -------- NET CASH USED IN INVESTING ACTIVITIES (16,110) (33,018) CASH FLOWS FROM FINANCING ACTIVITIES: Increase in long-term debt 50,200 20,678 Current installments and payments of long-term debt (16,055) (168) Increase in notes payable 210 11,796 Dividends paid (2,026) (1,951) Other (6,448) 760 -------- -------- NET CASH PROVIDED BY FINANCING ACTIVITIES 25,881 31,115 Effect of exchange rate changes on cash (203) (554) -------- -------- NET CHANGE IN CASH AND CASH EQUIVALENTS (677) (10,260) Cash and cash equivalents at beginning of year 9,830 17,377 -------- -------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 9,153 $ 7,117 ======== ======== Supplemental disclosures of cash flow information: Cash paid during the year for: Interest expense (net of amount capitalized) $ 4,268 $ 2,218 Income taxes $ 6,964 $ 3,513
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 February 28, 1995 and November 30, 1994, the results of its operations for the three month periods ended February 28, 1995 and 1994 and its cash flows for the three month periods ended February 28, 1995 and 1994. All adjustments were of a normal recurring nature. 2. The results of operations for the three month period ended February 28, 1995 are not necessarily indicative of the results to be expected for the full year. 3. The composition of inventories is presented below: February 28, 1995 November 30, 1994 ----------------- ----------------- Raw materials $ 79,079 $ 78,007 Finished goods 92,545 85,032 LIFO reserve (10,677) (10,388) -------- -------- $160,947 $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. Market value gains and losses are recognized, and the resulting credit or debit offsets foreign exchange gains or losses on those receivables/payables. At February 28, 1995, the aggregate contract value of instruments used to buy U.S. dollars in exchange for foreign currency (primarily 8,722 Dutch guilders, 3,887 deutsche marks and 2,820 Canadian dollars) was $11,055. The aggregate contract value of instruments used to sell pound sterling in exchange for Dutch guilders was approximately $5,396. The contracts mature between March 1, 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 February 28, 1995, are as follows: (000's) Carrying Fair Amount Value -------- -------- Cash and short-term investments $ 9,153 $ 9,153 Notes payable 53,622 53,622 Long-term debt 171,706 173,752 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 first quarter of 1995 increased $53,150 or 21.9% when compared to the same quarter in 1994. A comparison of sales increases by operating area is as follows: Three Months Ended February 28, 1995 Operating Area February 28, 1994 -------------- ------------------- North America $ 25,600 19% Latin America 6,322 14% Europe 14,974 30% Asia/Pacific 6,254 41% --------- Total $ 53,150 22% ========== In North America, the 19% first quarter sales increase was composed of 6 percentage points relating to increased volume and changes in product mix, 9 percentage points related to a second quarter 1994 acquisition and 4 percentage points resulting from an increase in pricing. The Adhesives, Sealants and Coatings Group had a 26% increase in sales with 13% resulting from a second quarter 1994 acquisition and the other 13% of growth occurring primarily in the paper/converting, graphic arts and polymer markets of the industrial adhesives group and in the woodworking and engineered systems markets of the structural adhesives group. In the Specialty Group, sales increased 4% primarily due to growth occurring in the Industrial Coatings Division and TEC Incorporated. Sales of the Linear Products Corporation, Monarch Division and Foster Products Corporation approximated the sales of 1994. Overall, Specialty Group sales on a comparable basis were adversely affected by 3 percentage points by the second quarter 1994 restructuring in Foster Products Corporation when the PVC product line was sold. North American operating earnings grew at a rate of 67% increasing from $3,056 to $5,090. -8- Latin American first quarter 1995 sales increased 14% over 1994. The increase in sales is composed of 10 percentage points relating to increased volume and changes in product mix and a 4 percentage point increase in pricing. Latin American operating earnings were up slightly when compared to 1994, increasing from $6,814 to $6,927. In Europe, the 30% first quarter 1995 sales increase was composed of 10 percentage points resulting from favorable foreign currency translations due to the weakening of the U.S. dollar, 1 percentage point due to an increase in pricing, 9 percentage points due to an increase in volume and changes in product mix and 10 percentage points resulting from sales of a business in the United Kingdom acquired late in the first quarter of 1994. As a result of the sales increase, operating income was up substantially when compared to the same quarter in 1994, increasing from $231 to $2,730. Asia/Pacific sales were up 41% compared to the same period last year. The weakening of the U.S. dollar, compared to local currencies, caused 12 percentage points of the increase. A late first quarter 1994 New Zealand acquisition accounted for 18 percentage points of the sales increase. Operating earnings increased from $28 in 1994 to $347 in 1995, primarily as a result of the operating results of the New Zealand acquisition. A pretax restructuring charge of $6,001 ($5,299 after tax) was recorded in the fourth quarter of fiscal year 1993. As of February 28, 1995, the remaining pretax restructuring reserve was $1,037 and is currently estimated to be adequate to complete the restructuring. Cost of sales for the first quarter increased 22.2% ($36,742) over the same quarter in 1994. Consolidated gross margins, as a percent of sales, decreased from 31.74% in 1994 to 31.58% in 1995 with the acquisitions of 1994 having a negative 0.37% of sales impact. During the first quarter 1995, the Company continued to experience increases in the cost of raw materials. However, excluding the impact of acquisitions, gross margins, as a percent of sales, approximated or exceeded 1994 margins in all geographic regions. The Company anticipates further increases in raw material costs over the near term which may affect gross margins. The extent to which these increases may affect gross margins will depend on the Company's ability to pass on the price increases to its customers. Selling, administrative, and other expenses for the quarter were up 17.1% ($11,443) when compared to the prior year. This category of expense, as a percent of sales, decreased from 27.6% in 1994 to 26.5% in 1995. Significant improvement in this category of expense was primarily due to improvements in North America and Europe. Interest expense increased 54.3% ($1,447) primarily as a result of increased borrowing to finance the 1994 aquistions and the increased capital spending. -9- Income taxes for the first quarter of 1995 increased $1,537 (55.2%) when compared to the first quarter of 1994 primarily as a result of increased earnings. The effective tax rate increased from 39.5% in 1994 to 40.8% in 1995. The Company adopted the provisions of FAS 112 (Postemployment Benefits) in the first quarter of 1995, resulting in an accounting change charge of $2,532 ($3,981 pretax). Net earnings decreased from $4,036 in the first quarter of 1994 to $3,501 in first quarter 1995. Earnings before the cumulative effect of the accounting change in 1995 were $6,033. Liquidity and Capital Resources ------------------------------- The cash flows as presented in this section have been calculated by comparison of the Consolidated Condensed Balance Sheets at February 28, 1995 and November 30, 1994 and February 28, 1994 and November 30, 1993. During the first quarter of 1995, the Company used $10,245 of cash to finance operations as compared to a $7,803 use of cash in the first quarter of 1994. The increased use of cash was primarily the result of cash flow from net earnings which increased $1,997 (excluding the non-cash accounting change charge of $2,532) in 1995 and an increase of $3,927 of other non- cash adjustments to net income in 1995 compared to the same period in 1994, which was more than offset by an $8,366 increase in cash to fund operating working capital. Working capital was $154,946 at February 28, 1995 compared to $129,665 at November 30, 1994. The current ratio at February 28, 1995 was 1.7 compared to 1.6 at November 30, 1994. The number of days sales in trade accounts receivable was 52 days at February 28, 1995 equalling the days sales at February 28, 1994. The average days sales in inventory on hand was at 67 days equalling the days sales at February 28, 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 second quarter sales. The Company's long-term debt to total capitalization ratio was 37.5% at February 28, 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 $16,104 in first quarter 1995 were primarily for continued construction of manufacturing plants in Honduras and 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. -10- 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 Three Months Ended February 28, 1995 and 1994 ------------------- Amount Percent ------- ------- NET SALES $53,150 21.9% Cost of sales 36,742 22.2% Selling, administrative and other expenses 11,443 17.1% Interest expense 1,447 54.3% Other income (expense), net 33 7.7% ------- Earnings before income taxes, minority interests and accounting changes 3,551 50.5% Income taxes 1,537 55.2% Net earnings of consolidated subsidiaries applicable to minority interests 17 7.8% ------- Earnings before accounting changes 1,997 49.5% Accounting changes (2,532) * ------- NET EARNINGS $ (535) -13.3% ======= * Change of 100% or more.
-11- PART II. OTHER INFORMATION 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 February 28, 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: April 12, 1995 /S/ Jorge Walter Bolanos ------------------------ Jorge Walter Bolanos Senior Vice President, Treasurer and Chief Financial Officer Dated: April 12, 1995 /S/ David J. Maki ----------------------- David J. Maki Vice President and Controller -12- 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 3-MOS NOV-30-1994 DEC-01-1994 FEB-28-1995 9,153 0 176,809 6,039 160,947 381,684 528,690 225,850 771,559 226,738 165,068 13,948 0 306 261,265 771,559 295,649 295,649 202,270 280,555 393 404 4,112 10,589 4,320 6,033 0 0 2,532 3,501 0.25 0.25
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